U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the period ended March 31, 2001.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE Act of 1934 for the transition period from ___ to ___.
Commission file number: 0-25791
AIRTRAX, INC.
(Name of Small Business Issuer in its charter)
New Jersey 22-3506376
-------------- ----------------
(State of (I.R.S. Employer
Incorporation) I.D. Number)
870B Central Avenue, Hammonton, New Jersey 08037
(Address of principal executive offices)(Zip Code)
Issuer's telephone number 609-567-7800.
1616 Pennsylvania Avenue, #122, Vineland, New Jersey 08361; 856-327-8112
(Former address and former telephone number, if changed from last report)
Securities registered under Section 12 (b) of the Act:
Title of each class Name of exchange on which
to be registered each class is to be registered
None None
Securities registered under Section 12(g) of the Act:
Common Stock
(Title of Class)
Check whether issuer (1) filed all reports to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
(1). Yes: X No:
(2). Yes: X No:
The number of shares issued and outstanding of issuer's common stock, no
par value, as of March 31, 2001 was 5,302,426.
Transitional Small Business Issuer Format (Check One):
Yes: No: X
PART I - FINANCIAL STATEMENTS
Item 1. Financial Statements.
INDEX
Page
Balance Sheets 3
Statements of Income 4
Statements of Cash Flows 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis. 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. 15
Item 2. Changes in Securities. 15
Item 3. Defaults upon Senior Securities. 15
Item 4. Submission of Matters to Vote of Security Holders. 15
Item 5. Other Information. 15
Item 6. Exhibits and Reports on Form 8-K. 15
Signatures 16
AIRTRAX, INC.
(A Development Stage Company)
BALANCE SHEETS
March 31, 2001 December 31, 2000
-------------- -----------------
ASSETS
Current Assets
Cash $ 190,537 $ 23,663
Accounts receivable 4,619 34,382
Inventory 788,415 764,875
Prepaid expenses 6,938 6,938
Deferred tax asset 78,694 61,285
-------------- -----------------
Total current assets 1,069,203 891,143
Fixed Assets
Office furniture and equipment 43,673 35,303
Automotive equipment 16,915 16,915
Shop equipment 20,660 20,660
Casts and tooling 82,148 76,687
-------------- -----------------
163,396 149,565
Less, accumulated depreciation 90,852 82,346
-------------- -----------------
Net fixed assets 72,544 67,219
Other Assets
Patents - net 45,542 45,331
Utility deposits 65 65
-------------- -----------------
Total other assets 45,607 45,396
-------------- -----------------
TOTAL ASSETS $ 1,187,354 $ 1,003,758
============== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 831,935 $ 763,210
Accrued liabilities 19,726 35,630
Stockholder note payable 24,014 23,314
-------------- -----------------
Total current liabilities 875,675 822,154
Stockholders' Equity
Common stock - authorized, 10,000,000 shares without
par value; issued and outstanding - 5,302,426 and 2,715,349 2,408,549
Preferred stock - authorized, 500,000 shares without
par value; 275,000 issued and outstanding 12,950 12,950
Deficit accumulated during the development stage (2,209,668) (2,032,943)
Deficit prior to development stage (206,952) (206,952)
-------------- -----------------
Total stockholders' equity 311,679 181,604
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 1,187,354 $ 1,003,758
============== =================
The accompanying notes are an integral part of these financial statements.
-3-
AIRTRAX, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS and DEFICIT
ACCUMULATED DURING DEVELOPMENT STAGE
For the Three Month Period Ended March 31, 2001 and 2000
May 19, 1997
(Date of Inception)
2001 2000 to March 31, 2001
-------------- -------------- -------------------
SALES $ 35,967 $ 27,589 $ 265,802
COST OF GOODS SOLD 2,904 5,899 66,415
-------------- -------------- -------------------
Gross Profit 33,063 21,690 199,387
OPERATING AND ADMINISTRATIVE EXPENSES 220,219 193,925 2,345,850
-------------- -------------- -------------------
OPERATING LOSS (187,156) (172,235) (2,146,463)
OTHER INCOME AND (EXPENSE)
Interest expense (7,103) (65) (45,953)
Other income 125 1 12,386
-------------- -------------- -------------------
NET LOSS BEFORE INCOME TAXES (194,134) (172,299) (2,180,030)
-------------- -------------- -------------------
INCOME TAX BENEFIT (STATE):
Current 17,409 - 78,694
Prior years - - 122,288
-------------- -------------- -------------------
Total Benefit 17,409 - 200,982
-------------- -------------- -------------------
LOSS ACCUMULATED DURING
DEVELOPMENT STAGE $ (176,725) $ (172,299) $ (1,979,048)
============== ==============
PREFERRED STOCK DIVIDENDS DURING
DEVELOPMENT STAGE (230,620)
DEFICIT ACCUMULATED DURING DEVELOPMENT
STAGE $ (2,209,668)
=================
NET LOSS PER SHARE - Basic and Diluted $(0.03) $(0.04)
============== ==============
The accompanying notes are an integral part of these financial statements.
-4-
AIRTRAX, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the Three Month Periods ended March 31, 2001 and 2000
May 19, 1997
(Date of Inception)
2001 2000 to March 31, 2001
-------------- -------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (176,725) $ (172,299) $ (1,979,048)
Adjustments to reconcile net income to net cash
consumed by operating activities:
Depreciation and amortization 8,295 8,512 112,917
Value of common stock issued for services - 6,208 80,802
Accrual of deferred tax benefit (17,409) (78,694)
Changes in current assets and liabilities:
Increase in accounts payable and
accrued liabilities 53,521 132,189 852,361
Decrease (Increase) in prepaid expense - - (7,003)
Decrease (increase) in accounts receivable 29,763 26,481 (4,620)
Increase in inventory (23,540) (140,038) (788,415)
-------------- -------------- -------------------
Net Cash Consumed By
Operating Activities (126,095) (138,947) (1,811,700)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of equipment (13,831) (249) (163,395)
Additions to patent cost - - (67,607)
-------------- -------------- -------------------
Net Cash Consumed By
Investing Activities (13,831) (249) (231,002)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds of common stock sales 306,800 153,079 2,250,478
Proceeds of sales of preferred stock - - 12,950
Proceeds of stockholder loans - 1,990 23,314
Preferred stock dividends paid in cash - - (53,503)
-------------- -------------- -------------------
Net Cash Provided By
Financing Activities 306,800 155,069 2,233,239
-------------- -------------- -------------------
Net Increase (Decrease) In Cash 166,874 15,873 190,537
Balance at beginning of period 23,663 48,652 -
-------------- -------------- -------------------
Balance at end of period $ 190,537 $ 64,525 $ 190,537
============== ============== ===================
The accompanying notes are an integral part of these financial statements.
-5-
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2001
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization Of Company
The Company was formed April 17, 1997. On May 19, 1997, it merged with a
predecessor which had initiated and advanced the development of omni-directional
technology. On November 5, 1999, the Company merged with MAS Acquisition IX
Corp. ("MAS"), a reporting company under Federal securities law. Pursuant to
this merger agreement, the Company assumed the reporting status of MAS. In both
merger transactions, the Company was the surviving entity. For financial
accounting purposes, the reverse merger with MAS was accounted for as a pooling
of interests.
Business
The Company has designed a forklift vehicle using omni-directional
technology obtained under a contract with the United States Navy Surface Warfare
Center in Panama City, Florida. The right to exploit this technology grew out of
a Cooperative Research and Development Agreement with the Navy. Significant
resources have been devoted during the past two years to the construction of a
prototype of this omni-directional forklift vehicle. It is expected to be in
full commercial production during the third quarter of 2001. At that time, it
will be offered to industrial users.
The Company has also developed a traditional helicopter ground handling
machine which has been marketed by the Company on a limited basis.
Development Stage Accounting
The Company is a development stage company, as defined in Financial
Accounting Standards (FAS) Statement No. 7. Generally accepted accounting
principles that apply to established operating enterprises govern the
recognition of revenue by a development stage enterprise and the accounting for
costs and expenses. From inception to March 31, 2001, the Company has been in
the development stage and all its efforts have been devoted to the development
of a forklift vehicle with omni-directional technology that is suitable for
market. Only small amounts of revenue have been realized through March 31, 2001.
Basis of Presentation
The Company has incurred losses from inception to March 31, 2001 of
$1,979,048. Activities have been financed primarily through private placements
of equity securities. The Company may need to raise additional capital through
the issuance of debt or equity securities to fund its operations.
-6-
1. continued
Cash
For purposes of the statements of cash flows, the Company considers all
short-term debt securities purchased with a maturity of three months or less to
be cash equivalents.
Inventory
Inventory consists principally of component parts and supplies which are
being used to assemble forklift vehicles. Inventories are stated at the lower of
cost (determined on a first in-first out basis) or market.
Fixed Assets
Fixed assets are recorded at cost. Depreciation is computed by using
accelerated methods, with useful lives of seven years for furniture and shop
equipment and five years for computers and automobiles.
Income Taxes
Deferred income taxes are recorded to reflect the tax consequences or
benefits to future years of temporary differences between the tax bases of
assets and liabilities, and of net operating loss carryforwards.
Intangible Assets
Patents
The Company incurred costs to acquire and protect certain patent rights.
These costs were capitalized and are being amortized over a period of
fifteen (15) years on a straight-line basis.
Prototype Equipment
The cost of developing and constructing the prototype omni-directional
helicopter handling vehicle and the omni-directional forklift vehicle is
expensed as incurred.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Actual results
could differ from those estimated.
-7-
1. continued
Fair Value of Financial Instruments
The carrying amounts of the Company's financial instruments, which include
cash equivalents, accounts receivable, accounts payable and accrued liabilities,
approximate their fair values at March 31, 2001.
Advertising Costs
The Company expenses advertising costs when the advertisement occurs.
Advertising costs amounted to $42,267 in the first quarter of 2001 and $10,791
in the 2000 period.
Segment Reporting
Management treats the operations of the Company as one segment.
Revenue Recognition
Revenue is realized from product sales. Recognition occurs upon delivery.
Common Stock
Common stock is often issued in return for product, services, and as
dividends on the preferred stock. These issuances are assigned values equal to
the value of the product or service received or the market value of the common
stock, with appropriate discounts, whichever is most clearly evident.
2. RELATED PARTY TRANSACTIONS
During 2000, 95,558 shares of common stock of the Company were issued in
lieu of cash dividends on the preferred stock in the amount of $56,751, as
permitted by the terms of the preferred stock issue. The preferred stock is
wholly owned by the majority shareholder (see Note 4 for description of the
preferred stock). This majority shareholder is a corporation wholly owned by the
president of the Company.
During 2000, a total of 129,999 shares were issued to the President and
Vice President of the Company pursuant to their respective employment agreements
yielding a total of $60,851. Three non-employee directors each received 5,000
shares of common stock upon exercise of their director options yielding a total
of $7,500. In addition, the majority stockholder purchased 33,334 shares for
$50,001 during the 2000 period. The majority shareholder corporation made loans
to the Company during 1999 and 2000. The related notes accrued interest at 12%,
which totaled $5,519 for the year 2000 and $700 for the three months ended March
31, 2001. The unpaid balance of principal and interest was $24,014 at March 31,
2001, and was due on demand.
-8-
During 2000, a board member received 5,539 shares of common stock in
exchange for professional services rendered to the Company valued at $9,000, and
an affiliate of a board member received 2,097 shares of common stock in exchange
for professional services rendered to the Company valued at $6,208
Since June 1999, the Company has made its headquarters in premises owned by
the Company president, which to date has been rent free.
3. PRIVATE PLACEMENT OFFERINGS
The Company conducted private placement offerings during 2000 and the first
quarter of 2001. These offerings were exempt under the Securities Act of 1933,
as amended, and the rules and regulations promulgated thereunder. A total of
330,719 shares of common stock was sold under the offerings during 2000 and
204,533 shares during the first quarter of 2001, resulting in net proceeds of
$430,858 and $306,800, respectively.
4. PREFERRED STOCK
The Company is authorized to issue 500,000 shares of preferred stock,
without par value. At December 31, 2000, 275,000 of these shares had been
issued. Each of these shares entitles the holder to a 5% cumulative dividend
based on a $5 per share stated value. If sufficient cash is not available, or at
the option of the shareholder, these dividends may be paid in common stock. If
payment is in stock, it is to be valued at a price calculated at thirty percent
of the lower of the last price traded in either a public or private transaction
during the applicable quarter. This issue of preferred stock also provides a
voting right of 10 votes for each share. The holder of this preferred stock is
the majority shareholder of the Company, which is a corporation wholly owned by
the Company's President and Chairman.
Dividends of $68,750 accrued on this issue of preferred stock during the
year 2000; an additional $17,188 accrued during the first quarter of 2001.
During 2000, the holder received dividends in the form of 95,558 shares of
common stock, which were valued at $56,751. At March 31, 2001, $29,187 of
dividends remains unpaid.
The characteristics of the remaining 225,000 preferred shares authorized
have not been specified.
-9-
5. LOSS PER SHARE
Basic and diluted loss per share is based on the net loss divided by the
weighted average number of common shares outstanding during the period.
Three Months Ended March 31, 2001
----------------------------------
Weighted
Income Average Shares Per Share
(Loss) Outstanding Amount
-----------------------------------------------
Net Loss $(176,725)
Adjustment for preferred stock dividends (17,188)
----------
Loss allocable to common shareholders -
Basic and Diluted $(193,913) 5,040,621 $ (.04)
========== ============== =========
Three Months Ended March 31, 2000
----------------------------------
Net loss $(172,299)
Adjustment for preferred stock dividends (17,188)
----------
Loss allocable to common shareholders -
Basic and Diluted $(189,487) 4,589,809 $ (.04)
========== ============== =========
-10-
6. INCOME TAXES
The Company has experienced losses each year since its inception. As a
result, it has incurred no Federal income tax. The Internal Revenue Code allows
net operating losses (NOL's) to be carried forward and applied against future
profits for a period of twenty years. At December 31, 2000, the Company had NOL
carryforwards of $1,885,253 available for Federal taxes and $586,773 for New
Jersey taxes. The potential tax benefit of the state NOL's has been recognized
on the books of the Company; the potential benefit of the Federal NOL's has been
offset by a valuation allowance. If not used, these Federal carryforwards will
expire as follows:
2017 $129,092
2018 486,799
2019 682,589
2020 586,773
During the year 2000, the Company realized $122,561 from the sale, as
permitted by New Jersey law, of its rights to use the New Jersey NOL'S and
research and development credits that had accrued through December 31, 1999.
These potential New Jersey offsets are, thus, no longer available to the
Company.
Under Statement of Financial Accounting Standards No. 109, recognition of
deferred tax assets is permitted unless it is more likely than not that the
assets will not be realized. At March 31, 2001, the Company has recorded
deferred tax assets as follows:
Current Non-current Total
----------------------------------
Deferred Tax Assets $138,542 $623,616 $762,158
Valuation Allowance 59,848 623,616 683,464
----------------------------------
Balance Recognized $ 78,694 $ - $ 78,694
==================================
The entire balance of the valuation allowance relates to Federal taxes.
Since state tax benefits for years prior to 2000 were realized during the year
2000, no reserve is deemed necessary for the benefit of state tax losses of 2000
or 2001.
-11-
7. RENTALS UNDER OPERATING LEASES
Office equipment is leased under an operating lease that expires in June
2003. The following is a schedule of future minimum rental payments required
under the operating lease:
Year Ending
December 31, Amount
-----------------------------------------
2001 Remainder) $ 5,143
2002 6,857
2003 2,857
--------
$ 14,857
========
There was no expense incurred for rent during the three months ended March
31, 2001. Rent expense amounted to $1,143 in the 2000 period.
8. SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid for interest and income taxes is presented below:
Three Months Ended March 31,
2001 2000
----------------------------
Interest $ $ 65
Income taxes - 200
There were no noncash investing activities during the 2001 period or the
2000 period. The following noncash financing activity occurred:
a. Shares of common stock were issued for services during the 2000 periods
these totaled 2,097 shares.
b. Common stock totaling 57,272 shares was issued to satisfy the Company
obligation under a merger agreement (see Note 9).
-12-
9. CONTINGENCIES
Pursuant to agreements relating to the merger transaction with MAS, the
Company was required to issue 114,867 shares of common stock to former
shareholders of MAS (MAS Common Stock) and make a cash payment to an affiliate
of the majority shareholder of MAS in the amount of $25,000. The Company
asserted claims against the majority shareholder. The claims involved the amount
of the MAS Common Stock and the cash due to the majority shareholder and
affiliate under the merger agreement. This matter was settled during the first
quarter of 2001 by the issuance of 57,272 share of common stock.
The Company had an employment agreement with its president, which expired
December 31, 2000. The agreement provided, in part, for options permitting the
president to acquire up to 50,000 shares of common stock per year, with portions
of these options accumulating if not exercised. Options were exercised for
100,000 shares during the year 2000; these yielded proceeds of $48,376. There
were no options outstanding at December 31, 2000. A renewal of the president's
contract is currently being discussed and a new contract is expected to be
executed shortly.
Item 2. Management's Discussion and Analysis.
The following discusses the financial results and position of the accounts
of the Company for the periods indicated.
Forward Looking Statements. Certain of the statements contained in this
Quarterly Report on Form 10-QSB includes "forward looking statements" within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended
("Exchange Act"). See the Company's Annual Report on Form 10-KSB for the period
ending December 31, 2000 for additional statements concerning operations and
future capital requirements.
Certain risks exist with respect to the Company and its business, which
risks include the need for additional capital, lack of commercial product, lack
of determined product prices and impact on profit margins, and limited operating
history, among other factors. Readers are urged to refer to the section entitled
"Cautionary Statements in the Company's Form 10-KSB for the period ended
December 31, 2000 for a broader discussion of such risks and uncertainties.
-13-
Results of Operations
Three Months Ended March 31, 2001 compared with Three Months Ended March
31, 2000.
For the period ended March 31, 2001 and comparable period in 1999, the
Company was a development stage company and the Company has not engaged in full
scale operations for these periods. The limited revenues for the periods have
been derived from sales of a non omni-directional product, and from contracts
with the United States Navy that relate to the research and potential
application of omni-directional products for military use. The period-to-period
results presented and discussed below are not necessarily meaningful comparisons
due to the Company's development stage status, and are not indicative of future
results.
Revenues for the three months ended March 31, 2001 were $35,967 compared
with $27,589 in revenues for the same period in 2000. Revenues for the 2001
period consisted of $33,860 in contract revenues from the United States Navy and
$2,107 in sales of a non omni-directional product.
Cost of sales for the 2001 and 2000 periods were $2,904 and $5,899,
respectively, representing parts and manufacturing costs for the non
omni-directional product.
General and administrative expenses which includes administrative salaries
and overhead for the three month period in 2001 totaled $220,219 compared with
$193,195 for the same period in 2000. The increase of $26,294 for the 2001
period is principally due to increases in prototype development costs of the
omni-directional wheel. Net loss for the three month period in 2001 was $176,725
compared with a net loss of $172,299 for the prior period.
Liquidity and Capital Resources
Since its inception, the Company has financed its operations through the
private placement of its common stock. During 2000, the Company raised $430,858
net of offering costs from the private placement of 330,719 shares of its common
stock. During the first quarter of 2001, the Company raised $306,800 net of
offering costs from the private placement of 204,533 shares of its common stock.
As of March 31, 2001, the Company's working capital was $193,528.
The Company anticipates that its cash requirements for the foreseeable
future will be significant. In particular, management expects substantial
expenditures for inventory and product production in anticipation of the rollout
of its omni-directional forklift, which is projected to occur in the third
quarter of 2001. The Company intends to fund its operations through the issuance
of equity and/or debt securities. Presently, the Company is seeking capital from
one or more funding sources; however, at this time no arrangement has been
finalized. No assurances can be given that the Company will be successful in
obtaining sufficient capital to fund the initiation of its production
activities. If the Company is unable to obtain sufficient funds in the near
future, such event will delay the rollout of its product and likely will have a
material adverse impact on the Company and its business prospects. In order to
facilitate additional funding, on December 15, 2000, a majority of shareholders
approved the increase of its authorized capital stock of the Company to
10,000,000 common shares.
-14-
Fixed assets, net of accumulated depreciation, totaled $72,544 on March 31,
2001. Fixed assets, net of accumulated depreciation, totaled $67,219 on December
31, 2000.
Part II OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Securityholders.
None
Item 5. Other Information.
None
Item 6. Exhibits.
(a) Furnish the Exhibits required by Item 601 of Regulation S-B.
Exhibit 10(iv) Amended Agreement and Plan of Merger effective November
1, 1999 by and between MAS Acquisition IX Corp., an
Indiana corporation, MAS Financial Corp, an Indiana
corporation, MAS Capital Inc, an Indiana corporation,
AirTrax Inc., a New Jersey corporation (filed herewith).
(b) Reports on Form 8-K.
None.
-15-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AIRTRAX, INC.
Date: May 17, 2001 /s/
Peter Amico
President and
Principal Financial Officer
-16-
Exhibit 10(iv)
AMENDED AGREEMENT AND PLAN OF MERGER
AMENDED
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT is effective this 5th day of November 1999, by and between
MAS Acquisition IX Corp., an Indiana corporation, MAS Financial Corp, an Indiana
corporation, MAS Capital Inc, an Indiana corporation, and AirTrax Inc., a New
Jersey corporation.
WITNESSETH:
WHEREAS, reference is hereby made to that certain Agreement and Plan of
Merger dated the 5th day of November 1999, by and between MAS Acquisition IX
Corp., a Indiana corporation ("MAS") and Airtrax Corporation, a New Jersey
corporation ("AITX") ("Merger Agreement"),
WHEREAS, MAS Capital Inc. ("MAS Capital") is the majority shareholder of
MAS as of the date of merger, and MAS Financial Corp. ("MAS Financial") is the
wholly owned subsidiary of MAS Capital, Inc. and a party to the Merger
Agreement,
WHEREAS, a dispute existed between the parties and pursuant to that certain
Release in favor of AirTrax, Inc. and related parties executed by MAS
Acquisition IX Corp, MAS Financial Corp and Aaron Tsai dated January 30, 2001
("Release") the parties did resolve the dispute,
WHEREAS, as a result of the settlement of the dispute, the parties desire
to amend and modify the Merger Agreement as set forth herein,
NOW THEREFORE, in consideration of the mutual covenants, terms and
conditions contained herein, the parties do hereby covenant, warrant and agree
as follows:
1. For purposes of this Agreement, defined terms herein shall have the
meanings ascribed to in the Merger Agreement.
2. Section 2.08 of the Merger Agreement is amended and modified in its
entirety to read as follow;
-1-
Section 2.08 EFFECT OF MERGER ON CAPITAL STOCK. At the Effective Time, by
virtue of the Merger and without any action on the part of any holder of any
capital stock of the MAS and AITX:
(a). Conversion of MAS Shares. Each issued and outstanding MAS Share (other
than any Dissenting Shares or shares held by AITX), whether or not certificates
for such shares have been issued to such holder, shall be converted into 0.00674
of a share of duly authorized, validly issued, fully paid and non-assessable
AITX Share ("Conversion Ratio"), provided that, the Conversion Ratio shall be
subject to equitable adjustments in the event of any stock split, stock
dividend, reverse stock split, or other change in the number of outstanding
shares of MAS Shares, and provided further that.
(b). Rights of Dissenters. Each Dissenting Share shall be converted into
the right to receive payment from the Surviving Corporation with respect thereto
in accordance with IBCL, and
(c). AITX Owned Shares. Each MAS Share owned by AITX shall be canceled.
(d). No Fractional Shares. Notwithstanding anything contained herein to the
contrary, no certificates or scrip for fractional shares of AITX shall be issued
in the merger and no AITX common stock dividend, stock split or interest shall
relate to any fractional security, and such fractional interests shall not
entitle the owner thereof to any other rights of a security holder of AITX In
lieu of any such fractional shares, each MAS Shareholder who would otherwise
have been entitled to a fractional share of AITX common stock will be entitled
to receive such fraction multiplied by the price per share of Two Dollars and
Fifty Cents ($2.50).
(e). Cash Payment. In addition to (d) above, AITX shall not be required to
issue AITX Shares to any MAS Shareholder for an amount less than (10) shares,
and each such MAS Shareholder in lieu of receiving AITX Shares shall receive
from AITX a cash value for such shares equal to Two Dollars and Fifty Cents
($2.50) per share.
MAS Financial Corp will provide AITX with a copy of a shareholder list
reflecting the shares of AITX to be issued to the MAS Shareholders in accordance
with the above. AITX shall send cash or check payment directly to each MAS
Shareholder within 30 days and will notify MAS Financial in writing confirming
total amount sent to each shareholder.
-2-
3. MAS Capital and MAS Financial hereby consent and agree to the amendments
and modifications contained herein above. MAS Capital hereby accepts 55,582
shares of AITX as full and complete settlement of all of its claims it may have
against AITX and its officers, directors and affiliated parties in connection
with the Merger Agreement, as amended herein and the Consulting Agreement dated
October 29, 1999 by and between AirTrax, Inc. and MAS Financial Corp.
4. Except as provided herein, the terms and conditions of the Merger
Agreement is binding and in full force and effect. This agreement supersedes all
prior and contemporaneous agreements among the parties regarding the subject
matter herein, except that the Release is binding and in full force and effect.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
MAS Acquisition IX Corp.
By /s/ Aaron Tsai
-------------------------------------------
Aaron Tsai, President
MAS Financial Corp.
By /s/ Aaron Tsai
-------------------------------------------
Aaron Tsai, President
MAS Capital Inc.
By /s/ Aaron Tsai
-------------------------------------------
Aaron Tsai, President
AirTrax, Inc.
By /s/ Aaron Tsai
-------------------------------------------
Peter Amico, Chief Executive Officer
-3-