Airtrax

Form 10QSB for AIRTRAX INC: Quaterly Report
05/19/2005

Form 10QSB for AIRTRAX INC
________________________________________
16-May-2005
Quarterly Report
Item 2. Management's Discussion and Analysis and Results of Operations Forward Looking Statements
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of such terms, or other comparable terminology. These statements are only predictions. Actual events or results may differ materially from those in the forward-looking statements as a result of various important factors. Although we believe that the expectations reflected in the forward-looking statements are reasonable, such should not be regarded as a representation by AIRTRAX, Inc., or any other person, that such forward-looking statements will be achieved. The business and operations of AIRTRAX, Inc. are subject to substantial risks, which increase the uncertainty inherent in the forward-looking statements contained in this report.
Overview
Since 1995, substantially all of our resources and operations have directed towards the development of the omni-directional wheel and related components for forklift and other material handling applications. Many of the components, including the unique shaped wheels, motors, and frames, have been specially designed by us and specially manufactured for us. Four pilot models of the commercial omni-directional lift truck are operational and have been used for extensive testing over the past few years.
We have completed our initial production run consisting of 10 units of our Sidewinder ATX-3000 Omni-Directional Lift Truck. Two of these vehicles have been sold to consumers while several of the other eight trucks will be used for additional testing including UL (Underwriters Laboratories) compliance. Unit assembly for the first 10 units was completed by us at the H&R Industries facility in Warminster, PA. ANSI testing is completed using specified mast and will be continued throughout the second and third quarters on optional mast to be used with this vehicle. Final UL compliance must be completed at the plant of initial and final assembly. Following required compliance testing, we expect to sell the remainder these units to select dealers in the United States. We have received orders for these units.
We have incurred losses and experienced negative operating cash flow since our formation. For the three months ended March 31, 2005 and 2004, we had a net loss of $(619,811) and $(280,454), respectively. 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 are located at 870B Central Avenue, Hammonton, NJ 08037 and our telephone number is (609) 567-7800. We are incorporated in the State of New Jersey.
Company 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.
Results of Operations - Three Months Ended March 31, 2005 compared with Three Months Ended March 31, 2004
We have been a development stage company for the periods ended March 31, 2005 and 2004 and have not engaged in full-scale operations for the periods indicated. The limited revenues for the periods have been derived from the first sales of the Sidewinder Omni-Directional Lift Truck. During 2005, we expect to transition from a development stage company to an operating company as we begin production and sales of the Sidewinder Omni-Directional Lift Truck. Consequently, management believes that the year-to-year comparisons described below are not indicative of future year-to-year comparative results.
Revenues. For the three-month period ended March 31, 2005, the Company had sales revenue of $76,991. This compares to revenues of $0 for the three months ended March 31, 2004. The increase in sales revenue represents the first sales of the SIDEWINDER Omni-Directional Lift Truck.
Cost of Goods Sold. The Company's cost of goods sold for the three months ended March 31, 2005 amounted to $52,361. For the three months ended March 31, 2004, the Company's cost of goods sold was $0. The Company's $52,361 cost of goods sold reflects the cost of the lift trucks sold during the three months ended March 31, 2005.
The Company is entitled to a benefit for the effect on income taxes on the net operating loss. Accordingly, a benefit in the amount of $58,145 has been recorded for the first quarter of 2005 and $25,959 was recorded during the first quarter of 2004.
Operating and Administrative Expenses. Operating and administrative expenses includes administrative salaries and overhead. For the three months ended March 31, 2005, the Company's operating and administrative expenses totaled $723,594. Operating and administrative expenses totaled $298,809 for the three months ended March 31, 2004. For the three months ended March 31, 2005 operating and administrative expenses increased $424,785 compared with the same period of 2004. These changes are a result of the time and material costs preparing for production of the SIDEWINDER and other production related issues.
Loss Before Income Taxes. Loss before income taxes for the three month period ended March 31, 2005 totaled $677,956. For the three months ended March 31, 2004, loss before income taxes totaled $306,413. The increase in loss before income tax for the three months ended March 31, 2005 compared with the same period of 2004 was caused by the time and material allocations preparing for production of the SIDEWINDER and other production related issues.
Preferred Stock Dividends. During the three months ended March 31, 2005, the Company paid no dividends on preferred stock. During the three months ended March 31, 2004, the Company paid dividends on preferred stock in the amount of $45,833. The preferred stock dividends are payable to a company that is owned by the Company's President.
Liquidity and Capital Resources - Three Months Ended March 31, 2005 compared with Three Months Ended March 31, 2004
As of March 31, 2005, the Company's cash on hand was $3,187,890 and working capital was $3,930,139. Since its inception, the Company has financed its operations through the private placement of its common stock. During the three months ended March 31, 2005, the Company sold an aggregate of 3,914,904 shares of common stock to accredited and institutional investors. During the three months ended March 31, 2004, the Company sold an aggregate of 1,831,250 shares of common stock to accredited and institutional investors and issued an aggregate of 93,745 shares of common stock in consideration for services rendered.
The Company anticipates that its cash requirements for the foreseeable future will be significant. In particular, management expects substantial expenditures for inventory, production, and advertising in anticipation of the rollout of its omni-directional forklift. The Company expects that it will be required to raise funds through the private or public offering of its securities.
The Company's initial production run of ten SIDEWINDER Omni-Directional Lift Trucks was completed in the first quarter of 2005. The Company will need additional funds to support production requirements beyond the initial production run of its forklift which are estimated to be $2,000,000. Of the total amount, approximately 75% is projected for parts and component inventory and manufacturing costs, with the balance projected as general operating expenditures, which includes overhead and salaries. The Company also will require additional funds to complete the proposed acquisition of the 75.1% interest in Filco GmbH ("Filco"), primarily for Filco's working capital needs. As of March 31, 2005, the Company has loaned to Filco a total of $3,825,000. The Company intends to complete the acquisition of Filco once operating capital for Filco is secured to finance their operations. The Company will lease facilities starting in the second quarter of 2005 as corporate headquarters. This building will also facilitate the assembly of the SIDEWINDER and other omni-directional products, partial assembly of Filco lift trucks, if the proposed acquisition is completed, warranty work, and product distribution. The Company currently rents or leases space at Warminster PA and Flemington NJ. These leases and/or rentals will be terminated as the workload permits.
As of March 31, 2005, our working capital was $3,930,139. Fixed assets, net of accumulated depreciation, and total assets, as of March 31, 2005, were $92,470 and $8,921,961, respectively. Current liabilities as of March 31, 2005 were $944,317.

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