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.

 

 

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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.

 

 

 

 

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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.

 

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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%.

 

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(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.

 

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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.

 

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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.

 

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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%.

 

 

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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).

 

 

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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.

 

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(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)	Voting and investment power over shares beneficially owned by Harbourview Master Fund LP is ultimately held by Messrs. Richard Rosenblum and David Stefansky, in their capacities as General Partners of Harborview Master Fund, LP.  Messrs. Rosenblum and Stefansky disclaim beneficial ownership of the shares held by Harbourview Master Fund LP.
(12)	Joshua Silverman has voting control and investment discretion over securities held by Iroquois Capital LP. Mr. Silverman disclaims beneficial ownership of the shares held by Iroquois Capital LP.
(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.

 

35

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(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.

 

 

36

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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.

37

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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.

38

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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

 

 

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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.

 

40

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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

 

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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

 

 

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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;

 

43

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•

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;

 

44

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•

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

 

 

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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

 

 

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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.

 

 

 

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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.

 

 

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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

 

 

49

 

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.

 

 

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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

 

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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.

 

 

 

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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.

 

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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.

 

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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;

 

 

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•

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

 

 

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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;

 

 

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•

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

 

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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.

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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.

 

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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.

 

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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.

 

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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.

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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.

 

 

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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).

 

 

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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.

 

 

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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.

 

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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.

 

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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

 

 

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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:

 

 

70

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•

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).

 

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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

 

 

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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.

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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

 

 

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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.

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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.

 

 

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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	%

 

 

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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.

 

 

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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.

 

 

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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

 

 

 

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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;

 

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•

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).

 

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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%.

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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

 

 

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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

 

 

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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.

 

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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.

 

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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	F-6 to F-13
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

 

 

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	/s/ Robert G. Jeffrey, Certified Public Accountant
	July 27, 2007
	Wayne, New Jersey

 

 

F-1

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