formsb2a.htm
As
filed
with the Securities and Exchange Commission on August 2, 2007
An
Exhibit List can be found on page II-7.
Registration
No. 333-142644
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON
D.C. 20549
____________________________
FORM
SB-2
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
_____________________________
AIRTRAX,
INC.
(Name
of
small business issuer in its charter)
New
Jersey
|
3537
|
22-3506376
|
(State
or other Jurisdiction of
Incorporation or Organization)
|
(Primary
Standard Industrial
Classification Code Number)
|
(I.R.S.
Employer Identification
No.)
|
|
|
|
200
Freeway Drive, Unit One
Blackwood,
NJ 08012
(856)
232-3000
(Address
and telephone number of principal executive offices and principal place
of
business)
Robert
M. Watson, Chief Executive Officer
AIRTRAX,
INC.
200
Freeway Drive, Unit One
Blackwood,
NJ 08012
(856)
232-3000
(Name,
address and telephone number of agent for service)
Copies
to:
Richard
A. Friedman, Esq.
Sichenzia
Ross Friedman Ference LLP
61
Broadway, 32nd Flr.
New
York, New York 10006
(212)
930-9700
(212)
930-9725 (fax)
APPROXIMATE
DATE OF PROPOSED SALE TO THE PUBLIC:
From
time
to time after this Registration Statement becomes effective.
If
any
securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If
this
Form is filed to register additional securities for an offering pursuant to
Rule
462(b) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. ________
If
this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. _________
If
this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. _________
If
delivery of the prospectus is expected to be made pursuant to Rule 434, please
check the following box. _________
CALCULATION
OF REGISTRATION FEE
Title
of Each Class Of
Securities
To Be Registered
|
|
|
Amount
To Be
Registered
(1)
|
|
|
Proposed
Maximum
Offering
Price
Per
Security (2)
|
|
|
Proposed
Maximum
Aggregate
Offering
Price
|
|
|
Amount
Of
Registration
Fee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock, no par value per share
|
|
|
278,444
|
|
$
|
0.52
|
|
$
|
144,790.88
|
|
$
|
4.45
|
|
Common
Stock, no par value per share, issuable upon exercise of convertible
debentures
|
|
|
13,186,168
|
|
$
|
0.52
|
|
$
|
6,856,807.36
|
|
$
|
210.50
|
|
Common
Stock, no par value per share, issuable upon exercise of warrants
exercisable at $0.45 per share
|
|
|
6,291,308
|
|
$
|
0.52
|
|
$
|
3,271,480.16
|
|
$
|
100.43
|
|
Common
Stock, no par value per share, issuable upon exercise of warrants
exercisable at $0.54 per share
|
|
|
9,013,200
|
|
$
|
0.54
|
|
$
|
4,867,128.00
|
|
$
|
149.42
|
|
Common
Stock, no par value per share, issuable upon exercise of warrants
exercisable at $0.75 per share
|
|
|
4,148,933
|
|
$
|
0.75
|
|
$
|
3,111,699.75
|
|
$
|
95.53
|
|
Common
Stock, no par value per share, issuable upon exercise of warrants
exercisable at $1.25 per share
|
|
|
4,325,433
|
|
$
|
1.25
|
|
$
|
5,406,791.25
|
|
$
|
165.99
|
|
Common
Stock, no par value per share, issuable upon exercise of warrants
exercisable at $1.65 per share
|
|
|
72,200
|
|
$
|
1.65
|
|
$
|
119,130.00
|
|
$
|
3.66
|
|
Common
Stock, no par value per share, issuable upon exercise of warrants
exercisable at $2.50 per share
|
|
|
534,595
|
|
$
|
2.50
|
|
$
|
1,336,487.50
|
|
$
|
41.03
|
|
Total
|
|
|
37,850,281
|
|
|
|
|
$
|
25,114,297.90
|
|
$
|
771.01
|
|
(2)
|
Includes
shares of our common stock, no par value per share, which may be
offered
pursuant to this registration statement, which shares are issuable
upon
conversion of secured convertible debentures and exercise of
warrants.
|
|
|
(2)
|
Estimated
solely for purposes of calculating the registration fee in accordance
with
Rule 457(c) and Rule 457(g) under the Securities Act of 1933, using
the
average of the high and low price as reported on the Over-The-Counter
Bulletin Board on May 2, 2007, which was $0.52 per share.
|
|
|
The
registrant hereby amends this registration statement on such date or dates
as
may be necessary to delay its effective date until the registrant shall file
a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
Pursuant
to Rule 429 promulgated under the Securities Act of 1933, the enclosed
prospectus constitutes a combined prospectus also relating to an aggregate
of up
to 6,760,188 shares of our common stock that were previously registered for
sale
in a Registration Statement on Form S-2, Registration No. 333-116475, as amended
by Registration Statements Amendment No. 1, Amendment No. 2 on Form S-2,
Post-Effective Amendment No. 1, Registration Nos. 333-116475 and Post-Effective
Amendment No. 2 to the Registration Statement on Form S-2, Registration No.
333-116475. As such, this prospectus also constitutes Post-Effective Amendment
No. 3 to the Registration Statement on Form S-2, Registration No. 333-116475,
which shall hereafter become effective concurrently with the effectiveness
of
this Registration Statement on Form SB-2 in accordance with Section 8(c) of
the
Securities Act of 1933.
The
information in this prospectus is not complete and may be changed. The
securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT
TO COMPLETION, DATED AUGUST 2, 2007
PROSPECTUS
AIRTRAX,
INC.
37,850,281 Shares
of Common Stock
This
prospectus relates to the resale by the selling stockholders of up to 37,850,281
shares of our common stock, including 278,444 shares of common stock, up to
13,186,168 shares of common stock underlying secured convertible debentures
in
the face amount of $6,074,836.37, up to 6,291,308 shares underlying warrants
exercisable at $0.45 per share, up to 9,013,200 shares underlying warrants
exercisable at $0.54 per share, up to 4,148,933 shares underlying warrants
exercisable at $0.75 per share, up to 4,325,433 shares underlying warrants
exercisable at $1.25 per share, up to 72,200 shares underlying warrants
exercisable at $1.65 per share and up to 534,595 shares underlying warrants
exercisable at $2.50 per share. The selling stockholders may sell common stock
from time to time in the principal market on which the stock is traded at the
prevailing market price or in negotiated transactions. The selling stockholders
may be deemed underwriters of the shares of common stock which they are
offering. We will pay the expenses of registering these shares.
Our
common stock is traded on the Over-The-Counter Bulletin Board under the
symbol
“AITX.” On July 27, 2007, the last reported sale price of our common stock on
the Over-The-Counter Bulletin Board was $0.48 per
share.
The
securities offered in this prospectus involve a high degree of risk. See "Risk
Factors" beginning on page 3 of this prospectus to read about factors you
should consider before buying shares of our common stock.
The
selling stockholders are offering these shares of common stock. The selling
stockholders may sell all or a portion of these shares from time to time in
market transactions through any market on which our common stock is then traded,
in negotiated transactions or otherwise, and at prices and on terms that will
be
determined by the then prevailing market price or at negotiated prices directly
or through a broker or brokers, who may act as agent or as principal or by
a
combination of such methods of sale. The selling stockholders will receive
all
proceeds from the sale of the common stock. For additional information on the
methods of sale, you should refer to the section entitled "Plan of
Distribution."
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or determined whether this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The
date
of this Prospectus is ____, 2007
TABLE
OF CONTENTS
|
|
Page
|
Prospectus
Summary
|
|
1
|
Risk
Factors
|
|
2
|
Use
of Proceeds
|
|
9
|
Market
For Common Stock and Related Stockholder Matters
|
|
9
|
Management’s
Discussion and Analysis and Plan of Operations
|
|
10
|
Business
|
|
19
|
Description
of Property
|
|
25
|
Legal
Proceedings
|
|
26
|
Management
|
|
27
|
Executive
Compensation
|
|
29
|
Certain
Relationships and Related Transactions
|
|
31
|
Security
Ownership of Certain Beneficial Owners and Management
|
|
32
|
Description
of Securities
|
|
33
|
Indemnification
for Securities Act Liabilities
|
|
35
|
Plan
of Distribution
|
|
36
|
Selling
Stockholders
|
|
38
|
Legal
Matters
|
|
90
|
Experts
|
|
90
|
Additional
Information
|
|
91
|
Index
to Financial Statements
|
|
92
|
You
should rely only on the information contained in this prospectus. We have not
authorized anyone to provide you with information that is different. This
prospectus is not an offer to sell, nor is it seeking an offer to buy, these
securities in any jurisdiction where the offer or sale of these securities
is
not permitted. You should assume that the information contained in this
prospectus is accurate as of the date on the front of this prospectus only.
Our
business, financial condition, results of operations and prospects may have
changed since that date.
All
references herein to our fiscal year and our fiscal year end represent the
twelve months ended December 31 and December 31, respectively, and all
references herein to our fiscal quarters ended refer to March 31, June 30 and
September 30, as appropriate.
PROSPECTUS
SUMMARY
The
following summary highlights selected information contained in this prospectus.
This summary does not contain all the information you should consider before
investing in the securities. Before making an investment decision, you should
read the entire prospectus carefully, including the “risk factors” section, the
financial statements and the secured convertible notes to the financial
statements.
AIRTRAX,
INC.
Since
1995, substantially all of our resources and operations have been directed
towards the development of the Omni-Directional wheel, related components,
Omni-Directional Lift Trucks and other Omni-Directional Vehicles. Many of the
components, including the unique shaped wheels, motors, and frames, have been
designed by Airtrax and are specially manufactured for us.
Omni-Directional
means that vehicles designed and built by us can travel in any direction. Our
Omni-directional vehicles are controlled with a joystick. The vehicle will
travel in the direction the joystick is pushed. If the operator pushes the
joystick sideways, the vehicle will travel sideways. If the operator were to
twist the joystick the vehicle will travel in circles. Our omni-directional
vehicles have one motor and one motor controller for each wheel. The
omni-directional movement is caused by coordinating the speed and direction
of
each motor with joystick inputs which are routed to a micro-processor, then
from
the micro-processor to the motor controllers and finally to the motor
itself.
During
the year ended December 31, 2006, we continued development of the COBRA and
KING
COBRA scissor lifts and the Omni-Directional power chair. We anticipate
incurring more costs on these products and plan to begin production of the
first
COBRA model and the KING COBRA in 2007. The growth and development of our
business will require a significant amount of additional working capital. We
currently have limited financial resources and based on our current operating
plan, we will need to raise additional capital in order to continue operations.
However, we are in discussions with lenders to raise capital in order to
continue operating, although we have no contracts or commitments for additional
capital at this time. We currently do not have adequate cash to meet our short
or long term objectives. In the event additional capital is raised, it may
have
a dilutive effect on our existing stockholders. However, there can be no
assurance that additional financing will be available at terms that are suitable
to us.
The
assembly of our products is conducted at our executive offices. Currently 100%
of our vehicle frames are being manufactured in the USA. These frames are
shipped to the Blackwood plant for final assembly. Previously, partially
assembled vehicles were shipped to the Blackwood facility from the Filco plant
in Germany. Fourteen were shipped to the USA for final assembly. A total of
approximately sixty frames were shipped from Bulgaria to the Filco plant for
partial assembly. None of the frames shipped from Bulgaria were within
specification. The twenty-seven frames shipped to the United States required
re-machining in order to make them useable. The balance were rejected and
abandoned with other parts inventory that was stored in the Filco
plant.
We
have
incurred losses and experienced negative operating cash flow since our
formation. For our fiscal years ended December 31, 2006 and 2005, we had
net
losses of approximately $4,200,000 and $15,200,000, respectively. For the
three
months ended March 31, 2007, we incurred a net loss of $5,906,586. We expect
to
continue to incur significant expenses. Our operating expenses have been
and are
expected to continue to outpace revenues and result in significant losses
in the
near term. We may never be able to reduce these losses, which will require
us to
seek additional debt or equity financing.
Our
principal executive offices and assembly plant are located at 200 Freeway Drive,
Unit One, Blackwood, NJ 08012 and our telephone number is (856) 232-3000. We
are
a New Jersey corporation.
The
Offering
Common
stock offered by selling stockholders
|
|
Up
to 37,850,281 shares, including the following:
|
|
|
|
|
|
- 278,444
shares of common stock;
|
|
|
- up
to 13,186,168 shares of common stock underlying secured convertible
debentures in the face amount of $6,074,836.37;
|
|
|
- up
to 6,291,308 shares underlying warrants exercisable at $0.45 per
share;
|
|
|
- up
to 9,013,200 shares underlying warrants exercisable at $0.54 per
share;
|
|
|
- up
to 4,148,933 shares underlying warrants exercisable at $0.75 per
share;
|
|
|
- up
to 4,325,433 shares underlying warrants exercisable at $1.25 per
share;
|
|
|
- up
to 72,200 shares underlying warrants exercisable at $1.65 per share;
and
|
|
|
- up
to 534,595 shares underlying warrants exercisable at $2.50 per
share.
|
|
|
|
Shares
outstanding prior to offering
|
|
25,700,993
shares as of July 27, 2007
|
|
|
|
Shares
to be outstanding after the offering
|
|
63,272,830
|
|
|
|
Use
of proceeds
|
|
We
will not receive any proceeds from the sale of the common stock.
However,
we will receive the sale price of any common stock we sell to the
selling
stockholder upon exercise of the warrants. However, most of warrants
entitle the holder to exercise their warrants on a cashless basis.
In the
event that any investor exercises its warrants on a cashless basis,
then
we will not receive any proceeds from the exercise of those warrants.
We
expect to use the proceeds received from the exercise of the warrants,
if
any, for general working capital purposes.
|
|
|
|
Over-The-Counter
Bulletin Board
symbol
|
|
AITX
|
The
above
information regarding common stock to be outstanding after the offering
is based
on 25,700,993 shares of common stock outstanding as of July 27, 2007 and
assumes the conversion of the debentures and exercise of the
warrants.
RISK
FACTORS
This
investment has a high degree of risk. Before you invest you should carefully
consider the risks and uncertainties described below and the other information
in this prospectus. If any of the following risks actually occur, our business,
operating results and financial condition could be harmed and the value of
our
stock could go down. This means you could lose all or a part of your investment.
Risks
Related to Our Financial Condition and Business:
WE
MAY NEVER BECOME PROFITABLE AND CONTINUE AS A GOING CONCERN BECAUSE WE HAVE
HAD
LOSSES SINCE OUR INCEPTION.
We
may
never become profitable because we have incurred losses and experienced
negative
operating cash flow since our formation. For our fiscal years ended December
31,
2006 and 2005, we had a net loss attributable to common stockholders of
approximately $(4.2 million) and $(15.2 million), respectively. For the
three
months ended March 31, 2007, we had a net loss attributable to common
stockholders of approximately $(5.9 million). We expect to continue to
incur
significant expenses. Our operating expenses have been and are expected
to
continue to outpace revenues and result in significant losses in the near
term.
We anticipate that our cash requirements to fund operating or investing
cash
requirements over the next 12 months will be greater than our current cash
on
hand. We may never be able to reduce these losses, which will require us
to seek
additional debt or equity financing. We do not currently have commitments
for
additional funds and there can be no assurance that additional financing
will be
available, or if available, will be on acceptable terms. If we are unable
to
obtain sufficient funds during the next 12 months we will further reduce
the
size of our organization and may be forced to reduce and/or curtail our
production and operations, all of which could have a material adverse impact
on
our business prospects.
OUR
BUSINESS OPERATIONS WILL BE HARMED IF WE ARE UNABLE TO OBTAIN ADDITIONAL
FUNDING.
Our
business operations will be harmed if we are unable to obtain additional
funding. We do not know if additional financing will be available when needed,
or if it is available, if it will be available on acceptable terms. Insufficient
funds may prevent us from implementing our business strategy or may require
us
to delay, scale back or eliminate certain opportunities for the provision of
our
technology and products.
On
January 20, 2006, Filco filed for insolvency in Germany and a receiver was
appointed. As a result, on February 7, 2006, we terminated the tentative
agreement to acquired Filco stock and began negotiations with the receiver
to
acquire some or all of the Filco assets. The $6,275,881 of advances to Filco
that were outstanding at December 31, 2005, were secured by liens filed against
the machinery and equipment owned by Filco which in 2003 was appraised at
$5,400,000, and by liens filed against its intellectual property, which had
not
been appraised. Due to the uncertainty of our position under German bankruptcy
law, $4,275,881 of the Filco advances were written off in 2005, and the
remaining $2,000,000 was written off in 2006. In addition, $413,174 of our
inventory stored at the Filco plant was abandoned and written off during 2006.
During 2006, an auction of Filco assets was conducted by the receiver who did
not acknowledge our liens against property and equipment.
THE
PRICING POLICY FOR OUR LIFT TRUCKS MAY BE SUBJECT TO CHANGE, AND ACTUAL SALES
OR
OPERATING MARGINS MAY BE LESS THAN PROJECTED.
We
are
assessing present and projected component pricing in order to establish a
pricing policy for the SIDEWINDER Lift Truck. We have not finalized our
assessment as current prices for certain lift truck components reflect special
development charges, which are expected to be reduced as order volume for such
components increase and as manufacturing efficiencies improve. We intend to
price our lift trucks so as to maximize sales yet provide sufficient operating
margins. Given the uniqueness of our product, we have not yet established final
pricing sensitivity in the market. Consequently, the pricing policy for its
lift
trucks may be subject to change, and actual sales or operating margins may
be
less than projected.
WE
HAVE RECEIVED LIMITED INDICATIONS OF THE COMMERCIAL ACCEPTABILITY OF OUR
OMNI-DIRECTIONAL LIFT TRUCK. ACCORDINGLY, WE CANNOT PREDICT WHETHER OUR
OMNI-DIRECTIONAL PRODUCTS CAN BE MARKETED AND SOLD IN A COMMERCIAL
MANNER.
Our
success will be dependent upon our ability to sell Omni-Directional products
in
quantities sufficient to yield profitable results. To date, we have received
limited indications of the commercial acceptability of our Omni-Directional
lift
truck. Accordingly, we cannot predict whether the Omni-Directional product
can
be marketed and sold in a commercial manner.
WE
CANNOT ASSURE THAT WE WILL HAVE IN PLACE PATENT PROTECTION AND CONFIDENTIALITY
AGREEMENTS FOR OUR PROPRIETARY TECHNOLOGY. IF WE DO NOT ADEQUATELY PROTECT
OUR
INTELLECTUAL PROPERTY RIGHTS, THERE IS A RISK THAT THEY WILL BE INFRINGED UPON
OR THAT OUR TECHNOLOGY INFRINGES UPON ONE OF OUR COMPETITOR'S PATENTS. AS A
RESULT, WE MAY EXPERIENCE A LOSS OF REVENUE AND OUR OPERATIONS MAY BE MATERIALLY
HARMED.
Our
success will be dependent, in part, upon the protection of our proprietary
Omni-Directional technology from competitive use. A form of our Omni-Directional
technology was originally patented in 1973 and was sold to the US Navy. We
secured a transfer of this technology from the Navy in 1996 under the terms
of a
CRADA agreement (Cooperative Research and Development Agreement) and we have
worked since that time to commercialize Omni-Directional products. We received
3
patents regarding the "redesign" of the wheel. In addition, we have a license
agreements for the algorithms used to control vehicular movement, and a patent
for this technology has been applied for. Further, we have applied for patents
for a movable operator's control station and a munitions handler.
Notwithstanding the foregoing, we believe our lack of patent protection is
a
material competitive risk. Our competitors could reverse engineer our technology
to build similar products. Also, certain variations to the technology could
be
made whereby our competitors may use the technology without infringing upon
our
intellectual property. The patent for the Omni-Directional wheel expired in
1990. We, however, have received patent protection of certain other aspects
of
its Omni-Directional wheel, and for features specific to our lift truck. In
addition to the patent applications, we rely on a combination of trade secrets,
nondisclosure agreements and other contractual provisions to protect our
intellectual property rights. Nevertheless, these measures may be inadequate
to
safeguard our underlying technology. If these measures do not protect the
intellectual property rights, third parties could use our technology, and our
ability to compete in the market would be reduced significantly. In addition,
if
the sale of our product extends to foreign countries, we may not be able to
effectively protect its intellectual property rights in such foreign
countries.
In
the
future, we may be required to protect or enforce our patents and patent rights
through patent litigation against third parties, such as infringement suits
or
interference proceedings. These lawsuits could be expensive, take significant
time, and could divert management's attention from other business concerns.
These actions could put our patents at risk of being invalidated or interpreted
narrowly, and any patent applications at risk of not issuing. In defense of
any
such action, these third parties may assert claims against us. We cannot provide
any assurance that we will have sufficient funds to vigorously prosecute any
patent litigation, that we will prevail in any of these suits, or that the
damages or other remedies awarded, if any, will be commercially valuable. During
the course of these suits, there may be public announcements of the results
of
hearings, motions and other interim proceedings or developments in the
litigation. If securities analysts or investors perceive any of these results
to
be negative, it could cause the price of our common stock to
decline.
WE
CURRENTLY LACK ESTABLISHED DISTRIBUTION CHANNELS FOR OUR LIFT TRUCK PRODUCT
LINE.
We
do not
have an established channel of distribution for our lift truck product line.
We
have initiated efforts to establish a network of designated dealers throughout
the United States. Although we have received indications of interest from a
number of equipment distributors, to date, such indications have been limited.
We cannot predict whether we will be successful in establishing our intended
dealer network.
IF
WE ARE UNABLE TO RETAIN THE SERVICES OF ROBERT M. WATSON, OUR CHIEF EXECUTIVE
OFFICER, OR IF WE ARE UNABLE TO SUCCESSFULLY RECRUIT, QUALIFIED PERSONNEL,
WE
MAY NOT BE ABLE TO CONTINUE OPERATIONS.
Our
ability to successfully conduct our business affairs will be dependent upon
the
capabilities and business acumen of current management including Robert M.
Watson, our President and Chief Executive Officer. We have entered into an
employment agreement with Mr. Watson, however, we do not maintain key man life
insurance with respect to Mr. Watson. Accordingly, shareholders must be willing
to entrust all aspects of our business affairs to our current management.
Further, the loss of any one of our management team could have a material
adverse impact on our continued operation.
OUR
INDUSTRY AND PRODUCTS ARE CONSIDERED TO BE HIGH-RISK WITH A HIGH INCIDENCE
OF
SERIES PERSONAL INJURY OR PROPERTY LOSS WHICH COULD HAVE A MATERIAL ADVERSE
IMPACT ON OUR BUSINESS.
The
manufacture, sale and use of Omni-Directional lift trucks 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 we intend to provide on-site safety demonstrations, the
unique, sideways movement of the lift truck may heighten potential safety risks.
Despite the fact that we intend to maintain sufficient liability insurance
for
the manufacture and use of our products, one or more incidents of personal
injury or property loss resulting from the operation of our products could
have
a material adverse impact on our business.
IF
WE DO NOT SUCCESSFULLY DISTINGUISH AND COMMERCIALIZE OUR DEVELOPED PROPRIETARY
PRODUCTS AND SERVICES, WE WILL NOT ATTRACT A SUFFICIENT NUMBER OF CUSTOMERS.
ACCORDINGLY, WE MAY BE UNABLE TO COMPETE SUCCESSFULLY WITH OUR COMPETITORS
OR TO
GENERATE REVENUE SIGNIFICANT TO SUSTAIN OUR OPERATIONS.
Although
management believes our product will have significant competitive advantages
to
conventional lift trucks, we are competing in an industry populated by some
of
the foremost equipment and vehicle manufacturers in the world. All of these
companies have greater financial, engineering and other resources than us.
No
assurances can be given that any advances or developments made by such companies
will not supersede the competitive advantages of our Omni-Directional lift
truck. In addition, many of our competitors have long-standing arrangements
with
equipment distributors and carry one or more of competitive products in addition
to lift trucks. These distributors are prospective dealers for our company.
It
therefore is conceivable that some distributors may be loath to enter into
any
relationships with us for fear of jeopardizing existing relationships with
one
or more competitors.
Risks
Relating to Our Common Stock:
WE
HAVE ISSUED COMMON STOCK, WARRANTS, AND CONVERTIBLE NOTES TO INVESTORS AND
IN
EXCHANGE FOR FEES AND SERVICES AT A DISCOUNT TO THE MARKET PRICE OF OUR COMMON
STOCK AT THE TIME OF SUCH ISSUANCE. THIS RESULTS IN A LARGE NUMBER OF SHARES
WHICH HAVE BEEN ISSUED AND A LARGE NUMBER OF SHARES UNDERLYING OUR WARRANTS
AND
OTHER CONVERTIBLE SECURITIES THAT ARE OR MAY BE AVAILABLE FOR FUTURE SALE AND
THE SALE OF THESE SHARES MAY DEPRESS THE MARKET PRICE OF OUR COMMON
STOCK.
We
had
25,700,993 shares of common stock outstanding as of July 27, 2007, and we
had
$6,321,633.57 in convertible notes outstanding issued pursuant to private
placements in May and October 2005, July 2006 and February 2007 and settlement
of outstanding liquidated damages, which require the issuance of 13,734,606
additional shares of common stock. Additionally, warrants which require the
issuance of 24,385,669 additional shares of common stock pursuant to our
private
placements in November 2004, February, May and October 2005, February and
July
2006 and February 2007 and settlement of outstanding liquidated damages.
Further, we often issue common stock and warrants in exchange for fees and
services at a discount to the market price of our common stock at the time
of
such issuance. This results in a large number of shares, which have been
issued,
a large number of shares underlying our warrants and other convertible
securities that are or may be available for future sale, and may create an
overhang of securities for sale. The sale of these shares which were or will
be
issued upon exercise or conversion of our securities at a discount to the
market
price of our common stock at the time of issuance may depress the market
price
of our common stock and is dilutive to shareholder value.
IF
WE FAIL TO REMAIN CURRENT IN OUR REPORTING REQUIREMENTS, WE COULD BE REMOVED
FROM THE OTC BULLETIN BOARD WHICH WOULD LIMIT THE ABILITY OF BROKER-DEALERS
TO
SELL OUR SECURITIES AND THE ABILITY OF STOCKHOLDERS TO SELL THEIR SECURITIES
IN
THE SECONDARY MARKET.
Companies
trading on the OTC Bulletin Board, such as us, must be reporting issuers under
Section 12 of the Securities Exchange Act of 1934, as amended, and must be
current in their reports under Section 13, in order to maintain price quotation
privileges on the OTC Bulletin Board. If we fail to remain current on our
reporting requirements, we could be removed from the OTC Bulletin Board. As
a
result, the market liquidity for our securities could be severely adversely
affected by limiting the ability of broker-dealers to sell our securities and
the ability of stockholders to sell their securities in the secondary market.
OUR
COMMON STOCK IS SUBJECT TO THE "PENNY STOCK" RULES OF THE SEC AND THE TRADING
MARKET IN OUR SECURITIES IS LIMITED, WHICH MAKES TRANSACTIONS IN OUR STOCK
CUMBERSOME AND MAY REDUCE THE VALUE OF AN INVESTMENT IN OUR STOCK.
The
Securities and Exchange Commission has adopted Rule 15g-9 which establishes
the
definition of a "penny stock," for the purposes relevant to us, as any equity
security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions.
For
any transaction involving a penny stock, unless exempt, the rules require:
·
|
that
a broker or dealer approve a person's account for transactions in
penny
stocks; and
|
·
|
the
broker or dealer receive from the investor a written agreement to
the
transaction, setting forth the identity and quantity of the penny
stock to
be purchased.
|
In
order
to approve a person's account for transactions in penny stocks, the broker
or
dealer must:
·
|
obtain
financial information and investment experience objectives of the
person;
and
|
·
|
make
a reasonable determination that the transactions in penny stocks
are
suitable for that person and the person has sufficient knowledge
and
experience in financial matters to be capable of evaluating the risks
of
transactions in penny stocks.
|
The
broker or dealer must also deliver, prior to any transaction in a penny stock,
a
disclosure schedule prescribed by the Commission relating to the penny stock
market, which, in highlight form:
·
|
sets
forth the basis on which the broker or dealer made the suitability
determination; and
|
·
|
that
the broker or dealer received a signed, written agreement from the
investor prior to the transaction.
|
Generally,
brokers may be less willing to execute transactions in securities subject to
the
"penny stock" rules. This may make it more difficult for investors to dispose
of
our common stock and cause a decline in the market value of our stock.
Disclosure
also has to be made about the risks of investing in penny stocks in both public
offerings and in secondary trading and about the commissions payable to both
the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account
and
information on the limited market in penny stocks.
USE
OF PROCEEDS
We
will
not receive any proceeds from the sale of the common stock. However, we will
receive the sale price of any common stock we sell to the selling stockholder
upon exercise of the warrants. However, most of warrants entitle the holder
to
exercise their warrants on a cashless basis. In the event that any investor
exercises its warrants on a cashless basis, then we will not receive any
proceeds from the exercise of those warrants. We expect to use the proceeds
received from the exercise of the warrants, if any, for general working capital
purposes.
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our
common stock is quoted on the OTC Bulletin Board under the symbol “AITX”.
For
the
periods indicated, the following table sets forth the high and low bid prices
per share of common stock. These prices represent inter-dealer quotations
without retail markup, markdown, or commission and may not necessarily represent
actual transactions.
|
|
Fiscal
Year 2005
|
|
|
|
High
|
|
Low
|
|
First
Quarter
|
|
$
|
3.07
|
|
$
|
1.83
|
|
Second
Quarter
|
|
$
|
2.95
|
|
$
|
1.85
|
|
Third
Quarter
|
|
$
|
4.70
|
|
$
|
2.07
|
|
Fourth
Quarter
|
|
$
|
3.40
|
|
$
|
2.20
|
|
|
|
Fiscal
Year 2006
|
|
|
|
High
|
|
Low
|
|
First
Quarter
|
|
$
|
2.39
|
|
$
|
1.08
|
|
Second
Quarter
|
|
$
|
2.17
|
|
$
|
1.15
|
|
Third
Quarter
|
|
$
|
2.03
|
|
$
|
0.92
|
|
Fourth
Quarter
|
|
$
|
1.01
|
|
$
|
0.42
|
|
|
|
Fiscal
Year 2007
|
|
|
|
High
|
|
Low
|
|
First
Quarter
|
|
$
|
0.97
|
|
$
|
0.48
|
|
Second
Quarter
|
|
$
|
0.60
|
|
$
|
0.45
|
|
Third
Quarter (1)
|
|
$ |
0.56
|
|
$ |
0.46
|
|
Fourth
Quarter
|
|
|
xxx
|
|
|
xxx
|
|
(1)
As of
July 27, 2007.
Holders
As
of
July 27, 2007, we had approximately 871 holders of our common stock. The
number
of record holders was determined from the records of our transfer agent and
does
not include beneficial owners of common stock whose shares are held in the
names
of various security brokers, dealers, and registered clearing agencies. The
transfer agent of our common stock is Signature Stock Transfer, 301 Ohio
Drive,
Suite 100, Plano, TX 75093.
We
have
never declared or paid any cash dividends on our common stock. We do not
anticipate paying any cash dividends to stockholders in the foreseeable future.
In addition, any future determination to pay cash dividends will be at the
discretion of the Board of Directors and will be dependent upon our financial
condition, results of operations, capital requirements, and such other factors
as the Board of Directors deem relevant.
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
PLAN OF OPERATIONS
Some
of
the information in this Form SB-2 contains forward-looking statements that
involve substantial risks and uncertainties. You can identify these statements
by forward-looking words such as “may,” “will,” “expect,” “anticipate,”
“believe,” “estimate” and “continue,” or similar words. You should read
statements that contain these words carefully because they:
|
·
|
discuss
our future expectations;
|
|
·
|
contain
projections of our future results of operations or of our financial
condition; and
|
· state
other “forward-looking” information.
We
believe it is important to communicate our expectations. However, there may
be
events in the future that we are not able to accurately predict or over which
we
have no control. Our actual results and the timing of certain events could
differ materially from those anticipated in these forward-looking statements
as
a result of certain factors, including those set forth under “Risk Factors,”
“Business” and elsewhere in this prospectus. See “Risk Factors.”
Overview
Since
1995, substantially all of our resources and operations have been directed
towards the development of the Omni-Directional wheel, related components,
Omni-Directional Lift Trucks and other Omni-Directional Vehicles. Many of the
components, including the unique shaped wheels, motors, and frames, have been
designed by Airtrax and are specially manufactured for us.
Omni-Directional
means that vehicles designed and built by us can travel in any direction. Our
Omni-directional vehicles are controlled with a joystick. The vehicle will
travel in the direction the joystick is pushed. If the operator pushes the
joystick sideways, the vehicle will travel sideways. If the operator were to
twist the joystick the vehicle will travel in circles. Our omni-directional
vehicles have one motor and one motor controller for each wheel. The
omni-directional movement is caused by coordinating the speed and direction
of
each motor with joystick inputs which are routed to a micro-processor, then
from
the micro-processor to the motor controllers and finally to the motor
itself.
During
the year ended December 31, 2006, we continued development of the COBRA and
KING
COBRA scissor lifts and the Omni-Directional power chair. We anticipate
incurring more costs on these products and plan to begin production of the
first
COBRA and the KING COBRA models in 2007. The growth and development of our
business will require a significant amount of additional working capital. We
currently have limited financial resources and based on our current operating
plan, we will need to raise additional capital in order to continue operations.
However, we are in discussions with lenders to raise capital in order to
continue operating. We currently do not have adequate cash to meet our short
or
long term objectives. In the event additional capital is raised, it may have
a
dilutive effect on our existing stockholders. There can be no assurance that
additional financing will be available at terms that are suitable to
us.
We
have
incurred losses and experienced negative operating cash flow since our
inception. For the twelve month period ended December 31, 2006 and 2005,
we had
net losses attributable to common shareholders of approximately $4.2 million
and
$15.2 million, respectively. The net loss in both periods includes conversion
expenses of $1 million and $6.6 million in 2006 and 2005, respectively, offset
by revaluation income $3.7 million and $1 million in 2006 and 2005,
respectively, in connection with the repricing of the conversion ratios of
convertible debenture issues and of warrant conversion prices. We also wrote
down the advances to Filco of $2.0 million and $4.7 million in 2006 and 2005,
respectively. We expect to continue to incur significant expenses. Our operating
expenses have been and are expected to continue to outpace revenue and result
in
additional losses in the near term. We may never be able to reduce these
losses,
which will require us to seek additional debt or equity financing. While
we are
in discussions with several prospective lenders, we do not currently have
commitments for these funds and there can be no assurance that additional
financing will be available, or if available, will be on acceptable
terms.
Results
of Operations for the Year Ended December 31, 2006 Compared to the Year Ended
December 31, 2005
Liquidity
constraints and limited access to additional capital for production in 2005
and
2006 and the unexpected death of our Chief Executive Officer and President,
Peter Amico in August 2006 have limited production and sales of omni-directional
technology. Consequently, management believes that the year-to-year comparisons
described below are not indicative of future year-to-year comparative
results.
In
September 2006, Airtrax was awarded a $415,000 contract to design and build
a
customized MP2 Equipment Handling Unit for the Israeli Air Force. The contract
includes an option to build five additional units at $95,000 each upon the
acceptance of the first unit. It is estimated that the follow on orders that
could result from this contract would be from 29 to 100 units over the next
one
to three years. The Critical Design Review was completed in November 2006,
the
design was approved and initial deliverables were provided. As a result, we
received a first process payment of $170,000 on December 12 2006. We expect
to
begin the Acceptance Test Procedure in mid April 2007 and upon successful
completion, will receive a second payment of $162,000. We cannot predict whether
we will be able to successfully pass all of the acceptance tests and complete
the contract, or that if we do so, that any subsequent orders will
result.
We
believe that the joint cooperation between us and the United States Navy with
the MP2 contract, including building the ETU-110 omni-directional engine handler
and our contract to design and build a customized MP2 Equipment Handling Unit
for the Israeli Air Force, has bolstered the potential use of our technology
within the military. We do not intend to incur additional costs with the US
Navy
unless we incur potential expenses in demonstrating the ETU-110 omni-directional
engine handler, or other omni-directional vehicles in connection with the
Israeli contract.
Revenue
Revenue
for the twelve-month period ended December 31, 2006 was approximately $1.3
million, representing an increase of approximately $600,000 from revenue of
$719,000 for the comparable period in 2005. This increase in revenue, is
primarily, attributed to sales of our SIDEWINDER ATX-3000.
Cost
of Goods Sold
Our
cost
of goods sold for the twelve month period months ended December 31, 2006
amounted to approximately $1.5 million, an increase of approximately $800,000
from $729,000 for the twelve months ended December 31, 2005. This increase
in
cost of goods sold, is primarily, attributed to sales of our SIDEWINDER
ATX-3000.
Operating
and Administrative Expenses.
Operating
and administrative expenses which include administrative salaries, depreciation
and other expenses for the twelve month period ended December 31, 2006 totaled
$4.7 million which represents an decrease of approximately $400,000 from $5.1
million incurred in the twelve month period ended December 31, 2005. The
decrease is primarily due to recording of stock option expenses of $1.1 million
in 2005, compared to $76,000 in 2006, partially by additional expenses relating
to the increase in production of our SIDEWINDER ATX-3000 and Cobra and King
Cobra scissor lift and Omni-Directional Power Chair development
costs.
Loss
Attributable to Common Shareholders.
Loss
attributable to common shareholders for the twelve months ended December
31,
2006 was approximately $(4.2) million compared with a loss of $(15.2) million
for the same period in 2005. The decrease is due primarily to the recording
of
stock option expenses of approximately $1.1 million in 2005, compared with
$76,000 in the current period, and conversion expense recorded in the twelve
months ended December 31, 2005 of approximately $6.6 million compared with
$1.0
million in 2006. Additionally, we recorded revaluation income of $3.7 million
in
2006 compared with $1 million in 2005 in connection with the repricing of
certain conversion ratios of convertible debenture issues and of warrant
conversion prices. We also wrote down the remaining Filco advance of $2.
million
during 2006 compared with $4.7 million in 2005. We also recorded approximately
$300,000 of deemed dividend expense in each year.
Research
and Development
We
incurred $519,134 and $544,933 in research and development expenses during
the
year ended December 31, 2006 and 2005, respectively. Research and development
activities during fiscal 2005 primarily involved continued testing and
evaluation of omni-directional components and preparing these components for
production in 2005. Our wheel design was changed from the "concept" to
"production" phase. This was and is an ongoing process between our company
and
vendor’s engineers to insure manufacturability. The motors and controllers were
designed and/or changed in design in order to meet ANSI (American National
Standards Institute) and UL (Underwriters Laboratories) testing requirements.
We
and Danaher revised the algorithms used in the motor controllers as well the
microprocessor that runs the machines. Research and development activities
also
included further changes to existing designs and new designs that were patented
or for those patents with pending applications.
Results
of Operations for the Three Months ended March 31, 2007 Compared to the
Three
Months March 31, 2006
Liquidity
constraints and limited access to additional capital for production in
2004 and
2005 and the unexpected death of our then Chief Executive Officer and President,
Peter Amico in August 2006 have limited production and sales of omni-directional
technology. Consequently, management believes that the year-to-year comparisons
described below are not indicative of future year-to-year comparative
results.
In
September 2006, Airtrax was awarded a $415,000 contract to design and build
a
customized MP2 Equipment Handling Unit for the Israeli Air Force. The contract
includes an option to build five additional units at $95,000 each upon
the
acceptance of the first unit. It is estimated that the follow on orders
that
could result from this contract would be from 29 to 100 units over the
next one
to three years. The Critical Design Review was completed in November 2006,
the
design was approved and initial deliverables were provided. As a result,
we
received a first process payment of $170,000 on December 12 2006. We completed
the Acceptance Test Procedure in mid April 2007 and we expect to receive
a
second payment of $162,000. We cannot predict whether we will be able to
successfully pass all of the acceptance tests and complete the contract,
or that
if we do so, that any subsequent orders will result.
We
believe that the joint cooperation between us and the United States Navy
with
the MP2 contract, including building the ETU-110 omni-directional engine
handler
and our contract to design and build a customized MP2 Equipment Handling
Unit
for the Israeli Air Force, has bolstered the potential use of our technology
within the military. We do not intend to incur additional costs with the
US Navy
unless we incur potential expenses in demonstrating the ETU-110 omni-directional
engine handler, or other omni-directional vehicles in connection with the
Israeli contract.
Revenue
Revenue
for the three-month period ended March 31, 2007 was approximately $92,000,
representing a decrease of approximately $567,000 from revenue of $659,000
for
the three-month period ended March 31, 2006. This decrease in revenue,
is
primarily, attributed to the reduction in sales of our SIDEWINDER
ATX-3000.
Cost
of Goods Sold
Our
cost
of goods sold for the three-month period ended March 31, 2007 amounted
to
approximately $134,000, a decrease of approximately $459,000 from $593,000
for
the three-month period ended March 31, 2006. This decrease in cost of goods
sold
is primarily attributed to the reduction in sales of our SIDEWINDER
ATX-3000.
Operating
and Administrative Expenses
Operating
and administrative expenses which include administrative salaries, depreciation
and other expenses for the three-month period ended March 31, 2007 totaled
$797,000 which represents a decrease of approximately $159,000 from $956,000
incurred in the three-month period ended March 31, 2006. The decrease is
primarily due the reduction in production of our SIDEWINDER ATX-3000 off
set by
development costs for the Cobra and King Cobra scissor lift and Omni-Directional
Power Chair.
Loss
Attributable to Common Shareholders
Loss
attributable to common shareholders for the three-month period ended March
31,
2007 was $(5.9) million compared with income of $536,000 for the same period
in
2006. The decrease in income is due primarily to the recording of conversion
expense in this period of $4.9 million compared with $600,000 in 2006.
Additionally, we recorded revaluation expense of ($117,000) in 2007 compared
with $2.0 million of revaluation income in 2006, in connection with the
repricing of certain conversion ratios of convertible debenture issues
and of
warrant conversion prices.
Research
and Development
We
incurred $23,579 and $61,593 in research and development expenses during
the
three month period ended March 31, 2007 and 2006, respectively. Research
and
development activities during fiscal 2007 primarily involved continued
testing
and evaluation of omni-directional components and preparing these components
for
production in 2007. Our wheel design was changed from the "concept" to
"production" phase. This was and is an ongoing process between our Company
and a
vendor’s engineers to insure manufacturability. The motors and controllers were
designed and/or changed in design in order to meet ANSI (American National
Standards Institute) and UL (Underwriters Laboratories) testing requirements.
Danaher and us revised the algorithms used in the motor controllers as
well the
microprocessor that runs the machines. Research and development activities
also
included further changes to existing designs and new designs that were
patented
or for those patents with pending applications.
Liquidity
and Capital Resources
Since
our
inception, we have financed our operations through the private placement
of our
common stock and sales of convertible debt. During the twelve months ended
December 31, 2006 and 2005, we raised net of offering costs approximately
$1.3
million and $6.0 million, respectively, from the private placement of our
securities.
During
2000, we were approved by the State of New Jersey for our technology tax
transfer program pursuant to which we could sell our net operating losses and
research and development credits as calculated under state law. In the years
2006 and 2005, we recorded credits of $437,803 and $867,413, respectively,
from
the sale of our losses and credits.
We
have
consistently demonstrated our ability to meet our cash requirements through
private placements of our common stock and convertible notes. We have continued
to similarly satisfy those requirements during the twelve months ended December
31, 2006. However, there can be no assurances that we will be successful in
raising the required capital to continue our current operating
plan.
We
anticipate that our cash requirements for the foreseeable future will be
significant. In particular, management expects substantial expenditures for
inventory, product production, and advertising with production of its
Omni-Directional lift truck and the start of Cobra and King Cobra
(Scissors-Lift) production.
We
will
require additional funds to continue our operations beyond the initial
production run. We anticipate that operating capital in the amount of
approximately $3 to 5 million will be required during the next 12 months to
sufficiently fund operations. We expect to recognize lower per unit
manufacturing and part costs in the future due to volume discounts, as well
as
lower per unit shipping costs as we transition from the initial rate to
larger-scale production. While we are in discussions with several prospective
lenders, we do not currently have commitments for additional funds and there
can
be no assurance that additional financing will be available, or if available,
will be on acceptable terms. If we are unable to obtain sufficient funds during
the next six months we will further reduce the size of our organization and
may
be forced to reduce and/or curtail our production and operations, all of which
could have a material adverse impact on our business prospects.
As
a
result of our liquidity issues, we have experienced delays in the repayment
of
certain promissory notes upon maturity and payments to vendors and others.
If in
the future, the holders of our promissory notes may demand repayment of
principal and accrued interest instead of electing to extend the due date and
if
we are unable to repay our debt when due because of our liquidity issues, we
may
be forced to refinance these notes on terms less favorable to us than the
existing notes, seek protection under the federal bankruptcy laws or be forced
into an involuntary bankruptcy filing.
As
of
March 31, 2007, our working capital deficit was $4.5 million. Fixed
assets, net of accumulated depreciation, as of March 31, 2007 and December
31, 2006, were $265,470 and $283,920, respectively. Current
liabilities as of March 31, 2007 were $8.7 million compared with $4.1 million
as
of December 31, 2006. Current liabilities in 2007 and 2006 include liabilities
for options and conversion rights of $5.5 million and $.3 million,
respectively.
February
2007 Financing
On
February 20, 2007, we entered into a Securities Purchase Agreement with
certain
accredited and/or qualified institutional investors pursuant to which we
sold an
aggregate of $3,734,040 principal amount secured convertible debentures
convertible into shares of our common stock at a conversion price equal
to $0.45
for an aggregate purchase price of $3,219,000. The difference between the
face
amount of the borrowing $3,734,040 and proceeds $3,219,000 was recorded
as
prepaid interest and is being amortized over the life of the loan. In addition, we
issued to
the investors (i) warrants to purchase 8,297,866 shares of our common stock
at
an exercise price equal to $0.54 per share, which represents 100% of the
number
of shares issuable upon conversion of the debentures; (ii) callable warrants
to
purchase 4,148,933 shares of our common stock at an exercise price equal
to
$0.75 per share, which represents 50% of the number of shares issuable
upon
conversion of the debentures; and (iii) callable warrants to purchase 4,148,933
shares of our common stock at an exercise price equal to $1.25 per share,
which
represents 50% of the number of shares issuable upon conversion of the
debentures.
The
debentures mature on February 20, 2009. We may in our discretion redeem the
debentures, subject to certain equity conditions being met by us as set forth
in
the debentures, at a price equal to 150% of the principal balance, accrued
interest, and all liquidated damages, if any, thereon that are requested to
be
redeemed. Our obligations under the securities purchase agreement, the
debentures and the additional definitive agreements with respect to this
transaction are secured by all of our assets.
Off-Balance
Sheet Arrangements.
We
do not
have any off balance sheet arrangements that are reasonably likely to have
a
current or future effect on our financial condition, revenue, results of
operations, liquidity or capital expenditures.
Liquidated
Damages
In
connection with financings we
entered into with various investors in November 2004, October
2005 and February 2007,
we provided such investors
registration rights. Pursuant to those registration rights, in the event
that we
did not file a registration statement by a certain date registering for
resale
shares of common stock issuable upon conversion of their securities or
have such
registration statement effective by another date, we agreed to pay to such
investors liquidated damages. All of
the liquidated damages
in connection with
the November 2004 and October 2005 have been settled and no further liability
exists. On May 4, 2007, we filed a registration statement, and as a
result have an obligation
for liquidated damages in
connection with the February 2007 financing. When the conditions in
FAS # 5 are satisfied, we will establish a liability regarding the effectiveness
provisions of the February 2007 issue.
During
2006, to the investors in the November 2004 financing, we issued an aggregate
principal amount $198,248 of our 4% Unsecured Convertible Debentures and 5
year
warrants to purchase an aggregate of 72,201 shares of our common stock in
exchange for the settlement of $244,632 in accrued liquidated damages through
June 30, 2006. The debentures mature on March 1, 2008, and September 30, 2008,
respectively, pay simple interest at a rate of 4% per annum and are convertible
into shares of our common stock at a price equal to $1.56 per share. The
warrants are exercisable into shares of our common stock at a price equal to
$1.56 per share. In addition, the investors agreed to forego any future accrual
and payment of such liquidated damages.
In
July
2006 we issued 2% Unsecured Convertible Debentures to the investors in the
October 2005 financing, aggregating $359,549 and Stock Purchase Warrants to
acquire 110,808 shares of our common stock at $1.65 per share, in full
settlement of liquidated damages resulting from our not filing a registration
statement by a certain date registering for resale shares of common stock
issuable upon conversion of their securities. The conversion price of the shares
underlying the note was $1.56. Both the conversion price and the warrants
purchase price have been adjusted to $0.45 due to the pricing of the February
20, 2007 private placement.
Critical
Accounting Policies and Estimates
Revenue
Revenue
on product sales is recognized when persuasive evidence of an arrangement
exists, such as when a purchase order or contract is received from the customer,
the price is fixed, title to the goods has changed and there is a reasonable
assurance of collection of the sales proceeds. We obtain written purchase
authorizations from our customers for a specified amount of product at a
specified price and consider delivery to have occurred at the time of shipment.
Revenue is recognized at shipment.
Revenue
from research and development activities relating to firm fixed-price
contracts is generally recognized as billing occurs. Revenue from research
and development activities relating to cost-plus-fee contracts include costs
incurred plus a portion of estimated fees or profits based on the relationship
of costs incurred to total estimated costs. Contract costs include all direct
material and labor costs and an allocation of allowable indirect costs as
defined by each contract, as periodically adjusted to reflect revised agreed
upon rates. These rates are subject to audit by the other party. Amounts
can be
billed on a bi-monthly basis. Billing is based on subjective cost investment
factors.
Intangibles
We
continually evaluate whether events and changes in circumstances warrant
revised
estimates of useful lives or recognition of an impairment loss of our
intangibles, which as of March 31, 2007, consist mainly patents and
licensing agreements. The conditions that would trigger an impairment assessment
of our intangible assets include a significant, sustained negative trend
in our
operating results or cash flows, a decrease in demand for our products, a
change
in the competitive environment and other industry and economic
factors.
Accounting
for Income Taxes
As
part
of the process of preparing our financial statements, we are required to
estimate our income taxes. This process involves estimating our actual
current
tax exposure together with assessing temporary differences resulting from
differing treatment of items for tax and accounting purposes. These differences
result in deferred tax assets and liabilities, which are included within
our
consolidated balance sheet. We must then assess the likelihood that our
deferred
tax assets will be recovered from future taxable income. If there was not
persuasive evidence that recovery will occur, we would establish a valuation
allowance. To the extent we establish a valuation allowance or increase
this
allowance in a period, we must include an expense within the tax provision
in
the consolidated statement of operations.
Significant
management judgment is required in determining our provision for income
taxes,
our deferred tax assets and liabilities and any valuation allowance recorded
against our net deferred tax assets. We have recorded a valuation allowance
of
$8.3 million as of March 31, 2007, due to uncertainties related to our
ability
to utilize some of our deferred tax assets, primarily consisting of certain
net
operating losses carried forward before they expire and certain accrued
expenses, which are deferred for income tax purposes until paid. The
valuation
allowance is based on our estimates of taxable income and the period
over which
our deferred tax assets will be recoverable. The net deferred tax asset
as of
December 31, 2006 was $919,889, net of the valuation
allowance.
Issuances
of Common Stock
Because
of the significant liquidity issues we have faced since our inception,
we have
been required to issue common stock to third party vendors and others in
order
to pay for services rendered. Such issuances are recorded as an expense
in the
period in which the services are performed. During the three months ended
March
31, 2007, we issued an aggregate of 330,108 shares of common stock to third
parties in exchange for services performed. These services were valued
at
$178,257 for the three months ended March 31,
2007.
Recent
Accounting Pronouncement
The
Financial Accounting Standards Board (FASB) has recently issued FASB Staff
Position EITF 00-19-2 which modifies the accounting treatment of derivatives
that flow from financings involving embedded derivatives. This Staff Position
is
effective for financial statements for periods beginning January 1, 2007.
The
Company’s policy with respect to the classification of derivatives as either
equity or derivative liability will not change based on EITF 00-19-2, since
the
prior classification was made based on features independent of the presence
of a
Registration Payment Agreement, as is suggested in EITF
00-19-2.
We
will
still continue to recognize liquidated damages, as required. Whereas
they were previously recognized based on the incidence of a “Registration
Default,” that expense will now be recognized based upon the standards in SFAS #
5, “Contingencies”. These standards are probability and
susceptibility to reasonable estimation.
BUSINESS
CORPORATE
INFORMATION AND HISTORY
We
were
incorporated in the State of New Jersey on April 17, 1997. On May 19, 1997,
we
entered into a merger agreement with a predecessor company that was incorporated
on May 10, 1995. We were the surviving company in the merger.
Effective
November 5, 1999, we merged with MAS Acquisition IX Corp ("MAS"), and were
the
surviving company in the merger. Pursuant to the Agreement and Plan of Merger,
as amended, each share of common stock of MAS was converted to 0.00674 shares
of
our company. After giving effect to fractional and other reductions, MAS
shareholders received 57,280 of our shares as a result of the
merger.
In
March
2004, we reached an agreement in principal, subject to certain closing
conditions, with Fil Filipov to acquire 51% of the capital stock of Filco GmbH,
a German corporation. In October 2004, Mr. Filipov and we agreed to modify
our
agreement in principal so as to increase the number of shares of the capital
stock of Filco GmbH which we could acquire, if we had finalized the acquisition,
from 51% to 75.1%. Through December 31, 2005, we had loaned Filco GmbH an
aggregate principal amount of $6,275,881 with no loans made by us in 2006,
exclusive of interest at 8% per annum, pursuant to a series of secured
promissory notes. Security for these loans consisted of Filco's plant machinery,
equipment and other plant property, and intellectual property, including designs
and drawings. We used proceeds from the private placement offerings that we
completed during 2004 and 2005 to fund the Filco loans.
On
January 20, 2006, Filco filed for insolvency in Germany. As a result of the
filing by Filco, we terminated the Acquisition Agreement on February 7, 2006.
An
auction sale of Filco's assets occurred on May 10, 2006. Due to the uncertainty
of our position under German bankruptcy law, $4,275,881 of the Filco advances
was written off in 2005, and the remaining $2,000,000 was written off in 2006.
Accordingly, any inventory, equipment or outstanding advances to Filco have
been
written off during 2006 and there is no indication that the proceeds of any
inventory or equipment at the Filco plant will be returned to us.
INTRODUCTION
Our
principal executive offices are located at 200 Freeway Drive, Unit One,
Blackwood, NJ 08012 and our telephone number is (856) 232-3000. We are
incorporated in the State of New Jersey.
Since
1995, substantially all of our resources and operations have been directed
towards the development of the Omni-Directional wheel, related components,
Omni-Directional Lift Trucks and other Omni-Directional Vehicles. Many of the
components, including the unique shaped wheels, motors, and frames, have been
designed by Airtrax and are specially manufactured for us.
Omni-Directional
means that vehicles designed and built by us can travel in any direction. Our
Omni-directional vehicles are controlled with a joystick. The vehicle will
travel in the direction the joystick is pushed. If the operator pushes the
joystick sideways, the vehicle will travel sideways. If the operator were to
twist the joystick the vehicle will travel in circles. Our omni-directional
vehicles have one motor and one motor controller for each wheel. The
omni-directional movement is caused by coordinating the speed and direction
of
each motor with joystick inputs which are routed to a micro-processor, then
from
the micro-processor to the motor controllers and finally to the motor
itself.
During
the year ended December 31, 2006, we continued development of the COBRA and
KING
COBRA scissor lifts and the Omni-Directional power chair. We anticipate
incurring more costs on these products and plan to begin production of the
first
COBRA model and the KING COBRA in 2007. The growth and development of our
business will require a significant amount of additional working capital. We
currently have limited financial resources and based on our current operating
plan, we will need to raise additional capital in order to continue operations.
However, we are in discussions with lenders to raise capital in order to
continue operating, although we have no contracts or commitments for additional
capital at this time. We currently do not have adequate cash to meet our short
or long term objectives. In the event additional capital is raised, it may
have
a dilutive effect on our existing stockholders. However, there can be no
assurance that additional financing will be available at terms that are suitable
to us.
The
assembly of our products is conducted at our executive offices. Currently 100%
of our vehicle frames are being manufactured in the USA. These frames are
shipped to the Blackwood plant for final assembly. Previously, partially
assembled vehicles were shipped to the Blackwood facility from the Filco plant
in Germany. Fourteen were shipped to the USA for final assembly. A total of
approximately sixty frames were shipped from Bulgaria to the Filco plant for
partial assembly. None of the frames shipped from Bulgaria were within
specification. The twenty-seven frames shipped to the United States required
re-machining in order to make them useable. The balance were rejected and
abandoned with other parts inventory that was stored in the Filco
plant.
OMNI-DIRECTIONAL
TECHNOLOGY
Prior
History
Omni
directional vehicle technology has been the subject of research and development
by universities, the Department of Defense, and industry for over 25 years.
A
Swedish inventor patented an early stage omni-directional wheel. Thereafter,
the
technology was purchased by the United States Navy and was advanced at the
Naval
Surface Warfare Center. The US Navy held the patent until its expiration in
1990. In 1996, the Navy transferred this technology to us for commercialization
through a Cooperative Research and Development Agreement (CRADA).
Technology
Description
Since
the
technology transfer under the CRADA agreement, we have examined and redesigned
many aspects of the system for use in various applications including lift trucks
and other material handling equipment. In this regard, we refined control
software and hardware, and tested a variety of drive component features on
our
pilot Omni-Directional lift trucks, scissor-lifts, and multi-purpose mobility
platforms. Extensive demonstrations of prototype vehicles for commercial and
military users in combination with market research have enabled us to direct
our
development efforts towards the products offering the best probability of
success in the market.
Our
engineers have designed other aspects of our machine to complement the unique
functionality of our Omni-Directional technology. In so doing, we achieved
a
virtually maintenance free drive system which allows the vehicle free and
unrestricted movement during operation. Each vehicle is powered with electric
motors that eliminate brushes and commutators of conventional DC motors. The
motors also are lubricated for life thereby eliminating the need for additional
greasing and fittings. The ATX-3000 transmission uses a synthetic lubricant,
and
is sealed for life. The joysticks control all vehicle movement. Conventional
drive trains, steering racks, hydraulic valve levers, and foot petals for
braking and acceleration are all non-existent.
On
vehicles employing our Omni-Directional Technology, each wheel powered wheel
has
a separate electric motor, making the vehicle capable of traveling in any
direction. The motion of the vehicle is controlled by coordinating all powered
wheels through a microprocessor that receives input from an operator-controlled
joystick(s). The joystick(s) control all vehicle movement (starting, steering,
and stopping). The frame of our ATX-3000 Omni-Directional Lift Truck consists
of
a steel main frame and attached articulating axle, mobilized with four
Omni-Directional wheels. The AC electric motor for each wheel turns its own
wheel hub. Each wheel hub is encircled with multiple specially shaped rollers
that are offset 45 degrees. By independently controlling the forward or rearward
rotation of each wheel, the vehicle has the capability of traveling in any
direction. 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.
EXISTING
AND PROPOSED PRODUCTS
SIDEWINDER
Omni-Directional Lift Trucks. We anticipate that we will add additional models
of lift trucks to the SIDEWINDER line, including a Reach truck and an Order
Picker truck..
Omni-Directional
Aerial Work Platform. In late February 2004, we, in collaboration with MEC
Aerial Platform Sales Corporation of Fresno, California ("MEC"), introduced
a
concept version of a scissor lift at the American Rental Association trade
show
in Atlanta. The scissor lift called the "PHOENIX(TM)", incorporated our
Omni-Directional technology along with an MEC platform and lift
mechanisms.
On
March
13, 2004, we entered into a draft Product Development, Sales and Representation
Agreement with MEC. The draft agreement called for the joint development of
a
proto-type and production versions of an Omni-Directional aerial work platform
called the "3068ODS". During the development stage, each party was to provide
the parts, which apply to that party's area of responsibility. We would provide
all of the parts required for the Omni-Directional traction system and related
control systems, and MEC would provide all of the parts required for the scissor
lift and lifting apparatus and the control systems for the scissor lift
apparatus. After development of the prototype version, the parties were to
establish the cost of a commercial product, and if the cost of a commercial
product was considered commercially viable, the parties would jointly develop
a
commercial version of the aerial work platform. If commercial production
resulted, we would have been responsible for product manufacturing, and MEC
or
its affiliate would have been responsible to promote, market and sell the
product to their network of approximately 200 distributors. Aerial work platform
sales made by MEC would be subject to a royalty to us and, likewise sales made
by us would be subject to a royalty to MEC. The amount of the respective
royalties would be subject to agreement by the parties. Orders placed by MEC
would be financed by MEC subject to agreed production schedules. We also planned
to manufacture the COBRA(TM) AWP using the lifting mechanism as designed by
us
or procured from MEC and vendors other than MEC.
During
2004, MEC was repositioned to perform manufacturing in the United States thus
removing their obligation under the agreement. During the latter part of 2004,
we presented MEC with invoices for payment of tooling and engineering costs
related to development of the PHOENIX(TM). The invoices were not paid by MEC
who
was, at that time, in the process of realigning their finances. As a result
of
the aforementioned changes, the agreement was modified. The modification stated
that the 3068ODS aerial work platform project would be products of our company
instead of an MEC designed or built vehicle. This meant that the project would
be henceforth designed and built by us. MEC would still have the ability to
make
suggestions regarding vehicle design or construction, but the final product
would be our product. In addition, the agreement was revised to provide that
we
would build another vehicle product line, the COBRA, which will be marketed
exclusively by our dealers. The parties mutually agreed to the dissolution
of
the agreement and Airtrax has decided to design, build and market the AWP's
under the COBRA brand exclusively. Discussions with MEC regarding ways that
they
can make Omni-Directional AWP's available to their customers are on
going.
Omni-Directional
Personal Mobility Devices. We have begun the development of new technologies
which will enable us in the future, to develop Omni-Directional Personal
Mobility Devices such as Power Chairs, Scooters, and patient beds or lifts.
We
have had discussions with several equipment manufacturers who may be interested
in developing and marketing such products using these technologies. No
agreements have been made. We will require additional funds to complete
structural and ergonomic designs and proto-type vehicles, for further evaluation
and testing. We cannot predict whether we will be able to successfully develop
these products.
Military
Products. During 1999, we were 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). Under
the
Phase I base contract, we studied the application of the omni-directional
technology for military use and were supervised by the Naval Air Warfare Center
Aircraft Division (NAWC-AD) in Lakehurst, New Jersey. The contemplated use
includes the installation of jet engines on military aircraft and the
transportation of munitions and other military goods. We completed the Phase
I
base contract in 1999 and were subsequently awarded a Phase I option from
NAWC-AD to further define the uses of the MP2. In July 2000, we were awarded
a
Phase II research contract under the SBIR program. Under the Phase II contract,
we studied the feasibility of the MP2 for military purposes, and constructed
two
proto-type devices. This contract (with the option) was extended twice for
6
months each past the 42-month contract time period.. A completed proto-type
MP2
was delivered to the US Navy during the end of the first quarter of 2004 for
testing purposes. A second design, an Omni-Directional Jet Engine Handler
conversion kit was constructed, and demonstrated as proof of concept of the
modularity of the design. We have been advised by the US Navy that a non-SBIR
sponsor for the MP2 program must be identified before a Phase II option is
exercised. A Phase III contract could be awarded without such a sponsor.
Although our management believes the underlying Omni-Directional Technology
for
the proposed MP2
has
significant potential for both commercial and military applications, we
cannot
predict whether any sales beyond the Phase II contract will result from
the SBIR
program. It is the belief of management that sales to the US military for
products such as the MP2 will not materialize until the Omni-Directional
Technology achieves commercial acceptance. We do believe, however, that
products
such as the ATX-3000 or the COBRA AWP can and will be sold to the US government,
possibly including the military, through a GSA Multiple Awards Contract.
We have
begun the application process and hope it will be awarded by the end of
2007. We
cannot predict whether we will be successful in our
application.
On
September 7, 2006, we were awarded a $415,000 contract to design and build
a
customized MP2 Equipment Handling Unit for the Israeli Air Force. The contract
includes an option to build 5 additional units at $95,000 each upon the
acceptance of the first unit. It is estimated that the follow on orders
that
could result from this contract would be from 29 to 100 units over the
next one
to three years. The Critical Design Review was completed in November 2006,
the
design was approved and initial deliverables were provided. As a result,
we
received a first process payment of $170,000 on December 12, 2006. We began
the
Acceptance Test Procedure in April 2007, which is continuing to date, and
upon
successful completion, will receive a second payment of $162,000. We cannot
predict whether we will be able to successfully pass all of the acceptance
tests
and complete the contract, or that if we do so, that any subsequent orders
will
result.
CURRENT
OPERATIONS
Since
1995, substantially all of our resources and operations have been directed
towards the development of the Omni-Directional wheel, related components,
Omni-Directional Lift Trucks and other Omni-Directional Vehicles. Many of
the
components, including the unique shaped wheels, motors, and frames, have
been
designed by Airtrax and are specially manufactured for us. 29 ATX-3000
Omni-Directional lift trucks, carrying ANSI certification and the UL Label,
have
been shipped to customers in 2006, and nine others are ready to ship pending
receipt of orders.
ANSI
testing refers to a series of tests including tilt testing the vehicle with
masts it will use to make certain that it will not tip over in normal use.
In
addition, ANSI testing includes drop testing specified loads on the overhead
guard to make certain that the overhead guard will not fail and crush the
operator. These tests require us to turn the vehicle on its side to prove that
the battery door lock will retain the battery in the event the vehicle is
overturned. ANSI testing was performed and documented by us and we have
certified that the tests have been completed and the vehicle has passed in
all
respects. This testing was required prior to the vehicle being sold to the
public in the United States.
UL
testing is completed on lift trucks to certify that is free of hazards with
respect to fire and electrical shock. Completion of UL testing is generally
considered the mark of companies who will take extra steps and precautions
to
protect their customers.
MANUFACTURING
AND SUPPLIERS
There
was
limited production in the second through fourth quarters of 2006. All of the
units shipped in 2006 and our current inventory were assembled in the last
quarter of 2005 and the first quarter 2006. Our General Manager for plant
production, a former plant manager for GM, has established the production
assembly process and procedure for our vehicle assembly. His efforts have helped
to develop procedures, and to incorporate inventory control and quality
assurance programs so that we stand ready to rapidly scale production capacity
at the Blackwood facility. Initially this plant was equipped for nominal monthly
production but is capable of ramping up for anticipated demand before year's
end. We also plan to manufacture the KING COBRA Omni-Directional AWP in the
Blackwood plant beginning in the third quarter of 2007.
Components
for our products consist of over the counter products and proprietary products
that have been specially designed and manufactured by various suppliers in
collaboration with us. We believe that continual refinements of certain
components will occur during the first six months of initial KING COBRA
production in response to user feedback and additional product testing. We
will
strive to improve product functionality which may require additional refinements
in the future. We consider the specially designed and manufactured products
proprietary, and have entered into exclusive contractual agreements with certain
suppliers to protect the proprietary nature
of
these products. These arrangements prohibit the supplier from producing the
same
or similar products for other companies who would want to compete directly
with
us in the omni-directional vehicle market. In addition, while we maintain single
sources for some of the over the counter components, we are engaged in
qualifying and securing agreements with second sources for all possible
components
DISTRIBUTION
AND PRODUCT MARKETING
We
intend
to establish a national and international network of distributors and dealers
to
sell our SIDEWINDER and COBRA lines to users, however, we may sell directly
to
select national and international accounts and retailers. National and
international accounts or retailers include, but are not limited to, nationally
recognized businesses with national or international locations having facilities
in numerous states or countries.
During
2004 and 2005, in anticipation of commercial production, we solicited interest
from targeted dealers nationwide, and in certain instances, received contracts
from a number of these dealers. Due to the delay in establishing commercial
production, the contracts were not fulfilled. In 2004, we began soliciting
dealers nationwide and distributors in several foreign countries. Principal
terms of the agreement reached is that these dealers will purchase our products
which include the SIDEWINDER or the COBRA AWP (scissor lift), or both and sell
these products to their clients. Certain of the distributors were given
"exclusive" territories, such as Airtrax Canada (Airtrax Canada is not owned
or
operated by us but we have authorized their use of the Airtrax Name). Airtrax
Canada was required to purchase a minimum number of SIDEWINDER units to maintain
the "exclusivity" portion of the agreement between firms. Airtrax Canada lost
their exclusivity in 2006, as they did not meet the minimum requirements of
the
agreement. Presently, we are unable to distribute quantities of vehicles in
Europe due to our inability to be certified compliant ("CE") with Europe. We
expect to be CE compliant and able to distribute vehicles in 2007, although
no
assurances can be given. The dealers in the US generally have not been given
exclusive territorial rights, but that has occurred in some areas. They are
required to purchase one or more vehicles, however, to become a dealer. Credit
terms are now available to approved dealers while foreign distributors are
only
sold under the terms of letters of credit. All foreign sales are paid in
advance, under terms of an irrevocable letter of credit or approved credit
terms. Targeted dealers for the SIDEWINDER brand will consist of selected
premier equipment dealers, currently selling other lift truck products. The
dealer network will consist of dealers who have substantial market share in
the
US, with a history of being able to sell and repair lift trucks and/or related
material handling solutions. Several of the targeted dealers are significant
sized entities, having annual sales in excess of $100 million. We expect to
provide a sales incentive to dealers through an aggressive pricing structure.
Typically, a dealer will earn a commission ranging from $500 to $1,000 on the
sale of a competitive lift truck. Our pricing structure will enable the dealer
to receive much higher commissions from the sale of the SIDEWINDER
products.
We
also
intend to use trade shows and print and television media to advertise and
promote our Omni-Directional products. Print media will include advertisements
in national and international publications such as web based ads, major material
handling equipment magazines, and direct mailings to targeted distributors
and
end-users. Heavy equipment is rarely, if at all, advertised on television.
However, we believe that television will provide an effective media for our
product, due to its unique attributes. We believe that due to the current
economic conditions, we will be able to capitalize on favorable advertising
pricing. We also expect to be an exhibitor at industry trade shows from time
to
time, including the bi-annual ProMat show located in Chicago,
Illinois.
Product
Warranty Policies
Our
product warranty policy is similar to the warranty policies of other major
manufacturers, i.e., one-year warranties on all parts and labor, and two years
on major parts, however, our vehicles have fewer parts to warranty. In addition,
manufacturers of our parts and vehicles have their own warranty policies that,
in effect, take the financial exposure from our company. There are exceptions
to
the one year rule, such as the frame and significantly, the motors and
controllers. These parts have an eighteen-month warranty, because the coverage
begins when the product is shipped to us and not when the product is
purchased.
MARKETS
Lift
Trucks
Our
initial market focus was directed to the lift truck market. We believe that
commercial versions of Omni-Directional Lift Trucks will improve the materials
handling and warehousing industries creating potential markets globally.
Industry data shows that during 2003 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 (Modern
Materials Handling estimate), the total market in the United States would
approximate $5 billion in 2003. This amount represents sales of a broad range
of
vehicles with price ranges from $18,000 to $31,000 for a standard 3,000-pound
rated vehicle to $75,000 or greater for specialty narrow aisle or side loader
vehicles. We expect to continue to make inroads into this market with the
introduction of additional SIDEWINDER brand material handling vehicles in the
future.
Aerial
Work Platforms
Aerial
Work Platforms are used in the construction and warehousing industries, and
are
ideally suited for our Omni-Directional Technology. According to data provided
by the United States Department of Commerce, this market consists of
approximately $1.2 billion in annual sales. Aerial Work Platforms and man lifts
range in size from single user lifts to large off road machines. Of the total
market, we expect to compete with a range of indoor man lifts. Great strides
were made in our development of our AWP products during 2006, and we now plan
to
introduce two models under the COBRA brand in 2007, and additional units in
2008.
COMPETITION
We
expect
to confront competition from existing products, such as standard and "Narrow
Aisle or NA" lift trucks, and from competing technologies. Competition with
standard lift trucks, which retail from $16,000 to $31,000, will be on the
basis
of utility, price, and reliability. We believe that we will compete favorably
with a standard lift truck for reliability, and that a purchase decision will
be
based upon weighing the operational advantages of our products against its
higher purchase price. NA and sideloader lift trucks retail at $45,000 or
greater. While our SIDEWINDER Omni-Directional Lift Truck cannot be classified
as "narrow aisle", it can perform "narrow aisle" functions at a significantly
less cost. We also are aware of multi-directional lift trucks now being offered
by other manufacturers that retail from $42,000 and higher for the standard
version. These newer products have improved operational features, however,
they
are unable to travel in all directions, and hence are not omni-directional.
These machines have to stop, turn all four wheels, and then proceed to drive
in
the sideward direction. Despite these improved operational features, management
believes these manufacturers have adhered to older conventional methods and
have
added a substantial amount of parts to their lift trucks to achieve improved
functionality, which contrasts with the design and features of our product
as
discussed previously herein. Therefore, to that extent, we believe that we
maintain a competitive advantage to these newer products.
We
recognize that many of these manufacturers are subsidiaries of major national
and international equipment companies, and have significantly greater financial,
engineering, marketing, distribution, and other resources than us. In addition,
the patent on the first omni-directional wheels expired in 1990. Although we
have received patent protection for certain aspects of our advanced technology,
no assurances can be given that such patent protection will effectively thwart
competition.
PATENTS
AND PROPRIETARY RIGHTS
In
December 1997, we were awarded a patent for an omni-directional helicopter
ground-handling device. On January 22, 2002, we received US patent #6,340,065
relating to our low vibrations wheels. On May 28, 2002, we received US patent
#6,394,203 encompassing certain aspects of the omni-directional wheel with
some
features specific to the lift truck, and in April 15, 2003 we received US patent
#6,394,203 relating to methods for designing low-vibration wheels. We also
have
several patent applications pending relating to other aspects of our technology.
We expect to make future patent applications relating to various other aspects
of our omni-directional technology. We also have filed a patent application
for
our hybrid power module concepts. At this time, no foreign patents have been
issued for any of our technology.
On
September 8, 2003, we entered an exclusive license agreement with Excalibur
Design Services, Inc. and Nicholas Fenelli (Inventor), to secure and use certain
proprietary intellectual properties known collectively as "Omni-Directional
Vehicle Control Algorithms". Mr. Fenelli is also our Chief Operating Officer.
Due to severe cash flow restrictions in 2006, we were unable to fulfill our
obligations under the terms of the agreement and Excalibur rescinded the
exclusivity portion of the agreement. As of December 31, 2006, no other party
was granted rights to use the property. On February 19, 2007 we negotiated
an
amendment with Excalibur to reinstate our exclusive rights to the
"Omni-Directional Vehicle Control Algorithms". We expect to resolve all issues
to the mutual benefit of the two companies during 2007.
We
also
seek to protect our proprietary technology through exclusive supply contracts
with manufacturers for specially designed and manufactured
components.
PRODUCT
LIABILITY
Due
to
nature of our business, we may face claims for product liability resulting
from
the use or operation of our lift trucks or other products.
Presently,
we maintain product liability insurance in the amount of $1 million. We
anticipate increasing this amount to $10 million in the future, as we deem
necessary to do so. We obtained our insurance commensurate with the initial
shipment of our Omni-Directional Lift Trucks.
EMPLOYEES
LEGAL
PROCEEDINGS
From
time
to time, we may become involved in various lawsuits and legal proceedings which
arise in the ordinary course of business. However, litigation is subject to
inherent uncertainties, and an adverse result in these or other matters may
arise from time to time that may harm our business. We are currently not aware
of any such legal proceedings or claims that we believe will have, individually
or in the aggregate, a material adverse affect on our business, financial
condition or operating results.
MANAGEMENT
Directors
and Executive Officers
Name
|
Age
|
Position
|
Robert
M. Watson
|
59
|
Chief
Executive Officer, Acting Chief Financial Officer and
Director
|
D.
Barney Harris
|
46
|
Director
|
James
Hudson
|
64
|
Director
|
William
Hungerville
|
71
|
Director
|
Fil
Filipov
|
60
|
Director
|
Andrew
Guzzetti
|
59
|
Chairman
of the Board of Directors
|
Peter
Amico, Jr.
|
42
|
Director
|
Robert
Borski, Jr.
|
58
|
Director
|
Nicholas
Fenelli
|
52
|
Chief
Operations Officer
|
Directors
serve until the next annual meeting and until their successors are elected
and
qualified. The Directors of our company are elected by the vote of a
majority in interest of the holders of the voting stock of our company and
hold
office until the expiration of the term for which he or she was elected and
until a successor has been elected and qualified.
A
majority of the authorized number of directors constitutes a quorum of the
Board
for the transaction of business. The directors must be present at the meeting
to
constitute a quorum. However, any action required or permitted to be taken
by
the Board may be taken without a meeting if all members of the Board
individually or collectively consent in writing to the action.
Officers
are appointed to serve for one year until the meeting of the board of directors
following the annual meeting of stockholders and until their successors have
been elected and qualified.
The
principal occupations for the past five years (and, in some instances, for
prior
years) of each of our executive officers and directors, followed by our key
employees, are as follows:
Robert
M. Watson
- Mr.
Watson has been our Chief Executive Officer and a Director since November 1,
2006. From 2001 until October 2006, Mr. Watson was President and CEO of Hartz
& Company, a manufacturer of tailored clothing, with two production
facilities in the United States with sales and marketing offices in New York
City. From 1996 to 2001, Mr. Watson served as the Vice President, CFO and COO
of
America's Best Contacts and Eyeglasses, a retail chain with 118 locations,
a
full service laboratory and distribution center. His experience in the public
arena was with Continental Can Company, from 1967 through 1986, where he served
as Controller for the food packaging company with 29 manufacturing facilities
and sales in excess of $1 billion. Mr. Watson received a BS in accounting from
Fairleigh Dickinson University and an EMBA from the University of New
Haven.
D.
Barney Harris
- Mr.
Harris has been a Director since December 1998. From 1997 to July 1999, Mr.
Harris was employed by UTD, Inc. Manassas, Virginia. Prior to 1997, Mr. Harris
was employed by EG&G WASC, Inc., Gaithersburg, Maryland, 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.
James
Hudson
- Mr.
Hudson has been a Director since May 1998. From 1980 to present, he has been
President of Grammer, Dempsey & Hudson, Inc., a steel distributor located in
Newark, New Jersey.
William
Hungerville
- Mr.
Hungerville has been a Director since February 2002. Since 1998, Mr. Hungerville
has been retired from full time employment. From 1974 to 1998, he was the sole
owner of a pension administrative service firm. Mr. Hungerville is a graduate
of
Boston College, and attended an MBA program at Harvard University for 2
years.
Fil
Filipov
- Mr.
Filipov has been a Director since December 2004. Mr. Filipov has served as
the
Chairman of Supervisory Board of Tatra, a Czech Company, which is producing
off
highway trucks. . Mr. Filipov was President & CEO of Terex Cranes, a $1
billion dollar business segment of Terex Corporation. He was responsible for
strategic acquisitions and served as President and CEO from March 1995 through
December 2003. From 1994 through 1996, Mr. Filipov was the Managing Director
of
Clark Material Handling Company in Germany (Filco GmbH).
Andrew
Guzzetti
- Mr.
Guzzetti has been a director since April 1, 2006 and Chairman since August
31,
2006. From September 2004 to the present, Andrew G. Guzzetti has served as
Managing Director of the Private Client Group of McGinn Smith and Co., Inc.,
an
investment banking and retail brokerage firm, where he is responsible for
building the wealth management private client group through recruitment and
training. From February 2004 through September 2004, Mr. Guzzetti served as
Managing Director of the Private Client Division of The Keystone Equities Group
in which he was responsible for building the retail brokerage arm of this
company. From February 2002 through February 2004, Mr. Guzzetti was a private
investor consultant in which he assisted start-up public and private companies
in raising funds. From November 1995 through February 2002, Mr. Guzzetti served
as Senior Vice President and Branch Manager of Salomon Smith Barney where he
was
responsible for increasing the financial consultant population through
recruitment and training. Mr. Guzzetti received his BA in Economics from Utica
College in 1969.
Peter
Amico, Jr.
- From
1988 to the present, Mr. Amico has served as a police officer in the State
of
New Jersey where he has managed and trained personnel and directed police
operations. Mr. Amico served as a Police Investigator from 1994 to 1995 and
was
promoted to Supervisor in 1996. From 1983 to 1987, he served in the United
States Marine Corps. where his service included police duties and training
coordination. In addition, Mr. Amico received an Associates Degree in Law
Enforcement from Gloucester County College in 2003.
Robert
Borski, Jr.
- From
1982 to 2003, Mr. Borski represented the Third Congressional District of
Pennsylvania for ten terms in the United States House of Representatives, where
he was a senior member of the House Transportation and Infrastructure Committee
and a vocal advocate for an improved national transportation system. He was
awarded the American Public Transportation Association's National Distinguished
Service Award in 2002 and the Silver Order of the de Fleury Medal from the
Army
Engineering Association. In 2003, Mr. Borski formed Borski Associates, a
government relations firm specializing in transportation and economic
development issues. He is a driving force behind efforts to revitalize the
North
Delaware riverfront, an area of abandoned industrial sites, into a center of
residential and commercial activity. Currently, Mr. Borski serves on the Board
of Directors of the Northeast-Midwest Institute, an organization promoting
economic vitality for Northeastern and Midwestern states, and on the Board
of
Directors of Pennoni Associates, a civil engineering firm. Mr. Borski received
a
Bachelor of Arts degree from the University of Baltimore in 1971.
Nicholas
Fenelli -
Nicholas E. Fenelli has been with our company since 2001 serving first as
Project Engineer, and as Vice President of Concept Development. From 1996 to
1998, Mr. Fenelli served as Project Engineer NACCO Materials Handling Group,
Inc, where his work included the ergonomic improvement project for the
Hyster/Yale order picker trucks, and work on the development of the three
wheeled sit down rider truck. From 1990 to 1995, Mr. Fenelli was Plant Manager
for Cammerzell Machinery Company, a manufacturer of powder compaction and
robotic conveying equipment for the Ceramic, Refractory, and Pharmaceutical
industries. Between 1988 and 2002, Mr. Fenelli served as Treasurer and as a
member of the Board of Directors of the Engineers Club of Trenton. He received
a
BS in Mechanical Engineering from Lehigh University in 1978.
COMMITTEES
OF THE BOARD
Audit
Committee
Our Audit Committee currently consists of William Hungerville, James Hudson
and
D. Barney Harris, with Mr. Hungerville elected as Chairman of the Committee.
Our
Board of Directors has determined that each of Messrs. Hungerville, Hudson
and
Harris are "independent" as that term is defined under applicable SEC rules.
Mr.
Hungerville is our audit committee financial expert.
Our Audit Committee’s responsibilities include: (i) reviewing the independence,
qualifications, services, fees, and performance of the independent auditors,
(ii) appointing, replacing and discharging the independent auditor, (iii)
pre-approving the professional services provided by the independent auditor,
(iv) reviewing the scope of the annual audit and reports and recommendations
submitted by the independent auditor, and (v) reviewing our financial reporting
and accounting policies, including any significant changes, with management
and
the independent auditor.
We currently have no compensation committee or nominations and governance
committee of our board of directors.
FAMILY
RELATIONSHIPS
There
are
no family relationships among our executive officers and directors.
LEGAL
PROCEEDINGS
As
of the
date of this prospectus, there are no material proceedings to which any of
our
directors, executive officers, affiliates or stockholders is a party adverse
to
us.
CODE
OF ETHICS
We
have
not adopted a Code of Ethics within the meaning of Item 406(b) of Regulation
S-B
of the Securities Exchange Act of 1934.
SECTION
16(A) BENEFICIAL OWNERSHIP COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934 requires our directors and
executive officers and persons who beneficially own more than ten percent of
a
registered class of our equity securities to file with the SEC initial reports
of ownership and reports of change in ownership of common stock and other equity
securities of our company. Officers, directors and greater than ten percent
stockholders are required by SEC regulations to furnish us with copies of all
Section 16(a) forms they file. Based solely upon a review of Forms 3 and 4
and
amendments thereto furnished to us under Rule 16a-3(e) during the fiscal year
ended December 31, 2006, and Forms 5 and amendments thereto furnished to us
with
respect to the fiscal year ended December 31, 2006, we believe that during
the
year ended December 31, 2006, our executive officers, directors and all persons
who own more than ten percent of a registered class of our equity securities
complied with all Section 16(a) filing requirements.
EXECUTIVE
COMPENSATION
The
following table sets forth the cash compensation (including cash bonuses) paid
or accrued by us to our Chief Executive Officer and our four most highly
compensated officers other than the Chief Executive Officer as of December
31,
2006 and December 31, 2005.
Name
& Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Awards
($)
|
|
Option
Awards
($)
|
|
Non-Equity
Incentive Plan Compensation ($)
|
|
Change
in Pension Value and Non-Qualified Deferred Compensation
Earnings
($)
|
|
All
Other Compensation ($)
|
|
Total
($)
|
|
Peter
Amico,
CEO,
President & Director
|
|
|
2006
2005
|
|
|
$168,269
$303,751
|
|
|
$0
$0
|
|
|
0
0
|
|
|
0
$975,000
|
|
|
0
0
|
|
|
0
0
|
|
|
0
0
|
|
|
$168,269
$303,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nicholas
Fenelli, Vice President & COO
|
|
|
2006
2005
|
|
|
$96,798
$78,202
|
|
|
$0
$0
|
|
|
0
0
|
|
|
$24,000
$53,500
|
|
|
0
0
|
|
|
0
0
|
|
|
0
0
|
|
|
$96,798
$78,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
M. Watson. CEO, President & Director
|
|
|
2006
2005
|
|
|
$11,538
$0
|
|
|
$50,000
0
|
|
|
|
|
|
$45,000
0
|
|
|
0
0
|
|
|
0
0
|
|
|
0
0
|
|
|
$61,538
0
|
|
Outstanding
Equity Awards at Fiscal Year-End Table.
The
following table sets forth information with respect to grants of options to
purchase our common stock to the named executive officers at December 31,
2006.
Option
Awards
|
|
Stock
Awards
|
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
(#)
|
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
(#)
|
|
Equity
Incentive
Plan
Awards:
Market
or Payout
Value
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
($)
|
|
-Robert
M. Watson
|
|
|
-300,000
|
|
|
-0
|
|
|
-400,000
|
|
|
-$0.46
|
|
|
-Nov.
30, 2008
|
|
|
-0
|
|
|
-0
|
|
|
-0
|
|
|
-0
|
|
Director
Compensation
The
following table sets forth with respect to the named directors, compensation
information inclusive of equity awards and payments made at December 31,
2006.
Name
(a)
|
Fees
Earned or Paid in Cash
($)
(b)
|
Stock
Awards
($)
(c)
|
Option
Awards
($)
(d)
|
Non-Equity
Incentive Plan Compensation ($)
(e)
|
Change
in Pension Value and Nonqualified Deferred Compensation
Earnings
(f)
|
All
Other Compensation
($)
(g)
|
Total
($)
(h)
|
-
Andrew Guzzetti
|
-
|
20,000
-
|
$32,800
|
0
-
|
0
-
|
0
-
|
$32,800
-
|
-Robert
M. Watson
|
-
|
-0
|
-
|
0-
|
0-
|
0-
|
-
|
James
Hudson (1)-
|
-
|
35,000-
|
-$52,300
|
0-
|
0-
|
0-
|
--$52,300
|
William
Hungerville (1)-
|
-
|
35,000-
|
-$52,300-
|
0-
|
0-
|
0-
|
-$52,300-
|
D.
Barney Harris-(1)
|
-
|
35,000
|
-$52,300-
|
0-
|
0-
|
0-
|
-$52,300-
|
Fil
Filipov-
|
-
|
0
|
-
|
0-
|
0-
|
0-
|
-
|
Robert
Borski-
|
-
|
20,000-
|
$32,800-
|
0-
|
0-
|
0-
|
$32,800-
|
Peter
Amico, Jr,-
|
-
|
0
-
|
-
|
0-
|
0-
|
0-
|
-
|
(1)
Includes 15,000 shares issued for director fees earned in 2005.
EMPLOYMENT
AGREEMENTS
On
December 26, 2006, we entered into an Employment Agreement dated as of December
1, 2006 with Robert M. Watson, our President and Chief Executive
Officer.
Pursuant
to the Employment Agreement, we will employ Mr. Watson for a period of 2 years
commencing December 1, 2006 unless terminated upon 30 days prior written notice
by either party pursuant to the terms set forth therein. From December 1, 2006
through November 30, 2007, Mr. Watson will be paid an annual base salary of
$150,000 ("Base Salary"). In addition, Mr. Watson was paid a start-up bonus in
the amount of $50,000 for services rendered by him to our company prior to
the
execution of the Employment Agreement and Mr. Watson will be issued options
to
purchase 300,000 shares of our common stock at a price equal to $0.46 per share.
From December 1, 2007 through November 30, 2008, Mr. Watson's Base Salary will
increase to $200,000 per year. On December 1, 2007 and June 1, 2008, Mr. Watson
shall be issued options to purchase 200,000 and 200,000 shares of our common
stock, respectively, each at a price equal to $0.46 per share. Further, Mr.
Watson will be eligible to earn an annual cash bonus at the discretion of our
Board of Directors based on meeting performance objectives and bonus
criteria.
During
the term of his employment and for a period thereafter, Mr. Watson will be
subject to confidentiality and non-competition provisions, subject to standard
exceptions.
Equity
Compensation Plan Information
The
following table shows information with respect to each equity compensation
plan
under which our common stock is authorized for issuance as of December 31,
2006.
EQUITY
COMPENSATION PLAN INFORMATION
Plan
category
|
Number
of securities
to
be issued upon
exercise
of
outstanding
options,
warrants
and rights
|
Weighted
average
exercise
price of
outstanding
options,
warrants
and rights
|
Number
of securities
remaining
available for future issuance under equity compensation plans (excluding
securities reflected in column (a)
|
|
(a)
|
(b)
|
(c)
|
Equity
compensation plans approved by security holders
|
-0-
|
-0-
|
-0-
|
|
|
|
|
Equity
compensation plans not approved by security
holders
|
-0-
|
-0-
|
-0-
|
|
|
|
|
Total
|
-0-
|
-0-
|
-0-
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Other
than as disclosed below, there have been no transactions, or proposed
transactions, which have materially affected or will materially affect us in
which any director, executive officer or beneficial holder of more than 10%
of
the outstanding common stock, or any of their respective relatives, spouses,
associates or affiliates, has had or will have any direct or material indirect
interest. We have no policy regarding entering into transactions with affiliated
parties.
Arcon
Corp., a corporation wholly owned by the estate of our former chairman and
president Peter Amico, owns 275,000 shares of our preferred stock. Each share
of
Preferred Stock is entitled to 10 votes per share on all matters on which
shareholders are entitled to vote. The holders of our common stock and preferred
stock vote as one single class. Mr. Amico and Arcon Corp. together have
1,870,623 shares of common stock, representing 1,870,623 votes, plus 275,000
shares of preferred stock with 10 votes per share, or a total of 2,750,000
voting shares. The aforementioned equals a total of 4,620,623 voting shares
of
capital stock by Mr. Amico and Arcon. 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.
The annual cash dividend as of December 31, 2004 was $68,750. Dividends are
cumulative and the holder has a right during any quarter 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 trading price of the common stock on the last day
of
the dividend period. 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.
The
consideration paid by Mr. Amico and Arcon for the initial issuance of 275,000
shares of our preferred stock is as follows: Air Tracks, Inc. was incorporated
in May 1995. Peter Amico, our President and the largest shareholder of Air
Tracks, Inc., capitalized Air Tracks, Inc. with $20,000. In exchange, Mr. Amico
was issued 3.5 million shares of common stock of Air Tracks, Inc. We were formed
in April 1997 by Louis Perosi and Albert Walla. In April 1997, it was agreed
to
merge our company with Air Tracks, Inc. Pursuant to the merger, Mr. Amico
exchanged 3.5 million shares of Air Tracks, Inc. stock for 1 million shares
of
our common stock, plus 275,000 shares of preferred stock. It was determined
by
the parties that the voting shares that would be held by Mr. Amico/Arcon would
be essentially the same. Since the preferred shares are not convertible and
thus
held no exit method it was determined to provide a dividend. The $5.00 per
share
was the price used to satisfy the issue.
Dividends
of $68,750 accrued on the preferred stock
during each of the years 2002 through 2006. Cash dividends of $131,771 were
paid
during 2004. A stock dividend of 136,041 common shares will be paid in 2007,
satisfying $51,563 of the unpaid dividends. In addition, common shares will
be
issued in 2007 to satisfy $112,500 of unpaid dividends. The balance of unpaid
dividends at of December 31, 2006 was $47,916.
The
financial statements at December 31, 2004 reflect 275,000 shares of preferred
stock outstanding and disclosed that an additional 100,000 shares of preferred
stock were deemed the equivalent of 221,892 shares of common stock that would
have been required to settle an equivalent amount of preferred dividends. We
have determined that the number of shares deemed the equivalent of the preferred
stock dividend and has been recalculated based on our Articles of Incorporation,
as amended, including on April 30, 2000. Accordingly, we will issue 136,041
shares of common stock to the sole holder of the preferred stock as payment
of
$51,561 of preferred stock dividends less other adjustments resulting from
the
recalculation of the number of common shares required to pay preferred stock
dividends, subsequently approved. During the period January 1, 2003 through
June
30, 2006, 200,238 shares of common stock were issued in excess of the amount
required.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information regarding beneficial ownership
of
our common stock as of July 27, 2007.
· by
each
person who is known by us to beneficially own more than 5% of our common stock;
· by
each
of our officers and directors; and
· by
all of
our officers and directors as a group.
NAME
AND ADDRESS
OF
OWNER
|
TITLE
OF
CLASS
|
NUMBER
OF
SHARES
OWNED (1)
|
PERCENTAGE
OF CLASS PRIOR TO OFFERING (2)
|
PERCENTAGE
OF CLASS AFTER OFFERING (3)
|
|
|
|
|
|
Robert
M. Watson
|
Common
Stock
|
320,000
(4)
|
1.23%
|
*
|
200
Freeway Drive, Unit 1
|
|
|
|
|
Blackwood,
NJ 08012
|
|
|
|
|
D.
Barney Harris
|
Common
Stock
|
221,562
|
*
|
*
|
200
Freeway Drive, Unit 1
|
|
|
|
|
Blackwood,
NJ 08012
|
|
|
|
|
|
|
|
|
|
James
Hudson
|
Common
Stock
|
140,800
(5)
|
*
|
*
|
200
Freeway Drive, Unit 1
|
|
|
|
|
Blackwood,
NJ 08012
|
|
|
|
|
|
|
|
|
|
William
Hungerville
|
Common
Stock
|
221,000
|
*
|
*
|
200
Freeway Drive, Unit 1
|
|
|
|
|
Blackwood,
NJ 08012
|
|
|
|
|
|
|
|
|
|
Fil
Filipov
|
Common
Stock
|
20,000
|
*
|
*
|
200
Freeway Drive, Unit 1
|
|
|
|
|
Blackwood,
NJ 08012
|
|
|
|
|
|
|
|
|
|
Andrew
Guzzetti
|
Common
Stock
|
190,000
|
*
|
*
|
200
Freeway Drive, Unit 1
|
|
|
|
|
Blackwood,
NJ 08012
|
|
|
|
|
|
|
|
|
|
Peter
Amico, Jr.
|
Common
Stock
|
52,500
|
*
|
*
|
200
Freeway Drive, Unit 1
|
|
|
|
|
Blackwood,
NJ 08012
|
|
|
|
|
|
|
|
|
|
Robert
Borski, Jr.
|
Common
Stock
|
78,504
|
*
|
*
|
200
Freeway Drive, Unit 1
|
|
|
|
|
Blackwood,
NJ 08012
|
|
|
|
|
|
|
|
|
|
Nicholas
Fenelli
|
Common
Stock
|
138,500
|
*
|
*
|
200
Freeway Drive, Unit 1
|
|
|
|
|
Blackwood,
NJ 08012
|
|
|
|
|
All
Officers and Directors
|
Common
Stock
|
1,402,866
(4) (5)
|
5.40%
|
2.21%
|
As
a Group (9 persons)
|
|
|
|
|
|
|
|
|
|
Crescent
International, Ltd.
|
Common
Stock
|
1,496,481
(6)
|
5.50%
|
0%
|
*
Less
than 1%.
(1)
Beneficial Ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock subject to options
or
warrants currently exercisable or convertible, or exercisable or convertible
within 60 days of July 27, 2007 are deemed outstanding for computing the
percentage of the person holding such option or warrant but are not deemed
outstanding for computing the percentage of any other person.
(2)
Based
upon 25,700,993 shares issued and outstanding on July 27,
2007.
(3)
Percentage based upon 63,272,830 shares of common stock outstanding after
the
offering, assuming all shares registered are sold.
(4)
Includes 300,000 options for common stock issued in connection with Mr. Watson’s
employment contract dated December 1, 2006.
(5)
Includes 44,500 shares owned by a corporation owned by Mr. Hudson.
(6)
Represents shares of common stock issuable upon conversion of convertible
debentures and exercise of warrants. The percentage of class after offering
assumes that all registered shares are sold.
DESCRIPTION
OF SECURITIES
COMMON
STOCK
We
are
authorized to issue up to 100,000,000 shares of common stock, no par value.
As
of July 27, 2007, there were 25,700,993 shares of common stock outstanding.
Holders of the common stock are entitled to one vote per share on all matters
to
be voted upon by the stockholders. Holders of common stock are entitled
to
receive ratably such dividends, if any, as may be declared by the Board
of
Directors out of funds legally available therefor. Upon the liquidation,
dissolution, or winding up of our company, the holders of common stock
are
entitled to share ratably in all of our assets which are legally available
for
distribution after payment of all debts and other liabilities and liquidation
preference of any outstanding common stock. Holders of common stock have
no
preemptive, subscription, redemption or conversion rights. The outstanding
shares of common stock are validly issued, fully paid and
nonassessable.
The
transfer agent of our common stock is Signature Stock Transfer, 301 Ohio Drive,
Suite 100, Plano, TX 75093.
PREFERRED
STOCK
As
of
July 27, 2007, there were 275,000 shares of preferred stock outstanding.
We held
a special meeting of our shareholders on March 28, 2005 pursuant to which
a
majority of our shareholders approved an amendment to our certificate of
incorporation to increase our authorized preferred stock from 500,000 to
5,000,000 shares. Accordingly, we are authorized to issue up to 5,000,000
shares
of preferred stock. In addition, pursuant to said meeting, a majority of
our
shareholders approved an amendment to our certificate of incorporation to
provide that the shares of preferred stock may be issued in series, and shall
have such voting powers, full or limited, or no voting powers, and such
designations, preferences and relative participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, as shall
be
stated and expressed in the resolution or resolutions providing for the issuance
of such stock adopted from time to time by the board of directors. Accordingly,
our board of directors is expressly vested with the authority to determine
and
fix in the resolution or resolutions providing for the issuances of preferred
stock the voting powers, designations, preferences and rights, and the
qualifications, limitations or restrictions thereof, of each such series
to the
full extent now or hereafter permitted by the laws of the State of New Jersey.
The
holders of the preferred stock are entitled to receive, when, as, and if
declared by our board of directors, out of funds legally available therefore,
cash dividends on each share of preferred stock at the rate of 5% per annum,
or
if cash is not legally available, in additional shares of common stock. The
preferred stock, in respect of dividends and distributions upon our liquidation,
winding-up, and dissolution, shall rank senior to all classes of our common
stock and each other class of capital stock or series of preferred stock created
that does not expressly provide that it ranks senior to, or on a parity with,
the preferred stock. The holders of preferred stock are entitled to cast 10
votes for each share held of the preferred Stock on all matters presented to
our
shareholders for shareholder vote.
On
April
1, 2005, we issued 100,000 shares of preferred stock to the sole holder of
the
preferred stock as payment of dividends in lieu of cash dividends with respect
to previously issued shares of preferred stock. Our original Articles of
Incorporation, as amended, including on April 30, 2000, do not support the
issuance of additional shares of preferred stock as payment of dividends on
shares of issued and outstanding preferred stock. Accordingly, the 100,000
shares of preferred stock which were issued to the holder on April 1, 2005
were
issued in error.
Our
Articles of Incorporation, as amended, including on April 30, 2000, similarly
do
not support the calculation we used in determining the number of shares of
common stock used to pay preferred stock dividends. The difference being the
date used in determining the stock price at the end of each preferred dividend
period, as opposed to the lowest common stock price during the preferred
dividend period, subject to a 70% discount, for calculating the number of common
shares issued as payment of the period’s preferred stock dividend. Accordingly,
the number of shares was greater than the number of shares required, and were
issued in error.
Our
financial statements at December 31, 2004 reflect 275,000 shares of preferred
stock outstanding and disclosed that an additional 100,000 shares of preferred
stock were deemed the equivalent of 221,892 shares of common stock that would
have been required to settle an equivalent amount of preferred dividends. We
have determined that the number of shares deemed the equivalent of the preferred
stock dividend has been recalculated based on our Articles of Incorporation,
as
amended, including on April 30, 2000. Accordingly, we will issue 136,041 shares
of common stock to the sole holder of the preferred stock as payment of $51,561
of preferred stock dividends less other adjustments resulting from the
recalculation of the number of common shares required to pay preferred stock
dividends, subsequently approved. During the period January 1, 2003 through
June
30, 2006, 200,238 shares of common stock were issued in excess of the amount
required.
OPTIONS
As
of
July 27, 2007, we had 1,715,500 options outstanding, with an average weighted
exercise price of $0.73.
WARRANTS
In
connection with various private placements we have conducted between November
2004 and February 2007 and settlement of liquidated damages, we have issued
warrants to purchase an aggregate of total of 24,385,669
shares
of our common stock, including warrants exercisable at $0.45 per share to
purchase 6,291,308 shares of common stock, warrants exercisable at $0.54 per
share to purchase 9,013,200 shares of common stock, warrants exercisable at
$0.75 per share to purchase 4,148,933 shares of common stock, warrants
exercisable at $1.25 per share to purchase 4,325,433 shares of common stock,
warrants exercisable at $1.65 per share to purchase 72,200 shares of common
stock and warrants exercisable at $2.50 per share to purchase 534,595 shares
of
common stock. Some of the warrants we have issued contain full or partial
ratchet and anti-dilution provisions.
CONVERTIBLE
SECURITIES
We
have
outstanding convertible debentures in an aggregate principal amount of
approximately $6,321,633.57,
including $6,123,385.80 of convertible debentures convertible into shares of
our
common stock at $0.45 per share and approximately $198,247.57 of convertible
debentures convertible into shares of our common stock at $1.56 per share.
The
convertible debentures are convertible into approximately 13,734,606 shares
of
common stock. Some of the convertible dentures contain full or partial ratchet
and anti-dilution provisions. A more detailed summary of the terms of the
secured convertible debentures and related agreements as set forth elsewhere
under the heading “Selling Stockholders - Private Placements.”
INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our
Articles of Incorporation, as amended, provide to the fullest extent permitted
by New Jersey law, our directors or officers shall not be personally liable
to
us or our shareholders for damages for breach of such director's or officer's
fiduciary duty. The effect of this provision of our Articles of Incorporation,
as amended, is to eliminate our rights and our shareholders (through
shareholders' derivative suits on behalf of our company) to recover damages
against a director or officer for breach of the fiduciary duty of care as a
director or officer (including breaches resulting from negligent or grossly
negligent behavior), except under certain situations defined by statute. We
believe that the indemnification provisions in our Articles of Incorporation,
as
amended, are necessary to attract and retain qualified persons as directors
and
officers.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933
(the
“Act” or “Securities Act”) may be permitted to directors, officers or persons
controlling us pursuant to the foregoing provisions, or otherwise, we have
been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
PLAN
OF DISTRIBUTION
Each
selling stockholder of the common stock and any of their pledgees, assignees
and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on the OTC Bulletin Board or any other stock exchange, market
or
trading facility on which the shares are traded or in private transactions.
These sales may be at fixed or negotiated prices. A selling stockholder may
use
any one or more of the following methods when selling shares:
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
·
|
privately
negotiated transactions;
|
|
·
|
settlement
of short sales entered into after the effective date of the registration
statement of which this prospectus is a part;
|
|
·
|
broker-dealers
may agree with the selling stockholders to sell a specified number
of such
shares at a stipulated price per
share;
|
|
·
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or
otherwise;
|
|
·
|
a
combination of any such methods of sale;
or
|
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
selling stockholders may also sell shares under Rule 144 under the Securities
Act of 1933, as amended, if available, rather than under this
prospectus.
Broker-dealers
engaged by the selling stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the selling stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated, but,
except as set forth in a supplement to this prospectus, in the case of an agency
transaction not in excess of a customary brokerage commission in compliance
with
NASDR Rule 2440; and in the case of a principal transaction a markup or markdown
in compliance with NASDR IM-2440.
In
connection with the sale of the common stock or interests therein, the selling
stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the common
stock in the course of hedging the positions they assume. The selling
stockholders may also sell shares of the common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The selling
stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such
transaction).
The
selling stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them
may
be deemed to be underwriting commissions or discounts under the Securities
Act
of 1933. Each selling stockholder has informed us that it does not have any
written or oral agreement or understanding, directly or indirectly, with any
person to distribute the common stock. In no event shall any broker-dealer
receive fees, commissions and markups which, in the aggregate, would exceed
8%.
We
are
required to pay certain fees and expenses incurred by us incident to the
registration of the shares. We have agreed to indemnify the selling stockholders
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act of 1933.
Because
selling stockholders may be deemed to be “underwriters” within the meaning of
the Securities Act, they will be subject to the prospectus delivery requirements
of the Securities Act of 1933 including Rule 172 thereunder. In addition, any
securities covered by this prospectus which qualify for sale pursuant to Rule
144 under the Securities Act of 1933 may be sold under Rule 144 rather than
under this prospectus. There is no underwriter or coordinating broker acting
in
connection with the proposed sale of the resale shares by the selling
stockholders.
We
agreed
to keep this prospectus effective until the earlier of (i) the date on which
the
shares may be resold by the selling stockholders without registration and
without regard to any volume limitations by reason of Rule 144(k) under the
Securities Act or any other rule of similar effect or (ii) all of the shares
have been sold pursuant to this prospectus or Rule 144 under the Securities
Act
or any other rule of similar effect. The resale shares will be sold only through
registered or licensed brokers or dealers if required under applicable state
securities laws. In addition, in certain states, the resale shares may not
be
sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and is complied with.
Under
applicable rules and regulations under the Exchange Act, any person engaged
in
the distribution of the resale shares may not simultaneously engage in market
making activities with respect to the common stock for the applicable restricted
period, as defined in Regulation M, prior to the commencement of the
distribution. In addition, the selling stockholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of purchases
and
sales of shares of the common stock by the selling stockholders or any other
person. We will make copies of this prospectus available to the selling
stockholders and have informed them of the need to deliver a copy of this
prospectus to each purchaser at or prior to the time of the sale (including
by
compliance with Rule 172 under the Securities Act).
SELLING
STOCKHOLDERS
The
following table sets forth the common stock ownership of the selling
stockholders as of May 2, 2007, including the number of shares of common stock
issuable upon the exercise of warrants held by the selling stockholders. Other
than as set forth in the following table, the selling stockholders have not
held
any position or office or had any other material relationship with us or any
of
our predecessors or affiliates within the past three years.
|
|
Beneficial
Ownership Prior to this Offering (1)
|
|
|
|
Beneficial
Ownership After this Offering (1) ( 2)
|
|
|
Selling
Stockholder
|
|
Number
of
Shares
|
|
Percent
of
Class
|
|
Shares
That May be Offered and Sold Hereby
|
|
Number
of
Shares
|
|
Percent
of
Class
|
|
|
Zirchon
Avrohon Abba and Leon Goldenberg
|
|
223,190
|
|
*
|
|
223,190
|
(27)
|
|
|
0
|
|
|
0%
|
|
|
Alpha
Capital Aktiengesellshaft (3)
|
|
4,039,743
|
|
13.58%
|
(53)
|
4,039,743
|
(28)
|
|
|
0
|
|
|
0%
|
|
|
Michael
P. Bailey and Kristen Bailey
|
|
57,693
|
|
*
|
|
57,693
|
(26)
|
|
|
0
|
|
|
0%
|
|
|
Patricia
Bailey
|
|
32,332
|
|
*
|
|
32,332
|
(26)
|
|
|
0
|
|
|
0%
|
|
|
Patricia
Baldt
|
|
6,410
|
|
*
|
|
6,410
|
(26)
|
|
|
0
|
|
|
0%
|
|
|
Howard
Blackmon & Mary Ann Oldham
|
|
100,703
|
|
*
|
|
100,703
|
(29)
|
|
|
0
|
|
|
0%
|
|
|
James
G. Blumenthal
|
|
966,666
|
|
3.62%
|
|
966,666
|
(30)
|
|
|
0
|
|
|
0%
|
|
|
Robert
Borski
|
|
38,504
|
|
*
|
|
38,504
|
(26)
|
|
|
0
|
|
|
0%
|
|
|
Gori
Chandran
|
|
6,559
|
|
*
|
|
6,559
|
(26)
|
|
|
0
|
|
|
0%
|
|
|
Chestnut
Ridge Partners, L.P. (4)
|
|
144,231
|
|
*
|
|
144,231
|
(26)
|
|
|
0
|
|
|
0%
|
|
|
Crescent
International, Ltd. (5)
|
|
1,496,481
|
|
5.50%
|
|
1,496,481
|
(31)
|
|
|
0
|
|
|
0%
|
|
|
CSL
Associates, L.P. (6)
|
|
806,221
|
|
3.04%
|
|
806,221
|
(32)
|
|
|
0
|
|
|
0%
|
|
|
DKR
Soundshore Oasis Holding Fund Ltd. (7)
|
|
144,231
|
|
*
|
|
144,231
|
(26)
|
|
|
0
|
|
|
0%
|
|
|
Ellis
International LP (8)
|
|
1,991,025
|
|
7.19%
|
(53)
|
1,991,025
|
(33)
|
|
|
0
|
|
|
0%
|
|
|
Excalibur
Limited Partnership (9)
|
|
2,203,191
|
|
7.90%
|
(53)
|
2,203,191
|
(34)
|
|
|
0
|
|
|
0%
|
|
|
First
Montauk Securities Corporation (10)
|
|
1,314,911
|
|
4.87%
|
|
1,314,911
|
(26)
|
|
|
0
|
|
|
0%
|
|
|
Leon
Goldenberg
|
|
773,334
|
|
2.92%
|
|
773,334
|
(35)
|
|
|
0
|
|
|
0%
|
|
|
Harborview
Master Fund LP (11)
|
|
1,933,332
|
|
7.00%
|
(53)
|
1,933,332
|
(36)
|
|
|
0
|
|
|
0%
|
|
|
Linda
Hechter
|
|
263,431
|
|
1.01%
|
|
263,431
|
(37)
|
|
|
0
|
|
|
0%
|
|
|
Iroquois
Capital, L.P. (12)
|
|
173,077
|
|
*
|
|
173,077
|
(26)
|
|
|
0
|
|
|
0%
|
|
|
Edward
M. Jaffe
|
|
89,579
|
|
*
|
|
89,579
|
(38)
|
|
|
0
|
|
|
0%
|
|
|
Lerner
Enterprises LLC (13)
|
|
288,462
|
|
1.11%
|
|
288,462
|
(26)
|
|
|
0
|
|
|
0%
|
|
|
Grace
Lipson and Charles Lipson
|
|
194,343
|
|
*
|
|
194,343
|
(39)
|
|
|
0
|
|
|
0%
|
|
|
Stuart
A. Margolis
|
|
232,000
|
|
*
|
|
232,000
|
(40)
|
|
|
0
|
|
|
0%
|
|
|
Meadowbrook
Opportunity Fund LLC (14)
|
|
225,000
|
|
*
|
|
225,000
|
(26)
|
|
|
0
|
|
|
0%
|
|
|
Rachel
Medelowitz
|
|
1,166,527
|
|
4.34%
|
|
1,166,527
|
(41)
|
|
|
0
|
|
|
0%
|
|
|
MNJ1
LLC (15)
|
|
773,334
|
|
2.92%
|
|
773,334
|
(35)
|
|
|
0
|
|
|
0%
|
|
|
Motivated
Minds LLC (16)
|
|
1,107,077
|
|
4.16%
|
|
1,107,077
|
(42)
|
|
|
0
|
|
|
0%
|
|
|
Thomas
R. Morehouse
|
|
18,395
|
|
*
|
|
18,395
|
(26)
|
|
|
0
|
|
|
0%
|
|
|
Chris
Musso
|
|
10,011
|
|
*
|
|
10,011
|
(26)
|
|
|
0
|
|
|
0%
|
|
|
Samuel
Nebenzahl
|
|
77,885
|
|
*
|
|
77,885
|
(26)
|
|
|
0
|
|
|
0%
|
|
|
Nite
Capital LP (17)
|
|
784,954
|
|
2.96%
|
|
784,954
|
(43)
|
|
|
0
|
|
|
0%
|
|
|
Mark
A. Phelps
|
|
354,797
|
|
1.36%
|
|
354,797
|
(44)
|
|
|
0
|
|
|
0%
|
|
|
Platinum
Partners (18)
|
|
3,866,666
|
|
13.08%
|
(53)
|
3,866,666
|
(45)
|
|
|
0
|
|
|
0%
|
|
|
Lionel
Porber
|
|
190,007
|
|
*
|
|
190,007
|
(26)
|
|
|
0
|
|
|
0%
|
|
|
Quinto
Corp (19)
|
|
48,492
|
|
*
|
|
48,492
|
(26)
|
|
|
0
|
|
|
0%
|
|
|
Peter
Rand
|
|
1,180,106
|
|
4.39%
|
|
1,180,106
|
(46)
|
|
|
0
|
|
|
0%
|
|
|
Matthrew
Rei
|
|
32,887
|
|
*
|
|
32,887
|
(26)
|
|
|
0
|
|
|
0%
|
|
|
Alan
Robinson
|
|
20,465
|
|
*
|
|
20,465
|
(26)
|
|
|
0
|
|
|
0%
|
|
|
William
Samuel
|
|
6,410
|
|
*
|
|
6,410
|
(26)
|
|
|
0
|
|
|
0%
|
|
|
Tim
Scott
|
|
13,155
|
|
*
|
|
13,155
|
(26)
|
|
|
0
|
|
|
0%
|
|
|
Willfred
Shearer
|
|
773,334
|
|
2.92%
|
|
773,334
|
(35)
|
|
|
0
|
|
|
0%
|
|
|
Sichenzia
Ross Friedman Ference LLP (20)
|
|
94,444
|
|
*
|
|
94,444
|
|
|
|
0
|
|
|
0%
|
|
|
NFS/FMTC
IRA FBO Richard Spencer
|
|
274,534
|
|
1.06%
|
|
274,534
|
(47)
|
|
|
0
|
|
|
0%
|
|
|
Richard
Lee Spencer Jr.
|
|
702,960
|
|
2.66%
|
|
702,960
|
(48)
|
|
|
0
|
|
|
0%
|
|
|
JN
Stauffer
|
|
16,447
|
|
*
|
|
16,447
|
(26)
|
|
|
0
|
|
|
0%
|
|
|
Stonestreet
Limited Partnership (21)
|
|
633,098
|
|
2.40%
|
|
633,098
|
(49)
|
|
|
0
|
|
|
0%
|
|
|
Torrey
Pines Master Fund Ltd. (22)
|
|
268,846
|
|
1.04%
|
|
268,846
|
(26)
|
|
|
0
|
|
|
0%
|
|
|
Unbeatable
Trading Inc. (23)
|
|
773,334
|
|
2.92%
|
|
773,334
|
(35)
|
|
|
0
|
|
|
0%
|
|
|
Unity
Capital (24)
|
|
1,546,668
|
|
5.68%
|
(53)
|
1,546,668
|
(50)
|
|
|
0
|
|
|
0%
|
|
|
Alvin
Wagner, Jr.
|
|
23,055
|
|
*
|
|
23,055
|
(26)
|
|
|
0
|
|
|
0%
|
|
|
Jeffrey
Walsh
|
|
6,577
|
|
*
|
|
6,577
|
(26)
|
|
|
0
|
|
|
0%
|
|
|
Abraham
Weitman & Daniel Altstadter
|
|
773,334
|
|
2.92%
|
|
773,334
|
(35)
|
|
|
0
|
|
|
0%
|
|
|
Sidney
Welz
|
|
657,334
|
|
2.49%
|
|
657,334
|
(51)
|
|
|
0
|
|
|
0%
|
|
|
Henry
& Linda Whale
|
|
64,889
|
|
*
|
|
64,889
|
(26)
|
|
|
0
|
|
|
0%
|
|
|
Whalehaven
Capital Fund (25)
|
|
3,014,583
|
|
10.50%
|
(53)
|
3,014,583
|
(52)
|
|
|
0
|
|
|
0%
|
|
|
James
W. Woodworth
|
|
57,693
|
|
*
|
|
57,693
|
(26)
|
|
|
0
|
|
|
0%
|
|
|
Jose
Zajac
|
|
773,334
|
|
2.92%
|
|
773,334
|
(35)
|
|
|
0
|
|
|
0%
|
|
|
*
Less
than 1%.
(1)
|
Percentage
calculated on the basis of 25,700,993
shares
of common stock outstanding on May 2, 2007.
|
|
|
(2)
|
Assumes
the sale of all shares of common stock registered pursuant to this
prospectus, although the selling stockholders are under no obligations
known to us to sell any shares of common stock at this
time.
|
|
|
|
|
(3)
|
In
accordance with rule 13d-3 under the securities exchange act of 1934,
Konrad Ackerman and Rainer Posch may be deemed a control person,
with
voting and investment control, of the shares owned by such entity.
The
selling stockholder has notified us that they are not broker-dealers
or
affiliates of broker-dealers and that they believe they are not required
to be broker-dealers.
|
|
|
|
|
(4)
|
In
accordance with rule 13d-3 under the securities exchange act of 1934,
Kenneth Pasternak may be deemed a control person, with voting and
investment control, of the shares owned by such entity. The selling
stockholder has notified us that they are not broker-dealers or affiliates
of broker-dealers and that they believe they are not required to
be
broker-dealers.
|
|
|
|
|
(5)
|
Mel
Craw, Maxi Brezzi and Bachir Taleb-Ibrahimi, in their capacity as
managers
of Cantara (Switzerland) SA, the investment advisor to Crescent
International Ltd., have voting control and investment discretion
over the
shares owned by Crescent International Ltd. Messrs. Craw, Brezzi
and
Taleb-Ibrahimi disclaim beneficial ownership of such shares. The
selling
stockholder has notified us that they are not broker-dealers or affiliates
of broker-dealers and that they believe they are not required to
be
broker-dealers.
|
|
|
|
|
(6)
|
In
accordance with rule 13d-3 under the securities exchange act of 1934,
Chuck Lipson may be deemed a control person, with voting and investment
control, of the shares owned by such entity. The selling stockholder
has
notified us that they are not broker-dealers or affiliates of
broker-dealers and that they believe they are not required to be
broker-dealers.
|
|
|
|
|
(7)
|
DKR
SoundShore Oasis Holding Fund Ltd. (the "Fund") is a master fund
in a
master-feeder structure. The Fund's investment manager is DKR Oasis
Management Company LP (the "Investment Manager"). Pursuant to an
investment management agreement among the Fund, the feeder funds
and the
Investment Manager, the Investment Manager has the authority to do
any and
all acts on behalf of the Fund, including voting any shares held
by the
Fund. Mr. Seth Fischer is the managing partner of Oasis Management
Holdings LLC, one of the general partners of the Investment Manager.
Mr.
Fischer has ultimate responsibility for trading with respect to the
Fund.
Mr. Fischer disclaims beneficial ownership of the shares. The Fund
has
notified us that it is not a broker-dealers or affiliate of a
broker-dealer and that it believes that it is not required to be
a
broker-dealer.
|
|
|
|
|
(8)
|
In
accordance with rule 13d-3 under the securities exchange act of 1934,
Wilhelm Ungar may be deemed a control person, with voting and investment
control, of the shares owned by such entity. The selling stockholder
has
notified us that they are not broker-dealers or affiliates of
broker-dealers and that they believe they are not required to be
broker-dealers.
|
|
|
|
|
(9)
|
In
accordance with rule 13d-3 under the securities exchange act of 1934,
William Hechter may be deemed a control person, with voting and investment
control, of the shares owned by such entity. The selling stockholder
has
notified us that they are not broker-dealers or affiliates of
broker-dealers and that they believe they are not required to be
broker-dealers.
|
|
|
|
|
(10)
|
In
accordance with rule 13d-3 under the securities exchange act of 1934,
the
Board of Directors of the selling stockholders may be deemed control
persons, with voting and investment control, of the shares owned
by such
entity and has acquired these securities in the ordinary course of
business as compensation.
|
|
|
|
|
(11)
|
|
|
|
(12)
|
|
|
|
|
|
|
|
(13)
|
In
accordance with rule 13d-3 under the securities exchange act of 1934,
Edward L. Cohen, Robert K. Tanenbaun, Mark D. Lerner and Theodore
N.
Lerner may be deemed control persons, with voting and investment
control,
of the shares owned by such entity. The selling stockholder has notified
us that they are not broker-dealers or affiliates of broker-dealers
and
that they believe they are not required to be
broker-dealers.
|
|
|
|
|
(14)
|
In
accordance with rule 13d-3 under the securities exchange act of 1934,
Michael Ragins may be deemed a control person, with voting and investment
control, of the shares owned by such entity. The selling stockholder
has
notified us that they are not broker-dealers or affiliates of
broker-dealers and that they believe they are not required to be
broker-dealers.
|
|
|
|
|
(15)
|
In
accordance with rule 13d-3 under the securities exchange act of 1934,
Moshe Singer may be deemed a control person, with voting and investment
control, of the shares owned by such entity. The selling stockholder
has
notified us that they are not broker-dealers or affiliates of
broker-dealers and that they believe they are not required to be
broker-dealers.
|
|
|
|
|
(16)
|
In
accordance with rule 13d-3 under the securities exchange act of 1934,
Ira
Gaines may be deemed a control person, with voting and investment
control,
of the shares owned by such entity. The selling stockholder has notified
us that they are not broker-dealers or affiliates of broker-dealers
and
that they believe they are not required to be
broker-dealers.
|
|
|
|
|
(17)
|
In
accordance with rule 13d-3 under the securities exchange act of 1934,
Keith Goodman may be deemed a control person, with voting and investment
control, of the shares owned by such entity. The selling stockholder
has
notified us that they are not broker-dealers or affiliates of
broker-dealers and that they believe they are not required to be
broker-dealers.
|
|
|
|
|
(18)
|
In
accordance with rule 13d-3 under the securities exchange act of 1934,
Mark
Nordlicht may be deemed a control person, with voting and investment
control, of the shares owned by such entity. The selling stockholder
has
notified us that they are not broker-dealers or affiliates of
broker-dealers and that they believe they are not required to be
broker-dealers.
|
|
|
|
|
(19)
|
Voting
and investment control for the shares of common stock owned is vested
in
the entity’s board of directors.
|
|
|
|
|
|
|
(20)
|
In
accordance with rule 13d-3 under the securities exchange act of 1934,
Greg
Sichenzia, Marc Ross, Richard Friedman and Michael Ference may be
deemed
control persons, with voting and investment control, of the shares
owned
by such entity. The selling stockholder has notified us that they
are not
broker-dealers or affiliates of broker-dealers and that they believe
they
are not required to be broker-dealers.
|
|
|
|
|
(21)
|
In
accordance with rule 13d-3 under the securities exchange act of 1934,
Michael Finkelstein and Libby Leonard may be deemed control persons,
with
voting and investment control, of the shares owned by such entity.
The
selling stockholder has notified us that they are not broker-dealers
or
affiliates of broker-dealers and that they believe they are not required
to be broker-dealers.
|
|
|
|
|
(22)
|
In
accordance with rule 13d-3 under the securities exchange act of 1934,
Rob
Jafek may be deemed a control person, with voting and investment
control,
of the shares owned by such entity. The selling stockholder has notified
us that they are not broker-dealers or affiliates of broker-dealers
and
that they believe they are not required to be
broker-dealers.
|
|
|
|
|
(23)
|
In
accordance with rule 13d-3 under the securities exchange act of 1934,
Jacob Gold may be deemed a control person, with voting and investment
control, of the shares owned by such entity. The selling stockholder has
notified us that they are not broker-dealers or affiliates of
broker-dealers and that they believe they are not required to be
broker-dealers.
|
|
|
|
|
(24)
|
In
accordance with rule 13d-3 under the securities exchange act of 1934,
Eli
Schick and Anat Seliger Schick may
be deemed control persons, with voting and investment control, of
the
shares owned by such entity. The selling stockholder has notified
us that
they are not broker-dealers or affiliates of broker-dealers and that
they
believe they are not required to be broker-dealers.
|
|
|
(25)
|
In
accordance with rule 13d-3 under the securities exchange act of 1934,
Evan
Schemenauer, Arthur Jones and Jennifer Kelly may be deemed control
persons, with voting and investment control, of the shares owned
by such
entity. The selling stockholder has notified us that they are not
broker-dealers or affiliates of broker-dealers and that they believe
they
are not required to be broker-dealers.
|
|
|
|
|
(26)
|
Represents
shares issuable upon exercise of warrants.
|
|
|
|
|
|
|
(27)
|
Includes
136,918 shares issuable upon conversion of convertible debentures
and
86,272 shares issuable upon exercise of warrants.
|
|
|
|
|
|
|
(28)
|
Includes
1,288,889 shares issuable upon conversion of convertible debentures
and
2,750,854 shares issuable upon exercise of warrants.
|
|
|
|
|
|
|
(29)
|
Includes
33,550 shares issuable upon conversion of convertible debentures
and
67,153 shares issuable upon exercise of warrants.
|
|
|
|
|
|
|
(30)
|
Includes
322,222 shares issuable upon conversion of convertible debentures
and
644,444 shares issuable upon exercise of warrants.
|
|
|
|
|
|
|
(31)
|
Includes
1,095,348 shares issuable upon conversion of convertible debentures
and
401,133 shares issuable upon exercise of warrants.
|
|
|
|
|
|
|
(32)
|
Includes
547,674 shares issuable upon conversion of convertible debentures
and
258,547 shares issuable upon exercise of warrants.
|
|
|
|
|
|
|
(33)
|
Includes
644,444 shares issuable upon conversion of convertible debentures
and
1,346,581 shares issuable upon exercise of warrants.
|
|
|
|
|
|
|
(34)
|
Includes
455,348 shares issuable upon conversion of convertible debentures
and
1,747,843 shares issuable upon exercise of warrants.
|
|
|
|
|
|
|
(35)
|
Includes
257,778 shares issuable upon conversion of convertible debentures
and
515,556 shares issuable upon exercise of warrants.
|
|
|
|
|
|
|
(36)
|
Includes
644,444 shares issuable upon conversion of convertible debentures
and
1,288,888 shares issuable upon exercise of warrants.
|
|
|
|
|
|
|
(37)
|
Includes
27,473 shares issuable upon conversion of convertible debentures
and
235,958 shares issuable upon exercise of warrants.
|
|
|
|
|
|
|
(38)
|
Includes
49,291 shares issuable upon conversion of convertible debentures
and
40,288 shares issuable upon exercise of warrants.
|
|
|
|
|
|
|
(39)
|
Includes
136,918 shares issuable upon conversion of convertible debentures
and
57,425 shares issuable upon exercise of warrants.
|
|
|
|
|
|
|
(40)
|
Includes
77,333 shares issuable upon conversion of convertible debentures
and
154,667 shares issuable upon exercise of warrants.
|
|
|
|
|
|
|
(41)
|
Includes
917,354 shares issuable upon conversion of convertible debentures
and
249,173 shares issuable upon exercise of warrants.
|
|
|
|
|
|
|
(42)
|
Includes
666,667 shares issuable upon conversion of convertible debentures
and
256,410 shares issuable upon exercise of warrants.
|
|
|
|
|
|
|
(43)
|
Includes
410,755 shares issuable upon conversion of convertible debentures
and
374,199 shares issuable upon exercise of warrants.
|
|
|
|
|
|
|
(44)
|
Includes
219,070 shares issuable upon conversion of convertible debentures
and
135,727 shares issuable upon exercise of warrants.
|
|
|
|
|
|
|
(45)
|
Includes
1,288,889 shares issuable upon conversion of convertible debentures
and
2,577,777 shares issuable upon exercise of warrants.
|
|
|
|
|
|
|
(46)
|
Includes
393,369 shares issuable upon conversion of convertible debentures
and
786,737 shares issuable upon exercise of warrants.
|
|
|
|
|
|
|
(47)
|
Includes
91,511 shares issuable upon conversion of convertible debentures
and
183,023 shares issuable upon exercise of warrants.
|
|
|
|
|
|
|
(48)
|
Includes
234,320 shares issuable upon conversion of convertible debentures
and
468,640 shares issuable upon exercise of warrants.
|
|
|
|
|
|
|
(49)
|
Includes
18,066 shares issuable upon conversion of convertible debentures
and
615,032 shares issuable upon exercise of warrants.
|
|
|
|
|
|
|
(50)
|
Includes
515,556 shares issuable upon conversion of convertible debentures
and
1,031,112 shares issuable upon exercise of warrants.
|
|
|
|
|
|
|
(51)
|
Includes
219,111 shares issuable upon conversion of convertible debentures
and
438,223 shares issuable upon exercise of warrants.
|
|
|
|
|
|
|
(52)
|
Includes
1,204,980 shares issuable upon conversion of convertible debentures
and
1,809,603 shares issuable upon exercise of warrants.
|
|
|
|
|
|
|
(53)
|
Assumes
full conversion of the debentures and exercise of the warrants. However
the selling stockholder has contractually agreed to restrict their
ability
to convert their convertible debentures or exercise their warrants
and
receive shares of our common stock such that the number of shares
of
common stock held by them in the aggregate and their affiliates after
such
conversion or exercise does not exceed 4.99% of the then issued and
outstanding shares of common stock as determined in accordance with
Section 13(d) of the Exchange Act. Accordingly, the number of shares
of
common stock set forth in the table for the selling stockholders
exceeds
the number of shares of common stock that the selling stockholders
could
own beneficially at any given time through their ownership of the
secured
convertible notes and the warrants. In that regard, the beneficial
ownership of the common stock by the selling stockholder set forth
in the
table is not determined in accordance with Rule 13d-3 under the Securities
Exchange Act of 1934, as amended.
|
Additional
Disclosure
NOVEMBER
2004 PRIVATE PLACEMENT
Dollar
Value of Securities Underlying Convertible Securities Registered
for Resale in
this Prospectus
None.
Interest
and Liquidated Damages Payments in Connection with the
Transaction
We
paid
First Montauk Securities Corp. fees of $174,560 and a warrant to
purchase
176,500 shares of common stock at an exercise price of $1.25 per
share as
selling agent, who has no relationship, contractual or otherwise,
with the
investors in this transaction. We agreed to pay the legal fees, up to
$40,000, to the attorneys representing the investors. No other fees
or expenses were paid pursuant to this private placement.
In
connection with the registration rights agreement, we were required
to pay
liquidated damages of 2.0% of the aggregate purchase price per
investor for
every 30 day period in which a resale registration statement was
either not
filed or effective pursuant to the registration rights agreement
we entered into
with the investors. These liquidated damages were accrued but not
paid. Between March and June 2006, we entered into a settlement
agreement with
these investors, pursuant to which we issued the investors convertible
debentures and warrants as settlement for all accrued liquidated
damages and
waiver of any liquidated damages in the future under the registration
rights
agreement. The face value of the convertible debentures is
$198,247.57. These convertible debentures and warrants are described
in detail under “Additional Disclosure – Settlement of November 2004 Liquidated
Damages.”
Net
Proceeds to Airtrax
Airtrax
received net proceeds from this
transaction of $1,0977,440, which represents gross proceeds of
$1,312,000, minus
$40,000 paid to investors’ legal counsel and $174,560 to First Montauk
Securities Corp. as selling agent.
Potential
Total Profit to the Selling Stockholders from Debentures Held by
the Selling
Stockholders
None,
as
we are only registering shares underlying Warrants for this
transaction.
Potential
Total Profit to the Selling Stockholders from Other Securities
Held by the
Selling Stockholders
Selling
Shareholder
|
Transaction
|
Type
|
Date
|
Market
Price
|
Exercise
Price
|
Total
Shares to be received
|
|
Combined
Market Price
|
|
Combined
Exercise Price
|
|
Discount
to Market
|
Excaliber
Limited Partnership
|
PIPE
|
Warrants
|
11/22/04
|
$1.56
|
$1.25
|
312,500
|
|
$487,500
|
|
$390,625.00
|
|
$96,875.00
|
Stonestreet
Limited Partnership
|
PIPE
|
Warrants
|
11/22/04
|
$1.56
|
$1.25
|
273,125
|
|
$426,075
|
|
$341,406.25
|
|
$84,668.75
|
Whalehaven
Capital Fund
|
PIPE
|
Warrants
|
11/22/04
|
$.56
|
$1.25
|
109,375
|
|
$170,625
|
|
$136,718.75
|
|
$33,906.25
|
Linda
Hechter
|
PIPE
|
Warrants
|
11/22/04
|
$1.56
|
$1.25
|
125,000
|
|
$195,000
|
|
$156,250.00
|
|
$38,750.00
|
First
Montauk Securities
|
Placement
agent services
|
Warrants
|
11/22/04
|
$1.56
|
$1.25
|
176,500
|
|
$275,340
|
|
$220,625.00
|
|
$54,715.00
|
Totals
|
|
|
|
|
|
996,500
|
|
$1,554,540
|
|
$1,245,625.00
|
|
$308,915.00
|
Total
of Possible Payments and Discounts as a Percentage of Net
Proceeds
The
following information presents the sum of all possible payments as a percentage
of the net proceeds to the issuer from the sale of the shares of common
stock,
as well as the amount of that resulting percentage.
The
percentage computation methodology utilized considers the following
factors:
|
•
|
the
gross proceeds paid to us from the sale of common
stock;
|
|
•
|
all
payments that we have made or that may be required to be
made
|
|
•
|
the
resulting net proceeds to us; and
|
|
•
|
the
combined total possible profit to be realized by the investors
as a result
of any conversion discounts regarding the warrants that are
held by the
selling shareholders or any affiliates of the selling
shareholders.
|
Gross
proceeds paid to the issuer in the private placement
|
|
$ |
1,312,000
|
|
All
payments made or that may be may be required to be made by
the issuer as
disclosed above
|
|
$ |
412,807.57
|
|
Net
proceeds to issuer, as Gross proceeds are reduced by the total
of all
possible payments (excluding principal)
|
|
$ |
899,192.43
|
|
|
|
|
|
|
Combined
total possible profit to be realized as a result of any conversion
discounts disclosed above
|
|
$ |
308,915
|
|
Percentage
of the total amount of all possible payments divided by the net
proceeds
to the issuer from the sale of the common stock |
|
|
45.91
|
% |
Prior
Securities Transactions Between Airtrax and Selling
Shareholders
None.
Relationship
Between Shares Issued and Outstanding and Shares Held by Selling
Stockholders
The
following tabular disclosure reflects:
|
•
|
the
number of shares outstanding prior to the private placement
that are held
by persons other than the selling shareholders, affiliates
of the company,
and affiliates of the selling
shareholder;
|
|
•
|
the
number of shares registered for resale by the selling shareholders
or
affiliates of the selling shareholders in prior registration
statements;
|
|
•
|
the
number of shares registered for resale by the selling shareholders
or
affiliates of the selling shareholders that continue to be
held by the
selling shareholders or affiliates of the selling
shareholders;
|
|
•
|
the
number of shares that have been sold in registered resale transactions
by
the selling shareholders or affiliates of the selling
shareholders
|
|
•
|
the
number of shares registered for resale on behalf of the selling
shareholders or affiliates of the selling shareholders in the
current
transaction.
|
In
this
analysis, the calculation of the number of outstanding shares excludes
any
securities underlying any outstanding convertible securities, options,
or
warrants.
Selling
Shareholders
|
|
Shares
held by persons other than the selling shareholders, affiliates
of the
company, and affiliates of the selling shareholder prior to the
current
transaction
|
|
|
Shares
registered for resale by the selling shareholders or affiliates
of the
selling shareholders in prior registration
statements
|
|
|
Shares
registered for resale by the selling shareholders or affiliates
of the
selling shareholders that continue to be held by
same
|
|
|
Shares
registered for resale on behalf of the selling shareholders or
affiliates
of the selling shareholders in the current
transaction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excalibur
Limited Partnership
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
555,555
|
|
Stonestreet
Limited Partnership
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
485,556
|
|
Whalehaven
Capital Fund
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
194,444
|
|
Linda
Hechter
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
222,222
|
|
First
Montauk Securities
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
176,500
|
|
Others
|
|
|
13,374,342
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Totals
|
|
|
13,374,342
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,634,278
|
|
Our
Financial Ability to Satisfy our Obligations to the Selling
Shareholders
There
is
nothing to repay, as this transaction involved the sale of common stock
and
warrants.
Existing
Short Positions by Selling Shareholders
Based
upon information provided by the selling shareholders, to the best of
our
knowledge, we are not aware of any of the selling shareholders having
an
existing short position in our common stock.
Relationships
Between Us and Selling Shareholders and Affiliates
We
hereby
confirms that a description of the relationships and arrangements between
and
among those parties already is presented in the prospectus and that all
agreements between and/or among those parties are included as exhibits
to the
registration statement by incorporation by reference.
Method
of Determining the Number of Shares Registered in this
Prospectus
Pursuant
to our registration rights agreement with the investors, entered into
on
November 22, 2004, we are required to register all of the shares issuable
upon
exercise of the warrants issued to the investors.
Fee
Table
|
Amount
to be registered
|
Shares
of common stock issuable upon exercise of warrants
|
1,634,278
|
Total
|
1,634,278
|
Selling
Stockholders
Investor
|
Convertible
Debentures
|
|
Warrants
|
|
Common
Stock
|
|
Shares
of Common Stock Included in Prospectus*
|
|
Excalibur
Limited Partnership
|
|
|
|
555,555
|
|
|
|
|
555,555
|
|
Stonestreet
Limited Partnership
|
|
|
|
485,556
|
|
|
|
|
485,556
|
|
Whalehaven
Capital Fund
|
|
|
|
194,444
|
|
|
|
|
194,444
|
|
Linda
Hechter
|
|
|
|
222,222
|
|
|
|
|
222,222
|
|
First
Montauk Securities
|
|
|
|
176,500
|
|
|
|
|
176,500
|
|
Total
|
|
|
|
1,634,278
|
|
|
|
|
1,634,278
|
|
*
Combined with the additional securities described herein, this reconciles
the
amounts due to each selling stockholder within the prospectus listed
within the
Selling Stockholder schedule, column 4 beginning on page 35.
FEBRUARY
2005 PRIVATE PLACEMENT
Dollar
Value of Securities Underlying Convertible Securities Registered
for Resale in
this Prospectus
None.
Interest
and Liquidated Damages Payments in Connection with the
Transaction
We
paid
First Montauk Securities Corp. fees of $650,000 and a warrant to
purchase
384,616, shares of common stock at an exercise price of $1.85 per
share as
selling agent, who has no relationship, contractual or otherwise,
with the
investors in this transaction. We agreed to pay the legal fees of
$25,000, to the attorneys representing the investors. The convertible
debentures issued in this transaction accrued interest at the rate
of 6% per
annum. When the convertible debentures were converted into shares of
common stock on maturity, the Company paid an aggregate of $150,000
in interest
to the investors.
No
other
fees or expenses were paid pursuant to this private placement.
Net
Proceeds to Airtrax
Airtrax
received net proceeds from this
transaction of $4,175,000, which represents gross proceeds of $5,000,000,
minus
$25,000 paid to investors’ legal counsel, $150,000 in interest and $650,000 to
First Montauk Securities Corp. as selling agent.
Potential
Total Profit
We
are
not registering the shares of common stock that were issued upon
conversion of
the convertible debentures.
Potential
Total Profit to the Selling Stockholders from Other Securities Held
by the
Selling Stockholders
Selling
Shareholder
|
Transaction
|
Type
|
Date
|
|
Market
Price
|
|
|
Exercise
Price
|
|
|
Total
Shares to be received
|
|
|
Combined
Market Price
|
|
|
Combined
Exercise Price
|
|
|
Discount
to Market
|
|
Stonestreet
Limited Partnership
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
1.85
|
|
|
|
76,923
|
|
|
$ |
182,307.51
|
|
|
$ |
142,307.55
|
|
|
$ |
39,999.96
|
|
Whalehaven
Capital Fund
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
1.85
|
|
|
|
134,615
|
|
|
$ |
319,037.55
|
|
|
$ |
249,037.75
|
|
|
$ |
69,999.80
|
|
Nite
Capital LP
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
1.85
|
|
|
|
192,308
|
|
|
$ |
455,769.96
|
|
|
$ |
355,769.80
|
|
|
$ |
100,000.16
|
|
Rachel
Medelowitz
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
1.85
|
|
|
|
38,462
|
|
|
$ |
91,154.94
|
|
|
$ |
71,154.70
|
|
|
$ |
20,000.24
|
|
Howard
Blackmon & Mary Ann Oldham
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
1.85
|
|
|
|
20,000
|
|
|
$ |
47,400.00
|
|
|
$ |
37,000.00
|
|
|
$ |
10,400.00
|
|
Edward
M. Jaffe
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
1.85
|
|
|
|
20,000
|
|
|
$ |
47,400.00
|
|
|
$ |
37,000.00
|
|
|
$ |
10,400.00
|
|
Mark
A. Phelps
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
1.85
|
|
|
|
60,000
|
|
|
$ |
142,200.00
|
|
|
$ |
111,000.00
|
|
|
$ |
31,200.00
|
|
Samuel
Nebenzahl
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
1.85
|
|
|
|
51,923
|
|
|
$ |
123,057.51
|
|
|
$ |
96,057.55
|
|
|
$ |
26,999.96
|
|
Lerner
Enterprises LLC
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
1.85
|
|
|
|
192,308
|
|
|
$ |
455,769.96
|
|
|
$ |
355,769.80
|
|
|
$ |
100,000.16
|
|
Michael
P. Bailey and Kristen Bailey
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
1.85
|
|
|
|
38,462
|
|
|
$ |
91,154.94
|
|
|
$ |
71,154.70
|
|
|
$ |
20,000.24
|
|
James
W. Woodworth
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
1.85
|
|
|
|
38,462
|
|
|
$ |
91,154.94
|
|
|
$ |
71,154.70
|
|
|
$ |
20,000.24
|
|
Zirchon
Avrohon Abba and Leon Goldenberg
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
1.85
|
|
|
|
38,462
|
|
|
$ |
91,154.94
|
|
|
$ |
71,154.70
|
|
|
$ |
20,000.24
|
|
Grace
Lipson and Charles Lipson
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
1.85
|
|
|
|
19,231
|
|
|
$ |
45,577.47
|
|
|
$ |
35,577.35
|
|
|
$ |
10,000.12
|
|
Chestnut
Ridge Partners, L.P.
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
1.85
|
|
|
|
96,154
|
|
|
$ |
227,884.98
|
|
|
$ |
177,884.90
|
|
|
$ |
50,000.08
|
|
Crescent
International, Ltd.
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
1.85
|
|
|
|
115,000
|
|
|
$ |
272,550.00
|
|
|
$ |
212,750.00
|
|
|
$ |
59,800.00
|
|
Alpha
Capital Aktiengesellshaft
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
1.85
|
|
|
|
115,385
|
|
|
$ |
273,462.45
|
|
|
$ |
213,462.25
|
|
|
$ |
60,000.20
|
|
DKR
Soundshore Oasis Holding Fund Ltd.
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
1.85
|
|
|
|
96,154
|
|
|
$ |
227,884.98
|
|
|
$ |
177,884.90
|
|
|
$ |
50,000.08
|
|
Meadowbrook
Opportunity Fund LLC
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
1.85
|
|
|
|
150,000
|
|
|
$ |
355,500.00
|
|
|
$ |
277,500.00
|
|
|
$ |
78,000.00
|
|
Iroquois
Capital, L.P.
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
1.85
|
|
|
|
115,385
|
|
|
$ |
273,462.45
|
|
|
$ |
213,462.25
|
|
|
$ |
60,000.20
|
|
CSL
Associates, L.P.
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
1.85
|
|
|
|
96,154
|
|
|
$ |
227,884.98
|
|
|
$ |
177,884.90
|
|
|
$ |
50,000.08
|
|
Torrey
Pines Master Fund Ltd.
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
1.85
|
|
|
|
179,231
|
|
|
$ |
424,777.47
|
|
|
$ |
331,577.35
|
|
|
$ |
93,200.12
|
|
Ellis
International, Inc.
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
1.85
|
|
|
|
38,462
|
|
|
$ |
91,154.94
|
|
|
$ |
71,154.70
|
|
|
$ |
20,000.24
|
|
First
Montauk Securities
|
Placement
agent services
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
1.85
|
|
|
|
384,616
|
|
|
$ |
182,307.51
|
|
|
$ |
142,307.55
|
|
|
$ |
39,999.96
|
|
Stonestreet
Limited Partnership
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
2.11
|
|
|
|
38,462
|
|
|
$ |
91,153.85
|
|
|
$ |
81,153.85
|
|
|
$ |
10,000.00
|
|
Whalehaven
Capital Fund
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
2.11
|
|
|
|
67,308
|
|
|
$ |
159,519.23
|
|
|
$ |
142,019.23
|
|
|
$ |
17,500.00
|
|
Nite
Capital LP
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
2.11
|
|
|
|
96,154
|
|
|
$ |
227,884.62
|
|
|
$ |
202,884.62
|
|
|
$ |
25,000.00
|
|
Rachel
Medelowitz
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
2.11
|
|
|
|
19,231
|
|
|
$ |
45,576.92
|
|
|
$ |
40,576.92
|
|
|
$ |
5,000.00
|
|
Howard
Blackmon & Mary Ann Oldham
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
2.11
|
|
|
|
10,000
|
|
|
$ |
23,700.00
|
|
|
$ |
21,100.00
|
|
|
$ |
2,600.00
|
|
Edward
M. Jaffe
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
2.11
|
|
|
|
10,000
|
|
|
$ |
23,700.00
|
|
|
$ |
21,100.00
|
|
|
$ |
2,600.00
|
|
Mark
A. Phelps
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
2.11
|
|
|
|
30,000
|
|
|
$ |
71,100.00
|
|
|
$ |
63,300.00
|
|
|
$ |
7,800.00
|
|
Samuel
Nebenzahl
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
2.11
|
|
|
|
25,962
|
|
|
$ |
61,528.85
|
|
|
$ |
54,778.85
|
|
|
$ |
6,750.00
|
|
Lerner
Enterprises LLC
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
2.11
|
|
|
|
96,154
|
|
|
$ |
227,884.62
|
|
|
$ |
202,884.62
|
|
|
$ |
25,000.00
|
|
Michael
P. Bailey and Kristen Bailey
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
2.11
|
|
|
|
19,231
|
|
|
$ |
45,576.92
|
|
|
$ |
40,576.92
|
|
|
$ |
5,000.00
|
|
James
W. Woodworth
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
2.11
|
|
|
|
19,231
|
|
|
$ |
45,576.92
|
|
|
$ |
40,576.92
|
|
|
$ |
5,000.00
|
|
Zirchon
Avrohon Abba and Leon Goldenberg
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
2.11
|
|
|
|
19,231
|
|
|
$ |
45,576.92
|
|
|
$ |
40,576.92
|
|
|
$ |
5,000.00
|
|
Grace
Lipson and Charles Lipson
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
2.11
|
|
|
|
9,615
|
|
|
$ |
22,788.46
|
|
|
$ |
20,288.46
|
|
|
$ |
2,500.00
|
|
Chestnut
Ridge Partners, L.P.
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
2.11
|
|
|
|
48,077
|
|
|
$ |
113,942.31
|
|
|
$ |
101,442.31
|
|
|
$ |
12,500.00
|
|
Crescent
International, Ltd.
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
2.11
|
|
|
|
57,500
|
|
|
$ |
136,275.00
|
|
|
$ |
121,325.00
|
|
|
$ |
14,950.00
|
|
Alpha
Capital Aktiengesellshaft
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
2.11
|
|
|
|
57,692
|
|
|
$ |
136,730.77
|
|
|
$ |
121,730.77
|
|
|
$ |
15,000.00
|
|
DKR
Soundshore Oasis Holding Fund Ltd.
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
2.11
|
|
|
|
48,077
|
|
|
$ |
113,942.31
|
|
|
$ |
101,442.31
|
|
|
$ |
12,500.00
|
|
Meadowbrook
Opportunity Fund LLC
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
2.11
|
|
|
|
75,000
|
|
|
$ |
177,750.00
|
|
|
$ |
158,250.00
|
|
|
$ |
19,500.00
|
|
Iroquois
Capital, L.P.
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
2.11
|
|
|
|
57,692
|
|
|
$ |
136,730.77
|
|
|
$ |
121,730.77
|
|
|
$ |
15,000.00
|
|
CSL
Associates, L.P.
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
2.11
|
|
|
|
48,077
|
|
|
$ |
113,942.31
|
|
|
$ |
101,442.31
|
|
|
$ |
12,500.00
|
|
Torrey
Pines Master Fund Ltd.
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
2.11
|
|
|
|
89,615
|
|
|
$ |
212,388.46
|
|
|
$ |
189,088.46
|
|
|
$ |
23,300.00
|
|
Ellis
International, Inc.
|
PIPE
|
Warrants
|
2/11/05
|
|
$ |
2.37
|
|
|
$ |
2.11
|
|
|
|
19,231
|
|
|
$ |
45,576.92
|
|
|
$ |
40,576.92
|
|
|
$ |
5,000.00
|
|
Totals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,884,615
|
|
|
$ |
7,748,091.69
|
|
|
$ |
6,298,088.85
|
|
|
$ |
1,450,002.84
|
|
Total
of Possible Payments and Discounts as a Percentage of Net
Proceeds
The
following information presents the sum of all possible payments as a
percentage
of the net proceeds to the issuer from the sale of the shares of common
stock,
as well as the amount of that resulting percentage.
The
percentage computation methodology utilized considers the following
factors:
|
•
|
the
gross proceeds paid to us from the sale of common
stock;
|
|
•
|
all
payments that we have made or that may be required to be
made
|
|
•
|
the
resulting net proceeds to us; and
|
|
•
|
the
combined total possible profit to be realized by the investors
as a result
of any conversion discounts regarding the warrants that are
held by the
selling shareholders or any affiliates of the selling
shareholders.
|
Gross
proceeds paid to the issuer in the private placement
|
|
$ |
5,000,000
|
|
All
payments made or that may be may be required to be made by
the issuer as
disclosed above
|
|
$ |
825,000
|
|
Net
proceeds to issuer, as Gross proceeds are reduced by the total
of all
possible payments (excluding principal)
|
|
$ |
4,175,000
|
|
|
|
|
|
|
Combined
total possible profit to be realized as a result of any conversion
discounts disclosed above
|
|
$ |
1,450,002.84
|
|
|
|
|
|
|
Percentage
of the total amount of all possible payments divided by the net
proceeds
to the issuer from the private placement |
|
|
19.76 |
% |
Prior
Securities Transactions Between Airtrax and Selling
Shareholders
Certain
of the selling shareholders had prior securities transactions with us
prior to
this transaction. The following tabular disclosure reflects:
|
•
|
the
date of the transaction;
|
|
•
|
the
number of shares of the class of securities subject to the
transaction
that were outstanding prior to the
transaction;
|
|
•
|
the
number of shares of the class of securities subject to the
transaction
that were outstanding prior to the transaction and held by
persons other
than the selling shareholders, affiliates of the company, or
affiliates of
the selling shareholders;
|
|
•
|
the
number of shares of the class of securities subject to the
transaction
that were issued or issuable in connection with the
transaction;
|
|
•
|
the
percentage of total issued and outstanding securities that
were issued or
issuable in the transaction (assuming full issuance), with
the percentage
calculated by taking the number of shares issued and outstanding
prior to
the applicable transaction and held by persons other than the
selling
shareholders, affiliates of the company, or affiliates of the
selling
shareholders, and dividing that number by the number of shares
issued or
issuable in connection with the applicable
transaction;
|
|
•
|
the
market price per share of the class of securities subject to
the
transaction immediately prior to the transaction (reverse split
adjusted,
if necessary); and
|
|
•
|
the
current market price per share of the class of securities subject
to the
transaction (reverse split adjusted, if
necessary).
|
Selling
shareholder and transaction date
|
Shares
of the class of securities subject to the transaction that
were
outstanding prior to the transaction
|
Shares
subject to transaction outstanding prior to the transaction
held in
“float” (1)
|
Shares
that were issued or issuable in connection with the
transaction
|
Percentage of
securities issued or issuable in connection with transaction
vs “float”
(1)
|
Market
price per share immediately prior to the
transaction
|
Current
market price per share of the class of securities subject to
the
transaction
|
|
|
|
|
|
|
|
Stonestreet
Limited
Partnership;
November
22, 2004
|
15,129,342
|
11,893,071
|
115,385
(2)
|
0.97%
|
1.56
|
0.48
|
|
|
|
|
|
|
|
Whalehaven
Capital Fund;
November
22, 2004
|
15,129,342
|
11,893,071
|
201,923
(2)
|
1.70%
|
1.56
|
0.48
|
Footnotes
(1)
|
The
Company has calculated the percentage of total issued and outstanding
securities that were issued or issuable in the transactions
above by
taking the number of shares issued or issuable in connection
with the
applicable transaction and dividing that number by the number
of shares
issued and outstanding prior to the applicable transaction
and held by
persons other than the selling shareholders, affiliates of
the company, or
affiliates of the selling shareholders. This formula is the
reverse of that suggested in this comment (fifth bullet paragraph),
since
the suggested formula does not yield the percentage of total
issued and
outstanding securities that were issued or issuable in the
respective
transactions.
|
(2)
|
The
number of shares issuable assumes the exercise of all warrants
but does
not include the number of shares issued at that time since
such shares are
not being registered.
|
Relationship
Between Shares Issued and Outstanding and Shares Held by Selling
Stockholders
The
following tabular disclosure reflects:
|
•
|
the
number of shares outstanding prior to the private placement
that are held
by persons other than the selling shareholders, affiliates
of the company,
and affiliates of the selling
shareholder;
|
|
•
|
the
number of shares registered for resale by the selling shareholders
or
affiliates of the selling shareholders in prior registration
statements;
|
|
•
|
the
number of shares registered for resale by the selling shareholders
or
affiliates of the selling shareholders that continue to be
held by the
selling shareholders or affiliates of the selling
shareholders;
|
|
•
|
the
number of shares that have been sold in registered resale transactions
by
the selling shareholders or affiliates of the selling
shareholders
|
|
•
|
the
number of shares registered for resale on behalf of the selling
shareholders or affiliates of the selling shareholders in the
current
transaction.
|
In
this
analysis, the calculation of the number of outstanding shares excludes
any
securities underlying any outstanding convertible securities, options,
or
warrants.
Selling
Shareholders
|
|
Shares
held by persons other than the selling shareholders, affiliates
of the
company, and affiliates of the selling shareholder prior to the
current
transaction
|
|
|
Shares
registered for resale by the selling shareholders or affiliates
of the
selling shareholders in prior registration
statements
|
|
|
Shares
registered for resale by the selling shareholders or affiliates
of the
selling shareholders that continue to be held by
same
|
|
|
Shares
registered for resale on behalf of the selling shareholders or
affiliates
of the selling shareholders in the current
transaction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stonestreet
Limited Partnership
|
|
|
115,385
|
|
|
|
0
|
|
|
|
0
|
|
|
|
115,385
|
|
Whalehaven
Capital Fund
|
|
|
201,923
|
|
|
|
0
|
|
|
|
0
|
|
|
|
201,923
|
|
Nite
Capital LP
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
288,462
|
|
Rachel
Medelowitz
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
57,693
|
|
Howard
Blackmon & Mary Ann Oldham
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
30,000
|
|
Edward
M. Jaffe
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
30,000
|
|
Mark
A. Phelps
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
90,000
|
|
Samuel
Nebenzahl
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
77,885
|
|
Lerner
Enterprises LLC
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
288,462
|
|
Michael
P. Bailey and Kristen Bailey
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
57,693
|
|
James
W. Woodworth
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
57,693
|
|
Zirchon
Avrohon Abba and Leon Goldenberg
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
57,693
|
|
Grace
Lipson and Charles Lipson
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
28,846
|
|
Chestnut
Ridge Partners, L.P.
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
144,231
|
|
Crescent
International, Ltd.
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
172,500
|
|
Alpha
Capital Aktiengesellshaft
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
173,077
|
|
DKR
Soundshore Oasis Holding Fund Ltd.
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
144,231
|
|
Meadowbrook
Opportunity Fund LLC
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
225,000
|
|
Iroquois
Capital, L.P.
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
173,077
|
|
CSL
Associates, L.P.
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
144,231
|
|
Torrey
Pines Master Fund Ltd.
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
268,846
|
|
Ellis
International, Inc.
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
57,692
|
|
First
Montauk Securities
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
384,616
|
|
Others
|
|
|
11,575,763
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Totals
|
|
|
11,893,071
|
|
|
|
0
|
|
|
|
0
|
|
|
|
3,269,237
|
|
Our
Financial Ability to Satisfy our Obligations to the Selling
Shareholders
There
is
nothing to repay, as the convertible debentures were converted
into shares of
common stock.
Existing
Short Positions by Selling Shareholders
Based
upon information provided by the selling shareholders, to the best
of our
knowledge, we are not aware of any of the selling shareholders
having an
existing short position in our common stock.
Relationships
Between Us and Selling Shareholders and Affiliates
We
hereby
confirm that a description of the relationships and arrangements
between and
among those parties already is presented in the prospectus and
that all
agreements between and/or among those parties are included as exhibits
to the
registration statement by incorporation by reference.
Method
of Determining the Number of Shares Registered in this
Prospectus
Pursuant
to our registration rights agreement with the investors, entered
into on
February 11, 2005, we are required to register all of the shares
issuable upon
exercise of the warrants issued to the investors.
Fee
Table
|
Amount
to be registered
|
Shares
of common stock issuable upon exercise of warrants
|
3,269,237
|
Total
|
3,269,237
|
Selling
Stockholders
Investor
|
Convertible
Debentures
|
|
Warrants
|
|
Common
Stock
|
|
Shares
of Common Stock Included in Prospectus*
|
|
Stonestreet
Limited Partnership
|
0
|
|
|
115,385
|
|
0
|
|
|
115,385
|
|
Whalehaven
Capital Fund
|
0
|
|
|
201,923
|
|
0
|
|
|
201,923
|
|
Nite
Capital LP
|
0
|
|
|
288,462
|
|
0
|
|
|
288,462
|
|
Rachel
Medelowitz
|
0
|
|
|
57,693
|
|
0
|
|
|
57,693
|
|
Howard
Blackmon & Mary Ann Oldham
|
0
|
|
|
30,000
|
|
0
|
|
|
30,000
|
|
Edward
M. Jaffe
|
0
|
|
|
30,000
|
|
0
|
|
|
30,000
|
|
Mark
A. Phelps
|
0
|
|
|
90,000
|
|
0
|
|
|
90,000
|
|
Samuel
Nebenzahl
|
0
|
|
|
77,885
|
|
0
|
|
|
77,885
|
|
Lerner
Enterprises LLC
|
0
|
|
|
288,462
|
|
0
|
|
|
288,462
|
|
Michael
P. Bailey and Kristen Bailey
|
0
|
|
|
57,693
|
|
0
|
|
|
57,693
|
|
James
W. Woodworth
|
0
|
|
|
57,693
|
|
0
|
|
|
57,693
|
|
Zirchon
Avrohon Abba and Leon Goldenberg
|
|
|
|
0
|
|
|
|
57,693
|
|
|
|
0
|
|
|
|
57,693
|
|
Grace
Lipson and Charles Lipson
|
|
|
|
0
|
|
|
|
28,846
|
|
|
|
0
|
|
|
|
28,846
|
|
Chestnut
Ridge Partners, L.P.
|
|
|
|
0
|
|
|
|
144,231
|
|
|
|
0
|
|
|
|
144,231
|
|
Crescent
International, Ltd.
|
|
|
|
0
|
|
|
|
172,500
|
|
|
|
0
|
|
|
|
172,500
|
|
Alpha
Capital Aktiengesellshaft
|
|
|
|
0
|
|
|
|
173,077
|
|
|
|
0
|
|
|
|
173,077
|
|
DKR
Soundshore Oasis Holding Fund Ltd.
|
|
|
|
0
|
|
|
|
144,231
|
|
|
|
0
|
|
|
|
144,231
|
|
Meadowbrook
Opportunity Fund LLC
|
|
|
|
0
|
|
|
|
225,000
|
|
|
|
0
|
|
|
|
225,000
|
|
Iroquois
Capital, L.P.
|
|
|
|
0
|
|
|
|
173,077
|
|
|
|
0
|
|
|
|
173,077
|
|
CSL
Associates, L.P.
|
|
|
|
0
|
|
|
|
144,231
|
|
|
|
0
|
|
|
|
144,231
|
|
Torrey
Pines Master Fund Ltd.
|
|
|
|
0
|
|
|
|
268,846
|
|
|
|
0
|
|
|
|
268,846
|
|
Ellis
International, Inc.
|
|
|
|
0
|
|
|
|
57,692
|
|
|
|
0
|
|
|
|
57,692
|
|
First
Montauk Securities
|
|
|
|
0
|
|
|
|
384,616
|
|
|
|
0
|
|
|
|
384,616
|
|
Total
|
|
|
|
0
|
|
|
|
3,269,237
|
|
|
|
0
|
|
|
|
3,269,237
|
|
*
Combined with the additional securities described herein, this reconciles
the
amounts due to each selling stockholder within the prospectus listed within
the
Selling Stockholder schedule, column 4 beginning on page 35.
MAY
2005 PRIVATE PLACEMENT
Dollar
Value of Securities Underlying Convertible Securities Registered for
Resale in
this Prospectus
None.
Interest
and Liquidated Damages Payments in Connection with the
Transaction
We
paid
First Montauk Securities Corp. fees of $65,000 and a warrant to purchase
38,462
shares of common stock at an exercise price of $1.85 per share as selling
agent,
who has no relationship, contractual or otherwise, with the investors
in this
transaction. We agreed to pay the legal fees of $10,000 to the
attorney representing the investor. The convertible debentures issued
in this transaction accrued interest at the rat of 8% per annum. The
Company accrued approximately $50,000 in interest through the maturity
date. No
other fees or expenses were paid pursuant to this private
placement.
No
other
fees or expenses were paid pursuant to this private placement.
Net
Proceeds to Airtrax
Airtrax
received net proceeds from this
transaction of $425,000, which represents gross proceeds of $500,000,
minus
$10,000 paid to investors’ legal counsel and $65,000 to First Montauk Securities
Corp. as selling agent.
Potential
Total Profit
We
are
not registering the shares of common stock that were issued upon conversion
of
the convertible debentures.
Potential
Total Profit to the Selling Stockholders from Other Securities Held by
the
Selling Stockholders
Selling
Shareholder
|
Transaction
|
Type
|
Date
|
|
Market
Price
|
|
|
Exercise
Price
|
|
|
Total
Shares to be received
|
|
|
Combined
Market Price
|
|
|
Combined
Exercise Price
|
|
|
Discount
to Market
|
|
First
Montauk Securities
|
Placement
agent services
|
Warrants
|
5/31/05
|
|
$ |
2.10
|
|
|
$ |
1.85
|
|
|
|
38,462
|
|
|
$ |
80,770.20
|
|
|
$ |
71,154.70
|
|
|
$ |
9,615.50
|
|
Totals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,462
|
|
|
$ |
80,770.20
|
|
|
$ |
71,154.70
|
|
|
$ |
9,615.50
|
|
Total
of Possible Payments and Discounts as a Percentage of Net
Proceeds
The
following information presents the sum of all possible payments as a
percentage
of the net proceeds to the issuer from the sale of the shares of common
stock,
as well as the amount of that resulting percentage.
The
percentage computation methodology utilized considers the following
factors:
|
•
|
the
gross proceeds paid to us from the sale of common
stock;
|
|
•
|
all
payments that we have made or that may be required to be
made
|
|
•
|
the
resulting net proceeds to us; and
|
|
•
|
the
combined total possible profit to be realized by the investors
as a result
of any conversion discounts regarding the warrants that are
held by the
selling shareholders or any affiliates of the selling
shareholders.
|
Gross
proceeds paid to the issuer in the private placement
|
|
$ |
500,000
|
|
All
payments made or that may be may be required to be made by
the issuer as
disclosed above
|
|
$ |
75,000
|
|
Net
proceeds to issuer, as Gross proceeds are reduced by the total
of all
possible payments (excluding principal)
|
|
$ |
425,000
|
|
|
|
|
|
|
Combined
total possible profit to be realized as a result of any conversion
discounts disclosed above
|
|
$ |
9,615,50
|
|
Percentage
of the total amount of all possible payments divided by the net
proceeds
to the issuer from the private placement |
|
|
17.65 |
% |
Prior
Securities Transactions Between Airtrax and Selling
Shareholders
Certain
of the selling shareholders had prior securities transactions with us
prior to
this transaction. The following tabular disclosure reflects:
|
•
|
the
date of the transaction;
|
|
•
|
the
number of shares of the class of securities subject to the
transaction
that were outstanding prior to the
transaction;
|
|
•
|
the
number of shares of the class of securities subject to the
transaction
that were outstanding prior to the transaction and held by
persons other
than the selling shareholders, affiliates of the company, or
affiliates of
the selling shareholders;
|
|
•
|
the
number of shares of the class of securities subject to the
transaction
that were issued or issuable in connection with the
transaction;
|
|
•
|
the
percentage of total issued and outstanding securities that
were issued or
issuable in the transaction (assuming full issuance), with
the percentage
calculated by taking the number of shares issued and outstanding
prior to
the applicable transaction and held by persons other than the
selling
shareholders, affiliates of the company, or affiliates of the
selling
shareholders, and dividing that number by the number of shares
issued or
issuable in connection with the applicable
transaction;
|
|
•
|
the
market price per share of the class of securities subject to
the
transaction immediately prior to the transaction (reverse split
adjusted,
if necessary); and
|
|
•
|
the
current market price per share of the class of securities subject
to the
transaction (reverse split adjusted, if
necessary).
|
Selling
shareholder and transaction date
|
Shares
of the class of securities subject to the transaction that
were
outstanding prior to the transaction
|
Shares
subject to transaction outstanding prior to the transaction
held in
“float” (1)
|
Shares
that were issued or issuable in connection with the
transaction
|
Percentage of
securities issued or issuable in connection with transaction
vs “float”
(1)
|
Market
price per share immediately prior to the
transaction
|
Current
market price per share of the class of securities subject to
the
transaction
|
|
|
|
|
|
|
|
Excalibur
Limited Partnership; November 22,
2004
|
13,374,342
|
10,667,135
|
555,555
(2)
|
4.95%
|
1.56
|
0.48
|
First
Montauk Securities Corp; November
22, 2004
|
13,374,342
|
10,667,135
|
176,500
|
1.63%
|
1.56
|
0.48
|
First
Montauk Securities Corp; February
11, 2005
|
15,129,342
|
11,893,071
|
384,616
|
3.13%
|
2.37
|
0.48
|
Footnotes
(1)
|
The
Company has calculated the percentage of total issued and outstanding
securities that were issued or issuable in the transactions above
by
taking the number of shares issued or issuable in connection
with the
applicable transaction and dividing that number by the number
of shares
issued and outstanding prior to the applicable transaction and
held by
persons other than the selling shareholders, affiliates of the
company, or
affiliates of the selling shareholders. This formula is the
reverse of that suggested in this comment (fifth bullet paragraph),
since
the suggested formula does not yield the percentage of total
issued and
outstanding securities that were issued or issuable in the respective
transactions.
|
(2)
|
The
number of shares issuable assumes the exercise of all warrants
but does
not include the number of shares issuable upon conversion of
the
convertible debentures issued at that time since such shares
are not being
registered.
|
Relationship
Between Shares Issued and Outstanding and Shares Held by Selling
Stockholders
The
following tabular disclosure reflects:
|
•
|
the
number of shares outstanding prior to the private placement that
are held
by persons other than the selling shareholders, affiliates of
the company,
and affiliates of the selling
shareholder;
|
|
•
|
the
number of shares registered for resale by the selling shareholders
or
affiliates of the selling shareholders in prior registration
statements;
|
|
•
|
the
number of shares registered for resale by the selling shareholders
or
affiliates of the selling shareholders that continue to be held
by the
selling shareholders or affiliates of the selling
shareholders;
|
|
•
|
the
number of shares that have been sold in registered resale transactions
by
the selling shareholders or affiliates of the selling
shareholders
|
|
•
|
the
number of shares registered for resale on behalf of the selling
shareholders or affiliates of the selling shareholders in the
current
transaction.
|
In
this
analysis, the calculation of the number of outstanding shares excludes
any
securities underlying any outstanding convertible securities, options,
or
warrants.
Selling
Shareholders
|
|
Shares
held by persons other than the selling shareholders, affiliates
of the
company, and affiliates of the selling shareholder prior to
the current
transaction
|
|
|
Shares
registered for resale by the selling shareholders or affiliates
of the
selling shareholders in prior registration
statements
|
|
|
Shares
registered for resale by the selling shareholders or affiliates
of the
selling shareholders that continue to be held by
same
|
|
|
Shares
registered for resale on behalf of the selling shareholders
or affiliates
of the selling shareholders in the current
transaction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excalibur
Limited Partnership
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
384,615
|
|
First
Montauk Securities Corp
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
38,642
|
|
Others
|
|
|
19,216,768
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Totals
|
|
|
19,216,768
|
|
|
|
0
|
|
|
|
0
|
|
|
|
423,257
|
|
Our
Financial Ability to Satisfy our Obligations to the Selling
Shareholders
We
are
only registering the shares of common stock underlying the warrants,
so there is
nothing to repay on the overlying securities.
Existing
Short Positions by Selling Shareholders
Based
upon information provided by the selling shareholders, to the best of
our
knowledge, we are not aware of any of the selling shareholders having
an
existing short position in our common stock.
Relationships
Between Us and Selling Shareholders and Affiliates
We
hereby
confirms that a description of the relationships and arrangements between
and
among those parties already is presented in the prospectus and that all
agreements between and/or among those parties are included as exhibits
to the
registration statement by incorporation by reference.
Method
of Determining the Number of Shares Registered in this
Prospectus
Pursuant
to our registration rights agreement with the investors, entered into
on May 31,
2005, we are required to register all of the shares issuable upon exercise
of
the warrants issued to the investors.
Fee
Table
|
Amount
to be registered
|
Shares
of common stock issuable upon exercise of warrants
|
423,257
|
Total
|
423,257
|
Selling
Stockholders
Investor
|
Convertible
Debentures
|
|
Warrants
|
|
Common
Stock
|
|
Shares
of Common Stock Included in Prospectus*
|
|
Excalibur
Limited Partnership
|
0
|
|
|
384,615
|
|
0
|
|
|
384,615
|
|
First
Montauk Securities
|
0
|
|
|
38,462
|
|
0
|
|
|
38,462
|
|
Total
|
0
|
|
|
423,257
|
|
0
|
|
|
423,257
|
|
*
Combined with the additional securities described herein, this reconciles
the
amounts due to each selling stockholder within the prospectus listed
within the
Selling Stockholder schedule, column 4 beginning on page
35.
OCTOBER
2005 PRIVATE PLACEMENT
Dollar
Value of Securities Registered for Resale in this
Prospectus
The
total
dollar value of the securities underlying the convertible debentures that
we
have registered for resale (using the number of underlying securities that
we
have registered for resale and the market price per share for those securities
on the date of the sale of the convertible debentures) are as
follows:
Securities
Underlying the Convertible Notes
|
Market
Price at October 18, 2005
|
Dollar
Value of Underlying Securities
|
|
|
|
2,222,222
|
$3.04
|
$6,755,554.88
|
Securities
Underlying the Convertible Notes
|
Market
Price at October 28, 2005
|
Dollar
Value of Underlying Securities
|
|
|
|
1,073,333
|
$2.98
|
$3,198,532.34
|
The
private placement was conducted in two closings of the same offering. The
terms
of the convertible debentures and warrants issued to the investors were
the
same.
Interest
and Liquidated Damages Payments in Connection with the Convertible Notes
Transaction
We
paid
First Montauk Securities Corp. fees of $154,800 and a warrant to purchase
77,400
shares of common stock at an exercise price of $3.25 per share as selling
agent,
who has no relationship, contractual or otherwise, with the investors in
this
transaction. We also paid a non-accountable fee of $46,440 to First
Montauk. No other fees or expenses were paid pursuant to this private
placement.
In
connection with the registration rights agreement, we were required to
pay
liquidated damages of 2.0% of the aggregate purchase price per investor
for
every 30 day period in which a resale registration statement was either
not
filed or effective pursuant to the registration rights agreement we entered
into
with the investors, subject to a maximum payment of 18%. These
liquidated damages were accrued but not paid. In July 2006, we entered
into a
settlement agreement with these investors, pursuant to which we issued
the
investors convertible debentures and warrants as settlement for all accrued
liquidated damages and waiver of any liquidated damages in the future under
the
registration rights agreement. The face value of the convertible debentures
is
$359,548.8. These convertible debentures and warrants are described
in detail under “Additional Disclosure – Settlement of October 2005 Liquidated
Damages.”
Net
Proceeds to Airtrax from the Private Placement
Airtrax
received net proceeds from this
transaction of $1,346,760, which represents gross proceeds of $1,548,000,
minus
$201,240 paid to First Montauk Securities.
Potential
Total Profit to the Selling Stockholders from the Convertible
Debentures
The
potential gain to the selling shareholders as of the dates of the sales
of the
convertible debentures, based upon $1.04 and $0.98 differentials between
the
market prices on the dates of the sales of the convertible debentures and
the
conversion price on those dates.
Selling Shareholder
|
|
Market
price per share of securities on the date of sale of the convertible
note
(October 18 or October 28)
|
|
|
Conversion
price per share of underlying securities on the date of sale of
the
convertible note
|
|
|
Total
possible shares underlying the convertible note
(1)
|
|
|
Combined
market price (market price per share * total possible shares)
(1)
|
|
|
Total
possible shares the selling shareholders may receive and combined
conversion price of the total number of shares underlying the convertible
note
|
|
|
Total
possible discount to market price as of the date of sale of the
convert
note (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crescent
International, Ltd.
|
|
$ |
3.04
|
|
|
$ |
2.00
|
|
|
|
200,000
|
|
|
$ |
608,000.00
|
|
|
$ |
400,000.00
|
|
|
$ |
208,000.00
|
|
Grace
Lipson and Charles Lipson
|
|
$ |
3.04
|
|
|
$ |
2.00
|
|
|
|
25,000
|
|
|
$ |
76,000.00
|
|
|
$ |
50,000.00
|
|
|
$ |
26,000.00
|
|
CSL
Associates, L.P.
|
|
$ |
3.04
|
|
|
$ |
2.00
|
|
|
|
100,000
|
|
|
$ |
304,000.00
|
|
|
$ |
200,000.00
|
|
|
$ |
104,000.00
|
|
Nite
Capital LP
|
|
$ |
3.04
|
|
|
$ |
2.00
|
|
|
|
75,000
|
|
|
$ |
228,000.00
|
|
|
$ |
150,000.00
|
|
|
$ |
78,000.00
|
|
Whalehaven
Capital Fund
|
|
$ |
3.04
|
|
|
$ |
2.00
|
|
|
|
100,000
|
|
|
$ |
304,000.00
|
|
|
$ |
200,000.00
|
|
|
$ |
104,000.00
|
|
Rachel
Medelowitz
|
|
$ |
2.98
|
|
|
$ |
2.00
|
|
|
|
167,500
|
|
|
$ |
499,150.00
|
|
|
$ |
335,000.00
|
|
|
$ |
164,150.00
|
|
Howard
Blackmon & Mary Ann Oldham
|
|
$ |
2.98
|
|
|
$ |
2.00
|
|
|
|
32,500
|
|
|
$ |
96,850.00
|
|
|
$ |
65,000.00
|
|
|
$ |
31,850.00
|
|
Edward
M. Jaffe
|
|
$ |
2.98
|
|
|
$ |
2.00
|
|
|
|
9,000
|
|
|
$ |
26,820.00
|
|
|
$ |
18,000.00
|
|
|
$ |
8,820.00
|
|
Mark
A. Phelps
|
|
$ |
2.98
|
|
|
$ |
2.00
|
|
|
|
40,000
|
|
|
$ |
119,200.00
|
|
|
$ |
80,000.00
|
|
|
$ |
39,200.00
|
|
Zirchon
Avrohon Abba and Leon Goldenberg
|
|
$ |
2.98
|
|
|
$ |
2.00
|
|
|
|
25,000
|
|
|
$ |
74,500.00
|
|
|
$ |
50,000.00
|
|
|
$ |
24,500.00
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
774,000
|
|
|
$ |
2,336,520.00
|
|
|
$ |
1,548,000.00
|
|
|
$ |
788,520.00
|
|
Potential
Gross Proceeds:
|
|
$ |
2,336,520
|
|
Total
Potential Cost Basis:
|
|
$ |
1,548,000
|
|
Total
Possible Profit to be Realized by Selling
Shareholders:
|
|
$ |
788,520
|
|
Footnotes
(1)
The
convertible debenture contains a reset provision, in that the conversion
price
of the convertible debenture shall be lowered in the event that we issue
shares
of common stock, or securities convertible into shares of common stock, at
a
lower price than the then current conversion price. The conversion price
of the
convertible debenture has been reduced to $0.45 as a result of a private
placement conducted in February 2007.
Potential
Total Profit to the Selling Stockholders from Other Securities Held by the
Selling Stockholders
The
warrants issued in connection with this private placement were exercisable
into
shares of common stock at an exercise price of $3.25 per share. As a
result, there was no potential profit for the warrants when issued. The warrants
contain a reset provision, in that the exercise price of the warrants shall
be
lowered in the event that we issue shares of common stock, or securities
convertible into shares of common stock, at a lower price than the then current
exercise price. The exercise price of the warrants has been reduced to $0.45
as
a result of a private placement conducted in February 2007.
Total
of Possible Payments and Discounts as a Percentage of Net
Proceeds
The
following information presents the sum of all possible payments and the total
possible discounts to the market price of the shares underlying the convertible
debentures as a percentage of the net proceeds to the issuer from the sale
of
the convertible debentures, as well as the amount of that resulting percentage
averaged over the term of the convertible debentures.
The
percentage computation methodology utilized considers the following
factors:
|
•
|
the
gross proceeds paid or payable to us from the convertible
debentures;
|
|
•
|
all
payments that we have made or that may be required to be
made
|
|
•
|
the
resulting net proceeds to us;
and
|
|
•
|
the
combined total possible profit to be realized by the investors
as a result
of any conversion discounts regarding the securities underlying
the
convertible debentures and any other warrants, options, notes,
or other
securities of ours that are held by the selling shareholders or
any
affiliates of the selling shareholders.
|
Gross
proceeds paid to the issuer in the convertible note
transaction
|
|
$ |
1,548,000
|
|
All
payments made or that may be may be required to be made by the
issuer that
are disclosed above
|
|
$ |
201,240
|
|
Net
proceeds to issuer, as Gross proceeds are reduced by the total
of all
possible payments (excluding principal)
|
|
$ |
1,346,760
|
|
|
|
|
|
|
Combined
total possible profit to be realized as a result of any conversion
discounts disclosed above
|
|
$ |
788,520
|
|
Percentage
of the total amount of all possible payments divided by the net
proceeds
to the issuer from the sale of the convertible notes
|
|
|
14.94 |
% |
|
|
|
|
|
Percentage
averaged over the term of the convertible note
|
|
|
7.47 |
% |
Prior
Securities Transactions Between Airtrax and Selling
Shareholders
Certain
of the selling shareholders had prior securities transactions with us prior
to
this transaction. The following tabular disclosure reflects:
|
•
|
the
date of the transaction;
|
|
•
|
the
number of shares of the class of securities subject to the transaction
that were outstanding prior to the
transaction;
|
|
•
|
the
number of shares of the class of securities subject to the transaction
that were outstanding prior to the transaction and held by persons
other
than the selling shareholders, affiliates of the company, or
affiliates of
the selling shareholders;
|
|
•
|
the
number of shares of the class of securities subject to the transaction
that were issued or issuable in connection with the
transaction;
|
|
•
|
the
percentage of total issued and outstanding securities that were
issued or
issuable in the transaction (assuming full issuance), with the
percentage
calculated by taking the number of shares issued and outstanding
prior to
the applicable transaction and held by persons other than the selling
shareholders, affiliates of the company, or affiliates of the selling
shareholders, and dividing that number by the number of shares
issued or
issuable in connection with the applicable
transaction;
|
|
•
|
the
market price per share of the class of securities subject to the
transaction immediately prior to the transaction (reverse split
adjusted,
if necessary); and
|
|
•
|
the
current market price per share of the class of securities subject
to the
transaction (reverse split adjusted, if
necessary).
|
Selling
shareholder and transaction date
|
Shares
of the class of securities subject to the transaction that were
outstanding prior to the transaction
|
Shares
subject to transaction outstanding prior to the transaction held
in
“float” (1)
|
Shares
that were issued or issuable in connection with the
transaction
|
Percentage of
securities issued or issuable in connection with transaction vs
“float”
(1)
|
Market
price per share immediately prior to the
transaction
|
Current
market price per share of the class of securities subject to the
transaction
|
|
|
|
|
|
|
|
Crescent
International;
February
11, 2005
|
15,129,342
|
11,893,071
|
172,500
(2)
|
1.43%
|
2.37
|
0.48
|
|
|
|
|
|
|
|
Grace
Lipson and Charles
Lipson;
February
11, 2005
|
15,129,342
|
11,893,071
|
28,846
(2)
|
*
|
2.37
|
0.48
|
|
|
|
|
|
|
|
CSL
Associates;
February
11, 2005
|
15,129,342
|
11,893,071
|
144,231
(2)
|
1.20%
|
2.37
|
0.48
|
|
|
|
|
|
|
|
Nite
Capital;
February
11, 2005
|
15,129,342
|
11,893,071
|
288,462
(2)
|
2.37%
|
2.37
|
0.48
|
|
|
|
|
|
|
|
Whalehaven
Capital Fund;
November
22, 2004
|
13,374,342
|
10,667,135
|
194,444
(2)
|
1.80%
|
1.56
|
0.48
|
|
|
|
|
|
|
|
Whalehaven
Capital Fund;
February
11, 2005
|
15,129,342
|
11,893,071
|
201,923
(2)
|
1.67%
|
2.37
|
0.48
|
|
|
|
|
|
|
|
Rachel
Medelowitz;
February
11, 2005
|
15,129,342
|
11,893,071
|
57,693
(2)
|
*
|
2.37
|
0.48
|
|
|
|
|
|
|
|
Howard
Blackmon and Mary Ann
Oldham;
February
11, 2005
|
15,129,342
|
11,893,071
|
30,000
(2)
|
*
|
2.37
|
0.48
|
|
|
|
|
|
|
|
Edward
M. Jaffe;
February
11, 2005
|
15,129,342
|
11,893,071
|
30,000
(2)
|
*
|
2.37
|
0.48
|
|
|
|
|
|
|
|
Mark
A. Phelps;
February
11, 2005
|
15,129,342
|
11,893,071
|
90,000
(2)
|
*
|
2.37
|
0.48
|
|
|
|
|
|
|
|
Zirchon
Avrohon Abba and Leon
Goldenberg;
February
11, 2005
|
15,129,342
|
11,893,071
|
57,693
(2)
|
*
|
2.37
|
0.48
|
|
|
|
|
|
|
|
First
Montauk Securities
Corp;
November
22, 2004
|
13,374,342
|
10,667,135
|
176,500
|
1.63%
|
1.56
|
0.48
|
|
|
|
|
|
|
|
First
Montauk Securities
Corp;
February
11, 2005
|
15,129,342
|
11,893,071
|
384,616
|
3.13%
|
2.37
|
0.48
|
|
|
|
|
|
|
|
*
Less
than 1%.
Footnotes
(1)
|
The
Company has calculated the percentage of total issued and outstanding
securities that were issued or issuable in the transactions above
by
taking the number of shares issued or issuable in connection
with the
applicable transaction and dividing that number by the number
of shares
issued and outstanding prior to the applicable transaction and
held by
persons other than the selling shareholders, affiliates of the
company, or
affiliates of the selling shareholders. This formula is the
reverse of that suggested in this comment (fifth bullet paragraph),
since
the suggested formula does not yield the percentage of total
issued and
outstanding securities that were issued or issuable in the respective
transactions.
|
(2)
|
The
number of shares issuable assumes the exercise of all warrants
but does
not include the number of shares issuable upon conversion of
the
convertible debentures or issued at that time since such shares
are not
being registered.
|
Relationship
Between Shares Issued and Outstanding and Shares Held by Selling
Stockholders
The
following tabular disclosure reflects:
|
•
|
the
number of shares outstanding prior to the convertible note transaction
that are held by persons other than the selling shareholders,
affiliates
of the company, and affiliates of the selling
shareholder;
|
|
•
|
the
number of shares registered for resale by the selling shareholders
or
affiliates of the selling shareholders in prior registration
statements;
|
|
•
|
the
number of shares registered for resale by the selling shareholders
or
affiliates of the selling shareholders that continue to be held
by the
selling shareholders or affiliates of the selling
shareholders;
|
|
•
|
the
number of shares that have been sold in registered resale transactions
by
the selling shareholders or affiliates of the selling
shareholders
|
|
•
|
the
number of shares registered for resale on behalf of the selling
shareholders or affiliates of the selling shareholders in the current
transaction.
|
In
this
analysis, the calculation of the number of outstanding shares excludes any
securities underlying any outstanding convertible securities, options, or
warrants.
Selling
Shareholders
|
|
Shares
held by persons other than the selling shareholders, affiliates
of the
company, and affiliates of the selling shareholder prior to the
current
transaction
|
|
|
Shares
registered for resale by the selling shareholders or affiliates
of the
selling shareholders in prior registration
statements
|
|
|
Shares
registered for resale by the selling shareholders or affiliates
of the
selling shareholders that continue to be held by
same
|
|
|
Shares
registered for resale on behalf of the selling shareholders or
affiliates
of the selling shareholders in the current
transaction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crescent
International, Ltd.
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,088,889
|
|
Grace
Lipson and Charles Lipson
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
136,111
|
|
CSL
Associates, L.P.
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
544,444
|
|
Nite
Capital LP
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
408,333
|
|
Whalehaven
Capital Fund
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
544,444
|
|
Rachel
Medelowitz
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
911,944
|
|
Howard
Blackmon & Mary Ann Oldham
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
32,500
|
|
Edward
M. Jaffe
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
49,000
|
|
Mark
A. Phelps
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
217,778
|
|
Zirchon
Avrohon Abba and Leon Goldenberg
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
136,111
|
|
Others
|
|
|
19,482,403
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Totals
|
|
|
19,482,403
|
|
|
|
0
|
|
|
|
0
|
|
|
|
4,069,556
|
|
Our
Financial Ability to Satisfy our Obligations to the Selling
Shareholders
We
have
the intention, and a reasonable basis to believe that we will have the
financial
ability, to make payments on the convertible debentures when they become
due. While we expect that most, if not all, of the convertible
debentures will be converted into shares of our common stock on the terms
as set
forth in the debentures, we have no commitment from the investor that they
will
convert any such debentures into shares of our common stock We have
duly accounted for such payments in our long-term comprehensive strategy
and
financial plan.
Existing
Short Positions by Selling Shareholders
Based
upon information provided by the selling shareholders, to the best of our
knowledge, we are not aware of any of the selling shareholders having an
existing short position in our common stock.
Relationships
Between Us and Selling Shareholders and Affiliates
We
hereby
confirms that a description of the relationships and arrangements between
and
among those parties already is presented in the prospectus and that all
agreements between and/or among those parties are included as exhibits
to the
registration statement by incorporation by reference.
Method
of Determining the Number of Shares Registered in this
Prospectus
The
number of shares being registered represent the number of shares of common
stock
underlying the convertible debentures and upon exercise of the
warrants. Currently, there is $1,483,000 in convertible debentures
issued and outstanding, which, at a conversion price of $0.45 per share,
results
in the issuance of 3,295,556 shares of common stock.
Fee
Table
|
|
Amount
to be registered
|
|
Shares
of common stock issuable upon conversion of convertible
debentures
|
|
|
3,295,556
|
|
Shares
of common stock issuable upon exercise of warrants
|
|
|
774,000
|
|
Total
|
|
|
4,069,556
|
|
Selling
Stockholders
Investor
|
|
Convertible
Debentures
|
|
Warrants
|
|
Common
Stock
|
|
Shares
of Common Stock Included in Prospectus*
|
|
Crescent
International, Ltd.
|
|
|
888,889
|
|
0
|
|
0
|
|
|
200,000
|
|
Grace
Lipson and Charles Lipson
|
|
|
111,111
|
|
0
|
|
0
|
|
|
25,000
|
|
CSL
Associates, L.P.
|
|
|
444,444
|
|
0
|
|
0
|
|
|
100,000
|
|
Nite
Capital LP
|
|
|
333,333
|
|
0
|
|
0
|
|
|
75,000
|
|
Whalehaven
Capital Fund
|
|
|
444,444
|
|
0
|
|
0
|
|
|
100,000
|
|
Rachel
Medelowitz
|
|
|
744,444
|
|
0
|
|
0
|
|
|
167,500
|
|
Howard
Blackmon & Mary Ann Oldham
|
|
|
0 |
|
0
|
|
0
|
|
|
32,500
|
|
Edward
M. Jaffe
|
|
|
40,000
|
|
0
|
|
0
|
|
|
9,000
|
|
Mark
A. Phelps
|
|
|
177,778
|
|
0
|
|
0
|
|
|
40,000
|
|
Zirchon
Avrohon Abba and Leon Goldenberg
|
|
|
111,111
|
|
0
|
|
0
|
|
|
25,000
|
|
Total
|
|
|
3,295,556
|
|
0
|
|
0
|
|
|
774,000
|
|
*
This
reconciles the amounts due to each selling stockholder within the prospectus
listed within the Selling Stockholder schedule, column 4 beginning on page
35.
FEBRUARY
2006 PRIVATE PLACEMENT
Dollar
Value of Securities Underlying Convertible Securities Registered for Resale
in
this Prospectus
None.
Interest
and Liquidated Damages Payments in Connection with the
Transaction
The
convertible debentures issued in this transaction accrued interest at the
rat of
8% per annum. The Company accrued $66,717.46 in interest through the
maturity date. No other fees or expenses were paid pursuant to this private
placement.
Net
Proceeds to Airtrax
Airtrax
received gross and net proceeds
from this transaction of $833,968.20.
Potential
Total Profit
We
are
not registering the shares of common stock that were issued upon conversion
of
the convertible debentures.
Potential
Total Profit to the Selling Stockholders from Other Securities Held by
the
Selling Stockholders
None. On
the transaction date of February 13, 2006, the market price of our securities
was $1.63 and the exercise price of the warrants issued was $2.50.
Total
of Possible Payments and Discounts as a Percentage of Net
Proceeds
As
disclosed above, there were no expenses incurred with the transaction and
there
was no discount to the warrants issued in connection with the
transaction.
Prior
Securities Transactions Between Airtrax and Selling
Shareholders
None.
Relationship
Between Shares Issued and Outstanding and Shares Held by Selling
Stockholders
The
following tabular disclosure reflects:
|
•
|
the
number of shares outstanding prior to the private placement that
are held
by persons other than the selling shareholders, affiliates of
the company,
and affiliates of the selling
shareholder;
|
|
•
|
the
number of shares registered for resale by the selling shareholders
or
affiliates of the selling shareholders in prior registration
statements;
|
|
•
|
the
number of shares registered for resale by the selling shareholders
or
affiliates of the selling shareholders that continue to be held
by the
selling shareholders or affiliates of the selling
shareholders;
|
|
•
|
the
number of shares that have been sold in registered resale transactions
by
the selling shareholders or affiliates of the selling
shareholders
|
|
•
|
the
number of shares registered for resale on behalf of the selling
shareholders or affiliates of the selling shareholders in the
current
transaction.
|
In
this
analysis, the calculation of the number of outstanding shares excludes
any
securities underlying any outstanding convertible securities, options,
or
warrants.
Selling
Shareholders
|
|
Shares
held by persons other than the selling shareholders, affiliates
of the
company, and affiliates of the selling shareholder prior to the
current
transaction
|
|
|
Shares
registered for resale by the selling shareholders or affiliates
of the
selling shareholders in prior registration
statements
|
|
|
Shares
registered for resale by the selling shareholders or affiliates
of the
selling shareholders that continue to be held by
same
|
|
|
Shares
registered for resale on behalf of the selling shareholders or
affiliates
of the selling shareholders in the current
transaction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan
Robinson
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
20,465
|
|
Chris
Musso
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
10,011
|
|
Gori
Chandran
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
6,559
|
|
Henry
& Linda Whale
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
64,889
|
|
Jeffrey
Walsh
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
6,577
|
|
JN
Stauffer
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
16,447
|
|
Lionel
Porber
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
190,007
|
|
Matthrew
Rei
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
32,887
|
|
Patricia
Bailey
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
32,332
|
|
Patricia
Baldt
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
6,410
|
|
Quinto
Corp
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
48,492
|
|
Robert
Borski
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
38,504
|
|
Thomas
R. Morehouse
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
18,395
|
|
Tim
Scott
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
13,155
|
|
Wagner
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
23,055
|
|
William
Samuel
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
6,410
|
|
Others
|
|
|
18,722,981
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Totals
|
|
|
18,722,981
|
|
|
|
0
|
|
|
|
0
|
|
|
|
534,595
|
|
Our
Financial Ability to Satisfy our Obligations to the Selling
Shareholders
We
are
only registering the shares of common stock underlying the warrants, so
there is
nothing to repay on the overlying securities.
Existing
Short Positions by Selling Shareholders
Based
upon information provided by the selling shareholders, to the best of our
knowledge, we are not aware of any of the selling shareholders having an
existing short position in our common stock.
Relationships
Between Us and Selling Shareholders and Affiliates
We
hereby
confirms that a description of the relationships and arrangements between
and
among those parties already is presented in the prospectus and that all
agreements between and/or among those parties are included as exhibits
to the
registration statement by incorporation by reference.
Method
of Determining the Number of Shares Registered in this
Prospectus
Pursuant
to our registration rights agreement with the investors, entered into on
February 13, 2006, we are required to register all of the shares issuable
upon
exercise of the warrants issued to the investors.
Fee
Table
|
|
Amount
to be registered
|
|
Shares
of common stock issuable upon exercise of warrants
|
|
|
534,595
|
|
Total
|
|
|
534,595
|
|
Selling
Stockholders
Investor
|
Convertible
Debentures
|
|
Warrants
|
|
Common
Stock
|
|
Shares
of Common Stock Included in Prospectus*
|
|
Alan
Robinson
|
0
|
|
|
20,465
|
|
0
|
|
|
20,465
|
|
Chris
Musso
|
0
|
|
|
10,011
|
|
0
|
|
|
10,011
|
|
Gori
Chandran
|
0
|
|
|
6,559
|
|
0
|
|
|
6,559
|
|
Henry
& Linda Whale
|
0
|
|
|
64,889
|
|
0
|
|
|
64,889
|
|
Jeffrey
Walsh
|
0
|
|
|
6,577
|
|
0
|
|
|
6,577
|
|
JN
Stauffer
|
0
|
|
|
16,447
|
|
0
|
|
|
16,447
|
|
Lionel
Porber
|
0
|
|
|
190,007
|
|
0
|
|
|
190,007
|
|
Matthrew
Rei
|
0
|
|
|
32,887
|
|
0
|
|
|
32,887
|
|
Patricia
Bailey
|
0
|
|
|
32,332
|
|
0
|
|
|
32,332
|
|
Patricia
Baldt
|
0
|
|
|
6,410
|
|
0
|
|
|
6,410
|
|
Quinto
Corp
|
0
|
|
|
48,492
|
|
0
|
|
|
48,492
|
|
Robert
Borski
|
0
|
|
|
38,504
|
|
0
|
|
|
38,504
|
|
Thomas
R. Morehouse
|
0
|
|
|
18,395
|
|
0
|
|
|
18,395
|
|
Tim
Scott
|
0
|
|
|
13,155
|
|
0
|
|
|
13,155
|
|
Wagner
|
0
|
|
|
23,055
|
|
0
|
|
|
23,055
|
|
William
Samuel
|
0
|
|
|
6,410
|
|
0
|
|
|
6,410
|
|
Total
|
0
|
|
|
534,595
|
|
0
|
|
|
534,595
|
|
*
Combined with the additional securities described herein, this reconciles
the
amounts due to each selling stockholder within the prospectus listed within
the
Selling Stockholder schedule, column 4 beginning on page
35.
SETTLEMENT
OF NOVEMBER 2004 LIQUIDATED DAMAGES
Dollar
Value of Securities Registered for Resale in this Prospectus
The
total
dollar value of the securities underlying the convertible debentures that
we
have registered for resale (using the number of underlying securities that
we
have registered for resale and the market price per share for those securities
on the date of the sale of the convertible debentures) are as
follows:
Securities
Underlying the Convertible Notes
|
Market
Price at March 1, 2006
|
Dollar
Value of Underlying Securities
|
|
|
|
96,154
|
$1.51
|
$145,192.54
|
Securities
Underlying the Convertible Notes
|
Market
Price at June 30, 2006
|
Dollar
Value of Underlying Securities
|
|
|
|
30,928
|
$1.90
|
$58,763.20
|
We
reached agreements with two of the
investors on March 1, 2006 and the other two investors on June 30,
2006. The terms of the convertible debentures and warrants issued to
the investors were the same.
Interest
and Liquidated Damages Payments in Connection with the Convertible Notes
Transaction
None.
Net
Proceeds to Airtrax from the Private Placement
As
the securities were issued in
settlement of previously accrued liquidated damages, we did not receive
any
proceeds from the issuance of these securities.
Potential
Total Profit to the Selling Stockholders from the Convertible
Debentures
The
convertible debentures are convertible into shares of common stock at a
conversion price of $1.56 per share. As a result, there was no
potential profit for the convertible debentures issued on March 1, 2006,
as the
conversion price ($1.56) was higher than the market price ($1.51). The
potential
gain to the selling shareholders as of the date of the issuances of the
convertible debentures issued on June 30, 2006, based upon a $0.34 differential
between the market price on the date of the issuance of the convertible
debentures and the conversion price on that date.
Selling Shareholder
|
|
Market
price per share of securities on the date of issuance of the convertible
note (June 30)
|
|
|
Conversion
price per share of underlying securities on the date of sale of
the
convertible note
|
|
|
Total
possible shares underlying the convertible note
|
|
|
Combined
market price (market price per share * total possible
shares)
|
|
|
Total
possible shares the selling shareholders may receive and combined
conversion price of the total number of shares underlying the convertible
note
|
|
|
Total
possible discount to market price as of the date of sale of the
convert
note
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Whalehaven
Capital Fund
|
|
$ |
1.90
|
|
|
$ |
1.56
|
|
|
|
12,862
|
|
|
$ |
24,437.80
|
|
|
$ |
20,064.72
|
|
|
$ |
4,373.08
|
|
Stonestreet
Limited Partnership
|
|
$ |
1.90
|
|
|
$ |
1.56
|
|
|
|
18,066
|
|
|
$ |
34,325.40
|
|
|
$ |
28,182.96
|
|
|
$ |
6,142.44
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
30,928
|
|
|
$ |
68,763.20
|
|
|
$ |
48,247.68
|
|
|
$ |
10,515.52
|
|
Potential
Gross Proceeds:
|
|
$ |
68,763.20
|
|
Total
Potential Cost Basis:
|
|
$ |
48,247.68
|
|
Total
Possible Profit to be Realized by Selling
Shareholders:
|
|
$ |
10,515.52
|
|
Potential
Total Profit to the Selling Stockholders from Other Securities Held by the
Selling Stockholders
The
warrants are exercisable into shares of common stock at an exercise price
of
$1.65 per share. As a result, there was no potential profit for the
warrants issued on March 1, 2006, as the exercise price ($1.65) was higher
than
the market price ($1.51). The potential gain to the selling shareholders
as of
the date of the issuances of the warrants issued on June 30, 2006, based
upon a
$0.25 differential between the market price on the date of the issuance of
the
warrants and the conversion price on that date.
Selling
Shareholder
|
Transaction
|
Type
|
Date
|
|
Market
Price
|
|
|
Exercise
Price
|
|
|
Total
Shares to be received
|
|
|
Combined
Market Price
|
|
|
Combined
Exercise Price
|
|
|
Discount
to Market
|
|
Whalehaven
Capital Fund
|
PIPE
|
Warrants
|
6/30/06
|
|
$ |
1.90
|
|
|
$ |
1.65
|
|
|
|
10,032
|
|
|
$ |
19,060.80
|
|
|
$ |
16,552.8
|
|
|
$ |
2,508
|
|
Stonestreet
Limited Partnership
|
PIPE
|
Warrants
|
6/30/06
|
|
$ |
1.90
|
|
|
$ |
1.65
|
|
|
|
14,092
|
|
|
$ |
26,774.80
|
|
|
$ |
23,251.80
|
|
|
$ |
3,523
|
|
Totals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,124
|
|
|
$ |
45,835.60
|
|
|
$ |
39,804.60
|
|
|
$ |
6,031
|
|
Total
of Possible Payments and Discounts as a Percentage of Net
Proceeds
The
following information presents the sum of all possible payments and the total
possible discounts to the market price of the shares underlying the convertible
debentures as a percentage of the net proceeds to the issuer from the sale
of
the convertible debentures, as well as the amount of that resulting percentage
averaged over the term of the convertible debentures.
The
percentage computation methodology utilized considers the following
factors:
|
•
|
the
gross proceeds paid or payable to us from the convertible
debentures;
|
|
•
|
all
payments that we have made or that may be required to be
made
|
|
•
|
the
resulting net proceeds to us;
and
|
|
•
|
the
combined total possible profit to be realized by the investors
as a result
of any conversion discounts regarding the securities underlying
the
convertible debentures and any other warrants, options, notes,
or other
securities of ours that are held by the selling shareholders or
any
affiliates of the selling shareholders.
|
Gross
proceeds paid to the issuer in the convertible note
transaction
|
|
$ |
0
|
|
All
payments made or that may be may be required to be made by the
issuer that
are disclosed above
|
|
$ |
0
|
|
Net
proceeds to issuer, as Gross proceeds are reduced by the total
of all
possible payments (excluding principal)
|
|
$ |
0
|
|
|
|
|
|
|
Combined
total possible profit to be realized as a result of any conversion
discounts disclosed above
|
|
$ |
6,031
|
|
|
|
|
|
|
Percentage
of the total amount of all possible payments divided by the net
proceeds
to the issuer from the sale of the convertible notes |
|
|
0 |
% |
|
|
|
|
|
Percentage
averaged over the term of the convertible note
|
|
|
0 |
% |
Prior
Securities Transactions Between Airtrax and Selling
Shareholders
Certain
of the selling shareholders had prior securities transactions with us prior
to
this transaction. The following tabular disclosure reflects:
|
•
|
the
date of the transaction;
|
|
•
|
the
number of shares of the class of securities subject to the transaction
that were outstanding prior to the
transaction;
|
|
•
|
the
number of shares of the class of securities subject to the transaction
that were outstanding prior to the transaction and held by persons
other
than the selling shareholders, affiliates of the company, or affiliates
of
the selling shareholders;
|
|
•
|
the
number of shares of the class of securities subject to the transaction
that were issued or issuable in connection with the
transaction;
|
|
•
|
the
percentage of total issued and outstanding securities that were
issued or
issuable in the transaction (assuming full issuance), with the
percentage
calculated by taking the number of shares issued and outstanding
prior to
the applicable transaction and held by persons other than the selling
shareholders, affiliates of the company, or affiliates of the selling
shareholders, and dividing that number by the number of shares
issued or
issuable in connection with the applicable
transaction;
|
|
•
|
the
market price per share of the class of securities subject to the
transaction immediately prior to the transaction (reverse split
adjusted,
if necessary); and
|
|
•
|
the
current market price per share of the class of securities subject
to the
transaction (reverse split adjusted, if
necessary).
|
Selling
shareholder and transaction date
|
Shares
of the class of securities subject to the transaction that were
outstanding prior to the transaction
|
Shares
subject to transaction outstanding prior to the transaction held
in
“float” (1)
|
Shares
that were issued or issuable in connection with the
transaction
|
Percentage of
securities issued or issuable in connection with transaction vs
“float”
(1)
|
Market
price per share immediately prior to the
transaction
|
Current
market price per share of the class of securities subject to the
transaction
|
|
|
|
|
|
|
|
Excalibur
Limited
Partnership;
November
22, 2004
|
13,374,342
|
10,667,135
|
172,500
(2)
|
1.43%
|
1.56
|
0.48
|
|
|
|
|
|
|
|
Excalibur
Limited
Partnership;
May
31, 2005
|
21,703,039
|
19,216,768
|
384,615
(2)
|
1.96%
|
2.10
|
0.48
|
|
|
|
|
|
|
|
Stonestreet
Limited
Partnership;
November
22, 2004
|
13,374,342
|
10,667,135
|
172,500
(2)
|
1.43%
|
1.56
|
0.48
|
|
|
|
|
|
|
|
Stonestreet
Limited
Partnership;
February
11, 2005
|
15,129,342
|
11,893,071
|
115,385
(2)
|
*
|
2.37
|
0.48
|
|
|
|
|
|
|
|
Whalehaven
Capital Fund;
November
22, 2004
|
13,374,342
|
10,667,135
|
194,444
(2)
|
1.80%
|
1.56
|
0.48
|
|
|
|
|
|
|
|
Whalehaven
Capital Fund;
February
11, 2005
|
15,129,342
|
11,893,071
|
201,923
(2)
|
1.67%
|
2.37
|
0.48
|
|
|
|
|
|
|
|
Whalehaven
Capital Fund;
October
18, 2005
|
21,906,174
|
19,482,403
|
544,444
|
2.72%
|
3.04
|
0.48
|
|
|
|
|
|
|
|
Linda
Hechter;
November
22, 2004
|
13,374,342
|
10,667,135
|
172,500
(2)
|
1.43%
|
1.56
|
0.48
|
*
Less than 1%.
Footnotes
(1)
|
The
Company has calculated the percentage of total issued and outstanding
securities that were issued or issuable in the transactions above
by
taking the number of shares issued or issuable in connection with
the
applicable transaction and dividing that number by the number of
shares
issued and outstanding prior to the applicable transaction and
held by
persons other than the selling shareholders, affiliates of the
company, or
affiliates of the selling shareholders. This formula is the
reverse of that suggested in this comment (fifth bullet paragraph),
since
the suggested formula does not yield the percentage of total issued
and
outstanding securities that were issued or issuable in the respective
transactions.
|
(2)
|
The
number of shares issuable assumes the exercise of all warrants
but does
not include the number of shares issuable upon conversion of the
convertible debentures or issued at that time since such shares
are not
being registered.
|
Relationship
Between Shares Issued and Outstanding and Shares Held by Selling
Stockholders
The
following tabular disclosure reflects:
|
•
|
the
number of shares outstanding prior to the convertible note transaction
that are held by persons other than the selling shareholders,
affiliates
of the company, and affiliates of the selling
shareholder;
|
|
•
|
the
number of shares registered for resale by the selling shareholders
or
affiliates of the selling shareholders in prior registration
statements;
|
|
•
|
the
number of shares registered for resale by the selling shareholders
or
affiliates of the selling shareholders that continue to be held
by the
selling shareholders or affiliates of the selling
shareholders;
|
|
•
|
the
number of shares that have been sold in registered resale transactions
by
the selling shareholders or affiliates of the selling
shareholders
|
|
•
|
the
number of shares registered for resale on behalf of the selling
shareholders or affiliates of the selling shareholders in the
current
transaction.
|
In
this
analysis, the calculation of the number of outstanding shares excludes
any
securities underlying any outstanding convertible securities, options,
or
warrants.
Selling
Shareholders
|
|
Shares
held by persons other than the selling shareholders, affiliates
of the
company, and affiliates of the selling shareholder prior to the
current
transaction
|
|
|
Shares
registered for resale by the selling shareholders or affiliates
of the
selling shareholders in prior registration
statements
|
|
|
Shares
registered for resale by the selling shareholders or affiliates
of the
selling shareholders that continue to be held by
same
|
|
|
Shares
registered for resale on behalf of the selling shareholders or
affiliates
of the selling shareholders in the current
transaction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excalibur
Limited Partnership
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
103,021
|
|
Linda
Hechter
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
41,209
|
|
Whalehaven
Capital Fund
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
22,894
|
|
Stonestreet
Limited Partnership
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
32,158
|
|
Others
|
|
|
18,722,981
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Totals
|
|
|
18,722,981
|
|
|
|
0
|
|
|
|
0
|
|
|
|
199,282
|
|
Our
Financial Ability to Satisfy our Obligations to the Selling
Shareholders
We
have
the intention, and a reasonable basis to believe that we will have the
financial
ability, to make payments on the convertible debentures when they become
due. While we expect that most, if not all, of the convertible
debentures will be converted into shares of our common stock on the terms
as set
forth in the debentures, we have no commitment from the investor that they
will
convert any such debentures into shares of our common stock We have
duly accounted for such payments in our long-term comprehensive strategy
and
financial plan.
Existing
Short Positions by Selling Shareholders
Based
upon information provided by the selling shareholders, to the best of our
knowledge, we are not aware of any of the selling shareholders having an
existing short position in our common stock.
Relationships
Between Us and Selling Shareholders and Affiliates
We
hereby
confirms that a description of the relationships and arrangements between
and
among those parties already is presented in the prospectus and that all
agreements between and/or among those parties are included as exhibits
to the
registration statement by incorporation by reference.
Method
of Determining the Number of Shares Registered in this
Prospectus
We
have
registered 100% of the number of shares issuable upon conversion of the
convertible debentures and exercise of the
warrants.
Fee
Table
|
|
Amount
to be registered
|
|
Shares
of common stock issuable upon conversion of convertible
debentures
|
|
|
127,082
|
|
Shares
of common stock issuable upon exercise of warrants
|
|
|
72,200
|
|
Total
|
|
|
199,282
|
|
Selling
Stockholders
Investor
|
|
Convertible
Debentures
|
|
Warrants
|
|
Common
Stock
|
|
Shares
of Common Stock Included in Prospectus*
|
|
Excalibur
Limited Partnership
|
|
|
68,681
|
|
0
|
|
0
|
|
|
34,340
|
|
Linda
Hechter
|
|
|
27,473
|
|
0
|
|
0
|
|
|
13,736
|
|
Whalehaven
Capital Fund
|
|
|
12,862
|
|
0
|
|
0
|
|
|
10,032
|
|
Stonestreet
Limited Partnership
|
|
|
18,066
|
|
0
|
|
0
|
|
|
14,092
|
|
Total
|
|
|
127,082
|
|
0
|
|
0
|
|
|
72,200
|
|
*
This
reconciles the amounts due to each selling stockholder within the prospectus
listed within the Selling Stockholder schedule, column 4 beginning on page
35.
SETTLEMENT
OF OCTOBER 2005 LIQUIDATED DAMAGES
Dollar
Value of Securities Registered for Resale in this
Prospectus
The
total
dollar value of the securities underlying the convertible debentures that
we
have registered for resale (using the number of underlying securities that
we
have registered for resale and the market price per share for those securities
on the date of the sale of the convertible debentures) are as
follows:
Securities
Underlying the Convertible Notes
|
Market
Price at July 21, 2006
|
Dollar
Value of Underlying Securities
|
|
|
|
798,997
|
$1.72
|
$1,374,274.84
|
Interest
and Liquidated Damages Payments in Connection with the Convertible Notes
Transaction
None.
Net
Proceeds to Airtrax from the Private Placement
As
the securities were issued in
settlement of previously accrued liquidated damages, we did not receive any
proceeds from the issuance of these securities.
Potential
Total Profit to the Selling Stockholders from the Convertible
Debentures
The
potential gain to the selling shareholders as of the date of the sale of
the
convertible debentures, based upon a $0.16 differential between the market
price
on the date of the sale of the convertible debentures and the conversion
price
on that date.
Selling Shareholder
|
|
Market
price per share of securities on the date of issuance of the convertible
note (July 21)
|
|
|
Conversion
price per share of underlying securities on the date of sale of
the
convertible note
|
|
|
Total
possible shares underlying the convertible note
|
|
|
Combined
market price (market price per share * total possible
shares)
|
|
|
Total
possible shares the selling shareholders may receive and combined
conversion price of the total number of shares underlying the convertible
note
|
|
|
Total
possible discount to market price as of the date of sale of the
convert
note
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crescent
International, Ltd.
|
|
$ |
1.72
|
|
|
$ |
1.56
|
|
|
|
59,556
|
|
|
$ |
102,435.56
|
|
|
$ |
92,906.67
|
|
|
$ |
9,528.89
|
|
Grace
Lipson and Charles Lipson
|
|
$ |
1.72
|
|
|
$ |
1.56
|
|
|
|
7,444
|
|
|
$ |
12,804.44
|
|
|
$ |
11,613.33
|
|
|
$ |
1,191.11
|
|
CSL
Associates, L.P.
|
|
$ |
1.72
|
|
|
$ |
1.56
|
|
|
|
29,778
|
|
|
$ |
51,217.78
|
|
|
$ |
46,453.33
|
|
|
$ |
4,764.44
|
|
Nite
Capital LP
|
|
$ |
1.72
|
|
|
$ |
1.56
|
|
|
|
22,333
|
|
|
$ |
38,413.33
|
|
|
$ |
34,840.00
|
|
|
$ |
3,573.33
|
|
Whalehaven
Capital Fund
|
|
$ |
1.72
|
|
|
$ |
1.56
|
|
|
|
29,778
|
|
|
$ |
51,217.78
|
|
|
$ |
46,453.33
|
|
|
$ |
4,764.44
|
|
Rachel
Medelowitz
|
|
$ |
1.72
|
|
|
$ |
1.56
|
|
|
|
49,878
|
|
|
$ |
85,789.78
|
|
|
$ |
77,809.33
|
|
|
$ |
7,980.44
|
|
Howard
Blackmon & Mary Ann Oldham
|
|
$ |
1.72
|
|
|
$ |
1.56
|
|
|
|
9,678
|
|
|
$ |
16,645.78
|
|
|
$ |
15,097.33
|
|
|
$ |
1,548.44
|
|
Edward
M. Jaffe
|
|
$ |
1.72
|
|
|
$ |
1.56
|
|
|
|
2,680
|
|
|
$ |
4,609.60
|
|
|
$ |
4,180.80
|
|
|
$ |
428.80
|
|
Mark
A. Phelps
|
|
$ |
1.72
|
|
|
$ |
1.56
|
|
|
|
11,911
|
|
|
$ |
20,487.11
|
|
|
$ |
18,581.33
|
|
|
$ |
1,905.78
|
|
Zirchon
Avrohon Abba and Leon Goldenberg
|
|
$ |
1.72
|
|
|
$ |
1.56
|
|
|
|
7,444
|
|
|
$ |
12,804.44
|
|
|
$ |
11,613.33
|
|
|
$ |
1,191.11
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
30,928
|
|
|
$ |
396,425.60
|
|
|
$ |
359,548.80
|
|
|
$ |
36,876.80
|
|
Potential
Gross Proceeds:
|
|
$ |
396,425.60
|
|
Total
Potential Cost Basis:
|
|
$ |
359,548.80
|
|
Total
Possible Profit to be Realized by Selling
Shareholders:
|
|
$ |
36,876.80
|
|
Potential
Total Profit to the Selling Stockholders from Other Securities Held by the
Selling Stockholders
The
potential gain to the selling shareholders as of the date of the issuances
of
the warrants, based upon a $0.07 differential between the market price on
the
date of the issuance of the warrants and the conversion price on that
date.
Selling
Shareholder
|
Transaction
|
Type
|
Date
|
|
Market
Price
|
|
|
Exercise
Price
|
|
|
Total
Shares to be received
|
|
|
Combined
Market Price
|
|
|
Combined
Exercise Price
|
|
|
Discount
to Market
|
|
Crescent
International, Ltd.
|
PIPE
|
Warrants
|
7/21/06
|
|
$ |
1.72
|
|
|
$ |
1.65
|
|
|
|
28,633
|
|
|
$ |
49,248.00
|
|
|
$ |
44,666.79
|
|
|
$ |
4,581.21
|
|
Grace
Lipson and Charles Lipson
|
PIPE
|
Warrants
|
7/21/06
|
|
$ |
1.72
|
|
|
$ |
1.65
|
|
|
|
3,579
|
|
|
$ |
6,156.00
|
|
|
$ |
5,583.35
|
|
|
$ |
572.65
|
|
CSL
Associates, L.P.
|
PIPE
|
Warrants
|
7/21/06
|
|
$ |
1.72
|
|
|
$ |
1.65
|
|
|
|
14,316
|
|
|
$ |
24,624.00
|
|
|
$ |
22,333.40
|
|
|
$ |
2,290.60
|
|
Nite
Capital LP
|
PIPE
|
Warrants
|
7/21/06
|
|
$ |
1.72
|
|
|
$ |
1.65
|
|
|
|
10,737
|
|
|
$ |
18,468.00
|
|
|
$ |
16,750.05
|
|
|
$ |
1,717.95
|
|
Whalehaven
Capital Fund
|
PIPE
|
Warrants
|
7/21/06
|
|
$ |
1.72
|
|
|
$ |
1.65
|
|
|
|
14,316
|
|
|
$ |
24,624.00
|
|
|
$ |
22,333.40
|
|
|
$ |
2,290.60
|
|
Rachel
Medelowitz
|
PIPE
|
Warrants
|
7/21/06
|
|
$ |
1.72
|
|
|
$ |
1.65
|
|
|
|
23,980
|
|
|
$ |
41,245.20
|
|
|
$ |
37,408.44
|
|
|
$ |
3,836.76
|
|
Howard
Blackmon & Mary Ann Oldham
|
PIPE
|
Warrants
|
7/21/06
|
|
$ |
1.72
|
|
|
$ |
1.65
|
|
|
|
4,653
|
|
|
$ |
8,002.80
|
|
|
$ |
7,258.35
|
|
|
$ |
744.45
|
|
Edward
M. Jaffe
|
PIPE
|
Warrants
|
7/21/06
|
|
$ |
1.72
|
|
|
$ |
1.65
|
|
|
|
1,288
|
|
|
$ |
2,216.16
|
|
|
$ |
2,010.01
|
|
|
$ |
206.15
|
|
Mark
A. Phelps
|
PIPE
|
Warrants
|
7/21/06
|
|
$ |
1.72
|
|
|
$ |
1.65
|
|
|
|
5,727
|
|
|
$ |
9,849.60
|
|
|
$ |
8,933.36
|
|
|
$ |
916.24
|
|
Zirchon
Avrohon Abba and Leon Goldenberg
|
PIPE
|
Warrants
|
7/21/06
|
|
$ |
1.72
|
|
|
$ |
1.65
|
|
|
|
3,579
|
|
|
$ |
6,156.00
|
|
|
$ |
5,583.35
|
|
|
$ |
572.65
|
|
Totals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
110,808
|
|
|
$ |
190,589.76
|
|
|
$ |
172,860.48
|
|
|
$ |
17,729.28
|
|
Total
of Possible Payments and Discounts as a Percentage of Net
Proceeds
The
following information presents the sum of all possible payments and the total
possible discounts to the market price of the shares underlying the convertible
debentures as a percentage of the net proceeds to the issuer from the sale
of
the convertible debentures, as well as the amount of that resulting percentage
averaged over the term of the convertible debentures.
The
percentage computation methodology utilized considers the following
factors:
|
•
|
the
gross proceeds paid or payable to us from the convertible
debentures;
|
|
•
|
all
payments that we have made or that may be required to be
made
|
|
•
|
the
resulting net proceeds to us;
and
|
|
•
|
the
combined total possible profit to be realized by the investors
as a result
of any conversion discounts regarding the securities underlying
the
convertible debentures and any other warrants, options, notes,
or other
securities of ours that are held by the selling shareholders or
any
affiliates of the selling
shareholders.
|
Gross
proceeds paid to the issuer in the convertible note
transaction
|
|
$ |
0
|
|
All
payments made or that may be may be required to be made by the
issuer that
are disclosed above
|
|
$ |
0
|
|
Net
proceeds to issuer, as Gross proceeds are reduced by the total
of all
possible payments (excluding principal)
|
|
$ |
0
|
|
|
|
|
|
|
Combined
total possible profit to be realized as a result of any conversion
discounts disclosed above
|
|
$ |
54,606.08
|
|
|
|
|
|
|
Percentage
of the total amount of all possible payments divided by the net
proceeds
to the issuer from the sale of the convertible notes
|
|
|
0 |
% |
|
|
|
|
|
Percentage
averaged over the term of the convertible note
|
|
|
0 |
% |
Prior
Securities Transactions Between Airtrax and Selling
Shareholders
Certain
of the selling shareholders had prior securities transactions with us prior
to
this transaction. The following tabular disclosure reflects:
|
•
|
the
date of the transaction;
|
|
•
|
the
number of shares of the class of securities subject to the transaction
that were outstanding prior to the
transaction;
|
|
•
|
the
number of shares of the class of securities subject to the transaction
that were outstanding prior to the transaction and held by persons
other
than the selling shareholders, affiliates of the company, or
affiliates of
the selling shareholders;
|
|
•
|
the
number of shares of the class of securities subject to the transaction
that were issued or issuable in connection with the
transaction;
|
|
•
|
the
percentage of total issued and outstanding securities that were
issued or
issuable in the transaction (assuming full issuance), with the
percentage
calculated by taking the number of shares issued and outstanding
prior to
the applicable transaction and held by persons other than the
selling
shareholders, affiliates of the company, or affiliates of the
selling
shareholders, and dividing that number by the number of shares
issued or
issuable in connection with the applicable
transaction;
|
|
•
|
the
market price per share of the class of securities subject to
the
transaction immediately prior to the transaction (reverse split
adjusted,
if necessary); and
|
|
•
|
the
current market price per share of the class of securities subject
to the
transaction (reverse split adjusted, if
necessary).
|
Selling
shareholder and transaction date
|
Shares
of the class of securities subject to the transaction that were
outstanding prior to the transaction
|
Shares
subject to transaction outstanding prior to the transaction held
in
“float” (1)
|
Shares
that were issued or issuable in connection with the
transaction
|
Percentage of
securities issued or issuable in connection with transaction vs
“float”
(1)
|
Market
price per share immediately prior to the
transaction
|
Current
market price per share of the class of securities subject to the
transaction
|
|
|
|
|
|
|
|
Crescent
International;
February
11, 2005
|
15,129,342
|
11,893,071
|
172,500
(2)
|
1.43%
|
2.37
|
0.48
|
Crescent
International;
October
18, 2005
|
21,906,174
|
19,482,403
|
1,088,889
|
5.29%
|
3.04
|
0.48
|
Grace
Lipson and Charles
Lipson;
February
11, 2005
|
15,129,342
|
11,893,071
|
28,846
(2)
|
*
|
2.37
|
0.48
|
Grace
Lipson and Charles
Lipson;
October
18, 2005
|
21,906,174
|
19,482,403
|
136,111
|
*
|
3.04
|
0.48
|
CSL
Associates;
February
11, 2005
|
15,129,342
|
11,893,071
|
144,231
(2)
|
1.20%
|
2.37
|
0.48
|
CSL
Associates;
October
18, 2005
|
21,906,174
|
19,482,403
|
544,444
|
2.72%
|
3.04
|
0.48
|
Nite
Capital;
February
11, 2005
|
15,129,342
|
11,893,071
|
288,462
(2)
|
2.37%
|
2.37
|
0.48
|
Nite
Capital;
October
18, 2005
|
21,906,174
|
19,482,403
|
408,333
|
2.05%
|
3.04
|
0.48
|
Whalehaven
Capital Fund;
November
22, 2004
|
13,374,342
|
10,667,135
|
194,444
(2)
|
1.80%
|
1.56
|
0.48
|
Whalehaven
Capital Fund;
February
11, 2005
|
15,129,342
|
11,893,071
|
201,923
(2)
|
1.67%
|
2.37
|
0.48
|
Whalehaven
Capital Fund;
October
18, 2005
|
21,906,174
|
19,482,403
|
544,444
|
2.72%
|
3.04
|
0.48
|
Rachel
Medelowitz;
February
11, 2005
|
15,129,342
|
11,893,071
|
57,693
(2)
|
*
|
2.37
|
0.48
|
Rachel
Medelowitz;
October
28, 2005
|
21,906,174
|
19,482,403
|
911,944
|
4.47%
|
2.98
|
0.48
|
Howard
Blackmon and Mary Ann
Oldham;
February
11, 2005
|
15,129,342
|
11,893,071
|
30,000
(2)
|
*
|
2.37
|
0.48
|
Howard
Blackmon and Mary Ann
Oldham;
October
28, 2005
|
21,906,174
|
19,482,403
|
32,500
(3)
|
*
|
2.98
|
0.48
|
Edward
M. Jaffe;
February
11, 2005
|
15,129,342
|
11,893,071
|
30,000
(2)
|
*
|
2.37
|
0.48
|
Edward
M. Jaffe;
October
28, 2005
|
21,906,174
|
19,482,403
|
49,000
|
*
|
2.98
|
0.48
|
Mark
A. Phelps;
February
11, 2005
|
15,129,342
|
11,893,071
|
90,000
(2)
|
*
|
2.37
|
0.48
|
Mark
A. Phelps;
October
28, 2005
|
21,906,174
|
19,482,403
|
217,778
|
1.11%
|
2.98
|
0.48
|
Zirchon
Avrohon Abba and Leon
Goldenberg;
February
11, 2005
|
15,129,342
|
11,893,071
|
57,693
(2)
|
*
|
2.37
|
0.48
|
Zirchon
Avrohon Abba and Leon
Goldenberg;
October
28, 2005
|
21,906,174
|
19,482,403
|
136,111
|
*
|
2.98
|
0.48
|
*
Less than 1%.
Footnotes
(1)
|
The
Company has calculated the percentage of total issued and outstanding
securities that were issued or issuable in the transactions above
by
taking the number of shares issued or issuable in connection with
the
applicable transaction and dividing that number by the number of
shares
issued and outstanding prior to the applicable transaction and
held by
persons other than the selling shareholders, affiliates of the
company, or
affiliates of the selling shareholders. This formula is the
reverse of that suggested in this comment (fifth bullet paragraph),
since
the suggested formula does not yield the percentage of total issued
and
outstanding securities that were issued or issuable in the respective
transactions.
|
(2)
|
The
number of shares issuable assumes the exercise of all warrants
but does
not include the number of shares issuable upon conversion of the
convertible debentures or issued at that time since such shares
are not
being registered.
|
(3)
|
Does
not include such shares that have been sold and are not being
registered.
|
Relationship
Between Shares Issued and Outstanding and Shares Held by Selling
Stockholders
The
following tabular disclosure reflects:
|
•
|
the
number of shares outstanding prior to the convertible note transaction
that are held by persons other than the selling shareholders,
affiliates
of the company, and affiliates of the selling
shareholder;
|
|
•
|
the
number of shares registered for resale by the selling shareholders
or
affiliates of the selling shareholders in prior registration
statements;
|
|
•
|
the
number of shares registered for resale by the selling shareholders
or
affiliates of the selling shareholders that continue to be held
by the
selling shareholders or affiliates of the selling
shareholders;
|
|
•
|
the
number of shares that have been sold in registered resale transactions
by
the selling shareholders or affiliates of the selling
shareholders
|
|
•
|
the
number of shares registered for resale on behalf of the selling
shareholders or affiliates of the selling shareholders in the
current
transaction.
|
In
this
analysis, the calculation of the number of outstanding shares excludes
any
securities underlying any outstanding convertible securities, options,
or
warrants.
Selling
Shareholders
|
|
Shares
held by persons other than the selling shareholders, affiliates
of the
company, and affiliates of the selling shareholder prior to the
current
transaction
|
|
|
Shares
registered for resale by the selling shareholders or affiliates
of the
selling shareholders in prior registration
statements
|
|
|
Shares
registered for resale by the selling shareholders or affiliates
of the
selling shareholders that continue to be held by
same
|
|
|
Shares
registered for resale on behalf of the selling shareholders or
affiliates
of the selling shareholders in the current
transaction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crescent
International, Ltd.
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
235,092
|
|
Grace
Lipson and Charles Lipson
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
29,386
|
|
CSL
Associates, L.P.
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
117,546
|
|
Nite
Capital LP
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
88,159
|
|
Whalehaven
Capital Fund
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
117,546
|
|
Rachel
Medelowitz
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
196,889
|
|
Howard
Blackmon & Mary Ann Oldham
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
38,202
|
|
Edward
M. Jaffe
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
10,579
|
|
Mark
A. Phelps
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
47,018
|
|
Zirchon
Avrohon Abba and Leon Goldenberg
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
29,386
|
|
Others
|
|
|
19,919,514
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Totals
|
|
|
19,919,514
|
|
|
|
0
|
|
|
|
0
|
|
|
|
909,805
|
|
Our
Financial Ability to Satisfy our Obligations to the Selling
Shareholders
We
have
the intention, and a reasonable basis to believe that we will have the
financial
ability, to make payments on the convertible debentures when they become
due. While we expect that most, if not all, of the convertible
debentures will be converted into shares of our common stock on the terms
as set
forth in the debentures, we have no commitment from the investor that they
will
convert any such debentures into shares of our common stock We have
duly accounted for such payments in our long-term comprehensive strategy
and
financial plan.
Existing
Short Positions by Selling Shareholders
Based
upon information provided by the selling shareholders, to the best of our
knowledge, we are not aware of any of the selling shareholders having an
existing short position in our common stock.
Relationships
Between Us and Selling Shareholders and Affiliates
We
hereby
confirms that a description of the relationships and arrangements between
and
among those parties already is presented in the prospectus and that all
agreements between and/or among those parties are included as exhibits
to the
registration statement by incorporation by reference.
Method
of Determining the Number of Shares Registered in this
Prospectus
We
have
registered 100% of the number of shares issuable upon conversion of the
convertible debentures and exercise of the
warrants.
Fee
Table
|
|
Amount
to be registered
|
|
Shares
of common stock issuable upon conversion of convertible
debentures
|
|
|
798,997
|
|
Shares
of common stock issuable upon exercise of warrants
|
|
|
110,808
|
|
Total
|
|
|
909,805
|
|
Selling
Stockholders
Investor
|
|
Convertible
Debentures
|
|
|
Warrants
|
|
Common
Stock
|
|
Shares
of Common Stock Included in Prospectus*
|
|
Crescent
International, Ltd.
|
|
|
206,459
|
|
|
|
28,633
|
|
0
|
|
|
235,092
|
|
Grace
Lipson and Charles Lipson
|
|
|
25,807
|
|
|
|
3,579
|
|
0
|
|
|
29,386
|
|
CSL
Associates, L.P.
|
|
|
103,230
|
|
|
|
14,316
|
|
0
|
|
|
117,546
|
|
Nite
Capital LP
|
|
|
77,422
|
|
|
|
10,737
|
|
0
|
|
|
88,159
|
|
Whalehaven
Capital Fund
|
|
|
103,230
|
|
|
|
14,316
|
|
0
|
|
|
117,546
|
|
Rachel
Medelowitz
|
|
|
172,910
|
|
|
|
23,980
|
|
0
|
|
|
196,889
|
|
Howard
Blackmon & Mary Ann Oldham
|
|
|
33,550
|
|
|
|
4,653
|
|
0
|
|
|
38,202
|
|
Edward
M. Jaffe
|
|
|
9,291
|
|
|
|
1,288
|
|
0
|
|
|
10,579
|
|
Mark
A. Phelps
|
|
|
41,292
|
|
|
|
5,727
|
|
0
|
|
|
47,018
|
|
Zirchon
Avrohon Abba and Leon Goldenberg
|
|
|
25,807
|
|
|
|
3,579
|
|
0
|
|
|
29,386
|
|
Total
|
|
|
798,997
|
|
|
|
110,808
|
|
0
|
|
|
909,805
|
|
*
This
reconciles the amounts due to each selling stockholder within the prospectus
listed within the Selling Stockholder schedule, column 4 beginning on page
35.
JULY
2006 PRIVATE PLACEMENT
Dollar
Value of Securities Registered for Resale in this Prospectus
The
total
dollar value of the securities underlying the convertible debentures
that we
have registered for resale (using the number of underlying securities
that we
have registered for resale and the market price per share for those
securities
on the date of the sale of the convertible debentures) are as
follows:
Securities
Underlying the Convertible Notes
|
Market
Price at July 26, 2006
|
Dollar
Value of Underlying Securities
|
|
|
|
666,667
|
$1.68
|
$1,120,000.56
|
Interest
and Liquidated Damages Payments in Connection with the Convertible
Notes
Transaction
We
paid
an aggregate of $40,000 to two placement agents in connection with
the
transaction, each wich had no relationship, contractual or otherwise,
with the
investors in this transaction. The convertible debentures issued in
this transaction accrued interest at the rat of 12% per annum. The
Company accrued $12,000 in interest through the maturity date. No
other fees or
expenses were paid pursuant to this private placement.
Net
Proceeds to Airtrax from the Private Placement
Airtrax
received net proceeds from this
transaction of $360,000, which represents gross proceeds of $400,000,
minus
$40,000 paid to the placement agents.
Potential
Total Profit to the Selling Stockholders from the Convertible
Debentures
The
potential gain to the selling shareholders as of the date of the sale
of the
convertible debentures, based upon a $0.12 differential between the market
price
on the date of the sale of the convertible debentures and the conversion
price
on that date.
Selling Shareholder
|
|
Market
price per share of securities on the date of sale of the convertible
note
(July 26)
|
|
|
Conversion
price per share of underlying securities on the date of sale of
the
convertible note
|
|
|
Total
possible shares underlying the convertible note
(1)
|
|
|
Combined
market price (market price per share * total possible shares)
(1)
|
|
|
Total
possible shares the selling shareholders may receive and combined
conversion price of the total number of shares underlying the convertible
note
|
|
|
Total
possible discount to market price as of the date of sale of the
convert
note (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motivated
Minds LLC
|
|
$ |
1.68
|
|
|
$ |
1.56
|
|
|
|
256,411
|
|
|
$ |
430,770.48
|
|
|
$ |
400,000
|
|
|
$ |
30,770.48
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
256,411
|
|
|
$ |
430,770.48
|
|
|
$ |
400,000
|
|
|
$ |
30,770.48
|
|
Potential
Gross Proceeds:
|
|
$ |
430,770.48
|
|
Total
Potential Cost Basis:
|
|
$ |
400,000
|
|
Total
Possible Profit to be Realized by Selling
Shareholders:
|
|
$ |
30,770.48
|
|
Footnotes
(1)
The
convertible debenture contains a reset provision, in that the conversion
price
of the convertible debenture shall be lowered in the event that we issue
shares
of common stock, or securities convertible into shares of common stock, at
a
lower price than the then current conversion price. The conversion price
of the
convertible debenture has been reduced to $0.45 as a result of a private
placement conducted in February 2007.
Potential
Total Profit to the Selling Stockholders from Other Securities Held by
the
Selling Stockholders
Selling
Shareholder
|
Transaction
|
Type
|
Date
|
|
Market
Price
|
|
|
Exercise
Price
|
|
|
Total
Shares to be received
|
|
|
Combined
Market Price
|
|
|
Combined
Exercise Price
|
|
|
Discount
to Market
|
|
Motivated
Minds
|
PIPE
|
Warrants
|
7/26/06
|
|
$ |
1.68
|
|
|
$ |
1.56
|
|
|
|
256,410
|
|
|
$ |
430,768.80
|
|
|
$ |
399,999.60
|
|
|
$ |
30,769.20
|
|
Totals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
256,410
|
|
|
$ |
430,768.80
|
|
|
$ |
399,999.60
|
|
|
$ |
30,769.20
|
|
Total
of
Possible Payments and Discounts as a Percentage of Net Proceeds
The
following
information presents the sum of all possible payments and the total possible
discounts to the market price of the shares underlying the convertible
debentures as a percentage of the net proceeds to the issuer from the
sale of
the convertible debentures, as well as the amount of that resulting percentage
averaged over the term of the convertible debentures.
The
percentage computation methodology utilized considers the following
factors:
|
•
|
the
gross proceeds paid or payable to us from the convertible
debentures;
|
|
•
|
all
payments that we have made or that may be required to be
made
|
|
•
|
the
resulting net proceeds to us; and
|
|
•
|
the
combined total possible profit to be realized by the investors
as a result
of any conversion discounts regarding the securities underlying
the
convertible debentures and any other warrants, options, notes,
or other
securities of ours that are held by the selling shareholders
or any
affiliates of the selling shareholders.
|
Gross
proceeds paid to the issuer in the convertible note
transaction
|
|
$ |
400,000
|
|
All
payments made or that may be may be required to be made by
the issuer that
are disclosed above
|
|
$ |
40,000
|
|
Net
proceeds to issuer, as Gross proceeds are reduced by the total
of all
possible payments (excluding principal)
|
|
$ |
360,000
|
|
|
|
|
|
|
Combined
total possible profit to be realized as a result of any conversion
discounts disclosed above
|
|
$ |
61,539.68
|
|
Percentage
of the total amount of all possible payments divided by the
net proceeds
to the issuer from the sale of the convertible notes
|
|
|
11.11 |
% |
|
|
|
|
|
Percentage
averaged over the term of the convertible note
|
|
|
3.70 |
% |
Prior
Securities Transactions Between Airtrax and Selling
Shareholders
None.
Relationship
Between Shares Issued and Outstanding and Shares Held by Selling
Stockholders
The
following tabular disclosure reflects:
|
•
|
the
number of shares outstanding prior to the convertible note transaction
that are held by persons other than the selling shareholders, affiliates
of the company, and affiliates of the selling
shareholder;
|
|
•
|
the
number of shares registered for resale by the selling shareholders
or
affiliates of the selling shareholders in prior registration
statements;
|
|
•
|
the
number of shares registered for resale by the selling shareholders
or
affiliates of the selling shareholders that continue to be held
by the
selling shareholders or affiliates of the selling
shareholders;
|
|
•
|
the
number of shares that have been sold in registered resale transactions
by
the selling shareholders or affiliates of the selling
shareholders
|
|
•
|
the
number of shares registered for resale on behalf of the selling
shareholders or affiliates of the selling shareholders in the current
transaction.
|
In
this
analysis, the calculation of the number of outstanding shares excludes any
securities underlying any outstanding convertible securities, options, or
warrants.
Selling
Shareholders
|
|
Shares
held by persons other than the selling shareholders, affiliates
of the
company, and affiliates of the selling shareholder prior to the
current
transaction
|
|
|
Shares
registered for resale by the selling shareholders or affiliates
of the
selling shareholders in prior registration
statements
|
|
|
Shares
registered for resale by the selling shareholders or affiliates
of the
selling shareholders that continue to be held by
same
|
|
|
Shares
registered for resale on behalf of the selling shareholders or
affiliates
of the selling shareholders in the current
transaction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motivated
Minds LLC
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
923,077
|
|
Others
|
|
|
19,919,514
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Totals
|
|
|
19,919,514
|
|
|
|
0
|
|
|
|
0
|
|
|
|
923,077
|
|
Our
Financial Ability to Satisfy our Obligations to the Selling
Shareholders
We
have
the intention, and a reasonable basis to believe that we will have the
financial
ability, to make payments on the overlying securities when they become
due. While we expect that most, if not all, of the convertible
debentures will be converted into shares of our common stock on the terms
as set
forth in the debentures, we have no commitment from the investor that they
will
convert any such debentures into shares of our common stock We have
duly accounted for such payments in our long-term comprehensive strategy
and
financial plan.
Existing
Short Positions by Selling Shareholders
Based
upon information provided by the selling shareholders, to the best of our
knowledge, we are not aware of any of the selling shareholders having an
existing short position in our common stock.
Relationships
Between Us and Selling Shareholders and Affiliates
We
hereby
confirms that a description of the relationships and arrangements between
and
among those parties already is presented in the prospectus and that all
agreements between and/or among those parties are included as exhibits
to the
registration statement by incorporation by reference.
Method
of Determining the Number of Shares Registered in this
Prospectus
The
number of shares being registered represent the number of shares of common
stock
underlying the convertible debentures and upon exercise of the
warrants. Currently, there is $300,000 in convertible debentures
issued and outstanding, which, at a conversion price of $0.45 per share,
results
in the issuance of 666,667 shares of common stock.
Fee
Table
|
|
Amount
to be registered
|
|
Shares
of common stock issuable upon conversion of convertible
debentures
|
|
|
666,667
|
|
Shares
of common stock issuable upon exercise of warrants
|
|
|
256,410
|
|
Total
|
|
|
923,077
|
|
Selling
Stockholders
Investor
|
|
Convertible
Debentures
|
|
|
Warrants
|
|
Common
Stock
|
|
Shares
of Common Stock Included in Prospectus*
|
|
Motivated
Minds
|
|
|
666,667
|
|
|
|
236,410
|
|
0
|
|
|
923,077
|
|
Total
|
|
|
666,667
|
|
|
|
236,410
|
|
0
|
|
|
923,077
|
|
*
This
reconciles the amounts due to each selling stockholder within the prospectus
listed within the Selling Stockholder schedule, column 4 beginning on
page
35.
FEBRUARY
2007 PRIVATE PLACEMENT
Dollar
Value of Securities Registered for Resale in this Prospectus
The
total
dollar value of the securities underlying the convertible debentures
that we
have registered for resale (using the number of underlying securities
that we
have registered for resale and the market price per share for those
securities
on the date of the sale of the convertible debentures) are as
follows:
Securities
Underlying the Convertible Notes
|
Market
Price at February 20, 2007
|
Dollar
Value of Underlying Securities
|
|
|
|
8,297,867
|
$0.68
|
$5,642,549.56
|
Interest
and Liquidated Damages Payments in Connection with the Convertible
Notes
Transaction
We
paid
First Montauk Securities Corp. fees of $321,900 and a warrant to purchase
715,333 shares of common stock at an exercise price of $0.54 per share
as
selling agent, who has no relationship, contractual or otherwise, with
the
investors in this transaction. We also paid a non-accountable fee of
$25,000 to First Montauk. No other fees or expenses were paid pursuant
to this
private placement.
Net
Proceeds to Airtrax from the Private Placement
Airtrax
received net proceeds from this
transaction of $2,872,100, which represents gross proceeds of $3,219,000,
minus
$346,900 paid to First Montauk Securities.
Potential
Total Profit to the Selling Stockholders from the Convertible
Debentures
The
potential gain to the selling shareholders as of the date of the sale
of the
convertible debentures, based upon a $0.23 differential between the
market price
on the date of the sale of the convertible debentures and the conversion
price
on that date.
Selling Shareholder
|
|
Market
price per share of securities on the date of sale of the convertible
note
(February 20)
|
|
|
Conversion
price per share of underlying securities on the date of sale of
the
convertible note
|
|
|
Total
possible shares underlying the convertible note
(1)
|
|
|
Combined
market price (market price per share * total possible shares)
(1)
|
|
|
Total
possible shares the selling shareholders may receive and combined
conversion price of the total number of shares underlying the convertible
note
|
|
|
Total
possible discount to market price as of the date of sale of the
convert
note (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
Lee Spencer Jr.
|
|
$ |
0.68
|
|
|
$ |
0.45
|
|
|
|
234,320
|
|
|
$ |
159,337.60
|
|
|
$ |
105,444.00
|
|
|
$ |
53,893.60
|
|
NFS/FMTC
IRA FBO Richard Spencer
|
|
$ |
0.68
|
|
|
$ |
0.45
|
|
|
|
91,511
|
|
|
$ |
62,227.56
|
|
|
$ |
41,180.00
|
|
|
$ |
21,047.56
|
|
James
G. Blumenthal
|
|
$ |
0.68
|
|
|
$ |
0.45
|
|
|
|
322,222
|
|
|
$ |
219,111.11
|
|
|
$ |
145,000.00
|
|
|
$ |
74,111.11
|
|
Jose
Zajac
|
|
$ |
0.68
|
|
|
$ |
0.45
|
|
|
|
257,778
|
|
|
$ |
175,288.89
|
|
|
$ |
116,000.00
|
|
|
$ |
59,288.89
|
|
Sidney
Welz
|
|
$ |
0.68
|
|
|
$ |
0.45
|
|
|
|
219,111
|
|
|
$ |
148,995.56
|
|
|
$ |
98,600.00
|
|
|
$ |
50,395.56
|
|
Leon
Goldenberg
|
|
$ |
0.68
|
|
|
$ |
0.45
|
|
|
|
257,778
|
|
|
$ |
175,288.89
|
|
|
$ |
116,000.00
|
|
|
$ |
59,288.89
|
|
MNJ1
LLC
|
|
$ |
0.68
|
|
|
$ |
0.45
|
|
|
|
257,778
|
|
|
$ |
175,288.89
|
|
|
$ |
116,000.00
|
|
|
$ |
59,288.89
|
|
Peter
Rand
|
|
$ |
0.68
|
|
|
$ |
0.45
|
|
|
|
393,369
|
|
|
$ |
267,490.84
|
|
|
$ |
177,016.00
|
|
|
$ |
90,474.84
|
|
Abraham
Weitman & Daniel Altstadter
|
|
$ |
0.68
|
|
|
$ |
0.45
|
|
|
|
257,778
|
|
|
$ |
175,288.89
|
|
|
$ |
116,000.00
|
|
|
$ |
59,288.89
|
|
Unbeatable
Trading Inc.
|
|
$ |
0.68
|
|
|
$ |
0.45
|
|
|
|
257,778
|
|
|
$ |
175,288.89
|
|
|
$ |
116,000.00
|
|
|
$ |
59,288.89
|
|
Unity
Capital
|
|
$ |
0.68
|
|
|
$ |
0.45
|
|
|
|
515,556
|
|
|
$ |
350,577.78
|
|
|
$ |
232,000.00
|
|
|
$ |
118,577.78
|
|
Willfred
Shearer
|
|
$ |
0.68
|
|
|
$ |
0.45
|
|
|
|
257,778
|
|
|
$ |
175,288.89
|
|
|
$ |
116,000.00
|
|
|
$ |
59,288.89
|
|
Whalehaven
Capital Fund
|
|
$ |
0.68
|
|
|
$ |
0.45
|
|
|
|
644,444
|
|
|
$ |
438,222.22
|
|
|
$ |
290,000.00
|
|
|
$ |
148,222.22
|
|
Excalibur
Limited Partnership
|
|
$ |
0.68
|
|
|
$ |
0.45
|
|
|
|
386,667
|
|
|
$ |
262,933.33
|
|
|
$ |
174,000.00
|
|
|
$ |
88,933.33
|
|
Ellis
International LP
|
|
$ |
0.68
|
|
|
$ |
0.45
|
|
|
|
644,444
|
|
|
$ |
438,222.22
|
|
|
$ |
290,000.00
|
|
|
$ |
148,222.22
|
|
Harborview
Master Fund LP
|
|
$ |
0.68
|
|
|
$ |
0.45
|
|
|
|
644,444
|
|
|
$ |
438,222.22
|
|
|
$ |
290,000.00
|
|
|
$ |
148,222.22
|
|
Alpha
Capital Anstalt
|
|
$ |
0.68
|
|
|
$ |
0.45
|
|
|
|
1,288,889
|
|
|
$ |
876,444.44
|
|
|
$ |
580,000.00
|
|
|
$ |
296,444.44
|
|
Platinum
Partners
|
|
$ |
0.68
|
|
|
$ |
0.45
|
|
|
|
1,288,889
|
|
|
$ |
876,444.44
|
|
|
$ |
580,000.00
|
|
|
$ |
296,444.44
|
|
Stuart
A. Margolis
|
|
$ |
0.68
|
|
|
$ |
0.45
|
|
|
|
77,333
|
|
|
$ |
52,586.67
|
|
|
$ |
34,800.00
|
|
|
$ |
17,786.67
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
8,297,867
|
|
|
$ |
5,642,549.33
|
|
|
$ |
3,734,040
|
|
|
$ |
1,908,509.33
|
|
Potential
Gross Proceeds:
|
|
$ |
5,642,549.33
|
|
Total
Potential Cost Basis:
|
|
$ |
3,734,040
|
|
Total
Possible Profit to be Realized by Selling
Shareholders:
|
|
$ |
1,908,509.33
|
|
Footnotes
(1)
The
convertible debenture contains a reset provision, in that the conversion
price
of the convertible debenture shall be lowered in the event that we issue
shares
of common stock, or securities convertible into shares of common stock,
at a
lower price than the then current conversion price. To date, the conversion
price of the convertible debentures has not been adjusted.
Potential
Total Profit to the Selling Stockholders from Other Securities Held by
the
Selling Stockholders
No
other
securities are being registered at this time.
Total
of Possible Payments and Discounts as a Percentage of Net
Proceeds
The
following information presents the sum of all possible payments and the
total
possible discounts to the market price of the shares underlying the convertible
debentures as a percentage of the net proceeds to the issuer from the sale
of
the convertible debentures, as well as the amount of that resulting percentage
averaged over the term of the convertible debentures.
The
percentage computation methodology utilized considers the following
factors:
|
•
|
the
gross proceeds paid or payable to us from the convertible
debentures;
|
|
•
|
all
payments that we have made or that may be required to be
made
|
|
•
|
the
resulting net proceeds to us; and
|
|
•
|
the
combined total possible profit to be realized by the investors
as a result
of any conversion discounts regarding the securities underlying
the
convertible debentures and any other warrants, options, notes,
or other
securities of ours that are held by the selling shareholders
or any
affiliates of the selling shareholders.
|
Gross
proceeds paid to the issuer in the convertible note
transaction
|
|
$ |
3,219,000
|
|
All
payments made or that may be may be required to be made by the
issuer that
are disclosed above
|
|
$ |
346,900
|
|
Net
proceeds to issuer, as Gross proceeds are reduced by the total
of all
possible payments (excluding principal)
|
|
$ |
2,872,100
|
|
|
|
|
|
|
Combined
total possible profit to be realized as a result of any conversion
discounts disclosed above
|
|
$ |
1,908,509.33
|
|
Percentage
of the total amount of all possible payments divided by the net
proceeds
to the issuer from the sale of the convertible notes |
|
|
12.08 |
% |
|
|
|
|
|
Percentage
averaged over the term of the convertible note
|
|
|
6.04 |
% |
Prior
Securities Transactions Between Airtrax and Selling
Shareholders
Certain
of the selling shareholders had prior securities transactions with us prior
to
this transaction. The following tabular disclosure reflects:
|
•
|
the
date of the transaction;
|
|
•
|
the
number of shares of the class of securities subject to the transaction
that were outstanding prior to the
transaction;
|
|
•
|
the
number of shares of the class of securities subject to the transaction
that were outstanding prior to the transaction and held by persons
other
than the selling shareholders, affiliates of the company, or
affiliates of
the selling shareholders;
|
|
•
|
the
number of shares of the class of securities subject to the transaction
that were issued or issuable in connection with the
transaction;
|
|
•
|
the
percentage of total issued and outstanding securities that were
issued or
issuable in the transaction (assuming full issuance), with the
percentage
calculated by taking the number of shares issued and outstanding
prior to
the applicable transaction and held by persons other than the
selling
shareholders, affiliates of the company, or affiliates of the
selling
shareholders, and dividing that number by the number of shares
issued or
issuable in connection with the applicable
transaction;
|
|
•
|
the
market price per share of the class of securities subject to
the
transaction immediately prior to the transaction (reverse split
adjusted,
if necessary); and
|
|
•
|
the
current market price per share of the class of securities subject
to the
transaction (reverse split adjusted, if
necessary).
|
Selling
shareholder and transaction date
|
Shares
of the class of securities subject to the transaction that were
outstanding prior to the transaction
|
Shares
subject to transaction outstanding prior to the transaction held
in
“float” (1)
|
Shares
that were issued or issuable in connection with the
transaction
|
Percentage of
securities issued or issuable in connection with transaction vs
“float”
(1)
|
Market
price per share immediately prior to the
transaction
|
Current
market price per share of the class of securities subject to the
transaction
|
|
|
|
|
|
|
|
Excalibur
Limited
Partnership;
November
22, 2004
|
13,374,342
|
10,667,135
|
555,555
(2)
|
4.95%
|
1.56
|
0.48
|
Excalibur
Limited
Partnership;
May
31, 2005
|
21,703,039
|
19,216,768
|
384,615
(2)
|
1.96%
|
2.10
|
0.48
|
Excalibur
Limited
Partnership;
March
1, 2006
|
22,283,624
|
18,722,981
|
103,021
|
*
|
1.51
|
0.48
|
Whalehaven
Capital Fund;
November
22, 2004
|
13,374,342
|
10,667,135
|
194,444
(2)
|
1.80%
|
1.56
|
0.48
|
Whalehaven
Capital Fund;
February
11, 2005
|
15,129,342
|
11,893,071
|
201,923
(2)
|
1.67%
|
2.37
|
0.48
|
Whalehaven
Capital Fund;
October
18, 2005
|
21,906,174
|
19,482,403
|
544,444
|
2.72%
|
3.04
|
0.48
|
Whalehaven
Capital Fund;
June
30, 2006
|
22,283,624
|
18,722,981
|
22,894
|
*
|
1.90
|
0.48
|
Whalehaven
Capital Fund;
July
21, 2006
|
23,480,157
|
19,919,574
|
117,546
|
*
|
1.72
|
0.48
|
First
Montauk Securities
Corp;
November
22, 2004
|
13,374,342
|
10,667,135
|
176,500
|
1.63%
|
1.56
|
0.48
|
First
Montauk Securities
Corp;
February
11, 2005
|
15,129,342
|
11,893,071
|
384,616
|
3.13%
|
2.37
|
0.48
|
First
Montauk Securities
Corp;
May
31, 2006
|
21,703,039
|
19,216,768
|
38,462
|
*
|
2.10
|
0.48
|
*
Less than 1%.
Footnotes
(1)
|
The
Company has calculated the percentage of total issued and outstanding
securities that were issued or issuable in the transactions above
by
taking the number of shares issued or issuable in connection with
the
applicable transaction and dividing that number by the number of
shares
issued and outstanding prior to the applicable transaction and
held by
persons other than the selling shareholders, affiliates of the
company, or
affiliates of the selling shareholders. This formula is the
reverse of that suggested in this comment (fifth bullet paragraph),
since
the suggested formula does not yield the percentage of total issued
and
outstanding securities that were issued or issuable in the respective
transactions.
|
(2)
|
The
number of shares issuable assumes the exercise of all warrants
but does
not include the number of shares issuable upon conversion of the
convertible debentures or issued at that time since such shares
are not
being registered.
|
Relationship
Between Shares Issued and Outstanding and Shares Held by Selling
Stockholders
The
following tabular disclosure reflects:
|
•
|
the
number of shares outstanding prior to the convertible note transaction
that are held by persons other than the selling shareholders, affiliates
of the company, and affiliates of the selling
shareholder;
|
|
•
|
the
number of shares registered for resale by the selling shareholders
or
affiliates of the selling shareholders in prior registration
statements;
|
|
•
|
the
number of shares registered for resale by the selling shareholders
or
affiliates of the selling shareholders that continue to be held
by the
selling shareholders or affiliates of the selling
shareholders;
|
|
•
|
the
number of shares that have been sold in registered resale transactions
by
the selling shareholders or affiliates of the selling
shareholders
|
|
•
|
the
number of shares registered for resale on behalf of the selling
shareholders or affiliates of the selling shareholders in the current
transaction.
|
In
this
analysis, the calculation of the number of outstanding shares excludes any
securities underlying any outstanding convertible securities, options, or
warrants.
Selling
Shareholders
|
|
Shares
held by persons other than the selling shareholders, affiliates
of the
company, and affiliates of the selling shareholder prior to the
current
transaction
|
|
|
Shares
registered for resale by the selling shareholders or affiliates
of the
selling shareholders in prior registration
statements
|
|
|
Shares
registered for resale by the selling shareholders or affiliates
of the
selling shareholders that continue to be held by
same
|
|
|
Shares
registered for resale on behalf of the selling shareholders or
affiliates
of the selling shareholders in the current
transaction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
Lee Spencer Jr.
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
234,320
|
|
NFS/FMTC
IRA FBO Richard Spencer
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
91,511
|
|
James
G. Blumenthal
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
322,222
|
|
Jose
Zajac
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
257,778
|
|
Sidney
Welz
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
219,111
|
|
Leon
Goldenberg
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
257,778
|
|
MNJ1
LLC
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
257,778
|
|
Peter
Rand
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
393,369
|
|
Abraham
Weitman & Daniel Altstadter
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
257,778
|
|
Unbeatable
Trading Inc.
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
257,778
|
|
Unity
Capital
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
515,556
|
|
Willfred
Shearer
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
257,778
|
|
Whalehaven
Capital Fund
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
644,444
|
|
Excalibur
Limited Partnership
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
386,667
|
|
Ellis
International LP
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
644,444
|
|
Harborview
Master Fund LP
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
644,444
|
|
Alpha
Capital Anstalt
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,288,889
|
|
Platinum
Partners
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,288,889
|
|
Stuart
A. Margolis
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
77,333
|
|
Others
|
|
|
22,934,021
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Totals
|
|
|
22,934,021
|
|
|
|
0
|
|
|
|
0
|
|
|
|
8,297,867
|
|
Our
Financial Ability to Satisfy our Obligations to the Selling
Shareholders
We
have
the intention, and a reasonable basis to believe that we will have the financial
ability, to make payments on the convertible debentures when they become
due. While we expect that most, if not all, of the convertible
debentures will be converted into shares of our common stock on the terms
as set
forth in the debentures, we have no commitment from the investor that they
will
convert any such debentures into shares of our common stock We have
duly accounted for such payments in our long-term comprehensive strategy
and
financial plan.
Existing
Short Positions by Selling Shareholders
Based
upon information provided by the selling shareholders, to the best of our
knowledge, we are not aware of any of the selling shareholders having an
existing short position in our common stock.
Relationships
Between Us and Selling Shareholders and Affiliates
We
hereby
confirms that a description of the relationships and arrangements between
and
among those parties already is presented in the prospectus and that all
agreements between and/or among those parties are included as exhibits to
the
registration statement by incorporation by reference.
Method
of Determining the Number of Shares Registered in this
Prospectus
Our
registration rights agreement, entered into on February 20, 2007 requires
us to
register 130% of such number of shares of common stock issuable upon conversion
of the convertible debentures and exercise of the warrants issued to the
investors, subject to reduction pursuant to Rule 415. As a result, we
have registered a number of shares issuable upon conversion of the outstanding
convertible debentures which we believe is allowable under Rule
415.
Fee
Table
|
|
Amount
to be registered
|
|
Shares
of common stock issuable upon conversion of convertible
debentures
|
|
|
8,297,867
|
|
Total
|
|
|
8,297,867
|
|
Selling
Stockholders
Investor
|
|
Convertible
Debentures
|
|
Warrants
|
|
Common
Stock
|
|
Shares
of Common Stock Included in Prospectus*
|
|
Richard
Lee Spencer Jr.
|
|
|
234,320
|
|
0
|
|
0
|
|
|
234,320
|
|
NFS/FMTC
IRA FBO Richard Spencer
|
|
|
91,511
|
|
0
|
|
0
|
|
|
91,511
|
|
James
G. Blumenthal
|
|
|
322,222
|
|
0
|
|
0
|
|
|
322,222
|
|
Jose
Zajac
|
|
|
257,778
|
|
0
|
|
0
|
|
|
257,778
|
|
Sidney
Welz
|
|
|
219,111
|
|
0
|
|
0
|
|
|
219,111
|
|
Leon
Goldenberg
|
|
|
257,778
|
|
0
|
|
0
|
|
|
257,778
|
|
MNJ1
LLC
|
|
|
257,778
|
|
0
|
|
0
|
|
|
257,778
|
|
Peter
Rand
|
|
|
393,369
|
|
0
|
|
0
|
|
|
393,369
|
|
Abraham
Weitman & Daniel Altstadter
|
|
|
257,778
|
|
0
|
|
0
|
|
|
257,778
|
|
Unbeatable
Trading Inc.
|
|
|
257,778
|
|
0
|
|
0
|
|
|
257,778
|
|
Unity
Capital
|
|
|
515,556
|
|
0
|
|
0
|
|
|
515,556
|
|
Willfred
Shearer
|
|
|
257,778
|
|
0
|
|
0
|
|
|
257,778
|
|
Whalehaven
Capital Fund
|
|
|
644,444
|
|
0
|
|
0
|
|
|
644,444
|
|
Excalibur
Limited Partnership
|
|
|
386,667
|
|
0
|
|
0
|
|
|
386,667
|
|
Ellis
International LP
|
|
|
644,444
|
|
0
|
|
0
|
|
|
644,444
|
|
Harborview
Master Fund LP
|
|
|
644,444
|
|
0
|
|
0
|
|
|
644,444
|
|
Alpha
Capital Anstalt
|
|
|
1,288,889
|
|
0
|
|
0
|
|
|
1,288,889
|
|
Platinum
Partners
|
|
|
1,288,889
|
|
0
|
|
0
|
|
|
1,288,889
|
|
Stuart
A. Margolis
|
|
|
77,333
|
|
0
|
|
0
|
|
|
77,333
|
|
Total
|
|
|
8,297,867
|
|
0
|
|
0
|
|
|
8,297,867
|
|
*
This
reconciles the amounts due to each selling stockholder within the prospectus
listed within the Selling Stockholder schedule, column 4 beginning on page
35.
LEGAL
MATTERS
Sichenzia
Ross Friedman Ference LLP, New York, New York will issue an opinion with respect
to the validity of the shares of common stock being offered hereby.
EXPERTS
Robert
G.
Jeffrey, Certified Public Accountant, has audited, as set forth in their report
thereon appearing elsewhere herein, our financial statements at December 31,
2006 and 2005 and for the years then ended that appear in the prospectus. The
financial statements referred to above are included in this prospectus with
reliance upon the certified public accountant’s opinion based on their expertise
in accounting and auditing.
AVAILABLE
INFORMATION
We
have
filed a registration statement on Form SB-2 under the Securities Act of 1933,
as
amended, relating to the shares of common stock being offered by this
prospectus, and reference is made to such registration statement. This
prospectus constitutes the prospectus of Airtrax, Inc., filed as part of the
registration statement, and it does not contain all information in the
registration statement, as certain portions have been omitted in accordance
with
the rules and regulations of the Securities and Exchange Commission.
We
are
subject to the informational requirements of the Securities Exchange Act of
1934
which requires us to file reports, proxy statements and other information with
the Securities and Exchange Commission. Such reports, proxy statements and
other
information may be inspected at public reference facilities of the SEC at 100
F
Street, N.E., Washington D.C. 20549. Copies of such material can be obtained
from the Public Reference Section of the SEC at 100 F Street, N.E., Washington,
D.C. 20549 at prescribed rates. Because we file documents electronically with
the SEC, you may also obtain this information by visiting the SEC's Internet
website at http://www.sec.gov.
INDEX
TO FINANCIAL STATEMENTS
AIRTRAX,
INC.
INDEX
TO
FINANCIAL STATEMENTS
For
the Years Ended December 31, 2006 and 2005
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
F-1
|
|
|
Consolidated
Balance Sheets
|
F-2
|
|
|
Consolidated
Statements of Operations
|
F-3
|
|
|
Consolidated
Statements of Changes in Shareholders’ Equity (Deficiency)
|
F-4
|
|
|
Consolidated
Statements of Cash Flows
|
F-5
|
|
|
Notes
to Consolidated Financial Statements
|
|
|
|
For
the Three Months Ended March 31, 2007 |
|
|
|
Consolidated
Balance Sheets (Unaudited) |
F-14
|
|
|
Consolidated
Statements of Operations (Unaudited) |
F-15
|
|
|
Consolidated
Statements of Cash Flows (Unaudited) |
F-16
|
|
|
Notes
to Unaudited Consolidated Financial Statements |
F-17
to F-22
|
Report
of Independent Registered Public Accounting Firm
The
Board
of Directors and shareholders
Airtrax,
Inc.
We
have
audited the accompanying balance sheets of Airtrax, Inc. (the "Company")
as of
December 31, 2006 and December 31, 2005 and the related statements of
operations, changes in shareholders' deficit and cash flows for each
of the two
years in the period ended December 31, 2006. These financial statements
are the
responsibility of the Company's management. Our responsibility is to
express an
opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is
not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of
internal
control over financial reporting as a basis for designing audit procedures
that
are appropriate under the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. 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. We believe that our audits
provide a
reasonable basis for our opinion.
In
our
opinion, based on our audits, the financial statements referred to above
present
fairly, in all material respects, the financial position of Airtrax,
Inc. as of
December 31, 2006, and the results of its operations and its cash flows
for the
years ended December 31, 2006 and 2005 in accordance with U.S. generally
accepted accounting principles.
As
detailed in Note 2 to the financial statements, factors were discovered
which
caused restatements of the financial statements for the years ended December
31,
2005 and December 31, 2006.
The
accompanying consolidated financial statements have been prepared assuming
that
the Company will continue as a going concern. As shown in the accompanying
consolidated financial statements, at December 31, 2006, the Company
had a
working capital deficiency of $3.0 million as well as an accumulated
deficit of
$29.5 million. In addition, the Company has had a continuing record of
losses.
These factors among other things, discussed in Notes 15 to the financial
statements, raise substantial doubt about the ability of the Company
to continue
as a going concern. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts
or
the amounts or classification of liabilities that might be necessary
should the
Company be unable to continue in operation.
|
/s/
Robert G. Jeffrey, Certified Public Accountant |
|
July
27, 2007
|
|
Wayne,
New Jersey
|
Balance
Sheets
As
of December 31, 2006 and 2005
Assets
|
|
2006
|
|
|
2005
|
|
Current
Assets:
|
|
(Restated)
|
|
|
|
|
Cash
|
|
$ |
327,737
|
|
|
$ |
19,288
|
|
Accounts
receivable
|
|
|
50,704
|
|
|
|
94,357
|
|
Inventory
|
|
|
1,049,457
|
|
|
|
2,005,139
|
|
Vendor
advance
|
|
|
103,628
|
|
|
|
163,517
|
|
Deferred
tax asset
|
|
|
919,889
|
|
|
|
977,302
|
|
Total
current assets
|
|
|
2,451,415
|
|
|
|
3,259,603
|
|
Property
and Equipment, net of
accumulated
|
|
|
|
|
|
|
|
|
depreciation
of $339,216 and $301886, respectively
|
|
|
283,920
|
|
|
|
190,893
|
|
Other
Assets
Advances
to Filco Gmbh
|
|
|
-
|
|
|
|
2,000,000
|
|
Patents,
net
|
|
|
148,151
|
|
|
|
154,263
|
|
Deferred
charges
|
|
|
-
|
|
|
|
388,392
|
|
Other
|
|
|
65
|
|
|
|
65
|
|
Total
other assets
|
|
|
148,216
|
|
|
|
2,542,720
|
|
Total
Assets
|
|
$ |
2,883,551
|
|
|
$ |
5,993,216
|
|
Liabilities
and
Shareholders’
Deficiency
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
1,097,361
|
|
|
$ |
885,463
|
|
Notes
payable, shareholder
|
|
|
75,713
|
|
|
|
186,961
|
|
Convertible
notes payable
|
|
|
2,129,797
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Derivative
liabilities- warrants and conversion privileges
|
|
|
355,203
|
|
|
|
3,516,462
|
|
Accrued
liabilities
|
|
|
461,973
|
|
|
|
266,556
|
|
Total
current liabilities
|
|
|
4,120,047
|
|
|
|
4,855,442
|
|
|
|
|
|
|
|
|
|
|
Convertible
Notes Payable
|
|
|
557,797
|
|
|
|
2,048,000
|
|
|
|
|
-
|
|
|
|
-
|
|
Total
Liabilities
|
|
|
4,677,844
|
|
|
|
6,903,442
|
|
Shareholders’
Deficiency;
|
|
|
|
|
|
|
|
|
Preferred
stock, no par value;
5,000,000 shares authorized,
|
|
|
|
|
|
|
|
|
275,000
issued and outstanding
|
|
|
12,950
|
|
|
|
12,950
|
|
|
|
|
|
|
|
|
|
|
Common
stock, no par value;
100,000,000 shares authorized,
|
|
|
|
|
|
|
|
|
24,260,352
and 21,939,360 shares issued and outstanding, respective
|
|
|
25,061,241
|
|
|
|
21,712,179
|
|
|
|
|
|
|
|
|
|
|
Additional
paid-in capital, warrants
|
|
|
1,065,263
|
|
|
|
1,042,400
|
|
Additional
paid-in-capital- options
|
|
|
1,407,299
|
|
|
|
1,330,948
|
|
Accumulated
Deficit
|
|
|
(29,341,046 |
) |
|
|
(25,008,703 |
) |
Total
shareholders'
(deficiency)
|
|
|
(1,794,293 |
) |
|
|
(910,226 |
) |
|
|
|
|
|
|
|
|
|
Total
Liabilities and Shareholders'
Deficiency
|
|
$ |
2,883,551
|
|
|
$ |
5,993,216
|
|
|
|
|
-
|
|
|
|
-
|
|
The
accompanying notes are an integral part of these consolidated financial
statements
AIRTRAX,
INC.
Statements
of Operations
For
the Years Ended December 31, 2006 and 2005
(Audited)
|
|
2006
|
|
|
2005
|
|
|
|
(Restated)
|
|
|
|
|
Revenues
|
|
$ |
1,346,913
|
|
|
$ |
718,842
|
|
Cost
of sales and services performed
|
|
|
1,470,542
|
|
|
|
729,080
|
|
Gross
loss
|
|
|
(123,629 |
) |
|
|
(10,238 |
) |
Operating
Expenses
General
and administrative costs
|
|
|
4,686,763
|
|
|
|
5,057,596
|
|
Impairment
of Filco advances
|
|
|
2,000,000
|
|
|
|
4,700,839
|
|
Total
operating expenses
|
|
|
6,686,763
|
|
|
|
9,758,435
|
|
Operating
loss
|
|
|
(6,810,392 |
) |
|
|
(9,768,673 |
) |
Other
Income and Expenses
Conversion
expense
|
|
|
(1,009,069 |
) |
|
|
(6,571,454 |
) |
Interest
expense
|
|
|
(230,149 |
) |
|
|
(488,342 |
) |
Revaluation
income
|
|
|
3,697,319
|
|
|
|
993,837
|
|
Other
income and expense
|
|
|
(2,255 |
) |
|
|
31,741
|
|
Loss
before income taxes and preferred stock expenses
|
|
|
(4,354,546 |
) |
|
|
(15,802,891 |
) |
IncomeTax
Benefit
|
|
|
437,803
|
|
|
|
867,413
|
|
Loss
before dividends
|
|
|
(3,916,743 |
) |
|
|
(14,935,478 |
) |
Deemed
dividends on preferred stock
|
|
|
(303,100 |
) |
|
|
(274,978 |
) |
Net
loss attributable to common shareholders
|
|
|
(4,219,843 |
) |
|
|
(15,210,456 |
) |
Preferred
stock dividend
|
|
|
(112,500 |
) |
|
|
(51,563 |
) |
Deficit
accumulated
|
|
$ |
(4,332,343 |
) |
|
$ |
(15,262,019 |
) |
Net
loss per share;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
attributable to common shareholders
|
|
$ |
(4,219,843 |
) |
|
$ |
(15,210,456 |
) |
Preferred
stock dividends
|
|
|
68,750
|
|
|
|
68,750
|
|
Loss
allocable to common shareholders
|
|
$ |
(4,288,593 |
) |
|
$ |
(15,279,206 |
) |
Net
loss per share; basic and diluted
|
|
$ |
(0.19 |
) |
|
$ |
(0.73 |
) |
Weighted
average common shares outstanding -
Basic
and diluted
|
|
|
23,068,165
|
|
|
|
20,951,187
|
|
The
accompanying notes are an integral part of these consolidated financial
statements
AIRTRAX,
INC.
Statement
of Changes in Shareholders’ Deficiency
For
the Years Ended December 31, 2006 and 2005
Restated
|
|
Common
Shares
|
|
|
Common
Amount
|
|
|
Preferred
Shares
|
|
|
Preferred
Amount
|
|
|
Options
& Warrants
|
|
|
Accumulated
Deficit
|
|
|
Total
|
|
Balance
at December 31, 2004
|
|
|
15,089,342
|
|
|
$ |
9,780,454
|
|
|
|
275,000
|
|
|
$ |
12,950
|
|
|
$ |
1,291,348
|
|
|
$ |
(9,746,684 |
) |
|
$ |
1,338,068
|
|
Shares
issued in private placement
|
|
|
68,750
|
|
|
|
55,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
55,000
|
|
Warrants
exercised
|
|
|
593,000
|
|
|
|
718,486
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
718,486
|
|
Options
exercised
|
|
|
45,000
|
|
|
|
19,619
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19,619
|
|
Shares
issued for services
|
|
|
291,695
|
|
|
|
735,387
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
735,387
|
|
Employee
stock awards
|
|
|
20,000
|
|
|
|
48,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
48,000
|
|
Shares
issued in lieu of rent
|
|
|
19,200
|
|
|
|
48,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
48,000
|
|
Issuance
of shares sold in prior year
|
|
|
1,749,827
|
|
|
|
1,401,172
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,401,172
|
|
Shares
issued in settlement of interest
|
|
|
28,453
|
|
|
|
66,295
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
66,295
|
|
Transfer
from liability on exercise of warrants.
|
|
|
-
|
|
|
|
181,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
181,000
|
|
Value
of options granted for year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,082,000
|
|
|
|
|
|
|
|
1,082,000
|
|
Conversion
of convertible debt
|
|
|
3,846,154
|
|
|
|
4,277,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
4,277,500
|
|
Conversion
benefit capitalized
|
|
|
-
|
|
|
|
3,596,154
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,596,154
|
|
Shares
issued for Filco investment
|
|
|
187,939
|
|
|
|
458,571
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
458,571
|
|
Dividends
on preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(51,563 |
) |
|
|
(51,563 |
) |
Preferred
stock dividend
|
|
|
|
|
|
|
326,541
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
326,541
|
|
Net
Loss
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
(15,210,456 |
) |
|
|
(15,210,456 |
) |
Balance
at December 31, 2005
|
|
|
21,939,360
|
|
|
$ |
21,712,179
|
|
|
|
275,000
|
|
|
|
12,950
|
|
|
$ |
2,373,348
|
|
|
$ |
(25,008,703 |
) |
|
$ |
(910,226 |
) |
Warrants
issued in connection with
convertible
debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$ |
22,614
|
|
|
|
-
|
|
|
$ |
22,614
|
|
Employee
stock awards
|
|
|
75,000
|
|
|
$ |
115,470
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
115,470
|
|
Value
of options granted during year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,600
|
|
|
|
|
|
|
|
76,600
|
|
Shares
issued for services
|
|
|
651,257
|
|
|
|
859,856
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
859,856
|
|
Shares
issued to directors
|
|
|
145,000
|
|
|
|
222,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
222,500
|
|
Shares
issued in settlement of Note default
|
|
|
184,000
|
|
|
|
93,490
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
93,490
|
|
Conversion
of convertible debt
|
|
|
811,033
|
|
|
|
1,204,519
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,204,519
|
|
Shares
issued for preferred dividend
|
|
|
418,979
|
|
|
|
415,610
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
415,610
|
|
Shares
issued for cash
|
|
|
35,723
|
|
|
|
65,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
65,500
|
|
Proceeds
from warrant extensions
|
|
|
|
|
|
|
117,000
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
117,000
|
|
Value
of debt conversion privilege
|
|
|
|
|
|
|
255,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
255,117
|
|
Dividends
on preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(112,500 |
) |
|
|
(112,500 |
) |
Net
Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,219,843 |
) |
|
|
(4,219,843 |
) |
Balance
at December 31, 2006
|
|
|
24,260,352
|
|
|
$ |
25,061,241
|
|
|
|
275,000
|
|
|
$ |
12,950
|
|
|
$ |
2,472,562
|
|
|
$ |
(29,341,046 |
) |
|
$ |
(1,794,293 |
) |
The
accompanying notes are an integral part of these consolidated financial
statements
AIRTRAX,
INC.
Statements
of Cash Flows
For
the Years Ended December 31, 2006 and December 31, 2005
|
|
2006
|
|
|
2005
|
|
Cash
flows from operating
activities:
|
|
(Restated)
|
|
|
|
|
Net
loss
|
|
$ |
(4,219,843 |
) |
|
$ |
(15,210,456 |
) |
Adjustments
to reconcile net loss to net cash
used
in operating activities:
Depreciation
and amortization
|
|
|
69,019
|
|
|
|
59,500
|
|
Cost
of conversion
|
|
|
961,569
|
|
|
|
7,068,174
|
|
Common
stock issued as payment for services
|
|
|
1,197,826
|
|
|
|
836,500
|
|
Options
granted for services
|
|
|
76,351
|
|
|
|
1,082,250
|
|
Cost
of settling liquidated damages
|
|
|
424,426
|
|
|
|
|
|
Value
of converted interest
|
|
|
66,464
|
|
|
|
|
|
Loss
on abandonment of vehicle
|
|
|
2,443
|
|
|
|
|
|
Accrued
interest on shareholder advances
|
|
|
4,693
|
|
|
|
4,015
|
|
Value
of shares issued to settle liabilities
|
|
|
93,490
|
|
|
|
149,589
|
|
Deemed
dividend on preferred stock
|
|
|
303,100
|
|
|
|
274,978
|
|
Decrease
in accrual of deferred tax benefit
|
|
|
7,413
|
|
|
|
(752,888 |
) |
Revaluation
of warrant liabilities
|
|
|
(3,697,319 |
) |
|
|
(992,757 |
) |
Impairment
of Filco investment
|
|
|
2,000,000
|
|
|
|
4,700,839
|
|
Change
in assets and liabilities;
Decrease
(increase) in accounts receivables
|
|
|
43,653
|
|
|
|
(205,857 |
) |
Decrease
in advances
|
|
|
59,889
|
|
|
|
-
|
|
Decrease(
increase) in inventory
|
|
|
955,682
|
|
|
|
(1,295,858 |
) |
Increase
in accounts payable
|
|
|
211,898
|
|
|
|
490,504
|
|
Increase
in accrued liabilities
|
|
|
569,713
|
|
|
|
89,592
|
|
Net
cash used in operating activities
|
|
|
(869,533 |
) |
|
|
(3,701,875 |
) |
Cash
flows from investing activities:
Acquisitions
of equipment
|
|
|
(151,577 |
) |
|
|
(150,806 |
) |
Additions
to patent cost
|
|
|
(6,800 |
) |
|
|
(42,861 |
) |
Advances
to Filco
|
|
|
-
|
|
|
|
(3,605,881 |
) |
Net
cash used in investing activities
|
|
|
(158,377 |
) |
|
|
(3,799,548 |
) |
Cash
flows from financing activities:
Proceeds
from converted debt
|
|
|
1,219,800
|
|
|
|
4,277,500
|
|
Proceeds
from the sale of common stock
|
|
|
65,500
|
|
|
|
55,000
|
|
Proceeds
from convertible debt
|
|
|
-
|
|
|
|
1,659,138
|
|
Proceeds
from notes payable to related parties
|
|
|
35,000
|
|
|
|
151,493
|
|
Payment
of notes payable to related parties
|
|
|
(100,941 |
) |
|
|
(2,002 |
) |
Proceeds
from exercise of warrants
|
|
|
117,000
|
|
|
|
718,486
|
|
Proceeds
from exercise of options
|
|
|
-
|
|
|
|
19,619
|
|
Net
cash provided by financing activities
|
|
|
1,336,359
|
|
|
|
6,879,234
|
|
Net
increase (decrease) in cash
|
|
|
308,449
|
|
|
|
(622,189 |
) |
Cash,
beginning of year
|
|
|
19,288
|
|
|
|
641,477
|
|
Cash,
end of year
|
|
$ |
327,737
|
|
|
$ |
19,288
|
|
The
accompanying notes are an integral part of these consolidated financial
statements
AIRTRAX,
INC.
Notes
to
the Consolidated Financial Statements
December
31, 2006
Business
The
Company was formed April 17, 1997. It has designed a lift truck 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 prior years to the
construction of a prototype of this omni-directional forklift vehicle. The
Company recognized its first revenues from sales of this product during the
year
2005.
Development
Stage Accounting
In
prior
periods the Company was a development stage company, as defined in Statement
of
Financial Accounting Standards (FASB) No. 7. The Company became an
operational company in 2005.
The
Company has incurred losses since its inception. Until the end of 2004, these
losses were financed by private placements of equity securities. During 2005
and
2006, the Company obtained financing almost exclusively from the issuance of
convertible debentures. The Company will need to raise additional capital
through the issuance of debt or equity securities to continue to fund
operations.
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 will be used to
assemble lift truck 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 certain patent rights. These costs were
capitalized and are being amortized over a period of fifteen 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 lift truck vehicle is expensed as
incurred.
Accounting
for Derivatives
The
Company’s issuances of convertible debt are accompanied by other financial
instruments. These financial instruments include warrants to purchase stock
and
the right to convert debt to stock at specified rates ( “conversion benefits.”)
These financial instruments are treated as embedded derivatives and are
classified within liabilities or equity based on the conditions specified
in
EITF 00-19, “ Accounting for Derivative Instruments Indexed To, and Potentially
Settled, in a Company’s Own Stock.”
AIRTRAX,
INC.
Notes
to
the Consolidated Financial Statements
December
31, 2006
The
fair
value of the derivatives is initially determined using a Black Scholes
valuation
model, taking into consideration the factors specified in FAS #123R, “Share
Based Payments.” These include the underlying price of stock at time of
issuance, the exercise price for warrants or the conversion price for stock
conversion, the life of the derivatives, the expected stock volatility
over the
life of derivatives and the risk-free rate available for a time period
comparable to the life of derivatives.
The
initial fair value is charged to conversion expense since the derivatives
are
immediately exercisable.
Derivatives
classified as liabilities are subject to revaluation for each reporting
period,
following the guidance in SFAS #133, Accounting for Derivatives and Hedging
Activities.” The offsetting P&L effect of these revaluations is reflected in
revaluation income or expense. No similar adjustment is required for
those
derivatives classified as equity.
Many
of
the convertible debt issues contain anti-dilutive, “ Most Favored Nations”
clauses that provide for adjustments to exercise or conversion prices
based upon
subsequent more favorable pricing of issuances. This type of clause is
the main
reason for classifying most derivatives as liabilities.
When
a
warrant classified as a liability is exercised, the fair value of the
warrant,
as determined at the time of exercise, is transferred to equity and is
no longer
subject to revaluation. A similar adjustment is made for a conversion
benefit
classified as a liability when the debt is converted to stock.
Conversion
Benefit Capitalized
As
noted
in “Accounting For Derivatives”, the value of conversion benefits is calculated
using a Black Scholes valuation model. The value of the benefit associated
with
a $ 5,000,000 issue that was quickly converted to stock ( $ 3.6 million)
was
credited to equity.
Registration
Rights and Liquidated Damages- Prior to the issuance of EITF
00-19-2, “ Accounting for Registration Payment Arrangements, “ the Company
accrued required damages based on the incidence of a “Registration
Default.” With the issuance of EITF 00-19-2, that liability
will be accrued, when required, based upon the standards of probability
and
reasonable estimability established in FAS # 5, “Accounting for
Contingencies.”.
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.
Net
Loss per Share
The
Company computes net income( loss) per share in accordance with SFAS No.
128,
“Earnings per Share,” and SEC Staff Accounting Bulletin (SAB) No 98.
Under the provisions of SFAS No, 128 and SAB 98, basic and diluted
net loss per share are computed by dividing the net loss available to common
shareholders by the weighted average number of shares outstanding during
the
period.. Accordingly, the number of weighted average shares outstanding
as well
as the amount of net loss per share is presented for basic and
diluted calculations for all periods in the financial
statements.
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, convertible debt and
financial instruments accounted for as embedded derivatives, approximate their fair
values at
December 31, 2006.The fair value of the derivative liabilities is
calculated using a Black Scholes model based upon the guidance of FAS
123R.
Research
and Development Cost
The
Company expenses all research and development cost unless the criteria required
by FASB No. 2 are met. To date there have been no research and development
costs
capitalized. During the years 2006 and 2005 a total of $519,314 and $544,933,
respectively, was spent on development activity.
Advertising
Costs
The
Company expenses advertising costs when the advertisement occurs. There were
no
advertising costs incurred during 2006 and 2005.
Stock
Options
Stock
options are awarded to employees as compensation for services. Such awards
have
been immediately exercisable. The Company adopted SFAS 123R, “Share Based
Payment” and SFAS 148, “Accounting for Stock Based Compensation - Transition and
Disclosure” on January 1, 2006. Prior to 2006, these awards were accounted for
under the intrinsic method as permitted by Accounting Principles Board
Opinion
No. 25. Since the time of adopting FAS#123R, the option awards have been
valued at their grant-date fair value as determined through the use
of Black Scholes valuation model.
The
following presents information ($000 omitted) about the net loss and loss per
share of the year 2005 as if the Company had applied the provisions of SFAS
123R
and 148 to all options granted during the year 2005.
Net
loss as reported
|
|
$
|
(15,210
|
)
|
Less:
Stock-based employee compensation
|
|
|
|
|
determined
under the Intrinsic Method
|
|
|
1,082
|
|
Add:
Stock bases compensation determined
|
|
|
|
|
under
the Fair Value Method
|
|
|
(1,105
|
)
|
Pro
forma net loss
|
|
$
|
(15,233
|
)
|
Loss
per share:
|
|
|
|
|
Basic
and diluted as reported
|
|
$
|
(.73
|
)
|
Basic
and diluted-pro forma
|
|
$
|
(.73
|
)
|
Pursuant
to the requirements of SFAS 123R, the weighted average fair value of options
granted during 2006 and 2005, as determined on the dates of grant, were
$ .25
and $1.37, respectively.. The fair values were determined using a
Black Scholes option-pricing model, using the following major
assumptions:
AIRTRAX,
INC.
Notes
to
the Consolidated Financial Statements
December
31, 2006
|
|
2006
|
|
|
2005
|
|
Volatility
|
|
|
89.88 |
% |
|
|
91.10 |
% |
Risk-free
interest rate
|
|
|
4.25 |
% |
|
|
3.71 |
% |
Expected
Life – years
|
|
|
3.33 |
|
|
|
4.52
|
|
Segment
Reporting
Management
treats the operations of the Company as one segment.
Revenue
Recognition
Revenue
will be realized from product sales. Recognition will occur upon shipment to
customers, and where the following criteria are met; persuasive evidence of
an
arrangement exists; delivery has occurred; the sales price is fixed or
determinable; and collectability is reasonably assured.
Some
revenue has been realized from performing services. Revenue from services is
recognized when the service is performed and where the following criteria are
met: persuasive evidence of an arrangement exists; the contract price is fixed
or determinable; and collectability is reasonably assured.
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
common stock on the dates of issuance.
Reclassifications
Certain
amounts from prior year have been reclassified to conform to current year
presentation.
2. RESTATEMENTS
On
April
25, 2007 we determined that a restatement of our financial statements for
the
year ended December 31, 2006 was necessary due to a 2006 convertible debt
issue
that had not been previously recorded. In July, 2006, we issued 2%
unsecured convertible debentures aggregating $359,549 and stock purchase
warrants to acquire 110,808 shares of our common stock at $1.65 per share
in
settlement of liquidated damages that had accrued for the October, 2005
issuance
of convertible debt. The conversion price of the shares underlying
the note was $1.56. Both the conversion price and the warrants
purchase price were adjusted in February 2007 to $.45 per share due to
the
pricing of the February 20, 2007 private placement.
On
April
30, 2007, the Company also determined that a restatement of its December
31,
2006 financial statements was necessary to correct an error in accounting
for
the anti-dilutive provisions of the November, 2004 private placement of
1,640,000, shares of common stock accompanied by warrants to purchase common
stock. This became a measurable liability only when in 2006 the
liquidated damages were settled.
In
addition, management determined that dividends on its preferred stock,
which had
been paid with equity securities, were incorrectly handled on the December
2005
financial statements, both in the dividend calculation and in the determination
of what type of stock could be used to satisfy preferred stock dividend
requirements. Preferred stock had been incorrectly used to pay
dividends on the preferred issue. These shares were cancelled and
replaced with common stock. In addition the value of the preferred
stock dividends, which had been incorrectly calculated, was
corrected.
The
effect on the Company’s previously issued audited December 31, 2006 financial
statements are summarized as follows:
Statement
of Operations 12/31/06
|
|
|
Previously
|
|
|
Increase
|
|
|
As
|
|
|
|
|
Reported
|
|
|
(decrease)
|
|
|
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and Administrative Expenses
|
|
$
|
4,452,179
|
|
$
|
234,584(A
|
)
|
$
|
4,686,793
|
|
Operating
Loss
|
|
|
(6,575,808
|
)
|
$
|
(234,584
|
)
|
|
(6,810,392
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Revaluation
Income
|
|
|
3,054,716
|
|
|
135,478
(A
|
)
|
|
3,697,319
|
|
|
|
|
|
|
|
343,985
(D |
) |
|
|
|
|
|
|
|
|
|
163,140 (E
|
) |
|
|
|
Loss
before income taxes
|
|
|
(4,762,565
|
)
|
|
408,019
|
|
|
(4,354,546
|
)
|
AIRTRAX,
INC.
Notes
to
the Consolidated Financial Statements
December
31, 2006
|
|
|
|
|
|
|
|
|
|
|
Net
loss attributable to common shareholders
|
|
$
|
(4,627,862
|
)
|
$
|
408,019
|
|
$
|
(4,219,843
|
)
|
Loss
per share-basic and diluted
|
|
$
|
(.20
|
)
|
$
|
.01
(B
|
)
|
$
|
(.19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Statement
of Cash Flows 12/31/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(4,627,862
|
)
|
$
|
408,019
|
|
$
|
(4,219,843
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of settling liquidated damages
|
|
|
44,266
|
|
|
380,160
(A
|
) |
|
424,426
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
in accrued liabilities
|
|
|
715,279
|
|
|
(145,566)
(C
|
)
|
|
569,713
|
|
|
|
|
|
|
|
Var.
|
|
|
|
|
Revaluation
income
|
|
|
(3,054,716
|
)
|
|
(642,603
|
)
|
|
(3,697,319
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Consumed in Operating Activities
|
|
|
(869,543
|
)
|
|
0
|
|
|
(869,543
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Balance
Sheet as of December 31, 2006:
|
|
|
|
Previously
|
|
|
Increase
|
|
|
As
|
|
|
|
|
Reported
|
|
|
(decrease)
|
|
|
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
$
|
2,451,415
|
|
$
|
--
|
|
$
|
2,451,415
|
|
All
Other Assets
|
|
|
432,136
|
|
|
--
|
|
|
432,136
|
|
Total
Assets
|
|
$
|
2,883,551
|
|
|
--
|
|
$
|
2,883,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,790(D |
) |
|
|
|
Warrant
and Conversion Option Liability
|
|
$
|
249,971
|
|
|
18,197(C
|
)
|
$
|
355,203
|
|
|
|
|
|
|
|
38,245
(E |
) |
|
|
|
Liability
for options
|
|
|
1,407,299
|
|
|
(1,407,299
|
)
|
|
-
|
|
Accrued
Liabilities
|
|
|
740,613
|
|
|
(278,640(C
|
)
|
|
461,973
|
|
AIRTRAX,
INC.
Notes
to
the Consolidated Financial Statements
December
31, 2006
Total
Current Liabilities
|
|
|
5,700,754
|
|
|
(1,580,707)
|
)
|
|
4,120,047
|
|
Long
Term Debt
|
|
|
198,248
|
|
|
359,549(C
|
)
|
|
557,797
|
|
Total
Liabilities
|
|
|
5,899,002
|
|
|
(1,221,158
|
)
|
|
4,677,844
|
|
Stockholders’
Deficit:
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
25,133,164
|
|
|
(71,923)-(E)-
|
|
|
25,061,241
|
|
Warrants
|
|
|
1,587,500
|
|
|
(392,775)(D
|
)
|
|
1,065,263
|
|
|
|
|
|
|
|
(129,462)(E
|
) |
|
|
|
Preferred
stock
|
|
|
12,950
|
|
|
--
|
|
|
12,950
|
|
Options
|
|
|
|
|
|
1,407,299
|
|
|
1,407,299
|
|
Accumulated
deficit
|
|
|
(29,749,065
|
)
|
|
408,019
|
|
|
(29,341,046
|
)
|
Total
Stockholders’ Deficiency
|
|
|
(3,015,451
|
)
|
|
1,221,158
|
|
|
(1,794,293
|
)
|
Total
Liabilities and Shareholders’ Deficiency
|
|
$
|
2,883,551
|
|
$
|
--
|
|
$
|
2,883,551
|
|
(A)
Effect on the statement of Operations due to the settlement of liquidated
damages.
(B)
Per
share effect of various corrections.
(C)
Reduction of the liabilities due to the settlement of liquidated
damages.
(D)
Correction of accounting for derivatives contained in the November
2004 issuance
of common stock with accompanying warrants.
(E)
Correction of accounting for derivatives associated with a convertible
debt
issue in 2006, reclassified from equity to derivative liabilities
after further
review of the provisions in the debt issuances.
(F)
Reclassification of options liability to equity
|
|
|
|
|
|
|
|
|
|
|
RESTATEMENTS
FOR YEAR ENDED DECEMBER 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement
of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previously
|
|
|
Increase
|
|
|
|
As
|
|
|
|
Reported
|
|
|
(decrease)
|
|
|
|
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss before dividends
|
|
$ |
(15,141,478 |
) |
|
$ |
206,000
|
|
(A)
|
|
$ |
(14,935,478 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deemed
dividends on preferred stock
|
|
|
(480,978 |
) |
|
|
206,000
|
|
(A)
|
|
|
274,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
accumulated
|
|
$ |
(15,468,019 |
) |
|
$ |
0
|
|
|
|
$ |
(15,210,456 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AIRTRAX,
INC.
Notes
to
the Consolidated Financial Statements
December
31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Previously
|
|
|
Increase
|
|
|
|
As
|
|
|
|
Reported
|
|
|
(decrease)
|
|
|
|
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement
of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Used in Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$ |
(15,141,478 |
) |
|
$ |
206,000
|
|
(A)
|
|
$ |
(15,210,456 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deemed
dividend
|
|
|
480,978
|
|
|
|
(206,000 |
) |
(A)
|
|
|
274,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Consumed in Operating activities
|
|
$ |
(869,533 |
) |
|
$ |
0
|
|
|
|
$ |
(869,533 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previously
|
|
|
Increase
|
|
|
|
As
|
|
|
|
Reported
|
|
|
(decrease)
|
|
|
|
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock
|
|
$ |
545,491
|
|
|
$ |
(532,541 |
) |
(A)
|
|
$ |
12,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
21,385,638
|
|
|
|
326,541
|
|
(A)
|
|
|
21,712,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
(24,802,703 |
) |
|
|
206,000
|
|
(A)
|
|
|
(25,008,703 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
stockholders deficit
|
|
$ |
(2,241,174 |
) |
|
$ |
0
|
|
|
|
$ |
(2,241,174 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
Adjustment required to revalue dividend and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to
reflect payment of dividend in common stock versus preferred
stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.
RELATED PARTY TRANSACTIONS
The
Chairman of the Board of Directors made periodic loans to the Company during
2006. The loans did not accrue interest and were due on demand. The combined
loans amounted to $35,000. At the end of the year 2006, these loans have
been
fully paid. The Majority shareholder of the corporation, who was also
the Company President, made loans to the Company from time to time. These
notes
together with accrued interest at 12%, are due on demand.
The combined unpaid balance of principal and interest on these notes at
December
31, 2006 was $75,713.
During
2006, the Board of Directors received 145,000 shares for services as directors;
these were valued at $222,500, reflecting the fair market value of the
stock at
time of awards.
On
August
25, 2006, the Company’s CEO, President and Chairman (“President”) died. The
President’s employment contact expired on June 30, 2006 and was not renewed. The
employment agreement did not provide for the exercise of the options upon
death. Under the terms of the employment contract, the President was
granted options to purchase 550,000 shares in 2004, valued at
$187,500. In 2005, he was granted 750,000 options to purchase stock
under that two year employment contract; these options were valued at $975,000.
Subsequent to his death, the Board of Directors extended for one year from
the date of the termination of the employment contract, the time during which
the options can be exercised. No adjustment has been made to previously recorded
compensation expense, as the fair value at grant significantly exceeded its
current fair value. FAS #123R indicates that modification adjustments
should only be made when they increase the value of the initially granted
option.
In
2006,
the Company granted 300,000 options to its Chief Executive Officer
AIRTRAX,
INC.
Notes
to
the Consolidated Financial Statements
December
31, 2006
4.
STOCK OPTIONS
The
Company has periodically awarded stock options under employment contracts
with
certain key employees. These options were immediately exercisable;
they have an implicit life of five years and none was forfeited during
either
year. A summary of option activity is presented
below.
|
|
2006
|
|
|
2005
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
Average
|
|
|
Average
|
|
|
|
Exercised
|
|
|
Exercised
|
|
|
|
Shares
|
|
|
Price
|
|
|
Shares
|
|
|
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
outstanding at beginning of year
|
|
|
1,375,000
|
|
|
$ |
.80
|
|
|
|
620,000
|
|
|
$ |
.73
|
|
Options
granted during year
|
|
|
350,000
|
|
|
|
.46
|
|
|
|
800,000
|
|
|
|
.83
|
|
Options
exercised during year
|
|
|
(7,500 |
) |
|
|
|
|
|
|
(45,000 |
) |
|
|
.40
|
|
Options
outstanding at end of year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,715,500
|
|
|
$ |
.73
|
|
|
|
1,375,000
|
|
|
$ |
.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average Fair Value of options granted
|
|
|
|
|
|
$ |
0..25
|
|
|
|
|
|
|
$ |
1.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average remaining life of outstanding options – years
|
|
|
|
|
|
|
3.33
|
|
|
|
|
|
|
|
4.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.
PRIVATE PLACEMENT OFFERINGS
A
second
2006 issue was $400,000 of 12% convertible debt due October 20, 2006. After
commissions, the Company received net proceeds of $342,500. The debt is
convertible to stock at $1.56 per share. The issue was accompanied by 282,052
warrants exercisable at $1.56 for five years. Those prices were subject
to
adjustment based on subsequent more favorable pricing of issues and were
adjusted to $ .45 in February, 2007.
The
third
and fourth issues, of 4% convertible debt, which totaled $198,248, were
made in
settlement of liquidated damages associated with a November, 2004 issue,
as
described in Note 12.There was no provision in these issues for repricing
due to
subsequent issue.
Finally,
in July 2006, the Company issued 2% unsecured convertible debentures aggregating
$359,549 accompanied by warrants to acquire 110,808 shares of our common
stock
at $1.65 per share. These were issued in settlement of the liquidated
damages associated with the October, 2005 issue.. The conversion price
of the
shares underlying the note was $1.56. Both the conversion price and the
warrants
purchase price have been adjusted to $.45 due to the pricing of the February
20,
2007 private placement.
AIRTRAX,
INC.
Notes
to
the Consolidated Financial Statements
December
31, 2006
At
December 31, 2006, the Company was in default on its 12% Series A Convertible
Note in the principal amount of $400,000 which the Company issued to a
qualified
institutional buyer on July 26, 2006. A total of $412,000 of principal
and
accrued and unpaid interest was due on October 20, 2006. The Company did
not
repay this obligation when it was due. The Company negotiated with
the holder to extend the note through the payment of cash, and the issuance
of
shares of common stock. The Note is due and payable in full, including
all
unpaid Interest, on November 29, 2007.The conversion price and warrant
exercise
prices were adjusted to $.45 per share based upon the subsequent more favorable
pricing of February, 2007 issue.
On
March
22, 2007, the Company made a $100,000 principal payment and paid interest
of
$30,233. The Note was thus reduced to $300,000 and interest on the Note
was
reduced to 10%. Additionally, the Company issued 184,000 shares of common
stock
as settlement of the default period and paid a fee of $15,000 to Source
Capital
Group, Inc., a registered representative of the Note-holder. The Company
also
agreed to make monthly interest payments. The conversion price was reset
according to the terms of the original Note.
On
March
1, 2006, the Company issued $150,000 of 4% Convertible Notes due March
1, 2008,
accompanied by 48,077 warrants to purchase common stock at $1.65 over a
five
year period. On June 30, 2006, the Company issued an additional $48,248
in 4%
convertible notes due September 30, 2008, accompanied by 24,124 warrants
exercisable at $1.65 per share over five years in settlement of the liquidated
damages described above. These notes are also convertible at $1.56 over
two
years. As of June 30, 2006, all damages payable to all of the investors
of the Company’s
November 2004 private placement were settled, and pursuant to a modification
agreement which the Company entered into with such investors on March 1,
2006
and June 30, 2006, no liquidated damages will accrue for the non-effectiveness
of the registration statement after the date of the modification
agreements.
The
Company’s private placements of convertible notes and common stock purchase
warrants in 2005 contained liquidated damages provisions, one of which
has been
settled as discussed above. For the two other financings, February and
May, no
liquidated damages have accrued despite the fact that the shares underlying
the
notes and warrants issued in such private placements have not been registered,
since the payment of damages is linked to the effectiveness of the registration
statement which was initially filed in February 2005 and said registration
statement has been withdrawn.
Each
of
these issues included associated warrants. The fair value of the warrants
was
calculated using a Black Scholes valuation model, following the principles
outlined in FAS #123R. Based upon an evaluation of the criteria in EITF
00-19,
most of the warrant’s fair value was classified as a derivative
liability and is subject to revaluation at the end of each reporting period
.
All warrants classified as liabilities had a “most favored nations”.provision
whereby the exercise prices were subject to adjustment based on more favorable
pricing of subsequent issues.
For
those
issues with “Most Favored Nations” provisions, the conversion benefit was
also considered a derivative liability in accordance with the
provisions of EITF 00-19. Those lacking such a provision were classified
in
equity( most specifically the modification debt issued to settle the
liquidated
damages for the November, 2004 issue ( principal amount of $
198,248.)
During
2005, the Company sold 68,750 shares in private placements, yielding proceeds
of
$55,000. It also issued three convertible debt issues. Each of these issues
included detachable warrants.
One
of
these debt issues ($5,000,000) yielded proceeds of $4,277,500 and was converted
in 2005 into 3,846,154 shares of common stock; this issue was sold with
warrants
to purchase 2,884,616 shares of common stock. The related conversion benefit,
as
valued at its fair value via Black Scholes model, was approximately $ 3.6
million and has been credited to equity. remaining issues that have not
yet been
converted to stock, bear interest at 8% and have two year conversion terms.
They
are further described below:
Balance
of 2005 convertible notes and Warrants issuances;
|
|
|
|
Exercise
|
Remaining
debt
|
Conversion
Price
|
Warrants
|
Price
|
$
246,797
|
$.45
|
384,615
|
$.45
|
1,483,000
|
$.45
|
774,000
|
.45
|
$
1,729,797
|
|
|
|
AIRTRAX,
INC.
Notes
to
the Consolidated Financial Statements
December
31, 2006
Balance
of 2006 convertible notes and Warrants
issuances;
|
|
|
|
Exercise
|
Remaining
debt
|
Conversion
Price
|
Warrants
|
Price
|
$
150,000
|
$1.56
|
48,077
|
$1.56
|
48,248
|
$1.56
|
24,124
|
$1.56
|
400,000
|
$.45
|
282,051
|
$.45
|
359,549
|
$.45
|
110,808
|
.45
|
$
957,797
|
|
|
|
$
2,687,594
|
|
|
|
This
debt
is classified on the balance sheet as follows:
Current
Convertible debt
|
$2,129,797
|
Long-term
convertible debt
|
$
557,797
|
Total
|
$2,687,594
|
Included
in funds raised during 2004 through stock sales was $1,312,000 raised under
a
Purchase Agreement dated November 22, 2004. That agreement required, among
other
things, that a registration statement be filed with the SEC and that the
registration statement be declared effective by the SEC within a prescribed
time. The Company did not satisfy its obligation to cause the SEC to declare
the
registration statement effective within the timeframe specified in the November
2004 Registration Rights Agreement. As a result, it was subject to, and accruing
liquidated damages in an amount equal to 2% of the amount invested for each
30
day period following the default date. On May 31, 2005, the Company entered
into
a letter agreement with a representative of this shareholder group under which
$120,429 was paid to settle the liquidated damages, which had accrued. Under
that agreement, no further liquidated damages would accrue until after June
30,
2005. The obligation concerning effectiveness of the registration statement
has
not been satisfied and liquidated damages accrued since June 30, 2005 at the
rate of approximately $26,240 per month. The liquidated damages paid thus far,
and liquidated damages that accrued subsequent to June 30, 2005, were charged
to
expense during the periods in which they accrued. For the year ended December
31, 2005 an additional $160,851 had accrued; and $88,126 accrued during 2006.
All liquidated damages for this issue were settled by the issuance on June
30,
2006 of convertible notes, which are described below.
There
were three private placement offerings during 2005. Under the provisions of
the
first of these offerings, penalties will not accrue as the registration
requirements of that offering have been satisfied. Under the second such
offering, there is no provision for penalties. Under the third such offering,
penalties began to accrue on March 18, 2006, and would have accrued for a period
of nine months. A settlement was reached with the investors of this issue on
July 21, 2006, under which the penalties were cancelled in exchange for $359,549
of convertible debt, which is described in Note 12.
On
February 20, 2007, the Company entered into a Securities Purchase Agreement
(the
"Purchase Agreement") with certain accredited and/or qualified institutional
investors pursuant to which we sold an aggregate of $3,734,040 principal
amount
secured convertible debentures (the "Debentures") convertible into shares
of our
common stock, no par value (the "Common Stock") at a conversion price equal
to
$0.45 (the "Conversion Price"), for an aggregate purchase price of $3,219,000.
The difference between the face amount of the borrowing ( $ 3,734,040)
and
proceeds $ ( 3,219,000) was recorded as prepaid
interest and is being amortized over the life of the
loan. In addition, the Company issued to the investors ) warrants to
purchase 8,297,866 shares of the Company’s Common Stock (the "Warrants") at an
exercise price equal to $0.54 per share, which represents 100% of the number
of
shares issuable upon conversion of the Debentures; (ii) callable warrants
to
purchase 4,148,933 shares of our Common Stock at an exercise price equal
to
$0.75 per share, which represents 50% of the number of shares issuable
upon
conversion of the Debentures; and (iii) callable warrants to purchase 4,148,933
shares of our Common Stock at an exercise price equal to $1.25 per share,
which
represents 50% of the number of shares issuable upon conversion of the
Debentures (collectively, the "Callable Warrants"). (see “Note 16 Subsequent
Events”)
AIRTRAX,
INC.
Notes
to
the Consolidated Financial Statements
December
31, 2006
On
February 20, 2007, the Company entered into a Securities Purchase Agreement
(the
"Purchase Agreement") with certain accredited and/or qualified institutional
investors pursuant to which we sold an aggregate of $3,734,040 principal amount
secured convertible debentures (the "Debentures") convertible into shares of
our
common stock, no par value (the "Common Stock") at a conversion price equal
to
$0.45 (the "Conversion Price"), for an aggregate purchase price of $3,219,000.
The difference between the face amount of the borrowing ( $ 3,734,040) and
proceeds $ ( 3,219,000) was recorded as prepaid interest and is being amortized
over the life of the loan. In addition, the Company issued to the investors
)
warrants to purchase 8,297,866 shares of the Company’s Common Stock (the
"Warrants") at an exercise price equal to $0.54 per share, which represents
100%
of the number of shares issuable upon conversion of the Debentures; (ii)
callable warrants to purchase 4,148,933 shares of our Common Stock at an
exercise price equal to $0.75 per share, which represents 50% of the number
of
shares issuable upon conversion of the Debentures; and (iii) callable warrants
to purchase 4,148,933 shares of our Common Stock at an exercise price equal
to
$1.25 per share, which represents 50% of the number of shares issuable upon
conversion of the Debentures (collectively, the "Callable Warrants"). (see
“Note
16 Subsequent Events”)
Previous
Convertible Issues and the warrants accompanying the November 2004 private
placement of common stock contain “Most Favored Nations” clauses that guaranteed
the investors that subsequent issues of stock or notes would not be made on
more
favorable terms. If the Company subsequently issues any shares of common stock
or securities convertible or exercisable into common stock at a per share
purchase price which is less than the conversion or exercise prices of
outstanding notes and warrants, such conversion or exercise prices would be
adjusted downward in accordance with their respective terms. As a result of
the
issuance of the convertible notes on February 20, 2007, the following warrant
and conversion prices were adjusted:
|
1.
|
The
exercise price of the warrants associated with the May 2005 convertible
debenture offering and the conversion price of that offering, which
were
previously adjusted to $1.56 per share, are now set at
$0.45.
|
|
2.
|
The
conversion price of the October 2005 issuance of the convertible
debentures, which was previously adjusted from $2.00 per share
to $1.56
per share, is now set at
$0.45.
|
|
3.
|
The
exercise price of the warrants issued pursuant to the October 2005
debenture offering, which was previously adjusted from $3.25 per
share to
$1.56 per share, is now set at
$0.45
|
|
4.
|
The
exercise price of the warrants associated with the November 2004
stock
offering was adjusted form $1.25 per share to $0.45 per
share
|
|
5.
|
The
exercise price associated with the July 2006 convertible debentures
was
adjusted form $1.56 per share to $0.45 per
share
|
|
6.
|
The
warrant exercise price associated with the warrants issued with
the July
2006 convertible debentures was adjusted from $1.65 per share to
$0.45 per
share.
|
The
affect of these changes will be included in the calculation of revaluation
income during the first quarter of 2007.
6.
PREFERRED STOCK
The
Company is authorized to issue 5,000,000 shares of preferred stock, without
par
value. At December 31, 2005, 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. This issue of
preferred stock also provides the shareholder with 10 votes for each share
of
preferred stock. The holder of this preferred stock is a corporation wholly
owned by the estate of the Company’s former President and Chairman.
Dividends
of $68,750 accrued on the preferred stock during each of the years 2002 through
2006. Cash dividends of $131,771 were paid during 2004. A stock dividend of
136,041 common shares will be paid in 2007, satisfying $51,563 of the unpaid
dividends. In addition, common shares will be issued in 2007 to satisfy $112,500
of unpaid dividends. The balance of unpaid dividends at of December 31, 2006
was
$47,916.
On
March
21, 2007,the Company determined, after consultation with its independent
registered public accounting firm, that a restatement of its financial
statements for the year ended December 31, 2005 filed on Form 10-KSB is
necessary due to the issuance of the Company’s preferred stock as payment of
dividends in lieu of cash dividends on April 1, 2005 with respect to previously
issued shares of preferred stock. The Company’s original Articles of
Incorporation, as amended, including on April 30, 2000, do not allow the
issuance of additional shares of preferred stock as payment of dividends on
shares of issued and outstanding preferred stock. Accordingly, the 100,000
shares of preferred stock which were issued to the holder on April 1, 2005
were
issued in error
AIRTRAX,
INC.
Notes
to
the Consolidated Financial Statements
December
31, 2006
The
Company’s Articles of Incorporation, as amended, including on April 30, 2000,
similarly do not support the calculation used by the Company in determining
the
number of shares of common stock used to pay preferred stock dividends. The
difference being the date used in determining the stock price at the end of
each
preferred dividend period, as opposed to the lowest common stock price during
the preferred dividend period, subject to a 70% discount, for calculating the
number of common shares issued as payment of the period’s preferred stock
dividend. Accordingly, the number of shares were greater than the number of
shares required, and were issued in error resulting in increased preferred
dividend expenses and preferred stock equity. The Company has determined that
the number of shares deemed the equivalent of the preferred stock dividend
will
be recalculated based on the Company’s Articles of Incorporation, as amended,
including on April 30, 2000. (see “Note 2 Restatements”)
The
Company has determined that the number of shares deemed the equivalent of the
preferred stock dividend will be recalculated based on the Company’s Articles of
Incorporation, as amended, including on April 30, 2000. Accordingly, the Company
will issue 136,041 shares of common stock to the sole holder of the preferred
stock as payment of $51,561 of preferred stock dividends less other adjustments
resulting from the recalculation of the number of common shares required to
pay
preferred stock dividends, subsequently approved. During the period January
1,
2003 through June 30, 2006, 200,238 shares of common stock were issued in excess
of the amount required.
7.
SHARES ISSUED FOR SERVICES
Stock
options were granted to two Company employees during 2006 and 2005. In addition,
there were shares awarded as compensation for other services. These issuances
for 2006 are detailed below by type of service performed.
The
following shares were issued for services in 2006
|
|
|
|
|
|
|
|
|
|
|
|
Number
of
|
|
Grant
|
|
Price
at
|
|
Value
at
|
|
Services
Rendered
|
|
Shares
|
|
Date
|
|
Date
|
|
Grant
Date
|
|
Employee
awards
|
|
|
32,500
|
|
|
1/26
|
|
$
|
1.64
|
|
$
|
53,250
|
|
Investor
relations
|
|
|
22,500
|
|
|
1/26
|
|
|
2.13
|
|
|
47,925
|
|
Professional
Services
|
|
|
2,500
|
|
|
1/26
|
|
|
2.20
|
|
|
5,500
|
|
Professional
Services
|
|
|
6,712
|
|
|
2/1
|
|
|
1.57
|
|
|
10,534
|
|
Legal
Services
|
|
|
25,000
|
|
|
2/5
|
|
|
1.95
|
|
|
48,750
|
|
Professional
Services
|
|
|
5,000
|
|
|
2/9
|
|
|
1.73
|
|
|
8,650
|
|
Product
Development services
|
|
|
30,000
|
|
|
2/28
|
|
|
1.49
|
|
|
44,700
|
|
Marketing
services
|
|
|
25,000
|
|
|
3/27
|
|
|
1.08
|
|
|
27,000
|
|
Software
Consulting services
|
|
|
1,440
|
|
|
3/22
|
|
|
1.31
|
|
|
1,886
|
|
Legal
Services
|
|
|
1,304
|
|
|
3/22
|
|
|
1.51
|
|
|
1,969
|
|
Investor
relations
|
|
|
85,000
|
|
|
4/12
|
|
|
1.49
|
|
|
126,650
|
|
Professional
Services
|
|
|
5,847
|
|
|
4/12
|
|
|
1.49
|
|
|
8,712
|
|
Employee
awards
|
|
|
25,000
|
|
|
4/12
|
|
|
1.49
|
|
|
37,253
|
|
Professional
Services
|
|
|
5,599
|
|
|
5/1
|
|
|
1.64
|
|
|
9,182
|
|
Director
awards
|
|
|
145,000
|
|
|
5/1
|
|
|
1.53
|
|
|
222,500
|
|
Investor
relations
|
|
|
26,000
|
|
|
5/10
|
|
|
1.27
|
|
|
33,020
|
|
Professional
Services
|
|
|
6,142
|
|
|
5/10
|
|
|
1.27
|
|
|
7,804
|
|
Professional
Services
|
|
|
26,000
|
|
|
5/11
|
|
|
1.30
|
|
|
33,800
|
|
Investor
relations
|
|
|
15,000
|
|
|
6/1
|
|
|
1.64
|
|
|
24,600
|
|
Professional
Services
|
|
|
22,900
|
|
|
6/5
|
|
|
1.80
|
|
|
41,220
|
|
Marketing
services
|
|
|
10,000
|
|
|
6/22
|
|
|
1.85
|
|
|
18,500
|
|
Professional
Services
|
|
|
6,750
|
|
|
6/22
|
|
|
1.85
|
|
|
12,488
|
|
Professional
Services
|
|
|
25,000
|
|
|
6/30
|
|
|
1.90
|
|
|
47,500
|
|
Professional
Services
|
|
|
15,000
|
|
|
7/1
|
|
|
1.27
|
|
|
19,050
|
|
Professional
Services
|
|
|
13,560
|
|
|
9/9
|
|
|
1.31
|
|
|
17,764
|
|
Employee
awards
|
|
|
12,500
|
|
|
9/28
|
|
|
1.71
|
|
|
21,400
|
|
Investor
relations s
|
|
|
75,000
|
|
|
9/28
|
|
|
1.61
|
|
|
120,736
|
|
Professional
Services
|
|
|
100,000
|
|
|
10/9
|
|
|
.75
|
|
|
74,800
|
|
Marketing
services
|
|
|
35,000
|
|
|
10/20
|
|
|
.71
|
|
|
24,990
|
|
Legal
Services
|
|
|
10,000
|
|
|
10/20
|
|
|
.71
|
|
|
7,140
|
|
Professional
Services
|
|
|
49,000
|
|
|
10/20
|
|
|
.84
|
|
|
34,986
|
|
Employee
awards
|
|
|
5,000
|
|
|
10/20
|
|
|
.84
|
|
|
3,570
|
|
Total
shares issued for services
|
|
|
871,257
|
|
|
|
|
|
|
|
|
1,197,826
|
|
AIRTRAX,
INC.
Notes
to
the Consolidated Financial Statements
December
31, 2006
The
following shares were issued for services in 2005
|
|
|
|
|
|
|
|
|
|
|
|
Number
of
|
|
Grant
|
|
Price
at
|
|
Value
at
|
|
Services
Rendered
|
|
Shares
|
|
Date
|
|
Date
|
|
Grant
Date
|
|
Advertising
|
|
|
5,000
|
|
|
2/24
|
|
|
2.50
|
|
|
12,500
|
|
Lega1
services
|
|
|
11,000
|
|
|
5/2
|
|
|
2.78
|
|
|
30,580
|
|
Financial
consulting
|
|
|
100,000
|
|
|
5/6
|
|
|
2.60
|
|
|
260,000
|
|
Legal
services
|
|
|
50,000
|
|
|
5/6
|
|
|
2.60
|
|
|
130,000
|
|
Investor
relations
|
|
|
15,000
|
|
|
4/1
|
|
|
2.40
|
|
|
36,000
|
|
Public
relations
|
|
|
20,000
|
|
|
5/1
|
|
|
2.55
|
|
|
51,000
|
|
Facility
search
|
|
|
5,000
|
|
|
5/1
|
|
|
2.55
|
|
|
12,750
|
|
Marketing
services
|
|
|
9,009
|
|
|
7/29
|
|
|
2.25
|
|
|
20,270
|
|
Investor
relations
|
|
|
15,000
|
|
|
9/6
|
|
|
2.25
|
|
|
33,750
|
|
Financial
services
|
|
|
2,500
|
|
|
12/1
|
|
|
2.60
|
|
|
6,500
|
|
Investor
relations
|
|
|
21,186
|
|
|
12/9
|
|
|
2.35
|
|
|
49,787
|
|
Public
relations
|
|
|
18,000
|
|
|
12/9
|
|
|
2.35
|
|
|
42,300
|
|
Investor
relations
|
|
|
15,000
|
|
|
12/9
|
|
|
2.35
|
|
|
35,250
|
|
Total
shares issued to consultants
|
|
|
286,695
|
|
|
|
|
|
|
|
|
728,657
|
|
Other
Issuances:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
awards
|
|
|
20,000
|
|
|
various
|
|
|
2.40
|
|
|
48,000
|
|
Shares
issued in lieu of rent
|
|
|
19,200
|
|
|
various
|
|
|
|
|
|
48,000
|
|
Shares
issued as partial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
compensation
of financing
|
|
|
5,000
|
|
|
various
|
|
|
|
|
|
14,700
|
|
Amortization
of cost of grants made
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in
prior periods
|
|
|
|
|
|
|
|
|
|
|
|
5,113
|
|
Total
Value of stock issued for services
|
|
|
330,895
|
|
|
|
|
|
|
|
|
836,500
|
|
Value
of options granted for services
|
|
|
-
|
|
|
|
|
|
|
|
|
1,082,250
|
|
Value
of equity items issued for services
|
|
|
330,895
|
|
|
|
|
|
|
|
|
1,918,750
|
|
8.
WARRANTS
The
Company has issued warrants both as part of “stock units” and as an integral
part of convertible note issues. The determination to classify the warrants
as
either derivative liabilities or equity was based upon consideration of the
specific criteria for classification established in EITF 00-19. The fair
value
of the warrants is determined using a Black Scholes valuation model. Those
warrants classified as liabilities are subject to revaluation for each reporting
period following the guidance in SFAS # 133.
The
following is a schedule of changes in warrants outstanding during the years
2006
and 2005. Each of these warrants is exercisable over five year periods from
dates of issuance at prices ranging from $0.45-$1.75 per share. They were
recorded at their fair values as determined by a Black Scholes valuation
model.
AIRTRAX,
INC.
Notes
to
the Consolidated Financial Statements
December
31, 2006
|
|
|
|
|
|
Balance
December 31, 2004
|
|
|
|
5,537,763
|
|
|
|
|
|
|
|
Warrants
issued in conjunction with issuances of convertible debt:
|
|
|
|
|
|
February
issue
|
|
|
2,884,615
|
|
|
|
|
May
issue
|
|
|
384,615
|
|
|
|
|
October
issue
|
|
|
774,000
|
|
|
4,043,230
|
|
Awarded
as partial fees to brokers:
|
|
|
|
|
|
|
|
February
issue
|
|
|
484,615
|
|
|
|
|
May
issue
|
|
|
38,462
|
|
|
|
|
October
issue
|
|
|
154,800
|
|
|
677,877
|
|
Warrants
exercised during 2005
|
|
|
|
|
|
(593,000
|
)
|
Warrants
voided during 2005
|
|
|
|
|
|
(200,000
|
)
|
Warrants
issued for services
|
|
|
|
|
|
37,688
|
|
Balance
December 31 2005
|
|
|
|
|
|
9,503,558
|
|
|
|
|
|
|
|
|
|
Warrants
issued in conjunction with issuances of 2006 convertible
debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
issued with $819,800 convertible debt through May, subsequently
converted
to equity
|
|
|
|
|
|
525,513
|
|
|
|
|
|
|
|
|
|
Warrants
issued with $150,000 convertible debt, March
|
|
|
|
|
|
48,077
|
|
|
|
|
|
|
|
|
|
Warrants
issued with $48,248 convertible debt, June
|
|
|
|
|
|
24,124
|
|
|
|
|
|
|
|
|
|
Warrants
issued with $400,000 convertible debt, July
|
|
|
|
|
|
282,051
|
|
|
|
|
|
|
|
|
|
Warrants
issued with $359,549 convertible debt, July
|
|
|
|
|
|
110,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
warrants issued during 2006
|
|
|
|
|
|
990,573
|
|
Balance
December 31, 2006
|
|
|
|
|
|
10,494,131
|
|
The
exercise price of the warrants is changed primarily due to the presence of
a
“MFN” clause that provides for adjustments based upon more favorable pricing of
subsequent issues. When these events occur, repricing letters are sent to
the
investors.
Certain
issues have “cashless exercise” features whereby the investor can convert
warrants to stock after a specified time period based, generally in the absence
of an effective Registration Statement. The warrants are exchanged for stock
based upon predetermined formulas that reflect stock
appreciation.
9. OPERATING
AND ADMINISTRATIVE EXPENSES
Details
of operating and administrative expenses are presented below:
|
|
Twelve
Months ended December 31, 2006
|
|
Twelve
Months ended December 31, 2005
|
|
Salaries
and payroll taxes
|
|
$
|
1,123,791
|
|
$
|
626,450
|
|
Options
expense
|
|
|
93,000
|
|
|
1,082,250
|
|
Investor
relations
|
|
|
11,629
|
|
|
0
|
|
AIRTRAX,
INC.
Notes
to
the Consolidated Financial Statements
December
31, 2006
Marketing
expense
|
|
|
228,501
|
|
|
272,879
|
|
Development
costs
|
|
|
519,134
|
|
|
544,933
|
|
Professional
fees
|
|
|
665,945
|
|
|
580,961
|
|
Consulting
- administrative
|
|
|
411,433
|
|
|
610,550
|
|
Settlement
expense
|
|
|
531,655
|
|
|
281,281
|
|
Liquidated
damages
|
|
|
214,247
|
|
|
0
|
|
Depreciation
& Amortizations
|
|
|
69,019
|
|
|
59,500
|
|
Rent
|
|
|
160,571
|
|
|
87,627
|
|
Insurance
|
|
|
145,379
|
|
|
179,739
|
|
Director
awards
|
|
|
222,500
|
|
|
0
|
|
Office
expense
|
|
|
59,617
|
|
|
224,235
|
|
Other
expenses
|
|
|
230,342
|
|
|
507,191
|
|
Totals
|
|
$
|
4,686,763
|
|
$
|
5,057,596
|
|
10. 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, 2006 the Company had
NOL
carryforwards of $25,257,084 available for Federal taxes and $17,091,769 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:
2011
|
|
$
|
206,952
|
|
2012
|
|
|
129,092
|
|
2018
|
|
|
486,799
|
|
2019
|
|
|
682,589
|
|
2020
|
|
|
501,169
|
|
2021
|
|
|
775,403
|
|
2022
|
|
|
590,764
|
|
2023
|
|
|
2,233,386
|
|
2024
|
|
|
2,493,486
|
|
2025
|
|
|
10,309,634
|
|
2026
|
|
|
6,847,810
|
|
During
the year 2006, the Company realized $445,216 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 during 2005. These potential New Jersey
offsets for periods prior to 2006 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. The Company has recorded deferred tax assets as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
Non-current
|
|
|
Total
|
|
Deferred
Tax Assets
|
|
$
|
919,889
|
|
$
|
8,257,629
|
|
$
|
9,177,518
|
|
Valuation
Allowance
|
|
|
(919,889
|
)
|
|
8,257,629
|
|
|
9,177,518
|
|
Balance
Recognized
|
|
|
|
|
$
|
$--
|
|
$ |
|
|
The
entire balance of the valuation allowance relates to Federal taxes. Since
state
tax benefits for years prior to 2005 have been realized, no reserve is deemed
necessary for the benefit of state tax losses of 2006. The valuation reserve
increased by $919,889 during the year.
11.
RENTALS UNDER OPERATING LEASES
At
present, the Company is not obligated under any operating lease.
AIRTRAX,
INC.
Notes
to
the Consolidated Financial Statements
December
31, 2006
Rent
expense amount to $160,571 in 2006 and $87,627 in 2005.
12.
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash
paid
for interest and income taxes is presented below:
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
Interest
|
|
$
|
1,971
|
|
$
|
9,741
|
|
Income
taxes
|
|
|
500
|
|
|
500
|
|
There
were no non-cash investing activities during either 2006 or 2005. The following
non-cash financing activities occurred:
|
a)
|
Shares
of common stock were issued for services during 2006 and 2005; these
totaled 687,665 and 330,895 shares,
respectively.
|
|
b)
|
During
2006, the following amounts were converted from debt to
equity:
|
|
o
|
$819,800
of convertible debt was converted into 525,513 shares of common
stock.
|
|
|
$253,203
of the May 2005 convertible debt issue was converted into 180,925
shares
of stock.
|
|
|
$65,000
of the October, 2005 convertible debt issue was converted into 41,666
shares of common stock.
|
|
c)
|
During
2005, $5,000,000 of convertible debt was converted into 3,846,154
shares
of common stock.
|
|
d)
|
During
2006, the holder of the preferred stock issue elected to receive
common
stock in lieu of $112,500 of cash dividends. A total of 218,742
shares of
common stock will be issued to satisfy this
dividend.
|
|
During
2005, the holder of the preferred stock issue also elected to receive
common stock in lieu of a $51,563 cash dividend. A total of 136,041
shares
will be issued to satisfy this
dividend.
|
|
e)
|
During
2006, $66,464 of interest that had accrued on the May, 2005 convertible
debt issue and the $819,800 2006 convertible issue were settled by
the
issuance of 54,373 shares of common
stock.
|
|
f)
|
During
2006, the Company issued $198,248 of 4% debentures as part of
a
Modification Agreement with investors, whereby the investors
yielded their
rights to liquidated damages on the November, 2004 stock
issue.
|
|
g)
|
During
2005, the Company issued 1,749,827 shares in settlement of stock
sales
that took place during 2004.
|
|
h)
|
During
2005, the Company issued 28,453 shares in settlement of interest
due to
investors.
|
|
i)
|
During
2005, the Company issued 187,939 shares in settlement of third party
debt
of a German company that the Company planned to acquire - see Note
on
FiLCO acquisition.
|
|
j)
|
During
2006, the Company issued 2% Unsecured Convertible Debentures aggregating
$359,549 and Stock Purchase Warrants to acquire 110,808 shares of
our
common stock at $1.65 per share. The issuance satisfies an obligation
for
liquidated damages which would have totaled $278,647 by December
31,
2006.
|
13.
PROPOSED ACQUISITION OF FILCO
On
February 19, 2004, the Company reached a tentative agreement to purchase
capital
stock of FiLCO GmgH., a German manufacturer of fork trucks (formerly Clark
Material Handling Company of Europe) with a manufacturing facility in Mulheim,
Germany (FiLCO). It was expected that the Company would acquire 75.1% of
FiLCO.
While negotiations were continuing, the Company agreed to make advances to
FiLCO. Through December 31, 2005 advances totaling $6,275,881 had thus been
made.
AIRTRAX,
INC.
Notes
to
the Consolidated Financial Statements
December
31, 2006
On
January 20, 2006, Filco filed for insolvency in Germany and a receiver was
appointed. As a result, on February 7, 2006 the Company terminated the tentative
agreement to acquired Filco stock and began negotiations with the receiver
to
acquire some or all of the Filco assets. The $6,275,881 of advances to Filco
that were outstanding at December 31, 2005, were secured by liens filed against
the machinery and equipment owned by Filco which in 2003 was appraised at
$5,400,000, and by liens filed against its intellectual property, which had
not
been appraised. Due to the uncertainty of the Company’s position under German
bankruptcy law, $4,275,881 of the Filco advances were written off in 2005,
and
the remaining $2,000,000 was written off in 2006. In addition, $413,000 of
Company inventory stored at the Filco plant was abandoned and written off during
2006. During 2006, an auction of Filco assets was conducted by the receiver
who
did not acknowledge the Airtrax liens against property and
equipment.
14.
RECENT ACCOUNTING PRONOUNCEMENTS
The
Financial Accounting Standards Board (FASB) has recently issued “FASB Staff
Position EITF 00-19-2 which modifies the accounting treatment of derivatives
that flow from financings involving embedded derivatives. This Staff Position
is
effective for financial statements for periods beginning January 1, 2007.
Management believes that this will cause some change in the way the Company
accounts for derivatives. Management is evaluating this position and has not
made a determination as to the effective it will have on its financial
statements.
The
Company has reviewed other accounting pronouncements issued during 2006 and
has
concluded that they will have no effect on the Company's financials
statements.
15.
GOING CONCERN
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As shown in the financial statements, the
Company had a material working capital deficiency and an accumulated deficit
as
of December 31, 2006 and has experienced continuing losses. These factors raise
substantial doubt about the ability of the Company to continue as a going
concern. The financial statements do not include adjustments relating to the
recoverability of assets and classification of liabilities that might be
necessary should the Company be unable to continue in operation. The Company’s
present plans, the realization of which cannot be assured, to overcome these
difficulties include but are not limited to the continuing effort to raise
capital in the public and private markets.
16.
COMMITMENTS AND CONTINGENCIES
During
May 2002, the Company signed an agreement with a broker-dealer to provide
investment banking and financial advisory services, which included the raising
of funds. Under the agreement, the broker-dealer was entitled to receive stock
warrants which if exercised would produce 450,000 shares of common stock of
the
Company during a four year term at an exercise price or approximately $1.75
per
share. A dispute arose between the parties regarding the agreement and its
performance. The Company has asserted that the broker-dealer induced the Company
to enter into the agreement through material misstatements and has not otherwise
performed its services under the agreement. The Company believes the
broker-dealer is not entitled to the stated compensation, and has not issued
the
stock warrants.
In
connection with the Acquisition Agreement, Mr. Filipov was to receive options
to
purchase 900,000 shares of the Company’s common stock at an exercise price of
$0.01. The Company did not issue such options because the Acquisition Agreement
was terminated and the conditions for such issuance were never fulfilled. Mr.
Filipov has indicated that he believes that the conditions were fulfilled and
that the Company owe’s him the options. The Company and Mr. Filipov are
endeavoring to reach a mutually acceptable settlement.
17.
SUBSEQUENT EVENTS
On
February 20, 2007, the Company entered into a Securities Purchase Agreement
(the
"Purchase Agreement") with certain accredited and/or qualified institutional
investors pursuant to which we sold an aggregate of $3,734,040 principal amount
secured convertible debentures (the "Debentures") convertible into shares of
our
common stock, no par value (the "Common Stock") at a conversion price equal
to
$0.45 (the "Conversion Price"), for an aggregate purchase price of $3,219,000.
In addition, the Company issued to the investors (i) warrants
to purchase 8,297,866 shares of the Company’s Common Stock (the "Warrants") at
an exercise price equal to $0.54 per share, which represents 100% of the number
of shares issuable upon conversion of the Debentures; (ii) callable warrants
to
purchase 4,148,933 shares of our Common Stock at an exercise price equal to
$0.75 per share, which represents 50% of the number of shares issuable upon
conversion of the Debentures; and (iii) callable warrants to purchase 4,148,933
shares of our Common Stock at an exercise price equal to $1.25 per share, which
represents 50% of the number of shares issuable upon conversion of the
Debentures (collectively, the "Callable Warrants").
AIRTRAX,
INC.
Notes
to
the Consolidated Financial Statements
December
31, 2006
The
Debentures mature on February 20, 2009. The Company may in our discretion redeem
the Debentures, subject to certain equity conditions being met by us as set
forth in the Debentures, at a price equal to 150% of the principal balance,
accrued interest, and all liquidated damages, if any, thereon that are requested
to be redeemed. The Company’s obligations under the Purchase Agreement, the
Debentures and the additional definitive agreements with respect to this
transaction are secured by all of our assets. The Conversion Price of the
Debentures is subject to adjustments for any failure by the Company to cause
the
Securities and Exchange Commission (the "SEC") to declare the initial
registration statement covering the shares underlying the Debentures, the
Warrants and the Callable Warrants effective.
The
Conversion Price of the Debentures and the respective exercise prices of the
Warrants and the Callable Warrants are subject to adjustment in certain events,
including, without limitation, upon the Company’s consolidation, merger or sale
of all of substantially all of the Company’s assets, a reclassification of our
Common Stock, or any stock splits, combinations or dividends with respect to
the
Company’s Common Stock.
In
addition, after such time as the SEC declares the registration statement
effective, if (i) the volume weighted average price for each of the 10
consecutive trading days (the "Measurement Period") exceeds $1.50 per share
with
respect to the $0.75 Callable Warrants and $2.50 with respect to the $1.25
Callable Warrants, (ii) the daily volume for each trading day in such
Measurement Period exceeds 250,000 shares of Common Stock per trading day,
and
(iii) the holder is not in possession of any information that constitutes,
or
might constitute, material non-public information, then we may, within one
trading day of the end of such Measurement Period, call for cancellation of
all
or any portion of the Callable Warrants which have not yet been exercised at
a
price equal to $.001 per share.
Under
the
Registration Rights Agreement we entered into with the investors on February
20,
2007, we are obligated to file a registration statement on Form SB-2 to effect
the registration of 130% the Common Stock issuable upon conversion of the
Debentures and exercise of the Warrants, the Callable Warrants and the selling
agent warrants (as described below) on the earlier of (i) 15 calendar days
from
the filing of our annual report on Form 10-KSB for the fiscal year ended
December 31, 2006, or (ii) April 15, 2007 (the "Filing Date"). We are obligated
to use our best efforts to cause the registration statement to be declared
effective no later than 90 days after the Filing Date. If we do not file the
registration statement by the Filing Date, or if the registration statement
is
not declared effective by the SEC within the deadline specified in the preceding
sentence, we shall pay to the investors, as liquidated damages, an amount equal
to 1.25% of the principal amount of the Debentures on a pro rata basis for
each
30-day period of such registration default.
On
March
22, 2007, the Company made a $100,000 principal payment and paid interest of
$30,213. The Note was reduced to $300,000 and interest on the Note was reduced
to 10%. Additionally, the Company issued 184,000 shares of common stock as
settlement of the default period and paid a fee
of
$12,000
to
Source Capital Group, Inc., a registered representative of the Note-holder.
The
Company also agreed to make monthly interest payments. The conversion price
was
reset per the terms of the original Note.
On
August
25, 2006, the Company’s CEO, President and Chairman (“President”) died. The
President’s employment contact expired on June 30, 2006 and was not renewed. The
employment agreement did not provide for the exercise of the options upon death.
The options granted in 2004 to the president were 550,000 options, valued at
$187,500 and in 2005 he President was granted 750,000 options, valued at
$975,000. On April 11, 2007, the Board of Directors extended the option for
an
18 month period commencing on the date Mr. Amico’s contract
expired.
AIRTRAX,
INC.
Notes
to
the Consolidated Financial Statements
March 31,
2007
AIRTRAX,
INC.
|
|
|
March
31, 2007
(Unaudited)
|
|
|
December
31, 2006
(Audited)
|
|
|
|
|
|
|
|
(Restated)
|
|
Current
Assets
|
|
|
|
|
|
|
|
Cash
|
|
$
|
1,913,310
|
|
$
|
327,737
|
|
Accounts
receivable
|
|
|
50,704
|
|
|
50,704
|
|
Inventory
|
|
|
1,112,830
|
|
|
1,049,457
|
|
Vendor
advances
|
|
|
140,268
|
|
|
103,628
|
|
Deferred
tax asset
|
|
|
1,001,256
|
|
|
919,889
|
|
Total
current assets
|
|
|
4,218,368
|
|
|
2,451,415
|
|
Fixed
Assets
|
|
|
|
|
|
|
|
Office
furniture and equipment
|
|
|
157,521
|
|
|
157,521
|
|
Demo
Equipment
|
|
|
149,249
|
|
|
149,249
|
|
Shop
equipment
|
|
|
43,350
|
|
|
43,350
|
|
Casts
and tooling
|
|
|
273,016
|
|
|
273,016
|
|
|
|
|
623,136
|
|
|
623,136
|
|
Less,
accumulated depreciation
|
|
|
(357,666
|
)
|
|
(339,216
|
)
|
Net
fixed assets
|
|
|
265,470
|
|
|
283,920
|
|
Other
Assets
|
|
|
|
|
|
|
|
Prepaid
interest
|
|
|
487,857
|
|
|
-
|
|
Patents
- net
|
|
|
143,921
|
|
|
148,151
|
|
Unamortized
financing costs
|
|
|
501,166
|
|
|
-
|
|
Deposits
|
|
|
65
|
|
|
65
|
|
Total
other assets
|
|
|
1,133,009
|
|
|
148,216
|
|
TOTAL
ASSETS
|
|
$
|
5,616,847
|
|
$
|
2,883,551
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
826,524
|
|
$
|
1,097,361
|
|
Accrued
liabilities
|
|
|
364,750
|
|
|
461,973
|
|
|
|
|
|
|
|
|
|
Derivative
liabilities- warrants and conversion privileges
|
|
|
5,532.421
|
|
|
355,203
|
|
Current
convertible debt
|
|
|
2,007,297
|
|
|
2,129,797
|
|
Shareholder
loans payable
|
|
|
40,713
|
|
|
75,713
|
|
Total
current liabilities
|
|
|
8,771,705
|
|
|
4,120,047
|
|
Long
Term Convertible Debt
|
|
|
4,291,837
|
|
|
557,797
|
|
TOTAL
LIABILITIES
|
|
|
13,063,542
|
|
|
4,677,844
|
|
|
|
|
|
|
|
|
|
Stockholders’
Deficit
|
|
|
|
|
|
|
|
Common
stock - authorized, 100,000,000 shares without par value; issued
and
outstanding - 24,715,235 and 21,939,360, respectively
|
|
|
25,305,064
|
|
|
25,061,241
|
|
Paid
in capital - warrants
|
|
|
1,065,263
|
|
|
1,065,263
|
|
Paid
in capital-options
|
|
|
1,417,660
|
|
|
1,407,299
|
|
Preferred
stock - authorized, 5,000,000 shares without par value; 275,000
issued and
outstanding
|
|
|
12,950
|
|
|
12,950
|
|
Deficit
during development stage
|
|
|
(35,247,632)
|
)
|
|
(29,341,046
|
)
|
Total
stockholders’ deficit
|
|
|
(7,446,695
|
)
|
|
(1,756,048
|
)
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
$
|
5,616,847
|
|
$
|
2,883,551
|
|
The
accompanying notes are an integral part of these financial
statements
AIRTRAX,
INC.
STATEMENTS
OF OPERATIONS
For
the Three Months Ended March 31,
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
SALES
|
|
$
|
91,385
|
|
$
|
658,976
|
|
COST
OF GOODS SOLD
|
|
|
134,269
|
|
|
592,899
|
|
Gross
profit
|
|
|
(42,884
|
)
|
|
66,077
|
|
|
|
|
|
|
|
|
|
OPERATING
AND ADMINISTRATIVE EXPENSES
|
|
|
797,363
|
|
|
956,352
|
|
|
|
|
|
|
|
|
|
OPERATING
LOSS
|
|
|
(840,247
|
)
|
|
(890,275
|
)
|
|
|
|
|
|
|
|
|
OTHER
INCOME AND EXPENSE
|
|
|
|
|
|
|
|
Conversion
expense
|
|
|
(4,937,231
|
)
|
|
(581,438
|
)
|
Interest
expense
|
|
|
(103,442
|
)
|
|
(48,751
|
)
|
Revaluation
(expense) income
|
|
|
(117,146
|
)
|
|
1,972,166
|
|
Other
income
|
|
|
10,113
|
|
|
-___
|
|
|
|
|
|
|
|
|
|
NET
(LOSS) INCOME BEFORE INCOME TAXES
|
|
|
(5,987,953)
|
)
|
|
451,702
|
|
|
|
|
|
|
|
|
|
INCOME
TAX BENEFIT (STATE):
|
|
|
|
|
|
|
|
Current
|
|
|
81,367
|
|
|
84,484
|
|
NET
(LOSS) INCOME
|
|
$
|
(5,906,586
|
)
|
$
|
536,186
|
|
|
|
|
|
|
|
|
|
NET
LOSS PER SHARE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
(LOSS) INCOME
|
|
$
|
((5,906,586
|
)
|
$
|
536,186
|
|
ADJUSTMENT
FOR PREFERRED STOCK DIVIDENDS ACCUMULATED
|
|
|
(17,188
|
)
|
|
(17,188
|
)
|
(LOSS)
INCOME ALLOCABLE TO COMMON SHAREHOLDERS
|
|
$
|
(5,923,774)
|
)
|
$
|
518,998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS INCOME PER SHARE - Basic and Diluted
|
|
$
|
(.24
|
)
|
$
|
.02
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF SHARES OUTSTANDING
|
|
|
24,436,655
|
|
|
22,014,543
|
|
The
accompanying notes are an integral part of these financial
statements
AIRTRAX,
INC.
STATEMENTS
OF CASHFLOWS
For
the Three Month Periods Ended March 31,
|
|
2007
|
|
2006
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
Net
(Loss) Income
|
|
$
|
(5,906,586)
|
)
|
$
|
536,186
|
|
Adjustments
to reconcile net income to net cash consumed by operating
activities:
|
|
|
|
|
|
|
|
Charges
not requiring the outlay of cash:
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
22,680
|
|
|
14,865
|
|
Options
issued for services
|
|
|
-
|
|
|
42,000
|
|
Equity
securities issued for services
|
|
|
178,257
|
|
|
250,166
|
|
Expense
of settling certain liquidated damages
|
|
|
-
|
|
|
108,417
|
|
Conversion
expense
|
|
|
4,937,231
|
|
|
581,438
|
|
Amortization
of prepaid interest
|
|
|
56,684
|
|
|
|
|
Increase
in accrual of deferred tax benefit
|
|
|
(81,367
|
)
|
|
(84,484
|
)
|
Revaluation
of liabilities for warrants and conversion privileges
|
|
|
117,046
|
|
|
(1,972,166
|
)
|
Interest
accrued on shareholder loan
|
|
|
-
|
|
|
1,739
|
|
Changes
in current assets and liabilities:
|
|
|
|
|
|
|
|
Increase
in accounts receivable
|
|
|
-
|
|
|
(39,710
|
)
|
Increase
in vendor advances
|
|
|
(36,640
|
)
|
|
-
|
|
Increase
(decrease) in accounts payable
|
|
|
(228,336
|
)
|
|
41,947
|
|
Increase
(decrease) in accrued liabilities
|
|
|
(97,223
|
)
|
|
138,471
|
|
Decrease
(increase) in inventory
|
|
|
(63,373
|
)
|
|
39,709
|
|
Net
cash consumed by operating activities
|
|
|
(1,101,527
|
)
|
|
(341,422
|
)
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
Acquisitions
of equipment
|
|
|
-
|
|
|
(10,319
|
)
|
Net
cash consumed by investing activities
|
|
|
-
|
|
|
(10,319
|
)
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
Proceeds
of issuance of convertible debt
|
|
|
2,822,100
|
|
|
451,200
|
|
Repayment
of stockholder loans
|
|
|
(35,000
|
)
|
|
(37,447
|
)
|
Repayment
of convertible debt
|
|
|
(100,000
|
)
|
|
-
|
|
Net
cash provided by financing activities
|
|
|
2,687,100
|
|
|
413,753
|
|
|
|
|
|
|
|
|
|
Net
increase in cash
|
|
|
1,585,573
|
|
|
62,012
|
|
Balance
at beginning of period
|
|
|
327,737
|
|
|
19,288
|
|
Balance
at end of period
|
|
$
|
1,913,310
|
|
$
|
81,300
|
|
The
accompanying notes are an integral part of these financial
statements
Airtrax,
Inc.
Notes
to the Financial Statements
March
31, 2007
(unaudited)
1. BASIS
OF PRESENTATION
The
unaudited interim financial statements of Airtrax, Inc. (“the Company”) as of
March 31, 2007 and for the three-month periods ended March 31, 2007 and 2006
have been prepared in accordance with accounting principles generally accepted
in the United States of America. In the opinion of management, such information
contains all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results of such periods. The results
of
operations for the three-month period ended March 31, 2007 are not necessarily
indicative of the results to be expected for the full fiscal year ending
December 31, 2007.
Certain
information and disclosures normally included in the notes to financial
statements have been condensed or omitted as permitted by the rules and
regulations of the Securities and Exchange Commission, although the Company
believes the disclosure is adequate to make the information presented not
misleading. The accompanying unaudited financial statements should be read
in
conjunction with the financial statements of the Company for the year ended
December 31, 2006.
2. RESTATEMENTS
During
an
internal review, it was determined that the liability for options was properly
classified as a separate component of equity. This reclassification is reflected
on both the December 31, 2006 and March 31, 2007 balance sheets. In addition,
the Company determined that the derivatives associated a $ 400,000 issuance
of
convertible debt in 2006 were more properly classified as derivative
liabilities, as per the conditions in EITF 00-19. This resulted in additional
revaluation income in 2006, offset by revaluation expense for the quarter
ended
March 31, 2007.
The
effects on the previously issued financial statements for March 31, 2007
are
summarized in the subsequent tables:
Statement
of Operations March 31, 2007
|
|
As
Previously
|
|
Adjustments
|
|
As
|
|
|
|
Reported
|
|
|
|
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revaluation
income
|
|
$
|
567,474
|
|
$
|
(159,413)
(A
|
)
|
$
|
(117,146
|
)
|
|
|
|
|
|
|
(525,207)
(B
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
allocable to common shareholders
|
|
$
|
(
5,239,154
|
)
|
$
|
(684,620
|
)
|
$
|
(
5,923,774)
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per share-basic and diluted
|
|
$
|
(
21
|
)
|
$
|
(.03)(B
|
)
|
$
|
(.24
|
)
|
Statement
of Cash Flows March 31, 2007
Cash
Flows from Operating Activities
|
|
As
Previously
|
|
Adjustments
|
|
As
|
|
|
|
Reported
|
|
|
|
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(
5,221,966
|
)
|
|
|
|
|
|
|
(525,207)
(B)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revaluation
income
|
|
|
(567,474
|
)
|
|
159,413
(A
|
)
|
|
117,146
|
|
525,207
(B)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
consumed from Operating
|
|
$
|
(
1,101,227
|
)
|
$
|
-
|
|
$
|
(
1,101,227)(c
|
)
|
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
sheet 3/31/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
13,945,574
|
|
|
(882,032
|
)
|
|
13,063,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
liabilities
|
|
$
|
4,996,793
|
|
$
|
(159,413)
(A
|
)
|
$
|
5,532,541
|
|
169,834
(B)
|
|
|
|
|
|
|
|
|
|
|
525,207
(E)
|
|
|
|
|
|
|
|
|
|
|
Option
liability
|
|
|
1,417,660
|
|
|
(1,417,660)
C
|
|
|
-
|
|
Liabilities
|
|
|
13,945,574
|
|
|
(882,032
|
)
|
|
13,063,542
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
25,319,211
|
|
|
(14,147)
(D
|
)
|
|
25,305,056
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid-in-capital-
options
|
|
|
|
|
|
|
|
|
1,417,660
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
(
34,726,152
|
)
|
|
3,727
(D
|
)
|
|
(
35,247,632
|
)
|
|
|
|
|
|
|
(525,207)
(E
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
deficit
|
|
|
(8,328,727
|
)
|
|
882,032
|
|
|
(
7,446,695
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and stockholders’
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
$
|
5,616,847
|
|
|
|
|
$
|
5,616,847
|
|
(A) |
Revaluation
expense associated with a derivative reclassified to liabilities
effective
December 31, 2006
|
(B) |
Offsetting
revaluation income in 2006 due to the reclassification of
derivative
|
(C) |
Reclass
of option liability to paid-in-capital
account
|
(D) |
Effects
of the derivative reclassification and required
corrections
|
(E) |
Revaluation
expense associated with changes in exercise prices due to February,
2007
issuance of convertible debt and activation of “MFN” clauses in prior
issues
|
The
Company also amended its Form 10-QSB for March 31, 2007 to reflect additional
disclosure in the accounting for derivatives, primarily Note 8, associated
with
the Company’s private placements. The Company also expanded Note 3 to include
additional disclosures regarding prepaid interest and unamortized financing
fees
and added disclosures in Note 8, regarding the impact of recent accounting
changes, particularly the impact of FSP EITF 00-19-2.
3. CONVERTIBLE
NOTE FINANCINGS AND STOCK SALES
On
February 20, 2007, the Company entered into a Securities Purchase Agreement
(the
"Purchase Agreement") with certain accredited and/or qualified institutional
investors pursuant to which the Company sold an aggregate of $3,734,040
principal amount secured convertible debentures (the "Debentures") convertible
into shares of common stock, no par value ("Common Stock") at a conversion
price
equal to $0.45 (the "Conversion Price"). The Debentures were sold at a discount
equal to the amounts of interest that will accrue at a simple rate of 8%
per
annum during the term of the debentures. The amount realized was $3,219,000;
this was further reduced by expenses of the sale of $396,900. In addition,
the
Company issued to the investors (i) warrants to purchase 8,297,866 shares
of
Common Stock (the "Warrants") at an exercise price equal to $0.54 per share,
which represents 100% of the number of shares issuable upon conversion of
the
Debentures; (ii) callable warrants to purchase 4,148,933 shares of Common
Stock
at an exercise price equal to $0.75 per share, which represents 50% of the
number of shares issuable upon conversion of the Debentures; and (iii) callable
warrants to purchase 4,148,933 shares of Common Stock at an exercise price
equal
to $1.25 per share, which represents 50% of the number of shares issuable
upon
conversion of the Debentures (collectively, the "Callable Warrants"). In
addition to the expenses of the sale, noted above, 715,333 warrants to purchase
common stock were issued to the placement agent that arranged the
financing.
The
difference between the face amount of the borrowing ($3,734,040) and proceeds
($3,219,000) was recorded as prepaid interest and is being amortized over
the
life of the loan.
The
financing expenses ($396,900) and the value of the broker warrants issued
in
conjunction with this transaction are also being amortized over the life
of the
loan and are presented on balance sheet as “Unamortized financing
costs.”
The
Debentures mature on February 20, 2009. The Company may in its discretion
redeem
the Debentures, subject to certain equity conditions being met by the Company
as
set forth in the Debentures, at a price equal to 150% of the principal balance,
accrued interest, and all liquidated damages, if any, thereon that are requested
to be redeemed. The Company’s obligations under the Purchase Agreement, the
Debentures and the additional definitive agreements with respect to this
transaction are secured by all of the assets of the Company.
The
Conversion Price of the Debentures is subject to the following adjustments
for
any failure by the Company to cause the Securities and Exchange Commission
(the
"SEC") to declare the initial registration statement covering the shares
underlying the Debentures, the Warrants and the Callable Warrants
effective:
|
•
|
if
the initial registration statement is not declared effective on
or before
February 20, 2008, the Conversion Price applicable to an amount
of
conversion shares equal to the highest number of shares of Common
Stock
which can be sold by the holder pursuant to Rule 144, promulgated
under
the Securities Act of 1933, as amended (the "144 Amount"), shall
be
adjusted to equal the lesser of (i) the then Conversion Price and
(ii) 80%
of the average of the 3 lowest closing prices of the Common Stock
during
the 10 trading days immediately preceding February 20,
2008;
|
|
•
|
if
the initial registration statement is not declared effective on
or before
April 20, 2008, the Conversion Price applicable to an amount of
conversion
shares equal to the 144 Amount shall be adjusted to equal the lesser
of
(i) the then Conversion Price and (ii) 80% of the average of the
3 lowest
closing prices of the Common Stock during the 10 Trading Days immediately
preceding April 20, 2008;
|
|
•
|
if
the initial registration statement is not declared effective on
or before
July 20, 2008, the Conversion Price applicable to an amount of
conversion
shares equal to the 144 Amount shall be adjusted to equal the lesser
of
(i) the then Conversion Price and (ii) 80% of the average of the
3 lowest
closing prices of the Common Stock during the 10 trading days immediately
preceding July 20, 2008;
|
|
•
|
if
the initial registration statement is not declared effective on
or before
October 20, 2008, the Conversion Price applicable to an amount
of
conversion shares equal to the 144 Amount shall be adjusted to
equal the
lesser of (i) the then Conversion Price and (ii) 80% of the average
of the
3 lowest closing prices of the Common Stock during the 10 trading
days
immediately preceding October 20, 2008;
and
|
|
•
|
if
the initial registration statement is not declared effective on
or before
February 20, 2009, the Conversion Price applicable to an amount
of
conversion shares equal to the 144 Amount shall be adjusted to
equal the
lesser of (i) the then Conversion Price and (ii) 80% of the average
of the
3 lowest closing prices of the Common Stock during the 10 trading
days
immediately preceding February 20,
2009.
|
The
Conversion Price of the Debentures and the respective exercise prices of
the
Warrants and the Callable Warrants are subject to adjustment in certain events,
including, without limitation, upon the consolidation, merger or sale of
all of
substantially all of the assets, a reclassification of our Common Stock,
or any
stock splits, combinations or dividends with respect to the Common
Stock.
In
addition, after such time as the SEC declares the registration statement
effective, if (i) the volume weighted average price for each of the 10
consecutive trading days (the "Measurement Period") exceeds $1.50 per share
with
respect to the $0.75 Callable Warrants and $2.50 with respect to the $1.25
Callable Warrants, (ii) the daily volume for each trading day in such
Measurement Period exceeds 250,000 shares of Common Stock per trading day,
and
(iii) the holder is not in possession of any information that constitutes,
or
might constitute, material non-public information, then the Company may,
within
one trading day of the end of such Measurement Period, call for cancellation
of
all or any portion of the Callable Warrants which have not yet been exercised
at
a price equal to $.001 per share.
Under
the
Registration Rights Agreement the Company entered into with the investors
on
February 20, 2007, the Company is obligated to file a registration statement
on
Form SB-2 to effect the registration of 130% the Common Stock issuable upon
conversion of the Debentures and exercise of the Warrants, the Callable Warrants
and the selling agent warrants (as described below) on the earlier of (i)
15
calendar days from the filing of the annual report on Form 10-KSB for the
fiscal
year ended December 31, 2006, or (ii) April 15, 2007 (the "Filing Date").
The
Company is obligated to use its best efforts to cause the registration statement
to be declared effective no later than 90 days after the Filing Date. If
we do
not file the registration statement by the Filing Date, or if the registration
statement is not declared effective by the SEC within the deadline specified
in
the preceding sentence, the Company shall pay to the investors, as liquidated
damages, an amount equal to 1.25% of the principal amount of the Debentures
on a
pro rata basis for each 30-day period of such registration default. On May
4,
2007, we filed the registration statement, and as a result have an obligation
for liquidated damages.
Further,
the Company paid commissions of $321,900 and issued 715,333 warrants to First
Montauk Securities Corp. (the "Selling Agent"), a NASD member firm, which
acted
as Selling Agent for the transaction, each as consideration for services
performed in connection with the purchase and sale of the Debentures, Warrants
and Callable Warrants to the investors pursuant to the Purchase Agreement.
The
Selling Agent had no obligation to buy any Debentures, Warrants or Callable
Warrants from us. In addition, the Company agreed to indemnify the Selling
Agent
and other persons against specific liabilities under the Securities Act of
1933,
as amended.
The
Company claimed an exemption from the registration requirements of the Act
for
the private placement of these securities pursuant to Section 4(2) of the
Act
and/or Regulation D promulgated thereunder since, among other things, the
transaction did not involve a public offering, the Investors were accredited
investors and/or qualified institutional buyers, the Investors had access
to
information about the Company and their investment, the Investors took the
securities for investment and not resale, and w the Company took appropriate
measures to restrict the transfer of the securities.
On
March
1, 2007, an investor in the October 2005 converted $22,500 of the 8% Convertible
Notes due October 18, 2007 in exchange, the Company issued 50,000 shares
of
common stock. The conversion price was $0.45 per share.
4. WARRANTS
The
Company has issued warrants both as part of “stock units” and as an integral
part of convertible note issues. The value of the warrants and conversion
options which are classified as liabilities are revalued each reporting period.
These values are determined by a Black Scholes valuation model, consistent with
the requirements of SFAS No.133. The following is a schedule of changes in
warrants outstanding during the first quarter of 2007. Each of these warrants
is
exercisable over five year periods from dates of issuance at prices ranging
from
$0.45-$1.56 per share.
|
|
|
|
Balance
December 31, 2006
|
|
|
10,383,323
|
|
|
|
|
|
|
Warrants
issued with $3,734,040 convertible debt, February 20,
|
|
|
16,595,732
|
|
Warrants
issued to Placement Agent of February 2007 convertible debt issue
|
|
|
715,333
|
|
Total
warrants issued during 2007
|
|
|
17,311,065
|
|
Total
warrants exercised during the quarter ended March 31, 2007
|
|
|
-
|
|
Balance
March 31, 2007
|
|
|
27,694,388
|
|
5. SUPPLEMENTAL
CASH FLOWS INFORMATION:
There
were no taxes paid during the quarters ended March 31, 2007 and March 31,
2006.
Interest
of $34,886 and $ 0 was paid during the quarter’s ended March 31, 2007 and March
31, 2006, respectively.
There
were no non-cash investing activities during either the March 31, 2007 and
March
31, 2006 periods.
The
following non-cash financing activities occurred during these
periods.
Shares
of
common stock were issued for services during both the March 31, 2007 and
March
31, 2006 periods. These totaled 330,106 shares and 144,456 shares, respectively
and were valued at $178,257 and $250,166.
During
the March 31, 2007 period the following additional noncash financing activity
occurred:
|
-
|
$22,500
of convertible debt was converted to 50,000 shares of common
stock.
|
|
-
|
$45,000
account payable was satisfied by the issuance of 94,444 shares
of common
stock.
|
During
the March 31, 2006 period, the Company issued $150,000 of 4% convertible
notes
in consideration of certain investors waiving their rights to liquidated
damages
which had accrued. A charge of $108,417 was recorded, representing the excess
of
the value of the convertible notes and associated derivatives over the $91,160
accrued damages that were settled.
6. OPERATING
AND ADMINISTRATIVE EXPENSES
Details
of operating and administrative expenses are presented below:
|
|
Three
Months Ended
March
31, 2007
|
|
Three
Months Ended
March
31, 2006
|
|
Options
expense
|
|
$
|
-
|
|
$
|
42,000
|
|
Salaries
and payroll taxes
|
|
|
222,977
|
|
|
156,630
|
|
Marketing
expense
|
|
|
12,619
|
|
|
13,702
|
|
Development
costs
|
|
|
23,579
|
|
|
61,593
|
|
Professional
fees
|
|
|
134,786
|
|
|
158,861
|
|
Commissions
|
|
|
-
|
|
|
50,845
|
|
Consulting
- administrative
|
|
|
6,054
|
|
|
14,150
|
|
Settlement
expense
|
|
|
-
|
|
|
108,417
|
|
Liquidated
damages
|
|
|
-
|
|
|
81,800
|
|
Consulting
- marketing
|
|
|
-
|
|
|
47,925
|
|
Rent
|
|
|
38,250
|
|
|
38,250
|
|
Insurance
|
|
|
17,021
|
|
|
-
|
|
Director
awards
|
|
|
148,873
|
|
|
-
|
|
Employee
awards
|
|
|
-
|
|
|
53,250
|
|
Office
expense
|
|
|
11,716
|
|
|
-
|
|
Other
expenses
|
|
|
181,488
|
|
|
128,929
|
|
Totals
|
|
$
|
797,363
|
|
$
|
956,352
|
|
7. RECENT
ACCOUNTING PROUNOUNCEMENTS
The
Company adopted EITF ”00-19-2, “ Accounting for Registration Payment
Arrangements,”( RPA) . for transactions after the statement’s effective date (
December 20, 2006.) The Company’s recording of a liability for these RPA’s will
now follow the guidelines in FAS #5, “ Accounting for Contingencies.” However,
the amendment to the original EITF 00-19 will not affect the recording of
derivatives as the “RPA’s” were not the sole determining factor in prior
decisions about derivative classification, as is emphasized in the amended
EITF.
8. CONVERSION,
REVALUATION AND EMBEDDED DERIVATIVES
The
Company’s issues of convertible debt normally have embedded derivatives ( i.e.
warrants and conversion benefits.) These derivatives are classified as either
liabilities or a component of equity based upon the criteria in EITF 00-19
Their
initial fair value, based upon grant date valuation using Black Scholes model,
is charged to conversion expense based upon the immediate exercisability
of the
derivatives.
Those
derivatives classified as liabilities are subject to revaluation each reporting
period, following SFAS #133 and its required fair value
treatment.
9. GOING
CONCERN
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As shown in the financial statements, the
Company had a working capital deficiency and an accumulated deficit as of
March
31, 2007 and has experienced continuing losses. These factors raise substantial
doubt about the abilility of the Company to continue as a going concern.
The
financial statements do not include adjustments relating to the recoverability
of assets and classification of liabilities that might be necessary should
the
Company be unable to continue in operation. The Company’s present plans, the
realization of which cannot be assured, to overcome these difficulties include,
but are not limited to, the continuing effort to raise capital in the public
and
private markets.
10. SUBSEQUENT
EVENTS
On
April
18, 2007, an investor in the October 2005 8% Convertible Promissory Notes,
elected to convert $45,000 of principal into 100,000 shares of common stock.
The
conversion price of the Convertible Promissory Note is $0.45 per share.
On
April
16, 2007, an investor in the May 2005 8% Convertible Promissory Notes, elected
to convert $92,000 of principal and $14.808 of accrued interest into 237,351
shares of common stock. The conversion price of the Convertible Promissory
Note
is $0.45 per share. The issuance of the above shares are pending the filing
of
the Company’s restated quarterly 10-QSB’s for 2005 and 2006.
On
July
26, 2007 First Montauk Securities, (“FMS”) advised the Company that additional
shares may need to be issued to the investors from the February 2005 private
placement. After reviewing the documents from that transaction, the Company
is
in agreement that the investors are entitled to additional shares pursuant
to
the Most Favored Nation/Anti-Dilution (“MFN”) provisions in the offering
documents. The February 2005 transaction provided for the anti-dilution
protection until six months after there is an effective registration
statement. This MFN protection applies to the holders from the November 2004
private placement as well, although FMS has not indicated at this time that
there are shareholders from that offering that would be eligible for the
additional shares.
The
Company’s records indicate there are shareholders from the February 2005
transaction that still own shares, however, the Company is investigating
if they
are shares from the February 2005 offering and are entitled to receive
additional shares. The number of shares that may be issued has not been
determined nor confirmed at this time.
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
ITEM
24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our
Articles of Incorporation, as amended, provide to the fullest extent permitted
by New Jersey law, our directors or officers shall not be personally liable
to
us or our shareholders for damages for breach of such director's or officer's
fiduciary duty. The effect of this provision of our Articles of Incorporation,
as amended, is to eliminate our right and our shareholders (through
shareholders' derivative suits on behalf of our company) to recover damages
against a director or officer for breach of the fiduciary duty of care as a
director or officer (including breaches resulting from negligent or grossly
negligent behavior), except under certain situations defined by statute. We
believe that the indemnification provisions in its Articles of Incorporation,
as
amended, are necessary to attract and retain qualified persons as directors
and
officers.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933
may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The
following table sets forth an itemization of all estimated expenses, all of
which we will pay, in connection with the issuance and distribution of the
securities being registered:
NATURE
OF EXPENSE AMOUNT
SEC
Registration fee |
|
$ |
771.01 |
|
Accounting
fees and expenses |
|
|
15,000.00* |
|
Legal
fees and expenses |
|
|
50,000.00* |
|
Miscellaneous |
|
|
5,000.00* |
|
TOTAL
|
|
$ |
70,771.01* |
|
|
|
|
|
|
*
Estimated.
During
the past three years, the registrant has sold the following securities which
were not registered under the Securities Act of 1933, as amended.
In
June
and October 2004, we issued an aggregate of 47,850 shares of common stock
to a
certain vendor as compensation for dealer account solicitation services
performed on our behalf. The closing price of our common stock on June 15,
2004
and October 15, 2004 was $1.05 and $1.04 per share, respectively, resulting
in
an aggregate value of $50,003.25 for this compensation.
Between
September 8, 2004 and December 20, 2004, we received subscriptions for an
aggregate of 1,812,403 shares of our common stock and an aggregate of 906,200
shares of common stock issuable upon exercise of common stock purchase warrants
to 33 accredited investors pursuant to a private placement offering. The stock
was sold at $.80 per share. The closing price of our common stock between
September 8, 2004 and December 20, 2004 ranged from a low of $.80 to a high
of
$1.58 per share. The warrants are exercisable at a price equal to $1.25 for
a
period of 5 years from the date of issuance.
In
October 2004, we issued an aggregate of 86,050 shares of common stock to a
certain investor relations consulting firm as compensation for services
performed on our behalf. The closing price for our common stock on October
15,
2004 was $1.04 per share, resulting in an aggregate value of $89,492 for this
compensation.
In
October 2004, we issued an aggregate of 24,000 shares of common stock to a
certain public relations consulting firm as compensation for services performed
on our behalf. The closing price for our common stock on October 15, 2004 was
$1.04 per share, resulting in an aggregate value of $24,960 for this
compensation.
In
October 2004, we issued an aggregate of 114,324 shares of common stock to 6
of
our directors as compensation for services performed on our behalf in each
of
their capacities as directors of our company. The closing price for our common
stock on October 15, 2004 was $1.04 per share, resulting in an aggregate value
of $118,897 for this compensation.
On
November 22, 2004, we entered into a Purchase Agreement (the "Purchase
Agreement") pursuant to which we sold and issued 1,125,000 shares of common
stock, no par value, and common stock purchase warrants to purchase 562,500
shares of our common stock to several accredited investors who are a party
to
the Purchase Agreement for an aggregate purchase price of $900,000. Thereafter,
on November 23, 2004, we entered into Joinders to the Purchase Agreement
pursuant to which we sold and issued an additional 515,000 shares of common
stock and warrants to purchase an additional 257,500 shares of our common stock
to several accredited investors who are a party to the Joinders to the Purchase
Agreement for an aggregate purchase price of $412,000. The closing price for
our
common stock on November 22 and November 23, 2004 was $1.56 and $1.40 per share,
respectively. The stock had a per share purchase price equal to $.80. First
Montauk Securities Corp. acted as placement agent in connection with the
offering. We issued 125,000 warrants on November 22, 2004 and 51,500 warrants
on
November 23, 2004 to the placement agent and to certain partners of the
placement agent as partial consideration for services performed in connection
with the issuance of common stock and warrants to the purchasers pursuant to
the
Purchase Agreement to purchase 62,500 and 25,750 shares of our Common Stock,
respectively. The warrants are exercisable from November 22, 2004 until November
22, 2009 and from November 23, 2004 until November 23, 2009, each at an exercise
price of $1.25 per share.
On
February 11, 2005, we entered into a Subscription Agreement pursuant to which
we
sold an aggregate of $5,000,000 of principal amount promissory notes convertible
into shares of our common stock, no par value, at a conversion price equal
to
$1.30 per share, and an aggregate of 2,884,615 Class A and Class B share
purchase warrants to purchase shares of our common stock to certain purchasers
who are a party to the Subscription Agreement. First Montauk Securities Corp.
acted as selling agent in connection with the offering. We issued a total of
384,616 warrants on February 11, 2005 to the selling agent as partial
consideration for services performed in connection with the offering. The Class
A warrants are exercisable at a price equal to $1.85 from the date of issuance
until 5 years after the closing date. The Class B warrants are exercisable
at a
price equal to $2.11, representing 101% of the 3 day average closing bid prices
of our common stock on the trading day immediately preceding the closing date,
from the date of issuance until 5 years after the closing date. The Class A
and
Class B warrants both have a cashless feature.
In
March
2005, the holders of our 6% promissory notes converted all principal and accrued
interest payable by us into an aggregate of 3,836,154 and 28,451 shares of
our
common stock, respectively, all of which we are registering in this
prospectus.
In
February and May of 2005, 30,000 shares of common stock to two public relations
consulting firm as compensation for services performed on our behalf. The
closing price for our common stock on February 15, 2005 was $2.10 per share
and
on May 16, 2005 it was $2.60 per share, resulting in an aggregate value of
$70,500 for this compensation.
On
April
7, 2005, we issued an aggregate of 28,453 shares of our common stock to the
holders of our convertible promissory notes at a conversion price of $1.30
per
share which we issued pursuant to our February 11, 2005 Subscription Agreement,
as payment, in lieu of cash, of accrued interest due to the holders under such
notes. The closing price for our common stock on the date the conversion, March
29, 2005, was $2.35 per share.
On
May
31, 2005, we entered into a 8% Series B Unsecured Convertible Debenture and
Warrants Purchase Agreement with one accredited investor pursuant to which
we
sold a $500,000 principal amount unsecured convertible debenture (the
"Debenture") convertible into shares of our common stock, no par value, at
a
conversion price equal to $1.30 per share, and stock purchase warrants to
purchase 384,615 shares of our common stock at an exercise price equal to $3.25
per share, to a certain investor who is a party to the Purchase Agreement for
an
aggregate purchase price of $500,000. First Montauk Securities Corp. acted
as
selling agent in connection with the offering. We issued a total of 38,462
warrants on May 31, 2005 to the selling agent as partial consideration for
services performed in connection with the offering. The warrants are exercisable
at a price equal to $2.11 for a period of 5 years from the closing
date.
In
April
and July of 2005, we issued an aggregate of 30,000 shares of common stock to
a
certain investor relations consulting firm as compensation for services
performed on our behalf.
On
July
1, 2005 we issued options to purchase an aggregate of 750,000 shares of our
common stock at an exercise price of $.85 per share to certain of our employees
and consultants as compensation for services performed on our
behalf.
On
August
25, 2005, we issued an aggregate of 187,939 shares of common stock to a certain
creditor of Filco GmbH pursuant to a certain Assignment and Purchase Agreement
which we entered into with the creditor.
On
October 18, 2005, we entered into a 8% Series C Unsecured Convertible Debenture
and Warrants Purchase Agreement with certain accredited investors pursuant
to
which we sold an aggregate of $1,000,000 principal amount unsecured convertible
debentures convertible into shares of our common stock, no par value, at a
conversion price of $2.00 per share, and an aggregate of 500,000 stock purchase
warrants to purchase shares of our Common Stock at $3.25 per share to certain
accredited investors who are parties to the Purchase Agreement for an aggregate
purchase price of $1,000,000. Further, we issued 50,000 Warrants to the
placement agent, a registered broker dealer firm, exercisable at $3.25 per
share, as consideration for services performed in connection with the issuance
of the Debentures and Warrants to the Investors pursuant to the Purchase
Agreement.
On
October 28, 2005, we held our second and final closing with certain accredited
investors (the "Investors") pursuant to a right of participation which was
granted to such investors under that certain securities purchase agreement
dated
as of November 23 and 24, 2004 and the subscription agreement dated as of
February 11,2005. In connection with the second closing, we sold an aggregate
of
$548,000 principle amount of Debentures convertible into shares of our common
stock, no par value, at a conversion price of $2.00 per share, and issued
275,000 warrants exercisable at $3.25 per share for an aggregate purchase price
of $ 548,000.
First
Montauk Securities Corp. (the "Selling Agent") acted as selling agent in
connection with the first and second closings of the Offering in which an
aggregate amount of $1,548,000 of Debentures and Warrants were sold. Pursuant
to
the second closing, we paid commissions of $54,800, a non-accountable expense
allowance of $16,440, and issued 27,400 Warrants to the placement agent, a
registered broker dealer firm, exercisable at $3.25 per share, each as
consideration for services performed in connection with the issuance of the
Debenture and Warrants to the Investor pursuant to the Purchase
Agreement.
On
February 13, 2006, we completed a private placement of our 8% Series D Unsecured
Convertible Debentures and Stock Purchase Warrants to certain accredited
investors pursuant to that certain Subscription Agreement dated as of February
13, 2006 under which we sold an aggregate of $391,200 principal amount
Debentures convertible into shares of our common stock, no par value, and
warrants to purchase 250,769 shares of our Common Stock to certain accredited
investors who are parties to the Subscription Agreement for an aggregate
purchase price of $391,200.
The
Debentures mature on February 13, 2007. Provided there then exists no event
of
default by us under the Debentures, the principal of and any accrued but unpaid
interest due under the Debentures on the maturity date shall automatically
be
converted into shares of Common Stock on the maturity date at the then
applicable conversion price. The Debentures pay simple interest quarterly
accruing at the annual rate of 8%, either in the form cash or shares of our
Common Stock, at our election, which shall be valued and computed based upon
the
conversion price of the Debentures. The Debentures are convertible into shares
of our Common Stock at a conversion price equal to $1.56. We may in our
discretion require, after 90 days from the closing date, that the Investors
convert all or a portion of the Debentures at a price equal to$1.56 per
share.
In
addition, we issued 250,769 Warrants to the Investors, representing an amount
of
Warrants equal to 100% of the quotient of (i) the principal amount of the
Debentures issued at the closing date divided by (ii) the conversion price
of
the Debentures. The Warrants are exercisable at a price equal to $2.50, from
the
date of issuance until 5 years after the closing date.
On
March
1, 2006, we issued an aggregate principal amount $150,000 of our 4% Unsecured
Convertible Debentures and 5 year warrants to purchase an aggregate of 48,077
shares of our common stock to two of the investors in our November 2004 private
placement. The debentures mature on March 1, 2008, pay simple interest at a
rate
of 4% per annum and are convertible into shares of our common stock at a price
equal to 1.56 per share. The warrants are exercisable into shares of our common
stock at a price equal to $1.65 per share. Our issuance of the aforementioned
securities were in settlement of accrued liquidated damages which we owed to
these investors for our inability to have the SEC declare our registration
statement on Form SB-2 effective within the specified timeframe as set forth
in
the Registration Rights Agreement dated November 22, 2004. In addition, the
investors agreed to forego any future accrual and payment of such liquidated
damages.
On
June
30, 2006, we issued an aggregate principal amount $48,248 of our 4% Unsecured
Convertible Debentures and 5 year warrants to purchase an aggregate of 24,124
shares of our common stock to the final two investors in our November 2004
private placement. The debentures mature on June 30, 2008, pay simple interest
at a rate of 4% per annum and are convertible into shares of our common stock
at
a price equal to 1.56 per share. The warrants are exercisable into shares of
our
common stock at a price equal to $1.65 per share. Our issuance of the
aforementioned securities were in settlement of accrued liquidated damages
which
we owed to the investors for our inability to have the SEC declare our
registration statement on Form SB-2 effective within the specified timeframe
as
set forth in the Registration Rights Agreement dated November 22, 2004. In
addition, the investors agreed to forego any future accrual and payment of
such
liquidated damages.
On
July
26, 2006, the Company issued a 12% Series A Convertible Note in the principal
amount of $400,000, together with warrants to purchase 282,052 shares of common
stock to a qualified institutional buyer. The Note is convertible into shares
of
common stock at a price equal to $1.56 per share. In addition, all principal
and
accrued and unpaid interest was due on October 20, 2006. The Company did not
repay the note in the amount of $412,000, inclusive of principal and accrued
and
unpaid interest, on or prior to October 20, 2006. The Company is currently
in
negotiations with the holder to repay the note through the payment of cash,
or
issuance of shares of common stock, or a combination of both.
During
the nine months ended September 30, 2006, the Company issued 672,257 shares
of
common stock were issued for services and recorded expenses in the amount of
$1,052,337.
During
the quarter ended September 30, 2006, holders converted $819,800 of convertible
debt, along with accrued interest into stock, resulting in the issuance of
534,352 shares of common stock.
During
the quarter ended September 30, 2006, a holder converted $253,303 of convertible
debt and accrued interest to stock, resulting in the issuance of 235,575
shares.
Following
is a summary of unregistered securities issued during the fourth quarter of
2006.
o
194,000
shares of common stock were issued for professional services valued at
$141,919.
o
184,000
shares of common stock were issued in connection with a settlement of a default
on a convertible promissory note. These shares were valued at
$93,490.
o
41,666
shares of common stock were issued in exchange of a $65,000 of convertible
note.
o
5,000
shares were issued as an Employee bonus valued at $3,570.
On
February 20, 2007, the Company entered into a Securities Purchase Agreement
(the
"Purchase Agreement") with certain accredited and/or qualified institutional
investors pursuant to which we sold an aggregate of $3,734,040 principal amount
secured convertible debentures (the "Debentures") convertible into shares of
our
common stock, no par value (the "Common Stock") at a conversion price equal
to
$0.45 (the "Conversion Price"), for an aggregate purchase price of $3,219,000.
In addition, the Company issued to the investors (i) warrants to purchase
8,297,866 shares of the Company's Common Stock (the "Warrants") at an exercise
price equal to $0.54 per share, which represents 100% of the number of shares
issuable upon conversion of the Debentures; (ii) callable warrants to purchase
4,148,933 shares of our Common Stock at an exercise price equal to $0.75 per
share, which represents 50% of the number of shares issuable upon conversion
of
the Debentures; and (iii) callable warrants to purchase 4,148,933 shares of
our
Common Stock at an exercise price equal to $1.25 per share, which represents
50%
of the number of shares issuable upon conversion of the Debentures
(collectively, the "Callable Warrants").
The
Debentures mature on February 20, 2009. The Company may in our discretion redeem
the Debentures, subject to certain equity conditions being met by us as set
forth in the Debentures, at a price equal to 150% of the principal balance,
accrued interest, and all liquidated damages, if any, thereon that are requested
to be redeemed. The Company's obligations under the Purchase Agreement, the
Debentures and the additional definitive agreements with respect to this
transaction are secured by all of our assets. The Conversion Price of the
Debentures is subject to adjustments for any failure by the Company to cause
the
Securities and Exchange Commission (the "SEC") to declare the initial
registration statement covering the shares underlying the Debentures, the
Warrants and the Callable Warrants effective.
The
Conversion Price of the Debentures and the respective exercise prices of the
Warrants and the Callable Warrants are subject to adjustment in certain events,
including, without limitation, upon the Company's consolidation, merger or
sale
of all of substantially all of the Company's assets, a reclassification of
our
Common Stock, or any stock splits, combinations or dividends with respect to
the
Company's Common Stock.
In
addition, after such time as the SEC declares the registration statement
effective, if (i) the volume weighted average price for each of the 10
consecutive trading days (the "Measurement Period") exceeds $1.50 per share
with
respect to the $0.75 Callable Warrants and $2.50 with respect to the $1.25
Callable Warrants, (ii) the daily volume for each trading day in such
Measurement Period exceeds 250,000 shares of Common Stock per trading day,
and
(iii) the holder is not in possession of any information that constitutes,
or
might constitute, material non-public information, then we may, within one
trading day of the end of such Measurement Period, call for cancellation of
all
or any portion of the Callable Warrants which have not yet been exercised at
a
price equal to $.001 per share.
On
March
22, 2007, the Company made a $100,000 principal payment and paid interest of
$30,213. The Note was reduced to $300,000 and interest on the Note was reduced
to 10%. Additionally, the Company issued 184,000 shares of common stock as
settlement of the default period and paid a fee of $12,000 to Source Capital
Group, Inc., a registered representative of the Note-holder. The Company also
agreed to make monthly interest payments. The conversion price was reset per
the
terms of the original Note.
*
All of
the above offerings and sales were deemed to be exempt under rule 506 of
Regulation D and Section 4(2) of the Securities Act of 1933, as amended. No
advertising or general solicitation was employed in offering the securities.
The
offerings and sales were made to a limited number of persons, all of whom were
accredited investors, business associates of Airtrax or executive officers
of
Airtrax, and transfer was restricted by Airtrax in accordance with the
requirements of the Securities Act of 1933. In addition to representations
by
the above-referenced persons, we have made independent determinations that
all
of the above-referenced persons were accredited or sophisticated investors,
and
that they were capable of analyzing the merits and risks of their investment,
and that they understood the speculative nature of their investment.
Furthermore, all of the above-referenced persons were provided with access
to
our Securities and Exchange Commission filings. Except as expressly set forth
above, the individuals and entities to whom we issued securities as indicated
in
this section of the registration statement are unaffiliated with us.
ITEM
27. EXHIBITS.
The
following exhibits are included as part of this Form SB-2. References to “the
Company” in this Exhibit List mean Airtrax, Inc., a New Jersey corporation.
3.1
|
Certificate
of Incorporation of Airtrax, Inc. dated April 11, 1997, filed as
an
exhibit to the Current Report on Form 8-K filed with the Securities
and
Exchange Commission on November 19, 1999 and incorporated herein
by
reference.
|
3.2
|
Certificate
of Correction of the Certificate of Incorporation dated April 30,
2000,
filed as an exhibit to the Current Report on Form 8-K filed with
the
Securities and Exchange Commission on November 17, 1999 and incorporated
herein by reference.
|
3.3
|
Certificate
of Amendment of Certificate of Incorporation dated March 19, 2001,
filed
as an exhibit to the Current Report on Form 8-K filed with the Securities
and Exchange Commission on November 17, 1999 and incorporated herein
by
reference.
|
3.4
|
Amended
and Restated By-Laws , filed as an exhibit to the Current Report
on Form
8-K filed with the Securities and Exchange Commission on November
19, 1999
and incorporated herein by
reference.
|
4.1
|
Form
of Common Stock Purchase Warrant issued to investors pursuant to
the May
2004 private placement.
|
4.2
|
Form
of Common Stock Purchase Warrant dated as of November 22, 2004 and
November 23, 2004, filed as an exhibit to the Current Report on Form
8-K
filed with the Securities and Exchange Commission on November 30,
2004 and
incorporated herein by reference.
|
4.3
|
Form
of Series A Convertible Note dated as of February 11, 2005, filed
as an
exhibit to the Current Report on Form 8-K filed on February 11, 2005
and
incorporated herein by reference.
|
4.4
|
Form
of Class A Common Stock Purchase Warrant dated as of February 11,
2005,
filed as an exhibit to the Current Report on Form 8-K filed on February
11, 2005 and incorporated herein by
reference.
|
4.5
|
Form
of Class B Common Stock Purchase Warrant dated as of February 11,
2005,
filed as an exhibit to the Current Report on Form 8-K filed on February
11, 2005 and incorporated herein by
reference.
|
4.6
|
Form
of Broker's Common Stock Purchase Warrant dated as of February 11,
2005,
filed as an exhibit to the Current Report on Form 8-K filed on February
11, 2005 and incorporated herein by
reference.
|
5.1 |
Sichenzia Ross Friedman Ference LLP Opinion and
Consent
(to be filed by amendment). |
10.1
|
Employment
agreement dated July 12, 1999, by and between Airtrax, Inc. and D.
Barney
Harris, filed as an exhibit to the Current Report on Form 8-K/A filed
with
the Securities and Exchange Commission on January 13, 2000 and
incorporated herein by reference.
|
10.2
|
Consulting
Agreement by and between MAS Financial Corp. and Airtrax, Inc. dated
October 26, 1999, filed as exhibit to the Current Report on Form
8-K filed
with the Securities and Exchange Commission on November 19, 1999
and
incorporated herein by reference.
|
10.3
|
Product
Development, Sales and Manufacturing Representation Agreement dated
March
13, 2004 by and between Airtrax, Inc., and MEC Aerial Platform Sales
Corporation, filed as an exhibit to the Current Report on Form 8-K
filed
on March 15, 2004 and incorporated herein by
reference.
|
10.4
|
Joinder
to the Purchase Agreement, dated November 23, 2004, by and among
Airtrax,
Inc., Excalibur Limited Partnership, Stonestreet Limited Partnership
and
Linda Hechter, filed as an exhibit to the Current Report on Form
8-K filed
on November 30, 2004 and incorporated herein by
reference.
|
10.5
|
Registration
Rights Agreement, dated November 22, 2004, by and among Airtrax,
Inc.,
Excalibur Limited Partnership, Stonestreet Limited Partnership, Whalehaven
Capital Fund and First Montauk Securities Corp, filed as an exhibit
to the
Current Report on Form 8-K filed on November 30, 2004 and incorporated
herein by reference.
|
10.6
|
Joinder
to the Registration Rights Agreement, dated November 23, 2004, by
and
among Airtrax, Inc., Excalibur Limited Partnership, Stonestreet Limited
Partnership, Linda Hechter and First Montauk Securities Corp., filed
as an
exhibit to the Current Report on Form 8-K filed on November 30, 2004
and
incorporated herein by reference.
|
10.7
|
Subscription
Agreement dated February 11, 2005 by and among Airtrax, Inc. and
the
investors named in the signature pages thereto, filed as an exhibit
to the
Current Report on Form 8-K filed on February 11, 2005 and incorporated
herein by reference.
|
10.8
|
Series
B Unsecured Convertible Debenture and Warrants Purchase Agreement,
dated
May 31, 2005, by and between Airtrax, Inc. and the investor named
on the
signature page thereto, filed as an exhibit to the Current Report
on Form
8-K filed on June 6, 2005 and incorporated herein by
reference.
|
10.9
|
Registration
Rights Agreement dated May 31, 2005, by and between Airtrax, Inc.
and the
investor named on the signature page thereto, filed as an exhibit
to the
Current Report on Form 8-K filed on June 6, 2005 and incorporated
herein
by reference.
|
10.10
|
Series
B Unsecured Convertible Debenture of Airtrax, Inc., filed as an exhibit
to
the Current Report on Form 8-K filed on June 6, 2005 and incorporated
herein by reference.
|
10.11
|
Form
of Stock Purchase Warrant of Airtrax, Inc., filed as an exhibit to
the
Current Report on Form 8-K filed on June 6, 2005 and incorporated
herein
by reference.
|
10.12
|
Letter
Agreement dated May 31, 2005 by and among Airtrax, Inc. and the investors
named on the signature page thereto, filed as an exhibit to the Current
Report on Form 8-K filed on June 6, 2005 and incorporated herein
by
reference.
|
10.13
|
Series
C Unsecured Convertible Debenture and Warrants Purchase Agreement,
dated
October 18, 2005 by and between Airtrax, Inc. and the investor named
on
the signature page thereto, filed as an exhibit to the Current Report
on
Form 8-K filed on October 24, 2005 and incorporated herein by
reference.
|
10.14
|
Registration
Rights Agreement dated October 18, 2005, by and between Airtrax,
Inc. and
the investor named on the signature page thereto, filed as an exhibit
to
the Current Report on Form 8-K filed on October 24, 2005 and incorporated
herein by reference.
|
10.15
|
Series
C Unsecured Convertible Debenture of Airtrax, Inc., filed as an exhibit
to
the Current Report on Form 8-K filed on October 24, 2005 and incorporated
herein by reference.
|
10.16
|
Form
of Stock Purchase Warrant of Airtrax, Inc., filed as an exhibit to
the
Current Report on Form 8-K filed on October 24, 2005 and incorporated
herein by reference.
|
10.17
|
Amended
and Restated Stock Acquisition Agreement effective as of as of February
19, 2004 by and between Airtrax, Inc. and Fil Filipov, filed as an
exhibit
to the Registration Statement on Form SB-2 filed on January 11, 2006
and
incorporated herein by reference.
|
10.18
|
Promissory
Note of Filco GmbH dated as of January 15, 2005 issued to Airtrax,
Inc.,
filed as an exhibit to the Registration Statement on Form SB-2 filed
on
January 11, 2006 and incorporated herein by
reference.
|
10.19
|
Promissory
Note of Filco GmbH dated as of June 5, 2005 issued to Airtrax, Inc.,
filed
as an exhibit to the Registration Statement on Form SB-2 filed on
January
11, 2006 and incorporated herein by
reference.
|
10.20
|
Assignment
and Purchase Agreement dated as of August 25, 2005 by and between
Werner
Faenger and Airtrax, Inc., filed as an exhibit to the Registration
Statement on Form SB-2 filed on January 11, 2006 and incorporated
herein
by reference.
|
10.21
|
Promissory
Note of Filco GmbH with Guarantees dated as of November 25, 2005
issued to
Airtrax, Inc., filed as an exhibit to the Registration Statement
on Form
SB-2 filed on January 11, 2006 and incorporated herein by
reference.
|
10.22
|
Form
of Subscription Agreement of Airtrax, Inc. dated as of February 13,
2006,
filed as an exhibit to the Current Report on Form 8-K filed on February
27, 2006 and incorporated herein by
reference.
|
10.23
|
Series
D Unsecured Convertible Debenture of Airtrax, Inc., filed as an exhibit
to
the Current Report on Form 8-K filed on February 27, 2006 and incorporated
herein by reference.
|
10.24
|
Form
of Stock Purchase Warrant of Airtrax, Inc., filed as an exhibit to
the
Current Report on Form 8-K filed on February 27, 2006 and incorporated
herein by reference.
|
23.1 |
Consent of Robert G. Jeffrey, Certified Public Accountant
(filed herewith). |
23.2 |
Consent
of legal counsel (see Exhibit 5.1).
|
ITEM
28. UNDERTAKINGS.
The
undersigned registrant hereby undertakes to:
(1) File,
during any period in which offers or sales are being made, a post-effective
amendment to this registration statement to:
(i) Include
any prospectus required by Section 10(a)(3) of the Securities Act of 1933,
as
amended (the “Securities Act”);
(ii) Reflect
in the prospectus any facts or events which, individually or together, represent
a fundamental change in the information in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of the securities offered would not exceed
that which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of a prospectus
filed with the Commission pursuant to Rule 424(b) under the Securities Act
if,
in the aggregate, the changes in volume and price represent no more than a
20%
change in the maximum aggregate offering price set forth in the “Calculation of
Registration Fee” table in the effective registration statement, and
(iii) Include
any additional or changed material information on the plan of
distribution.
(2) For
determining liability under the Securities Act, treat each post-effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide offering.
(3) File
a
post-effective amendment to remove from registration any of the securities
that
remain unsold at the end of the offering.
(4) For
determining liability of the undersigned small business issuer under the
Securities Act to any purchaser in the initial distribution of the securities,
the undersigned undertakes that in a primary offering of securities of the
undersigned small business issuer pursuant to this registration statement,
regardless of the underwriting method used to sell the securities to the
purchaser, if the securities are offered or sold to such purchaser by means
of
any of the following communications, the undersigned small business issuer
will
be a seller to the purchaser and will be considered to offer or sell such
securities to such purchaser:
(i)
Any
preliminary prospectus or prospectus of the undersigned small business issuer
relating to the offering required to be filed pursuant
to
Rule
424;
(ii) Any
free
writing prospectus relating to the offering prepared by or on behalf of the
undersigned small business issuer or used or referred to by the undersigned
small business issuer;
(iii) The
portion of any other free writing prospectus relating to the offering containing
material information about the undersigned small business issuer or its
securities provided by or on behalf of the undersigned small business issuer;
and
(iv) Any
other
communication that is an offer in the offering made by the undersigned small
business issuer to the purchaser.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and
is, therefore, unenforceable.
In
the
event that a claim for indemnification against such liabilities (other than
the
payment by the registrant of expenses incurred or paid by a director, officer
or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
SIGNATURES
In
accordance with the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of
the
requirements of filing on Form SB-2 and authorizes this registration statement
to be signed on its behalf by the undersigned, in the City of Blackwood,
State
of New Jersey, on August 2, 2007.
AIRTRAX, INC.
Date:
August 2, 2007
|
By: /s/
ROBERT M. WATSON
Robert
M. Watson
|
|
Chief
Executive Officer (Principal Executive Officer) and Acting Chief
Financial
Officer (Principal Financial and Accounting
Officer)
|
|
|
In
accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities
and
on the dates stated.
Name
|
Position
|
Date
|
|
|
|
|
|
|
Robert
M. Watson
|
Chief
Executive Officer (Principal Executive Officer), Acting Chief
Financial
Officer (Principal Financial and Accounting Officer) and
Director
|
August
2, 2007
|
|
|
|
|
|
|
*
Andrew
Guzzetti
|
Chairman
of the Board and Director
|
August
2, 2007
|
|
|
|
*
D.
Barney Harris
|
Director
|
August
2, 2007
|
|
|
|
*
James
Hudson
|
Director
|
August
2, 2007
|
|
|
|
*
William
Hungerville
|
Director
|
August
2, 2007
|
|
|
|
*
Fil
Filipov
|
Director
|
August
2, 2007
|
|
|
|
Peter
Amico, Jr.
|
Director
|
August
2, 2007
|
|
|
|
*
Robert
Borski, Jr.
|
Director
|
August
2, 2007
|
|
|
|
|
* By:
/s/ ROBERT M. WATSON |
|
|
|
Robert
M. Watson
Attorney-in-fact
|
|
|
|
|
|
|
|
II-11