UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-KSB/A

            /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                     FOR FISCAL YEAR ENDED DECEMBER 31, 2004

              / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                     FOR THE TRANSITION PERIOD FROM __ TO __

                                    001-16237
                             Commission File Number

                                 AIRTRAX, INC.

                 (Name of small business issuer in its charter)


        New Jersey                                               22-3506376
        ----------                                               ----------
State or other jurisdiction                                     IRS Employer
      of incorporation                                       Identification No.

                200 Freeway Drive, Unit One, Blackwood, NJ 08012
                    (Address of principal executive offices)

                    Issuer's telephone number: (856) 232-3000

      Securities registered under Section 12(b) of the Exchange Act: None.

 Securities registered under Section 12(g) of the Exchange Act: Common Stock, no
                                   par value.

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the Exchange Act,  during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes [X ] No [ ]

Check if disclosure  of delinquent  filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure  will be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [ ].

State the registrant's revenues for its most recent fiscal year: $0 for the year
ended December 31, 2004.

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates  computed by reference to the price at which the common equity
was sold,  or the average bid and asked  price of such  common  equity,  as of a
specified date within the past 60 days: $94,474 as of March 24, 2005.

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest  practicable date. As of March 31, 2005, the registrant
had 21,256,215 shares of common stock, no par value per share, outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      NONE.

Transitional Small Business Disclosure Format (check one): Yes [_] No [X]
<PAGE>
                                TABLE OF CONTENTS

                                                                           Page
                                     PART I

Item 1.   Description of Business.........................................3

Item 2.   Description of Property........................................14

Item 3.   Legal Proceedings..............................................15

Item 4.   Submission of Matter to Vote of
          Security Holders ..............................................15

                                     PART II

Item 5.   Market for Common Equity and Related Stockholder
          Matters........................................................16

Item 6.   Management's Discussion and Analysis
          or Plan of Operation ..........................................19

Item 7.   Financial Statements ...................................   F-1 to F-26

Item 8.   Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure ......................................31

Item 8A.  Controls and Procedures .......................................31

Item 8B.  Other Information .............................................31

                                    PART III

Item 9.   Directors, Executive Officers, Promoters and Control Persons;
          Compliance with Section 16(a) of the Exchange Act  ............32

Item 10.  Executive Compensation ........................................33

Item 11.  Security Ownership of Certain Beneficial Owners and Management
          and Related Stockholder Matters ...............................37

Item 12.  Certain Relationships and Related Transactions ................38

Item 13.  Exhibits . ....................................................40

Item 14.  Principal Accountant Fees and Services ........................41

          Signatures and Certifications..................................42



                                        2
<PAGE>
                                     PART I

NOTE REGARDING FORWARD LOOKING INFORMATION

Various  statements  in this Form  10-KSB  and in future  filings by us with the
Securities and Exchange Commission, in our press releases and in oral statements
made by or with the approval of authorized personnel constitute "forward-looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of 1995.  Forward-looking  statements are based on current  expectations and are
indicated  by  words  or  phrases  such  as  "anticipate,"  "could,"  "currently
envision,"  "estimate,"  "expect,"  "intend,"  "may,"  "project,"  "seeks,"  "we
believe,"  "will," and  similarwords  or phrases  and involve  known and unknown
risks,   uncertainties   and  other  factors  that  may  cause  actual  results,
performance  or  achievements  to differ  materially  from any  future  results,
performance  or  achievements  expressed  or  implied  by those  forward-looking
statements.

These  forward-looking  statements are based largely on our expectations and are
subject  to a number of risks and  uncertainties,  many of which are  beyond our
control.  Actual  results  could differ  materially  from these  forward-looking
statements as a result of the facts described in "Risk Factors." We undertake no
obligation to update publicly or revise any forward-looking statements,  whether
as a result of new  information,  future events or otherwise.  In light of these
risks  and  uncertainties,   we  cannot  assure  you  that  the  forward-looking
information contained in this Form 10-KSB will, in fact, transpire.

Our fiscal year ends on December  31.  References  to a fiscal year refer to the
calendar year in which such fiscal year ends.

ITEM 1. DESCRIPTION OF BUSINESS

INTRODUCTION

Since 1995,  substantially  all of our  resources and  operations  have directed
towards the development of the omni-directional wheel and related components for
forklift and other material handling applications.  Omni-directional  technology
creates  vehicles  which  can  travel  in any  direction.  Our  Omni-directional
vehicles  are  controlled  with a  joystick.  The  vehicle  will  travel  in the
direction the joystick is pushed.  If the operator pushes the joystick  sideways
the vehicle will travel  sideways.  If the operator  were to twist the joystick,
the vehicle will travel in circles. Our omni-directional vehicles have one motor
and one motor controller for each wheel. The omni-directional movement is caused
by coordinating the speed and direction of each motor with joystick inputs. Such
joystick   movements   are  first   routed  to  a   micro-processor,   from  the
micro-processor to the motor controllers,  and finally to the motor. Many of the
components,  including the unique shaped wheels,  motors, and frames,  have been
specially  designed by us and specially  manufactured.  Four pilot models of the
commercial omni-directional lift truck are currently operational.

We have commenced and are near  completion of getting the parts together for our
initial  production  run  consisting  of 10  units  of our  Sidewinder  ATX-3000
Omni-Directional  Lift Truck.  Substantially  all of the parts including frames,
motors, controllers,  and micro-processors have been ordered and received by us,
and are partially  assembled.  The initial production run will be completed upon
receipt of wheels and other  components  from suppliers which is expected in the
first quarter of 2005.  Unit assembly is undertaken by us at the H&R  Industries
facility at 100 Park Avenue,  Warminster, PA 18974. UL and final ANSI testing is
expected  to be  completed  from  30  to 90  days  from  production  completion.
Following  required testing,  we expect to sell these units to select dealers in
the United States. We have received orders for our initial run production run of
10 units.

We have incurred losses and experienced  negative  operating cash flow since our
formation.  For the years ended December 31, 2004 and 2003, we had a net loss of
$(2,272,200)  and  $(2,282,946),  respectively.  We expect to  continue to incur
significant  expenses.  Our  operating  expenses  have been and are  expected to
continue to outpace revenues and result in significant  losses in the near term.
We may never be able to reduce  these  losses,  which  will  require  us to seek
additional debt or equity financing.

Our principal  executive offices are located at 870B Central Avenue,  Hammonton,
NJ 08037 and our telephone number is (609) 567-7800.  We are incorporated in the
State of New Jersey.



                                        3
<PAGE>
OMNI-DIRECTIONAL TECHNOLOGY

PRIOR HISTORY

Omni  directional  vehicle  technology  has been the  subject  of  research  and
development by universities, the Department of Defense, and industry for over 25
years.  Omni-Directional means that vehicles designed and built by us can travel
in any direction. Our Omni-directional  vehicles are controlled with a joystick.
The vehicle will travel in the direction the joystick is pushed. If the operator
pushes the joystick sideways,  the vehicle will travel sideways. If the operator
were  to  twist  the  joystick   the  vehicle   will  travel  in  circles.   Our
omni-directional  vehicles  have one  motor and one  motor  controller  for each
wheel.  The  omni-directional  movement is caused by coordinating  the speed and
direction   of  each  motor  with   joystick   inputs  which  are  routed  to  a
micro-processor,  then from the  micro-processor  to the motor  controllers  and
finally  to the  motor  itself.  A  Swedish  inventor  patented  an early  stage
omni-directional wheel.  Thereafter,  the technology was purchased by the United
States Navy and was advanced at the Naval Surface  Warfare  Center.  The US Navy
held the patent until its expiration in 1990. In 1996, the Navy transferred this
technology  to us for  commercialization  through  a  Cooperative  Research  and
Development Agreement (CRADA).

TECHNOLOGY DESCRIPTION

Since the technology  transfer under the CRADA  agreement,  we have examined and
redesigned many aspects of the system for use in various applications  including
forklifts and other  material  handling  equipment.  In this regard,  we refined
control software and hardware,  and tested a variety of drive component features
on  our  pilot  omni  directional  lift  trucks  and  scissor-lifts.   Extensive
demonstrations  of prototype  vehicles  for  commercial  and  military  users in
combination  with market research  enabled us to direct our initial  development
efforts towards the material  handling  products,  offering the best probability
for successful market entry.Our management designed other aspects of our machine
to complement the unique functionality of our omni-directional technology. In so
doing, we achieved a virtually  maintenance  free unit which allows the operator
free and unrestricted movement during operation. Each vehicle is powered with AC
motors  eliminating  brushes and commutators of  conventional DC motors.  The AC
motors also are lubricated for life thereby  eliminating the need for additional
greasing and  fittings.  The  transmission  uses a synthetic  lubricant,  and is
sealed  for  life.  The  joystick  controls  all  vehicle  movement;   therefore
conventional  drive trains,  steering racks,  hydraulic  valve levers,  and foot
petals for braking and acceleration are all non-existent.

On a four-wheel  omni-directional  vehicle employing our technology,  each wheel
has a separate  electric  motor,  making the vehicle capable of traveling in any
direction.  The motion of the vehicle is  controlled  by  coordinating  all four
wheels through a microprocessor that receives input from an  operator-controlled
joystick.  The joystick controls all vehicle movement (starting,  steering,  and
stopping).  The framework of our omni-directional  lift truck consists primarily
of a steel frame mobilized with four  omni-directional  wheels.  The AC electric
motor for each wheel turns its own wheel hub.  Each wheel hub is encircled  with
multiple  tapered  rollers  that are offset 45  degrees.  The  tapered  rollers,
covered with polyurethane,  are extremely durable. By independently  controlling
the forward or rearward  rotation of each wheel,  the vehicle has the capability
of  traveling  in any  direction.  The  technology  allows  the  vehicle to move
forward,  laterally,  diagonally, or completely rotate within its own footprint,
thereby  allowing  it to move  into  confined  spaces  without  difficulty.  The
navigational options of an omni-directional vehicle are virtually limitless. The
omni-directional wheel can be manufactured in different sizes depending upon the
application.  For  instance,  our  management  believes the wheel can be used on
miniature vehicles or massive load-carrying vehicles.

EXISTING AND PROPOSED PRODUCTS

Sidewinder  Omni-Directional  Lift  Truck.  We  anticipate  that our  Sidewinder
Omni-Directional lift truck will be available with rated lift capacities ranging
from 3000 pounds and  higher.  Our  SIDEWINDER  ATX-3000  Omni-Directional  lift
truck,   which   is  our   3,000-pound   model,   features   our   revolutionary
omni-directional  technology.  Conventional  steering  racks and foot petals are
non-existent  allowing  impediment free ingress and egress. This lift truck will
deliver unequaled  maneuverability  providing  significantly  improved operating
efficiencies in the materials handling industry. The dealer price is expected to
retail at prices similar to or slightly higher than high-end,  comparably  sized
standard   forklifts.   The   "street   prices"  of  similar   rated,   standard
(non-omni-directional)  forklifts range from $16,000 to $31,000 per unit.  Other
specialty forklifts,  that are  multi-directional  sell for $42,000 and greater,
and vehicles  considered  very narrow  aisle (VNA),  are priced from $75,000 and
higher  per  unit.  We  believe   that,   due  to  its  unique   features,   the
omni-directional  lift  truck  will  support a price  slightly  higher  than the
average selling price of a conventional forklift.



                                        4
<PAGE>
Airtrax  Conventional  Forklift.  In the event of the successful  acquisition of
Filco GmbH, we expect to use the Filco plant and  operations to produce and sell
a line of conventional  forklifts  manufactured  under the Airtrax or Filco name
for distribution in the United States and other geographical markets. It also is
contemplated that the SIDEWINDER  Omni-Directional  lift truck will be assembled
or  partially  assembled  at the Filco plant and  distributed  by Filco or us to
European or Middle East markets or partially assembled at Filco for distribution
to the United States for final assembly.

Omni-Directional   Aerial  Work   Platform.   In  late  February  2004,  we,  in
collaboration  with MEC Aerial Platform Sales Corporation of Fresno,  California
("MEC"),  introduced a concept  version of a scissor lift at the American Rental
Association  trade show in  Atlanta.  The  scissor  lift  called  the  "Phoenix"
incorporated our omni-directional technology along with an MEC platform and lift
mechanisms.  The vehicle contains features presently unavailable on conventional
aerial work platforms.  For example,  similar to our lift truck, the aerial work
platform's  movement is controlled by a joystick.  Movement to a particular spot
or location at a job site can be accomplished easily due to the omni-directional
technology,  thereby  eliminating  the  back  and  forth  positioning  typically
associated with conventional  platforms.  Our designed control systems allow the
operator to move at very regulated and easily controlled acceleration and speed,
virtually  eliminating operator error. The machine can climb over obstacles that
would impede other  machines.  Our aerial work platform has the ability to climb
over obstacles up to a height of one-third the overall wheel diameter. The wheel
used on the aerial work  platform has a 17" total  diameter.  Accordingly,  this
vehicle can climb over  obstacles  more than 5.66"  high.  The ability to "climb
over"  obstacles is an inherent  advantage of our  omni-directional  technology.
This is a feature which we believe no other aerial work platform can perform, or
if another  aerial work  platform can perform,  it is to a very limited  degree.
Generally, any "wheeled" vehicle can "climb" over some obstacles, however, other
"wheeled"  vehicles  cannot climb over obstacles as high as the one-third of the
wheel's  diameter.  We believe  that,  similar to our lift truck,  the  improved
functionality of the aerial work platform will result in increased  productivity
at the job-site.

On March 13,  2004,  we  entered  into a draft  Product  Development,  Sales and
Representation  Agreement  with  MEC.  The draft  agreement  calls for the joint
development  of a  proto-type  and  production  versions of an  omni-directional
aerial work platform called the "Phoenix".  During the development  stage,  each
party  will   provide  the  parts,   which  apply  to  that   party's   area  of
responsibility.   We  will   provide   all  of  the  parts   required   for  the
omni-directional  traction  system and  related  control  systems,  and MEC will
provide all of the parts  required for the scissor  lift and lifting  apparatus.
After development of the prototype version,  the parties will establish the cost
of a commercial  product,  and if the cost of a commercial product is considered
commercially  viable,  the parties will jointly develop a commercial  version of
the  aerial  work  platform.  If  commercial  production  results,  we  will  be
responsible for product  manufacturing,  the traction system and frame,  and MEC
will  manufacture  the  scissors  lifting and upper frame  sections.  MEC or its
affiliate will be  responsible to promote,  market and sell the product to their
network  of  approximately   200   distributors.   This  product  will  also  be
manufactured under the COBRA name and distributed exclusively by us. Aerial work
platform  sales made by MEC will be  subject  to a royalty  to us and,  likewise
sales  made by us will be  subject  to a  royalty  to  MEC.  The  amount  of the
respective royalties will be subject to agreement by the parties.  Orders placed
by MEC will be  financed  by MEC  subject to agreed  production  schedules.  The
parties  expect to enter into a more  formal  agreement  to  further  define the
relationship  of the parties.  At this time, we cannot predict  whether a formal
agreement  will be entered into  between the parties,  or whether any sales will
result form the aerial work platform to be developed by the parties.

Omni-directional  Wheelchair.  Over 43 million  disabled and aging Americans are
protected by the Americans with  Disabilities Act of 1990 (ADA). This law became
effective in 1991, and now requires  businesses with over 15 employees to comply
with specifications which enable persons with disabilities access buildings.  As
a result of increased physical access, we believe that persons with disabilities
will experience an increased  number of employment and other  opportunities.  We
have conducted a preliminary design of an omni-directional  wheel for wheelchair
applications.  Based upon the preliminary  design, we believe that we can retail
an omni-directional  wheelchair for under $6,000. Wheelchair pricing ranges from
$3,500 for a standard unit to $30,000 for units with improved functionality such
as stair climbing capability.

We will require  additional  funds to complete a structural and ergonomic design
of a  proto-type  wheelchair,  and  to  construct  the  proto-type  for  further
evaluation  and  testing.   We  cannot  predict  whether  we  will  be  able  to
successfully develop this product.



                                        5
<PAGE>
Military  Products.  During 1999,  we were  awarded a Phase I research  contract
under the Department of Defense's  Small Business  Innovation  Research  program
(SBIR) to develop an omni-directional  Multiple Purpose Mobility Platform (MP2).
Under  the  Phase  I  base   contract,   we  studied  the   application  of  the
omni-directional  technology  for military use and were  supervised by the Naval
Air Warfare Center Aircraft  Division  (NAWC-AD) in Lakehurst,  New Jersey.  The
contemplated use includes the  installation of jet engines on military  aircraft
and the  transportation  of munitions and other military goods. We completed the
Phase I base  contract  in 1999 and were  subsequently  awarded a Phase I option
from  NAWC-AD to  further  define  the uses of the MP2.  In July  2000,  we were
awarded a Phase II research contract under the SBIR program.  Under the Phase II
contract, we are studying the feasibility of the MP2 for military purposes,  and
will culminate with the  construction  of one or more proto-type  devices.  This
contract  (with  the  option)  was  extended  twice  for 6 months  each past the
42-month contract time period. Contract revenues were $750,000. Through December
31,  2003 we  completed  the  vehicle  concept  design of the MP2.  A  completed
proto-type  MP2 was delivered to the US Navy during the end of the first quarter
of 2004 for testing purposes.  A second vehicle, an omni-directional  jet engine
installation  machine is being constructed for the US Navy. We have been advised
by the US Navy that a non-SBIR  sponsor for the MP2 program  must be  identified
before a Phase II option is  exercised.  A Phase III  contract  could be awarded
without  such  a  sponsor.  Although  our  management  believes  the  underlying
omni-directional  technology for the proposed MP2 has significant  potential for
both commercial and military  applications,  we cannot predict whether any sales
beyond the Phase II contract will result from the SBIR program. It is the belief
of  management  that sales to the military  for products  such as the MP2 or the
MHU-110  engine  handler  will  not  materialize   until  the   omni-directional
technology achieves commercial acceptance. We do believe, however, that products
such as the ATX-3000 or the Cobra AWP can and will be sold to the US government,
possibly including the military.

In  connection  with the MP2, on December  11,  2003,  we entered into a Teaming
Agreement with United Defense, L.P., Arlington,  Virginia.  Under the agreement,
United  Defense  agreed to provide  the  exclusive  manufacture,  marketing  and
support  for the MP2 and any  derivative  products  in respect to any  contracts
awarded to us by U.S.  Department  of  Defense  and any  international  military
customers under the SBIR arrangement.

We have also developed a traditional  helicopter  ground handling  machine which
has been  marketed  by us on a limited  basis.  This  vehicle,  Helitrax,  was a
patented design using technology that we purchased in 1995 under our predecessor
company, Air Track Inc. The patented device was redesigned by us to include many
features  which we  believe  are  needed by  industry  maintenance  crews and by
pilots.  Helitrax was sold from 1995 through 2001 in limited amounts, in no more
than  approximately 30 units total, and sales were discontinued  because of time
constraints  required  getting  the  Sidewinder  Omni-Directional  lift truck to
market.

CURRENT OPERATIONS

Since 1995,  substantially  all of our  resources and  operations  have directed
towards the development of the omni-directional wheel and related components for
forklift  and other  material  handling  applications.  Many of its  components,
including the unique shaped  wheels,  motors,  and frames,  have been  specially
designed by us and specially  manufactured.  Four pilot models of the commercial
omni-directional lift truck are currently operational.

We  have  commenced  and are  near  completion  of our  initial  production  run
consisting of 10 units of our Sidewinder ATX-3000  Omni-Directional  Lift Truck.
Substantially  all of the  parts  including  frames,  motors,  controllers,  and
micro-processors  have  been  ordered  and  received  by us,  and are  partially
assembled.  The initial  production run will be completed upon receipt of wheels
and other  components  from suppliers  which is expected in the first quarter of
2005.  Unit  assembly is  undertaken  by us at H&R  Industries  for the first 10
units.  We will conduct future assembly in the United States in facilities to be
leased early in the second quarter of 2005. ANSI's (American  National Standards
Institute)   testing  was  completed  in  the  first  quarter  of  2005  and  UL
(Underwriters  Laboratories)  testing is expected to be  completed at the end of
the first quarter, or in the beginning of the second quarter of 2005.  Following
required testing,  we expect to sell these units to select dealers in the United
States.  We have received  purchase orders for our initial  production run of 10
units.



                                        6
<PAGE>
ANSI testing refers to a series of tests including tilt testing the vehicle with
each of the masts it will use to make  certain that it will not fall over with a
raised load at specified tilt angles.  In addition,  ANSI testing  includes drop
testing  specified loads on the overhead guard to make certain that the overhead
guard will not fail and crush the  operator.  These tests require us to turn the
vehicle over to prove that the battery door lockwill  contain the battery in the
event the vehicle is  overturned.  ANSI  testing is  performed by us and we must
certify  and  document  that the tests have been  completed  and the vehicle has
passed in all respects. This testing is required prior to the vehicle being sold
to the public in the United States.

UL testing is completed on lift trucks because we believes it is more productive
to sell  vehicles  that  have  passed  the extra  safety  and  performance  test
requirements  mandated by UL.  Generally  UL testing  hinges  around  electrical
issues that could cause fires to the vehicles and/or property.  Most of the more
prominent lift truck manufacturers  complete UL testing on electrically operated
lift  trucks.  Completion  of UL testing  is  generally  considered  the mark of
companies who will take extra steps and precautions to protect their  customers.
UL approval  is a feature  that  salespersons  can use to their  advantage  when
selling  vehicles  because many insurers will not insure  premises that use lift
trucks that are not UL rated.

TRANSACTION WITH FILCO GMBH

In March 2004, we reached an agreement in principal,  subject to certain closing
conditions,  with Fil Filipov to acquire 51% of the capital stock of Filco GmbH,
a German  corporation.  In April 2003, Filco GmbH acquired  substantially all of
the assets of Clark  Material  Handling  of Europe  GmbH  which were  located at
Clark's  facility in  Rheinstrasse  Mulheim  a.d.  Ruhr,  Germany.  These assets
consisted of all of the tooling, machinery, equipment,  inventory,  intellectual
property,  office furniture and fixtures,  and personnel  necessary to build the
entire Clark line of lift trucks, but excluded the building and land, as well as
the rights to the Clark name.  Further,  Filco GmbH has entered into an 18-month
lease  agreement with the current  property owner with an option to purchase the
200,000 square foot building and land for 4.7 million euros,  and Filco GmbH has
been  operating  this plant since July 1, 2003.  Filco's  option to purchase the
200,000  square foot building and land for 4.7 million euros expires on December
31, 2005.

In October 2004,  Mr. Filipov and we agreed to modify our agreement in principal
so as to increase the number of shares of the capital  stock of Filco GmbH which
we will acquire, if we finalize the acquisition,  from 51% to 75.1%. The purpose
of this change is to give us control of Filco GmbH in accordance with USGAAP and
German law considerations  regarding consolidation and capitalization.  Further,
this change was offered and accepted in consideration of our agreeing to advance
Filco additional funds, in the form of a loan, to fund the start up of the Filco
operation prior to the consummation of the transaction. All other conditions and
terms of the agreement between the parties shall remain the same.

The  consideration  for the  proposed  acquisition  consists of the  issuance of
options to Mr.  Filipov to  purchase  900,000  shares of our common  stock at an
exercise  price of $0.01.  No more than 12.5% of such  options can be  exercised
during any one year.  Accordingly,  Mr. Filipov  cannot  exercise the options to
receive more than an  aggregate of 112,500  shares of our common stock per year.
Any increase on this  exercise  limit is subject to the approval of our board of
directors.  It is anticipated  that the option's three year exercise period will
be extended to allow 100% of the options to be exercised  at the 12.5%  exercise
limit  permitted  each  year.  In  addition,   we  agreed  to  loan  Filco  GmbH
approximately  $1,300,000,  which, if the acquisition is completed,  may, at our
exclusive  election,   be  converted  into  equity  of  Filco  GmbH  along  with
approximately  1,300,000  Euros  currently  owed to Fil  Filipov by Filco  GmbH.
Finally,  the agreement in principal  provided for Mr. Filipov to be appointed a
director  of our  company and to receive an  additional  100,000  options of our
common  stock for  serving as a  director.  In December  2004,  Mr.  Filipov was
appointed as a director of our company.  Although the proposed  acquisition with
Filco has not yet been  completed,  we have  appointed Mr. Filipov a director of
our company  because  management  believes  that his  credentials  are extremely
viable and valuable to our credibility in the investment and materials  handling
communities,  particularly  in Europe.  Mr.  Filipov  has been  employed  in the
materials  handling  industry  virtually  all of his life.  We believe  that his
associations and relations in this industry can and will aid us as we pursue our
business objectives.



                                        7
<PAGE>
The agreement in principal  provides  that we will register with the  Securities
and Exchange  Commission all of the shares  issuable to Mr.  Filipov,  including
those underlying the described stock options.

We have not yet finalized nor executed the acquisition agreement but have loaned
Filco GmbH an aggregate  principal amount of $2,700,000  pursuant to a series of
unsecured  promissory  notes.  We have used proceeds from the private  placement
offerings  that we  completed  during  2004 to fund such  loans.  Filco GmbH has
informed us its  estimated  working  capital  needs during the next year will be
approximately  $5,000,000,  with  $1,500,000  needed during the first quarter of
2005,  in order for it to achieve  profitable  operations.  We intend to provide
another $5 million to Filco,  either in the form of  guaranteed  credit lines or
through  additional  sales  our  securities.  Prior  to  the  completion  of the
acquisition,  we remain a creditor until we could guarantee  sufficient  funding
sources and to provide an adequate  line of credit for  Filco's  operations.  In
addition  to funding  and the  procuring  a line of credit,  the  closing of the
acquisition is contingent upon the completion of a final  definitive  agreement.
Should  we  complete  the  acquisition  of  Filco  GmbH,  we will  need to raise
additional  capital  or  secure  sufficient  credit  lines  in order to fund the
working capital needs of Filco GmbH.

The amounts loaned to Filco to date, even if unrecoverable, would not prevent us
from commencing the manufacture of the Sidewinder  Omni-Directional  Lift Truck.
The manufacture and sale of omni-directional  material handling equipment is our
primary goal.  During the second quarter of 2005, we realized limited revenues f
from the first sales of the Sidewinder Omni-Directional Lift Truck.

The loans are to be repaid on or prior to December 31, 2005. We believe that our
secured and unsecured loans to Filco are recoverable if the proposed acquisition
is not  completed.  We  expect  to  begin  collecting  on our  loans,  including
principal and interest,  from Filco when the company  becomes fully  operational
and  profitable,  which we  anticipate  will occur during  2006.  If this is not
realized,  we intend to obtain  security  interests in Filco's plant  machinery,
equipment and other plant property, and intellectual property, including designs
and drawings  for over 100 models of Clark lift trucks.  We intend to have Filco
engage an independent  appraiser in 2005 to appraise and value Filco's equipment
and  machinery.  Such  appraisal  may  not  include  the  valuation  of  Filco's
intellectual property, which Filco and we believe have significant value.

We loaned Filco approximately $2.7 million through the end of 2004 and loaned an
additional  $1.5 million  during the first quarter of 2005 exclusive of interest
at 8% per annum,  pursuant to a series of  unsecured  promissory  notes.  During
2005, we intend to secure our loans with Filco's plant machinery,  equipment and
other plant property, and intellectual property, including designs and drawings.
We  intend  to  provide  another  $5  million  to  Filco,  either in the form of
guaranteed  credit lines or through  additional  sales our  securities.  We have
contacted several financial  institutions  attempting to secure credit lines for
Filco in the  amount of $5  million.  Thus far,  we have  received  interest  in
providing  said  credit  line to Filco under the  conditions  that any  proposed
credit line is guaranteed by us and that Filco is operational  and able to repay
such debt from current earnings.  The condition that FiLCO be able to repay from
current  earnings makes the credit line from these sources  unobtainable at this
time.


We loaned Filco approximately $2.7 million through the end of 2004 and loaned an
additional  $1.5 million  during the first quarter of 2005. We intend to provide
another $5 million to Filco,  either in the form of  guaranteed  credit lines or
through  additional sales our securities.  We have contacted  several  financial
institutions  attempting  to secure  credit  lines for Filco in the amount of $5
million.  Thus far, we have received  interest in providing  said credit line to
Filco under the conditions that any proposed credit line is guaranteed by us and
that Filco is operational and able to repay such debt from current earnings. The
condition  that FiLCO be able to repay from  current  earnings  makes the credit
line from these sources unobtainable at this time.

There are a number of business  purposes  for our  consideration  of a potential
acquisition  of Filco GmbH.  Clark  Material  Handling  Co.,  one of the largest
forklift  manufacturers  in Europe,  owned  approximately  50% of the assets and
completed 50% of the sales of Clark Forklift.  Clark was bought by Terex in 1994
and sold for $140 million in 1996. During that period,  Terex was managed by Fil
Filipov,  who negotiated and completed  acquisitions  for Terex.  Clark declared
bankruptcy  in 2003.  Filco  GmbH was  formed by Fil  Filipov in May of 2003 and
Filco  purchased  the  assets  of  Clark  Europe.  The  term  "assets"  included
intellectual property, inventory, machinery and equipment, existing cliental and
a trained  workforce.  Since  that time  Filco has  operated  with very  limited
operating capital and has had problems with its employee's  unions. As a result,
Filco has not operated profitably. We have been knowledgeable of the transaction
involving the Filco  purchase of Clark assets and subsequent  operations  since.
Should the  acquisition be completed,  Filipov will maintain 24.9% ownership and
we will maintain a 75.1% ownership interest.



                                        8
<PAGE>
The  proposed  acquisition  of  Filco,  if  completed,  would  include  a leased
manufacturing facility, with an experienced workforce,  inventory,  intellectual
property,  and machinery  sufficient to fill 200,000 square feet of assembly and
manufacturing.  It is  anticipated  that the  potential  acquisition  will  also
include  cliental  throughout  Europe and the Middle  East.  We believe that the
proposed  acquisition  could provide us with the ability to sell a complete line
of lift trucks beyond the limited sized Sidewinder  Omni-Directional Lift Truck.
This is a huge  advantage  when  selling to  regular  customers.  The  potential
acquisition could also give us the ability to provide  manufacturing or assembly
for our products.  In addition to the  Sidewinder,  this includes  MEC's and our
aerial work platforms.  Currently,  we purchase  certain parts in Europe.  These
include the frames from Bulgaria,  motors and  controllers  manufactured  in the
Czech Republic and Sweden, and  transmissions,  brakes and seats manufactured in
Germany.  The mast could be manufactured  for us at the Filco plant.  The frames
will be powder  coated at Filco,  then  partially  assembled  vehicles  would be
shipped to the  United  States for final  assembly.  Wheels and other  parts for
vehicles to be sold in Europe or Middle  Eastern  countries will be shipped from
the United States to complete the manufacturing at Filco.

Accordingly,  we believe that if  completed,  this  acquisition  would give us a
financial  tie to Mr.  Filipov  and to some  extent,  companies  with whom he is
affiliated.  It could give us complete manufacturing  capabilities in Europe and
the United States which would compliment  existing  vehicle part suppliers.  The
proposed  acquisition  could provide us with the ability to move into the top 20
of  forklift  manufactures  in the world in the  current  year.  This  potential
acquisition  has given a lot of  credibility to our financial  capabilities  and
future outlook.

No assurance can be given that the acquisition  agreement will be finalized,  or
that if the  agreement  is  finalized,  that the  conditions  to closing will be
satisfied,  or that we will raise sufficient funds or secure  sufficient  credit
lines to  finance  Filco  operating  capital  needs to  warrant  completing  the
acquisition agreement.  Further, in the event that we consummate the acquisition
agreement,  no assurance  can be given that we will be able to continue to raise
sufficient  funds to meet the working capital needs of Filco, as well as our own
working capital needs.  Our inability to raise  sufficient  capital as discussed
herein may impair Filco's operations as well as our own operations.

HISTORY OF FILCO GMBH AND HISTORY OF OUR RELATIONSHIP WITH FILCO

Clark Material  Handling Co. was the largest forklift  manufacturer in the world
in the 1980's.  Clark Material Handling Co. of Europe owned approximately 50% of
the assets and completed an estimated 50% of the sales of Clark forklifts. Clark
was  bought  by Terex in 1994 and sold for $140  million  in 1996.  During  that
period it was  managed by Fil  Filipov,  who was  responsible  for  finding  and
completing acquisitions for Terex. Clark declared bankruptcy in 2003. Filco GmbH
was formed by Fil Filipov in May of 2003 and Filco GmbH thereafter purchased the
assets of Clark  Europe.  The  "assets" of Clark  Europe  included  intellectual
property,  inventory,  machinery and equipment,  existing cliental and a trained
workforce.  The  transaction  by Mr.  Filipov to acquire the Clark  assets was a
purchase  through the bankruptcy  administrator  which left all assets under his
control and ownership.  Mr. Filipov paid approximately  500,000 Euros and had to
advance  other fees to guarantee  lease and other  payments.  This resulted in a
total purchase by Mr. Filipov in the amount of approximately 1,300,000 Euros.

Since that time, Filco has operated with very limited operating capital, and has
unresolved union issues. As a result, Filco has not operated  profitably,  or at
all.

Through  the  proposed  acquisition,  we are not trying to acquire the assets of
Filco but are attempting to secure a 75.1% ownership  interest of an operational
business,  once that is achieved. We believe that the proposed  acquisition,  if
completed,  could put us in a very unique  position of being able to manufacture
our products in major  quantities  to satisfy a world market.  This  acquisition
could  expand our product  capabilities,  expand the reach of our  products to a
worldwide  market,  and  potentially  put the  Company in position to be a major
material handling equipment manufacturer.

The  intellectual  property of Filco is generally not  considered  "state of the
art." The  intellectual  property  generally  consists of drawings for 103 model
lift trucks,  masts and various other material handling parts and supplies.  The
LPG or diesel lift trucks are  generally  very up to date and need little in the
way of updates or  re-engineering  to make them sellable in the current  market.
However,  our management  believes that the electric trucks offered by Filco are
outdated and need to be re-engineered to be sellable in the modern  marketplace.
For the most  part,  the  changes  would be from DC to AC  electric  motors  and
controllers.  Engineering  from us and/or Filco engineers will most likely be in
the range of 1,000  man-hours  to  complete  these  updates to AC motors.  These
vehicles,  whether gas, diesel or electric,  are not convertible to our products
nor would this be considered. They offer us a complete product line in the event
a dealer or consumer needs a product other than our omni-directional product.



                                        9
<PAGE>
Our  President,  Peter Amico,  has  maintained a working  relationship  with Mr.
Filipov since 2002. The working relationship  between Messrs.  Filipov and Amico
has been  centered on Mr.  Filipov  informing  Mr.  Amico where to buy parts and
access better supply chain vendors in Eastern European Countries.  This has lead
to us being able to purchase  frames in  Bulgaria at prices  about 70% less than
the  frames  would  cost  in the US.  Messrs.  Filipov  and  Amico  have  shared
information  regarding  the  unions in Germany  and how to best run the  Filco's
business once it is acquired. There has been no personal relationship other than
the friendship that the parties have enjoyed in their working relationship.


BUSINESS PURPOSES OF THE PROPOSED ACQUISITION OF FILCO GMBH

In general,  the Filco proposed acquisition could provide us access to strategic
partnerships  in personnel and successful  business  ventures,  sales and market
exposure in Europe.

The proposed acquisition of Filco may include a leased  manufacturing  facility,
with an experienced workforce,  inventory,  intellectual property, and machinery
sufficient  to fill  200,000  square feet of assembly and  manufacturing.  Filco
could provide us with cliental throughout Europe and the Middle East. This could
provide us with the ability to sell a complete  line of lift  trucks  beyond the
limited  sized  Sidewinder   Omni-Directional   Lift  Truck.  It  would  provide
manufacturing or assembly for our products,  including,  but not limited to, the
aerial  work  platforms  or any other  products  we develop or can  contract  to
assemble with other companies.

In  addition,  if the  acquisition  is  completed  we  anticipate  that  we will
establish manufacturing capability in Europe, to complement our manufacturing in
the United  States.  We  currently  purchase a high  percentage  of our parts in
Europe,  including,  but not limited to, the frames  from  Bulgaria,  motors and
controllers  manufactured in the Czech Republic and Sweden,  and  transmissions,
brakes and seats  manufactured in Germany.  The mast could be manufactured,  the
frames could be powder coated  (painted),  and European parts could be assembled
at the Filco plant.  Partially assembled vehicles would be shipped to the United
States for final  assembly.  Wheels and other parts for the vehicles may be sold
in Europe or Middle  Eastern  countries  could be shipped from the United States
for  the  completion  of  manufacturing  at  Filco.  We  believe  we  could  cut
manufacturing   costs  because  our  material   handling   equipment   could  be
manufactured  in the  continent  in  which it is sold,  i.e.,  Europe.  With our
manufacturing  capabilities  in the United States,  this  potential  acquisition
would allow a portion of the Sidewinder  becoming  assembled and manufactured in
each of the two  continents  that  purchase  and use about  70% of all  material
handling equipment worldwide.

The primary objective that must be achieved to reach the aforementioned  goal(s)
is to secure  the  necessary  financing  required  to fund the  acquisition  and
manufacturing objectives of Filco and us. There can be no assurance that we will
be able to raise  sufficient  capital  necessary to complete the acquisition and
fund the manufacturing objectives of Filco and us.

MANUFACTURING AND SUPPLIERS

The initial  production  run of our lift truck is being  assembled  by us at H&R
Industries for the first 10 units. We will be conducting  future assembly in the
United States in  facilities  to be leased early in the second  quarter of 2005.
Schaeff  Forklift also has  constructed  the frames and overhead guards for this
production run in accordance with our specifications.  The parties operate under
the  terms of  written  purchase  orders.  Parts  and  assemblies  for the first
commercial  models have been ordered  and/or  procured from other  vendors.  The
initial production run will be completed upon receipt of wheels manufactured for
us by The Timken  Corporation and components from other  suppliers.  The initial
run will refine the assembly  line,  help develop  procedures,  and  incorporate
inventory control and quality assurance. Management anticipates that the initial
run of forklifts  should be completed in the first  quarter of 2005.  We plan to
create the  framework  for rapidly  scalable  production  capacity at facilities
which we anticipate  leasing early in the second quarter of 2005, and which will
be capable of ramping up for anticipated  demand before year's end. We also plan
to  complete  partial  assembly,  or  subcontract  to  certain  vendors  of  the
omni-directional  lift truck at the Filco GmbH  facility for European and Middle
Eastern sales for full assemby in the United States.



                                       10
<PAGE>
Components  for  our  forklifts   consist  of  over  the  counter  products  and
proprietary  products  that have been  specially  designed and  manufactured  by
various   suppliers  in  collaboration   with  us.  We  believe  that  continual
refinements  of certain  components  will occur during  continued  production in
response to user  feedback and  additional  product  testing.  We will strive to
improve product  functionality  which may require additional  refinements in the
future.  The need for  additional  refinements  on a  continuing  basis may slow
projected product sales.

We consider the specially designed and manufactured  products  proprietary,  and
have entered into exclusive  contractual  agreements  with certain  suppliers to
protect the proprietary nature of these products.  These  arrangements  prohibit
the supplier from producing the same or similar products for other companies. In
addition,  while we maintain single sources for the over the counter components,
we believe that other sources are available if necessary.

DISTRIBUTION AND PRODUCT MARKETING

We intend to establish a national and  international  dealer network to sell our
forklift  product  line to  existing  equipment  dealers.  However,  we may sell
directly to select national and international  accounts and retailers.  National
and  international  accounts  or  retailers  include,  but are not  limited  to,
nationally recognized businesses with national or international locations having
facilities in numerous states or countries.

During  the past  two  years,  in  anticipation  of  commercial  production,  we
solicited interest from targeted dealers  nationwide,  and in certain instances,
received  contracts  from a  number  of  these  dealers.  Due to  the  delay  in
establishing  commercial production,  the contracts were not fulfilled. In 2004,
we began  soliciting  dealers for  distribution  and during the first quarter of
2004 have  reached  an  agreement  with  approximately  40  dealers  nationwide.
Principal terms of the agreement reached is that these dealers will purchase our
products  which  include  the  ATX-3000,   the  Cobra  AWP  (scissor  lift)  and
conventional  lift trucks and  thereafter  sell these products to their clients.
Certain of the  dealers  were  given  "exclusive"  territories,  such as Airtrax
Canada  (Airtrax  Canada is not owned or operated  by us but we have  authorized
their use of the Airtrax Name.) Airtrax Canada is required to purchase a minimum
of 250 units of the Airtrax  Sidewinder or Cobra AWP or Filco trucks to maintain
the "exclusivity" portion of the agreement between firms. They cannot lose their
exclusivity  because we cannot  meet their  sales  requirements.  This same type
arrangement was reached with Lakeland in New Zealand for 125 vehicles each year,
Airtrax  Africa for 125 units each year,  Omnilink in Greece and the Balkans for
125 units  each  year and  others.  The  dealers  in the US have not been  given
exclusive  territorial  rights.  They  are  required  to  purchase  one or  more
vehicles,  however, to become a dealer.  Credit is not authorized to any dealers
or foreign  representatives.  All sales are paid in  advance,  under terms of an
irrevocable  letter of credit or COD.  Not all dealers  have agreed to represent
the conventional  lift trucks line as some are established with other lift truck
manufacturers and representing a competing product could be a violation of their
existing  agreement(s).  Targeted  dealers  will  consist  of  selected  premier
forklift dealers,  currently selling other forklift products. The dealer network
will  consist of dealers  who have  substantial  market  share in the US, with a
history of being  able to sell and  repair  forklifts  and/or  related  material
handling  solutions.  Several of the  targeted  dealers  are  significant  sized
entities,  having annual sales in excess of $100 million. We expect to provide a
sales incentive to dealers through an aggressive pricing structure. Typically, a
dealer  willearn  a  commission  ranging  from  $500 to  $1,000 on the sale of a
competitive  forklift.  Our pricing  structure will enable the dealer to receive
commissions from $3,500 to $4,000 per sale of the SIDEWINDER ATX-3000.

In the materials handling  industry,  distributors of products like ours finance
their  respective  inventories in several  different  ways. The  arrangement for
distributor  financing varies,  depending upon the credit worthiness,  financial
capability and size of the distributor. Floor planning, which is arranged by the
dealer or by the manufacturer, usually consists of financing from 6 to 12 months
whereby the distributor pays interest only during the finance period.  If at any
time during the finance  period the  distributor  sells the  product,  or if the
finance period expires,  the distributor is required to pay the principal.  Many
dealers buy vehicles to lease or rent to consumers  and finance the vehicle much
the same manner as a standard consumer.  Under certain arrangements,  the dealer
applies receipts against principal and interest.



                                       11
<PAGE>
In May 2003, we entered into contracts with two Alaskan Native Corporation (ANC)
whose primary  purpose is to manage assets and conduct  business for the benefit
of its nearly 3,000 Alaskan Native shareholders.  The two corporations have been
granted  Section 8(a),  small  disadvantaged  business  status,  under the Small
Business  Administration.  Under their Section 8(a) status, the two corporations
can provide  sole source bid to provide  services  and  products,  such as those
developed by us, for resale to the United States Government. During fiscal 2003,
we did not effect any sales through this re-seller channel,  and can not predict
whether  we will  be able to do so in the  future.  A  primary  reason,  for the
non-sales is, of course, that we have not been in production.

In  addition  to  establishing  our  own  dealer  network,  we will  attempt  to
capitalize on the existing distribution network of MEC if we are able to reach a
formal agreement with MEC and successfully develop the  omni-directional  aerial
work platform  discussed  above.  We would seek to include our  omni-directional
forklift,  and the Filco truck line, if the proposed  acquisition  is completed,
into the distribution network of MEC, which consist of approximately 200 dealers
nationwide.  We cannot predict  whether a formal  agreement will be entered into
between  the  parties,  or whether  any sales will  result  form the aerial work
platform to be developed by the parties.

We also intend to use trade shows and print and  television  media to  advertise
and   promote  our   omni-directional   products.   Print  media  will   include
advertisements in national and international publications such as major material
handling equipment magazines,  and direct mailings to targeted  distributors and
end-users.  Heavy  equipment is rarely,  if at all,  advertised  on  television.
However,  we believe that  television  will  provide an effective  media for our
product,  due to its  unique  attributes.  We  believe  that due to the  current
economic  conditions,  we will be able to  capitalize  on favorable  advertising
pricing.  We also expect to be an exhibitor at industry trade shows from time to
time, including the bi-annual ProMat show located in Chicago, Illinois.

PRODUCT WARRANTY POLICIES

Our product  warranty policy is similar to the warranty  policies of other major
manufacturers,  i.e.,  one-year warranties on all parts and labor, and two years
on major  parts.  However,  our  vehicles  have very few parts to  warranty.  In
addition,  manufacturers  of our  parts and  vehicles  have  their own  warranty
policies that, in effect,  take the financial  exposure from our company.  There
are exceptions to this rule, such as the frame and significantly, the motors and
controllers.  These parts have an eighteen-month  guarantee or warranty, but the
coverage  begins  when the  product is shipped to us and not when the product is
purchased. As a result of this policy Danaher has increased the warranty from 12
to 18 months for us.

FACILITIES

We maintain our administrative  offices at 870B Central Avenue,  Hammonton,  New
Jersey 08361 on premises  owned by our  President.  As of December 31, 2003, the
arrangement  between the parties has been  rent-free.  In addition,  we maintain
limited offices at H&R Industries, Inc. ("H&R Industries"),  located at 100 Park
Avenue,  Warminster,   Pennsylvania  18974.  H&R  Industries  provides  contract
manufacturing and assembly  services to us,  including,  but not limited to, the
rental of offices used for the  engineering and  manufacturing  of our prototype
machines,   rental   space  to  test   prototypes   and  for  the   storage   of
production-readied parts. Through December 31, 2002, the arrangement between the
parties  has been  rent-free.  Effective  January 1, 2003,  we agreed to pay H&R
Industries  a rental  fee of $3,000 per month and have the option to pay in cash
or in the form of common stock. The arrangement is on a month-to-month basis. We
also rent space at Flemington, NJ from Hall's Warehouse Corp. wherein we conduct
product  testing  and  evaluation.  We pay a rental fee of $3,500 per month on a
month-to-month  basis.  We are  investigating  the  possibility  of a lease  for
assembly and distribution facilities in the second quarter of 2005.



                                       12
<PAGE>
MARKETS

FORKLIFTS

Our initial market focus will be directed to the forklift market. We believe the
commercial  version of the  omni-directional  forklift  will  revolutionize  the
materials  handling  and  warehousing   industries  creating  potential  markets
globally. Industry data shows that during 2003 approximately 174,000 and 550,000
units  were  sold in the  United  States  and  worldwide,  respectively  (Modern
Materials  Handling).  Based  upon an  average  per unit sale  price of  $28,500
(Modern  Materials  Handling  estimate),  the total market in the United  States
would  approximate $5 billion in 2003. This amount  represents  sales of a broad
range of  vehicles  with price  ranges  from  $18,000 to $31,000  for a standard
3000-pound  rated  vehicle to $75,000 or greater for  specialty  narrow aisle or
side loader vehicles.  Of the total market,  management  expects to compete with
mid-range  electrical and gas powered riders, and some specialty narrow aisle or
side loader vehicles.

AERIAL WORK PLATFORMS

Aerial Work Platforms are used in the construction  and warehousing  industries,
and are  ideally  suited  for omni  directional  technology.  According  to data
provided by the United States  Department of Commerce,  this market  consists of
approximately $1.2 billion in annual sales.  Aerial Work Platforms and man lifts
range in size from  single user lifts to large off road  machines.  Of the total
market, we expect to compete with a range of indoor man lifts.

COMPETITION

We expect to confront  competition from existing products,  such as standard and
"very narrow aisle" forklifts, and from competing technologies. Competition with
standard forklifts,  which retails from $16,000 to $31,000, will be on the basis
of utility,  price, and reliability.  We believe that we will compete  favorably
with a standard  forklift for reliability,  and that a purchase decision will be
based upon  weighing the  operational  advantages  of our  products  against its
higher  purchase  price.  VNA and  sideloader  forklifts  retail at  $75,000  or
greater.  While our SIDEWINDER  omni-directional lift truck cannot be considered
"very narrow aisle",  it can perform "narrow aisle" functions at a significantly
less cost. We also are aware of multi-directional forklifts now being offered by
other  manufacturers  that  retail  from  $42,000  and higher  for the  standard
version. These newer products have improved operational features,  however, they
are  unable  to travel in all  directions,  and hence are not  omni-directional.
These machines have to stop, turn all four wheels,  and then proceed to drive in
the sideward direction. Despite these improved operational features,  management
believes these manufacturers have adhered to older conventional methods and have
added a  substantial  amount of parts to their  forklifts  to  achieve  improved
functionality,  which  contrasts  with the design and features of our product as
discussed  previously  herein.  Therefore,  to that  extent,  we believe that we
maintain a competitive advantage to these newer products.

We recognize that many of these manufacturers are subsidiaries of major national
and international equipment companies, and have significantly greater financial,
engineering,  marketing, distribution, and other resources than us. In addition,
the patent on  omni-directional  technology  expired in 1990.  Although  we have
received patent protection for certain aspects of our technology,  no assurances
can be given that such patent protection will effectively thwart competition.

PATENTS AND PROPRIETARY RIGHTS

A form of our  omni-directional  technology was originally patented in 1973. The
original  patents  were  sold to the US Navy.  We  secured  a  transfer  of this
technology  from  the  Navy  in  1996  under  the  terms  of a  CRADA  Agreement
(Cooperative Research and Development Agreement) and have worked since that time
to  commercialize  omni-directional  products.  During this  period of time,  we
became the only  company to "drive"  these  vehicles  instead of moving  them at
walking  speeds with a "tethered"  joystick.  As a result,  we  discovered  that
certain  features  were  required  to make  these  driven  vehicles  usable in a
"commercial"  environment."  Many of the same  features  required  with "driven"
vehicles, were common to vehicles that were used at much slower speeds.



                                       13
<PAGE>
We received 3 patents  regarding the  "redesign" of the wheel.  We have received
patent protection  regarding the algorithms used to control vehicular  movement.
We have also applied for patents with  respect to a movable  operator's  control
station and a munitions  handler,  among  others.  We are  satisfied  that it is
patent protected against  infringement by other companies,  most especially with
vehicles  that use a wheel type such as those used and patented by us.  However,
some of our competitors  could reverse  engineer our technology to build similar
products.  In  addition,  omni-directional  technology  was  invented  in  1973.
Therefore,  certain  variations  to the  technology  could be made whereby other
companies may find ways to circumvent our patents or use the technology  without
infringing upon our intellectual property rights.

On January  22,  2002,  we  received  US patent  #6,340,065  relating to our low
vibrations   wheels.   On  May  28,  2002,  we  received  US  patent  #6,394,203
encompassing  certain aspects of the  omni-directional  wheel with some features
specific to the forklift, and in April 15, 2003 we received US patent #6,394,203
relating to methods for  designing  low-vibration  wheels.  We also have several
patent  applications  pending  relating to other aspects of our  technology.  We
expect to make future patent  applications  relating to various other aspects of
our omni-directional technology. We also have filed a patent application for our
hybrid power module.  At this time, no foreign  patents have been issued for any
of  our  technology.  In  December  1997,  we  were  awarded  a  patent  for  an
omni-directional helicopter ground-handling device.

We also seek to protect our  proprietary  technology  through  exclusive  supply
contracts with manufacturers for specially designed and manufactured components.

PRODUCT LIABILITY

Due to  nature  of our  business,  we may  face  claims  for  product  liability
resulting from the use or operation of our forklifts or other products.

Presently,  we do not maintain  any product  liability  insurance.  We intend to
obtain  such   insurance   commensurate   with  the  initial   shipment  of  our
omni-directional forklifts

EMPLOYEES

As of April  15,  2005,  we have six full  time  employees  which  includes  our
President, two part time employees, and engage consultants from time to time. We
have no  collective  bargaining  agreements  with our  employees and believe our
relations with our employees are good.

ITEM 2. DESCRIPTION OF PROPERTY

We maintain our administrative  offices at 870B Central Avenue,  Hammonton,  New
Jersey 08361 on premises  owned by our  President.  As of December 31, 2003, the
arrangement  between the parties has been  rent-free.  In addition,  we maintain
limited offices at H&R Industries, Inc. ("H&R Industries"),  located at 100 Park
Avenue,  Warminster,   Pennsylvania  18974.  H&R  Industries  provides  contract
manufacturing  and  assembly  services  to us.  As of  December  31,  2002,  the
arrangement  between the parties has been rent-free.  Effective February 1, 2003
we agreed to pay H&R  Industries  a rental  fee of $3,000 per month and have the
option to pay in cash or in the form of common stock.  The  arrangement  is on a
month-to-month basis. We also rent space at Flemington, NJ from Hall's Warehouse
Corp. wherein we conduct product testing and evaluation.  We pay a rental fee of
$3,500 per month on a month-to-month basis. We are investigating the possibility
of a lease for assembly and  distribution  facilities  in the second  quarter of
2005



                                       14
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.

We are not  currently  a party  to,  nor is any of our  property  currently  the
subject of, any pending legal  proceeding.  None of our  directors,  officers or
affiliates is involved in a proceeding adverse to our business or has a material
interest adverse to our business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of security  holders during the fourth quarter
of the fiscal year covered by this report.



                                       15
<PAGE>
                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

                          MARKET FOR OUR COMMON SHARES

Our common stock has been traded on the  Over-The-Counter  Bulletin  Board under
the symbol "AITX".  The table below sets forth, for the periods  indicated,  the
high and low  closing  prices per share of the common  stock as  reported on the
Over-The-Counter   Bulletin  Board.  These  quotations  reflect  prices  between
dealers, do not include retail mark-ups,  markdowns, and commissions and may not
necessarily  represent actual  transactions.  The prices are adjusted to reflect
all stock splits.



                                                    High           Low
                                                    ----           ----
2004    First Quarter                               1.60           0.65
        Second Quarter                              1.45           0.75
        Third Quarter                               1.15           0.61
        Fourth Quarter                              3.35           0.81

2003
        First Quarter                               1.50           0.80
        Second Quarter                              1.68           0.87
        Third Quarter                               1.20           0.80
        Fourth Quarter                              1.01           0.65



As of March 31, 2005, there were 21,256,215 shares of common stock outstanding.

As of March 31, 2005, there were approximately 974 stockholders of record of our
common stock, respectively. This does not reflect those shares held beneficially
or those shares held in "street" name.

We have not paid  cash  dividends  in the  past,  nor do we  expect  to pay cash
dividends for the foreseeable future. We anticipate that earnings,  if any, will
be retained for the development of our business.

<TABLE>
<CAPTION>

EQUITY COMPENSATION PLAN INFORMATION
------------------- -----------------------  -------------------- ---------------------------------
Plan category      Number of securities to   Weighted-average      Number of securities
                   be issued upon exercise   exercise price of     remaining available
                   of outstanding options,   outstanding options,  for future issuance
                    warrants and rights      warrants and rights   under equity compensation plans
                                                                   (excluding securities
                                                                   reflected in column (a))
                                 (a) (b) (c)

------------------- ----------------------- --------------------- ---------------------------------
<S>                              <C>                <C>                        <C>
Equity compensation              -0-                -0-                        -0-
plans approved by
security holders
------------------- ----------------------- --------------------- ---------------------------------
Equity compensation              -0-                -0-                        -0-
plans not approved
by security holders
------------------- ----------------------- --------------------- ---------------------------------
 Total                           -0-                -0-                        -0-
------------------- ----------------------- --------------------- ---------------------------------
</TABLE>


                                       16
<PAGE>
We  currently  do not  have  an  equity  compensation  plan  for  our  officers,
directors,  employees  or  consultants.  However,  certain of our  officers  are
compensated  with  stock  options to  purchase  shares of our  common  stock.  A
description  of these  options  can be found in this  annual  report  under  the
heading "Item 10", "Executive Compensation".

RECENT SALES OF UNREGISTERED EQUITY SECURITIES

In  February  and May of 2005,  30,000  shares  of  common  stock to two  public
relations consulting firm as compensation for services performed on our behalf.

On February 11, 2005, we entered into a Subscription Agreement pursuant to which
we  sold an  aggregate  of  $5,000,000  of  principal  amount  promissory  notes
convertible into shares of our common stock, no par value, at a conversion price
equal to $1.30 per share,  and an  aggregate  of  2,884,615  Class A and Class B
share  purchase  warrants  to  purchase  shares of our  common  stock to certain
purchasers  who  are a  party  to  the  Subscription  Agreement.  First  Montauk
Securities  Corp.  acted as selling  agent in connection  with the offering.  We
issued a total of 384,616  warrants on February 11, 2005 to the selling agent as
partial  consideration  for services  performed in connection with the offering.
The Class A warrants are  exercisable at a price equal to $1.85 from the date of
issuance  until 5 years  after  the  closing  date.  The  Class B  warrants  are
exercisable  at a price equal to $2.11,  representing  101% of the 3 day average
closing bid prices of our common stock on the trading day immediately  preceding
the  closing  date,  from the date of  issuance  until 5 years after the closing
date. The Class A and Class B warrants both have a cashless feature.

On November  22,  2004,  we entered  into a Purchase  Agreement  (the  "Purchase
Agreement")  pursuant  to which we sold and  issued  1,125,000  shares of common
stock,  no par value,  and common stock  purchase  warrants to purchase  562,500
shares of our common stock to several  accredited  investors  who are a party to
the Purchase Agreement for an aggregate purchase price of $900,000.  Thereafter,
on  November  23,  2004,  we entered  into  Joinders to the  Purchase  Agreement
pursuant  to which we sold and  issued an  additional  515,000  shares of common
stock and warrants to purchase an additional  257,500 shares of our common stock
to several accredited  investors who are a party to the Joinders to the Purchase
Agreement for an aggregate purchase price of $412,000. The closing price for our
common stock on November 22 and November 23, 2004 was $1.56 and $1.40 per share,
respectively.  The stock had a per share  purchase  price  equal to $.80.  First
Montauk  Securities  Corp.  acted  as  placement  agent in  connection  with the
offering. We issued 125,000 warrants on November 22, 2004 and 51,500 warrants on
November  23,  2004  to the  placement  agent  and to  certain  partners  of the
placement agent as partial  consideration  for services  performed in connection
with the issuance of common stock and warrants to the purchasers pursuant to the
Purchase  Agreement to purchase  62,500 and 25,750  shares of our Common  Stock,
respectively. The warrants are exercisable from November 22, 2004 until November
22, 2009 and from November 23, 2004 until November 23, 2009, each at an exercise
price of $1.25 per share.

In October 2004,  we issued an aggregate of 114,324  shares of common stock to 6
of our directors as compensation for services performed on our behalf in each of
their  capacities as directors of our company.  The closing price for our common
stock on October 15, 2004 was $1.04 per share,  resulting in an aggregate  value
of $118,897 for this compensation.

In October  2004,  we issued an aggregate of 86,050  shares of common stock to a
certain  investor  relations   consulting  firm  as  compensation  for  services
performed on our behalf.  The closing  price for our common stock on October 15,
2004 was $1.04 per share,  resulting in an  aggregate  value of $89,492 for this
compensation.

In October  2004,  we issued an aggregate of 24,000  shares of common stock to a
certain public relations  consulting firm as compensation for services performed
on our behalf.  The closing  price for our common  stock on October 15, 2004 was
$1.04  per  share,   resulting  in  an  aggregate  value  of  $24,960  for  this
compensation.

Between  September 8, 2004 and December 20, 2004, we received  subscriptions for
an aggregate of 1,812,403 shares of our common stock and an aggregate of 906,200
shares of common stock issuable upon exercise of common stock purchase  warrants
to 33 accredited  investors pursuant to a private placement offering.  The stock
was sold at $.80 per  share.  The  closing  price of our  common  stock  between
September  8, 2004 and  December 20, 2004 ranged from a low of $.80 to a high of
$1.58 per share.  The warrants are  exercisable  at a price equal to $1.25 for a
period of 5 years from the date of issuance.

In June and October  2004,  we issued an  aggregate  of 47,850  shares of common
stock to a certain  vendor  as  compensation  for  dealer  account  solicitation
services  performed on our behalf. The closing price of our common stock on June
15,  2004 and  October  15,  2004 was $1.05 and $1.04 per  share,  respectively,
resulting in an aggregate value of $50,003.25 for this compensation.

In May 2004, we and several  accredited  investors  entered into a  Subscription
Agreement  whereby the  investors  agreed to purchase an  aggregate of 3,600,125
shares of common stock at a price of $0.80 per share for an  aggregate  purchase
price of $2,855,100.  In addition, the investors received warrants,  exercisable
at $1.25 per share,  to purchase 50% of the shares issued.  The closing price of
our common stock on May 13, 2004,  the closing date for this private  placement,
was $.99 per share.


                                       17
<PAGE>
On April 15, 2004,  we issued an  aggregate of 10,767  shares of common stock to
Basile & Testa, PA, as compensation for legal services  performed on our behalf.
One of our former directors,  Mr. Frank Basile, was a partner at this firm. This
represented  payment of $7,866.54 at $.73 per share for services  performed from
February 28, 2002 through April 14, 2004.  The share price on April 15, 2004 was
$.99 per share.

On March 31, 2004,  we issued an aggregate of 14,529 shares of common stock to a
certain  engineering  firm as compensation for electrical  engineering  services
performed on our behalf. The closing price of our common stock on March 28, 2004
was $1.04 per share,  resulting in an  aggregate  value of  $15,010.16  for this
compensation.

In October 2003,  we issued an aggregate of 345,000  shares of common stock to a
certain  consulting firm as compensation  for services  performed on our behalf.
The closing price of our common stock on October 15, 2003 was $.99, resulting in
an aggregate value of $341,550 for this compensation.

In August 2003 and February  2004,  we issued an  aggregate of 12,500  shares of
common  stock to an employee  as  compensation  for  services  performed  on our
behalf.  The closing price of our common stock was $1.05 and $.67,  resulting in
an aggregate value of $10,750 for this compensation.

From July to September  2003,  we issued an aggregate of 91,020 shares of common
stock to a  certain  investor  relations  consulting  firm as  compensation  for
services  performed on our behalf. The average closing price of our common stock
between July and September of 2003 was $.99,  resulting in an aggregate value of
$90,109.80 for this compensation.

In June and  September  2004,  we issued an  aggregate of 6,174 shares of common
stock to certain consultants for computer  programming services performed on our
behalf.  The closing  price of our common stock on September  15, 2004 was $.82,
resulting in an aggregate value of $5,062.68 for this compensation.

On June 10, 2003,  we issued an aggregate of 30,000  shares of common stock to a
certain  investor  relations   consulting  firm  as  compensation  for  services
performed on our behalf.  The closing price of our common stock on June 10, 2003
was $1.45, resulting in an aggregate value of $43,500 for this compensation.

On May 8, 2003,  we issued an  aggregate  of 350,000  shares of common  stock to
third  parties  pursuant to certain sales  agreements.  The closing price of our
common  stock on May 8,  2003 was  $1.50,  resulting  in an  aggregate  value of
$525,000 for this compensation.

In April and November of 2003, we issued an aggregate of 57,139 shares of common
stock to a certain financial  consultant as compensation for services  performed
on our  behalf.  The  closing  price of our  common  stock  was  $1.05 and $.85,
resulting in an aggregate value of $54,282.05 for this compensation.

In April and June of 2003,  we issued an  aggregate  of 60,000  shares of common
stock to 6 of our directors as compensation for services performed on our behalf
in each of their  capacities  as directors of our company.  The closing price of
our common stock was $1.01 and $1.45, resulting in an aggregate value of $73,800
for this compensation.

On January 20,  2003,  we issued  options to purchase  an  aggregate  of 180,000
shares of common  stock to our  President,  Peter  Amico,  as  compensation  for
services  performed  on  our  behalf  under  Mr.  Amico's  Original   Employment
Agreement.  Of the  options,  1/5 of the options  were  exercisable  for a total
consideration  of a $1.00,  1/2 of the options  were  exercisable  at 30% of the
lowest price paid for the stock in the 30 day period preceding exercise for each
year of the contract,  and the remaining  options were exercisable at 15% of the
lowest  price paid for the stock in the 30 day period  preceding  exercise.  The
closing price of our common stock on July 1, 2002 was $2.20 share.

From October 2002 through April 2005,  we issued an aggregate of 137,500  shares
of common stock to three of our employees as compensation for services performed
on our behalf, and as employee incentive bonuses.

In August 2002,  we issued an aggregate of 25,000  shares of common stock to one
of our  directors,  and options to purchase  5,000 shares of common stock to our
Secretary,  each as compensation  for services  performed on our behalf in their
respective capacities.  The closing price of our common stock on August 15, 2002
was $1.86 share.

On July 23, 2002, we issued an aggregate of 160,000  shares of common stock to a
certain  investor  relations   consulting  firm  as  compensation  for  services
performed on our behalf.  The closing price of our common stock on July 23, 2002
was $1.50, resulting in an aggregate value of $240,000 for this compensation.


                                       18
<PAGE>
In April  2002,  we issued an  aggregate  of 1,930  shares of common  stock to a
certain  engineering  firm as compensation for electrical  engineering  services
performed on our behalf. The closing price of our common stock on April 15, 2002
was $1.01, resulting in an aggregate value of $1,949.30 for this compensation.

From January 2002 through April 2005, we issued an aggregate of 60,200 shares of
our  common  stock to Harry  Schmidt  Associates,  PA as rental  payments  under
certain  leases  which we entered  into with said  firm.  These  stock  payments
represented  lease  payments of  $3,000.00  per month from  January 2002 through
April 2005, or 40 months, totaling $120,000.00.

* All of the above  offerings  and sales were deemed to be exempt under rule 506
of Regulation D and Section 4(2) of the Securities  Act of 1933, as amended.  No
advertising or general solicitation was employed in offering the securities. The
offerings and sales were made to a limited  number of persons,  all of whom were
accredited  investors,  business  associates of Airtrax or executive officers of
Airtrax,  and  transfer  was  restricted  by  Airtrax  in  accordance  with  the
requirements  of the Securities Act of 1933. In addition to  representations  by
the above-referenced  persons, we have made independent  determinations that all
of the above-referenced  persons were accredited or sophisticated investors, and
that they were  capable of analyzing  the merits and risks of their  investment,
and  that  they   understood  the  speculative   nature  of  their   investment.
Furthermore,  all of the  above-referenced  persons were provided with access to
our Securities and Exchange Commission filings.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Some  of  the  information  in  this  annual  report  contains   forward-looking
statements that involve  substantial risks and  uncertainties.  You can identify
these  statements  by  forward-looking  words such as "may",  "will",  "expect",
"anticipate", "believe", "estimate" and "continue", or similar words. You should
read statements that contain these words carefully because they:

o    discuss our future expectations;

o    contain projections of our future results of operations or of our financial
     condition; and

o    state other "forward-looking" information.

We believe it is important to communicate our expectations.  However,  there may
be events in the future that we are not able to accurately predict or over which
we have no control.  Our actual  results and the timing of certain  events could
differ materially from those anticipated in these forward-looking  statements as
a result of certain  factors,  including  those set forth under "Risk  Factors,"
"Business" and elsewhere in this prospectus. See "Risk Factors."

OVERVIEW

Since 1995,  substantially  all of our  resources and  operations  have directed
towards the development of the omni-directional wheel and related components for
forklift  and other  material  handling  applications.  Many of the  components,
including the unique shaped  wheels,  motors,  and frames,  have been  specially
designed by us and specially  manufactured.  Four pilot models of the commercial
omni-directional lift truck are currently operational.

We have commenced and are near  completion of getting the parts together for our
initial  production  run  consisting  of 10  units  of our  Sidewinder  ATX-3000
Omni-Directional  Lift Truck.  Substantially  all of the parts including frames,
motors, controllers,  and micro-processors have been ordered and received by us,
and are partially  assembled.  The initial production run will be completed upon
receipt of wheels and other  components  from suppliers which is expected in the
third and fourth quarters of 2004. Unit assembly for the first 10 unites will be
completed by us at the H&R Industries  facility in Warminster,  PA. UL and final
ANSI  testing is expected  to be  completed  from 30 to 90 days from  production
completion, although some parts of the final UL testing must be completed at the
plant of final assembly.  Following  required  testing,  we expect to sell these
units to select  dealers in the United States.  We have received  orders for our
initial run production run of 10 units.


                                       19
<PAGE>
We have incurred losses and experienced  negative  operating cash flow since our
formation.  For our fiscal years ended  December 31, 2004 and 2003, we had a net
loss of $(2,272,200) and  $(2,282,946),  respectively.  We expect to continue to
incur significant expenses. Our operating expenses have been and are expected to
continue to outpace revenues and result in significant  losses in the near term.
We may never be able to reduce  these  losses,  which  will  require  us to seek
additional debt or equity financing.

Our principal  executive offices are located at 870B Central Avenue,  Hammonton,
NJ 08037 and our telephone number is (609) 567-7800.  We are incorporated in the
State of New Jersey.

COMPANY HISTORY

We were  incorporated  in the State of New Jersey on April 17, 1997.  On May 19,
1997, we entered into a merger  agreement  with a  predecessor  company that was
incorporated on May 10, 1995. We were the surviving company in the merger.

Effective November 5, 1999, we merged with MAS Acquisition IX Corp ("MAS"),  and
were the surviving company in the merger.  Pursuant to the Agreement and Plan of
Merger,  as amended,  each share of common stock of MAS was converted to 0.00674
shares of our company.  After giving effect to fractional and other  reductions,
MAS shareholders received 57,280 of our shares as a result of the merger.


In March 2004, we reached an agreement in principal,  subject to certain closing
conditions,  with Fil Filipov to acquire 51% of the capital stock of Filco GmbH,
a German  corporation.  In April 2003, Filco GmbH acquired  substantially all of
the assets of Clark  Material  Handling  of Europe  GmbH  which were  located at
Clark's  facility in  Rheinstrasse  Mulheim  a.d.  Ruhr,  Germany.  These assets
consisted of all of the tooling, machinery, equipment,  inventory,  intellectual
property,  office furniture and fixtures,  and personnel  necessary to build the
entire Clark line of lift trucks, but excluded the building and land, as well as
the rights to the Clark name.  Further,  Filco GmbH has entered into an 18-month
lease  agreement with the current  property owner with an option to purchase the
200,000 square foot building and land for 4.7 million euros,  and Filco GmbH has
been  operating  this plant since July 1, 2003.  Filco's  option to purchase the
200,000  square foot building and land for 4.7 million euros expires on December
31, 2005


In October 2004,  Mr. Filipov and we agreed to modify our agreement in principal
so as to increase the number of shares of the capital  stock of Filco GmbH which
we will acquire, if we finalize the acquisition,  from 51% to 75.1%. The purpose
of this change is to give us control of Filco GmbH in accordance with USGAAP and
German law considerations  regarding consolidation and capitalization.  Further,
this change was offered and accepted in consideration of our agreeing to advance
Filco additional funds, in the form of a loan, to fund the start up of the Filco
operation prior to the consummation of the transaction. All other conditions and
terms of the agreement between the parties shall remain the same.


We have not yet finalized nor executed the acquisition agreement but have loaned
Filco GmbH an aggregate principal amount of $2,700,000, exclusive of interest at
8% per annum,  pursuant to a series of unsecured  promissory notes. During 2005,
we intend to secure our loans with Filco's plant machinery,  equipment and other
plant property,  and intellectual  property,  including designs and drawings. We
have used proceeds from the private placement offerings that we completed during
2004 and 2005 to fund such  loans.  Filco  GmbH has  informed  us its  estimated
working  capital  needs during the next year will be  approximately  $5,000,000,
with  $1,500,000  needed  during  January  2005,  in  order  for  it to  achieve
profitable operations. Should we complete the acquisition of Filco GmbH, we will
need to raise  additional  capital  through  equity or proper lines of credit in
order to fund the working capital needs of Filco GmbH.

We have not yet completed the acquisition  because we have not raised sufficient
funding to provide  adequate  operating  capital for Filco,  as set forth in the
closing  conditions in the Acquisition  Agreement.  We want to ensure that Filco
has the necessary  capital to achieve  profitable and full operations before the
acquisition is completed. Our ability to obtain funding has been limited. Due to
Filco's  monthly  cash burn  rate,  adequate  funding  from us is  necessary  to
complete the  acquisition.  We anticipate  completing the  acquisition  upon the
effectiveness of this registration statement and upon obtaining adequate funding
following such effectiveness.

We have  continued  to fund Filco  during the time when its plant was closed for
much of 2004 in order to assist the company in reopening its plant and achieving
the  recommencement of operations.  Loans provided by us have been used by Filco
to pay some debt,  to pay employee  payroll at a 20% short work rate  (employees
have been working 20% of the time and  unemployment  has compensated the balance
of their  payroll),  to pay current  heating,  lighting  and power,  telephones,
leases and to order parts to get into production.


In  general,  the  Filco  transaction  could  provide  us  access  to  strategic
partnerships  in personnel and successful  business  ventures,  sales and market
exposure in Europe.

The proposed acquisition of Filco may include a leased  manufacturing  facility,
with an experienced workforce,  inventory,  intellectual property, and machinery
sufficient  to fill  200,000  square feet of assembly and  manufacturing.  Filco
could provide us with cliental throughout Europe and the Middle East. This could
provide us with the ability to sell a complete  line of lift  trucks  beyond the
limited  sized  Sidewinder   Omni-Directional   Lift  Truck.  It  would  provide
manufacturing or assembly for our products,  including,  but not limited to, the
aerial  work  platforms  or any other  products  we develop or can  contract  to
assemble with other companies.


                                       20
<PAGE>
In  addition,  if the  acquisition  is  completed  we  anticipate  that  we will
establish manufacturing capability in Europe, to complement our manufacturing in
the United  States.  We  currently  purchase a high  percentage  of our parts in
Europe,  including,  but not limited to, the frames  from  Bulgaria,  motors and
controllers  manufactured in the Czech Republic and Sweden,  and  transmissions,
brakes and seats  manufactured in Germany.  The mast could be manufactured,  the
frames could be powder coated  (painted),  and European parts could be assembled
at the Filco plant.  Partially assembled vehicles would be shipped to the United
States for final  assembly.  Wheels and other parts for the vehicles may be sold
in Europe or Middle  Eastern  countries  could be shipped from the United States
for  the  completion  of  manufacturing  at  Filco.  We  believe  we  could  cut
manufacturing   costs  because  our  material   handling   equipment   could  be
manufactured  in the  continent  in  which it is sold,  i.e.,  Europe.  With our
manufacturing  capabilities  in the United States,  this  potential  acquisition
would allow a portion of the Sidewinder  becoming  assembled and manufactured in
each of the two  continents  that  purchase  and use about  70% of all  material
handling equipment worldwide.

The primary objective that must be achieved to reach the aforementioned  goal(s)
is to secure  the  necessary  financing  required  to fund the  acquisition  and
manufacturing objectives of Filco and us. There can be no assurance that we will
be able to raise  sufficient  capital  necessary to complete the acquisition and
fund the manufacturing objectives of Filco and us.

Loans to Filco GmbH

From May 5, 2003 through  September 2, 2003, we loaned Filco $365,435 to acquire
our initial  interest in Filco.  Such funds were  provided in the form of a loan
because  we were not able to come up with  sufficient  funding  to  acquire  our
initial interest. Filco repaid principal and interest under this loan to us.

In March of 2004, a tentative  agreement was  negotiated  with the principals of
Filco in connection with the proposed acquisition.  Our management determined to
provide Filco limited  funding in the form of loans,  until  financing  could be
obtained which would help guarantee that the operating  capital needed for Filco
operations  could, in fact, be obtained.  The tentative  agreement  reached with
Filco provided that we would take a 51% controlling ownership interest in Filco.
The tentative agreement required that we provide sufficient  funding,  which the
parties  estimated  would be  approximately  $1.3 million to be allocated in the
form of equity in  Filco.  The  tentative  agreement  required  that we secure a
guaranteed  credit  line for  Filco of not less  than $5  million  to be used as
operating  capital.  A later addendum to the tentative  agreement stated that we
would acquire 75.1% controlling ownership interest in Filco.

The amounts loaned to Filco to date, even if unrecoverable, would not prevent us
from commencing the manufacture of the Sidewinder  Omni-Directional  Lift Truck.
The manufacture and sale of omni-directional  material handling equipment is our
primary goal.  During the second quarter of 2005, we realized limited revenues f
from the first sales of the Sidewinder Omni-Directional Lift Truck.


The loans are to be repaid on or prior to December 31, 2005. We believe that our
secured and unsecured loans to Filco are recoverable if the proposed acquisition
is not  completed.  We  expect  to  begin  collecting  on our  loans,  including
principal and interest,  from Filco when the company  becomes fully  operational
and  profitable,  which we  anticipate  will occur during  2006.  If this is not
realized,  we intend to obtain  security  interests in Filco's plant  machinery,
equipment and other plant property, and intellectual property, including designs
and drawings  for over 100 models of Clark lift trucks.  We intend to have Filco
engage an independent  appraiser in 2005 to appraise and value Filco's equipment
and  machinery.  Such  appraisal  may  not  include  the  valuation  of  Filco's
intellectual property, which Filco and we believe have significant value.

We loaned Filco approximately $2.7 million through the end of 2004 and loaned an
additional  $1.5 million  during the first quarter of 2005 exclusive of interest
at 8% per annum,  pursuant to a series of  unsecured  promissory  notes.  During
2005, we intend to secure our loans with Filco's plant machinery,  equipment and
other plant property, and intellectual property, including designs and drawings.
We  intend  to  provide  another  $5  million  to  Filco,  either in the form of
guaranteed  credit lines or through  additional  sales our  securities.  We have
contacted several financial  institutions  attempting to secure credit lines for
Filco in the  amount of $5  million.  Thus far,  we have  received  interest  in
providing  said  credit  line to Filco under the  conditions  that any  proposed
credit line is guaranteed by us and that Filco is operational  and able to repay
such debt from current earnings.  The condition that FiLCO be able to repay from
current  earnings makes the credit line from these sources  unobtainable at this
time.


Filco GmbH's Financial Condition

The improvement of Filco's financial condition and results of operations, as set
forth below,  furthers our belief that we would be able to recover principal and
interest due under our  unsecured  loans to Filco in the event that the proposed
acquisition is not completed.

Filco  manufactured  approximately  550 lift  trucks  in 2003  and very  limited
numbers  in 2004.  In 2004,  Filco did not have  adequate  operating  capital to
conduct  business  operations and had numerous issues with its worker's union to
resolve.  It was and is  considered  by Filco's  management,  a better long term
negotiating tactic with unions to threaten to close the facility completely than
to attempt to run the facility during negotiations. Accordingly, for this reason
as well as the lack of  funding,  Filco's  plant was closed for much of 2004 and
the beginning of 2005.


                                       21
<PAGE>

Filco  reached  accord  with the  union on March  30,  2005.  Employees  will be
required to work a 40-hour week instead of 35 prior to additional  hires.  Wages
have been decreased  20%. The resolution of the problems Filco was  experiencing
with its union is critical to the future  success of the  company.  In addition,
the  loans  that  we  granted  to  Filco  as of the  date  hereof  have  created
considerable   improvements  in  Filco's  financial  condition  and  results  of
operations  by allowing the Company to pay debt and order parts for  production.
This influx of cash  transferred  some debt to a single  creditor  who is in the
process of acquiring Filco. The improvements to the Filco balance sheet and cash
flow have  considerably  declined in value in the past  several  months as Filco
continues to burn funds awaiting additional operating capital from us and parts.

As a result of the above,  Filco  recommenced  production of standard  forklifts
during the second  quarter of 2005. In April 2005,  Filco shipped new trucks and
at least 14 re-conditioned  vehicles. In addition, Filco began the assembly of a
Russian  tractor  for  distribution  in  Europe.  This  agreement  calls for the
production  of 700 units to be  assembled  each  year at a price of 2,800  Euros
each. The Russian company will supply all parts. Filco has not yet achieved full
production of forklifts under the contract with the Russian company until we can
obtain sufficient funding to provide capital to Filco in the form of loans which
will allow the  company  to  undertake  this  production  and  ensure  continued
operations  at Filco in general.  It is  anticipated  that Filco will be in full
forklift  production  late in the third  quarter of 2005.  The final  production
schedule is contingent  upon supply of parts from various venders and sufficient
operating capital.

CRITICAL ACCOUNTING POLICIES

The Securities and Exchange  Commission  ("SEC")  defines  "critical  accounting
policies" as those that require  application  of  management's  most  difficult,
subjective or complex judgments, often as a result of the need to make estimates
about the  effect of matters  that are  inherently  uncertain  and may change in
subsequent periods.

Not  all of the  accounting  policies  require  management  to  make  difficult,
subjective or complex judgments or estimates.  However,  the following  policies
could be deemed to be critical within the SEC definition.

REVENUE RECOGNITION

Revenue  on  product  sales  is  recognized  when  persuasive   evidence  of  an
arrangement  exists,  such as when a purchase order or contract is received from
the customer,  the price is fixed, title to the goods has changed and there is a
reasonable  assurance of collection  of the sales  proceeds.  We obtain  written
purchase  authorizations from our customers for a specified amount of product at
a  specified  price  and  consider  delivery  to have  occurred  at the  time of
shipment.  Revenue  is  recognized  at  shipment  and we  record a  reserve  for
estimated  sales  returns,  which is  reflected as a reduction of revenue at the
time of revenue recognition.

Revenues from research and development  activities  relating to firm fixed-price
contracts are generally recognized as billing occurs. Revenues from research and
development  activities  relating  to  cost-plus-fee   contracts  include  costs
incurred plus a portion of estimated  fees or profits based on the  relationship
of costs incurred to total  estimated  costs.  Contract costs include all direct
material  and labor  costs and an  allocation  of  allowable  indirect  costs as
defined by each contract,  as  periodically  adjusted to reflect  revised agreed
upon rates. These rates are subject to audit by the other party.  Amounts can be
billed on a bi-monthly  basis.  Billing is based on subjective  cost  investment
factors.


                                       22
<PAGE>
YEAR ENDED DECEMBER 31, 2004 COMPARED TO YEAR ENDED DECEMBER 31, 2003

RESULTS OF OPERATIONS

We have been a development  stage company for the 2004 and 2003 periods and have
not engaged in  full-scale  operations  for the periods  indicated.  The limited
revenues   for  the   periods   have   been   derived   from  the   sales  of  a
non-omni-directional product and from contracts with the United States Navy that
relate to the research and potential application of omni-directional  technology
for  military  use. The  available  dollar  limits of contracts  with the United
States Navy were substantially  completed during 2002, and we recognized limited
revenues  from the United  States Navy  contract  during 2003.  During 2005,  we
expect to transition from a development stage company to an operating company as
it completes the initial run of its forklifts. Consequently, management believes
that the year-to-year  comparisons  described below are not indicative of future
year-to-year comparative results.

There was no billing for the Navy MP2 project in 2004. The MP2 munitions carrier
was  delivered  to the Navy on/or about April 1, 2004 for their  evaluation  and
testing.  An  Omni-Direction  engine handler  developed for and with the Navy is
expected to be "loaned"  to the Navy during 2005 for an  evaluation.  An ETU-110
engine  handler was delivered to us by the Navy and is US  government  property.
The ETU-110 was cleaned,  re-painted,  and placed in working condition by us. We
provided  all  required  parts,  labor  and  technology  to  make  this  vehicle
omni-directional.  The cost for the parts and  labor was  allocated  to "Cost Of
Goods  Sold" in our  financial  statements  for fiscal  2003.  Since these funds
exceeded  the amount  contracted  with the Navy,  and an option  for  additional
services was not agreed upon,  the labor and materials  provided to the Navy for
building  the  ETU-110  engine  handler  remains  our  property.  This  piece of
equipment is therefore  owned  jointly by the US Navy and us and will be used to
demonstrate this technology to the US government and other military services.

We  believe  that the  joint  cooperation  between  us and the Navy with the MP2
contract, including the building of the ETU-110 omni-directionalengine  handler,
has bolstered the potential use of our technology within the military. We do not
intend to incur  additional  costs  with the US Navy  unless we incur  potential
expenses in demonstrating the ETU-110  omni-directional engine handler, or other
omni-directional vehicles.

REVENUES

Revenues  for  fiscal  2004 were $0,  representing  a decrease  of $21,879  from
revenues  of $21,879  for the 2003  period.  This  decrease  is  revenue  can be
attributed to completion of our contract with the US Navy.

COST OF GOODS SOLD

Cost of sales for 2004 was $0 which reflects a $91,283  decrease from $91,283 in
fiscal 2003. This decrease in cost of goods sold can be attributed to completion
of our contract with the US Navy.

OPERATING AND ADMINISTRATIVE EXPENSES

Operating and administrative  expenses which includes  administrative  salaries,
depreciation  and  overhead  for  the  2004  period  totaled   $2,529,775  which
represents  an increase  of  $421,405  from  $2,108,370  incurred  in 2003.  The
increase is due  primarily to  consulting  fees paid to various third parties in
the form of common stock which totaled  $1,332,989,  including,  (i) $447,210 to
consulting  firms;  (ii) $55,870 for payment of legal services  performed by our
legal counsel;  (iii) $33,350 for the payment of rental expenses;  (iv) $145,000
in consideration for public relations services including brochures, website, and
company  videos;   (v)  $260,050  for  services   performed  by  our  accounting
consultant;   (vi)  $50,500  to  our  directors  as  compensation  for  services
performed;  (vii) $95,899 in employee  stock  options and bonuses;  (viii) $0 in
options to our CEO;  and (ix)  $146,892  as  compensation  for public  relations
services.  In  addition,  the  increase  is due to costs  related to the further
development of our omni-directional  technology, which included preparations for
the  ANSI  (American  National  Standards  Institute),  compliance  testing,  UL
(Underwriters  Laboratories)  compliance and preparation for initial production.
Interest  expense payable to third party suppliers  totaled $30,894 for the 2004
period,  representing  a $13,044  decrease from $43,938 for the 2003 period.  In
2004, we posted  $86,667 in other income from  interest  payments due from Filco
GmbH,  which contrasts with $7,914 for the prior year end. Net loss before taxes
in 2004 was $2,471,023 which reflects an increase of $257,225 from $2,213,798 in
net loss before taxes for the 2003 period.

In 2004, we recorded  $175,413 as the expected sale of our net operating  losses
and tax credits under a New Jersey  program  described  further in Liquidity and
Capital  Resources below.  This amount  contrasts with $210,553  recorded during
2003.

                                       23
<PAGE>
Loss  attributable to shareholders  for 2004 was $2,272,200  which  represents a
decrease of $80,543 from $2,191,657 during the 2003 period. During 2004, we paid
dividends on our preferred stock to a controlling  shareholder of our company in
the amount of $131,771.  For the year ended December 31, 2003, we paid dividends
on our preferred stock to a controlling shareholder of our company in the amount
of  $80,749.  Deficit  accumulated  during  development  stage  during  2004 was
$2,403,971  (or a loss  per  share  of  $0.19  for  common  stockholders)  which
represents an increase of $131,565 from $2,272,406 (or a loss per share of $0.29
for common stockholders) for the 2003 period.

RESEARCH AND DEVELOPMENT

We incurred  $519,804 and $297,862 in research and  development  expenses during
the  year  ended  December  31,  2004  and  2003,  respectively.   Research  and
development  activities during fiscal 2004 primarily  involved continued testing
and evaluation of omni-directional components and preparing these components for
production  in  2005.  Our  wheel  design  was  changed  from the  "concept"  to
"production"  phase. This was and is an ongoing process between our and Timken's
engineers to insure manufacturability.  The motors and controllers were designed
and/or  changed  in design in order to meet ANSI  (American  National  Standards
Institute) and UL (Underwriters Laboratories) testing requirements.  Danaher and
us  revised  the  algorithms   used  in  the  motor   controllers  as  well  the
microprocessor that runs the machines.  Research and development activities also
included  further changes to existing designs and new designs that were patented
or for  those  patents  with  pending  applications.  Portions  of the  costs we
incurred due to testing and research and development were charged to the US Navy
contract as provided therein.

LIQUIDITY AND CAPITAL RESOURCES

Since our  inception,  we have  financed  our  operations  through  the  private
placement of our common stock and from loans from our President. During 2004 and
2003 we raised net of offering costs $5,103,103 and $789,000, respectively, from
the private placement of our securities.

During 2000, we were approved by the State of New Jersey for our  technology tax
transfer  program  pursuant to which we could sell our net operating  losses and
research and development  credits as calculated under state law. During 2004 and
2003, we recorded credits of $198,823 and $210,553,  respectively  from the sale
of our losses and credits (see Note 6 to financial statements).

We have  experienced  negative cash flows from  operations of $1,614,687  during
2004 and $705,790  during 2003.  These  negative  results  stem  primarily  from
operating losses of $2,272,200 in 2004 and $2,191,657 in 2003. These results are
not  unusual  for a company in the  development  state;  it is  noteworthy  that
significant portions of the losses result from non cash charges,  primarily from
equity securities issued for services.

We have  consistently  demonstrated  our  ability to meet our cash  requirements
through  private  placements of its common stock. We have continued to similarly
satisfy those requirements during the year ended December 31, 2004.


                                       24
<PAGE>
We anticipate  that our cash  requirements  for the  foreseeable  future will be
significant.  In particular,  management  expects  substantial  expenditures for
inventory, product production, and advertising in anticipation of the rollout of
its omni-directional  forklift. On January 13, 2004, we entered into a placement
agency agreement with a NASD registered  broker-dealer for the private placement
offering of our securities.  Our securities  consisted of units comprised of one
share of common stock and a stock warrant to purchase 50% of an additional share
of common stock at a unit-offering price of $0.80. The warrant is exercisable at
$1.25 per share  during a five-year  term.  The offering is being made on a best
efforts  basis,  for a total minimum  amount of  $1,000,000  and a total maximum
amount of  $4,000,000,  terminating  May 7,  2004.  During  the first and second
quarters of 2004, we received $2,880,108 net of offering costs and expenses from
the offering.  The offering was made pursuant to exemptions under the Securities
Act of  1933,  as  amended.  We  completed  our  initial  production  run of the
SIDEWINDER  Lift Truck in the fourth  quarter of 2004.  We  received  sufficient
funds from the offering to complete the initial  production  run and to complete
ANSI and UL testing, as well as some special tooling costs.


We will require  additional funds to continue our operations  beyond the initial
production  run. These funds are in addition to the funds required by Filco GmbH
as discussed  above.  We anticipate  that operating  capital in the amount of $5
million will be required during  calendar year 2005 to  sufficiently  fund Filco
operations.  Of the total amount,  approximately  70% is projected for parts and
component  inventory  and  manufacturing  costs,  with the balance  projected as
general operating expenditures,  which includes overhead and salaries. We expect
to recognize  lower per unit  manufacturing  and part costs in the future due to
volume discounts, as well as lower per unit shipping costs as we transition from
the initial production run to full-scale  production.  We partially funded these
additional  cash  requirements  through  the  issuance  of  equity  and/or  debt
securities  which may be  similar to the  offering  described  above.  We cannot
predict  whether we will be successful in obtaining  sufficient  capital to fund
continuing  operations.  If we are unable to obtain sufficient funds in the near
future,  such event will delay the rollout of its product and likely will have a
material adverse impact on us and our business prospects.


As of December 31,  2004,  our working  capital  deficit was  $(572,184).  Fixed
assets,  net of accumulated  depreciation,  and total assets, as of December 31,
2004,  were $93,587 and  $4,600,023,  respectively.  Current  liabilities  as of
December 31, 2004 were $2,291,153.

SUBSEQUENT EVENTS

We have incurred penalties payable to the investors of our November 2004 private
placements because we did not file a registration  statement on Form SB-2 within
the timeframe specified pursuant to the Registration Rights Agreement we entered
into with the  investors  on November  23,  2004.  We were  required to file the
registration  statement  on or prior to January  6,  2005,  but it was not filed
until February 14, 2005. We have not yet accounted for these penalties,  as they
were not incurred  until 2005.  We will account for such  penalties in the first
quarter of 2005.

                                  RISK FACTORS

In addition to other  information  contained in this Form 10-KSB,  the following
Risk Factors should be considered when evaluating the forward-looking statements
contained in this Form 10-KSB:

RISKS RELATED TO OUR FINANCIAL CONDITION AND BUSINESS

WE MAY NEVER BECOME  PROFITABLE AND CONTINUE AS A GOING CONCERN  BECAUSE WE HAVE
HAD LOSSES SINCE OUR INCEPTION.

We may never become  profitable and continue as a going concern  because we have
incurred  losses  and  experienced   negative  operating  cash  flow  since  our
formation.  For our fiscal years ended  December 31, 2004 and 2003, we had a net
loss of $(2,272,200) and  $(2,282,946),  respectively.  We expect to continue to
incur significant expenses. Our operating expenses have been and are expected to
continue to outpace revenues and result in significant  losses in the near term.
We may never be able to reduce  these  losses,  which  will  require  us to seek
additional  debt or equity  financing.  If such  financing is available  you may
experience significant additional dilution.


                                       25
<PAGE>
WE HAVE A LIMITED OPERATING HISTORY

We are development stage company, and, together with our predecessor,  have been
in operation since 1995.  However,  since 1995, our operations have been limited
to the  development of our  omni-directional  products,  and limited revenue has
been generated during this period. Consequently,  our business may be subject to
the many risks and pitfalls commonly experienced by development stage companies.

OUR  BUSINESS  OPERATIONS  WILL BE HARMED IF WE ARE UNABLE TO OBTAIN  ADDITIONAL
FUNDING.

Our  business  operations  will be harmed if we are unable to obtain  additional
funding.  We believe that our available  short-term assets and investment income
will be  sufficient  to meet our  operating  expenses  and capital  expenditures
through the end of fiscal year 2005. We do not know if additional financing will
be available  when  needed,  or if it is  available,  if it will be available on
acceptable  terms.  Insufficient  funds may  prevent  us from  implementing  our
business  strategy or may require us to delay,  scale back or eliminate  certain
opportunities  for the provision of our technology and products.  In addition to
our own need of working  capital,  we also will need working capital to fund the
operations of Filco GmbH. Filco has informed us that it needs working capital in
the amount of  $5,000,000  in the  beginning  of 2005 in order for it to achieve
profitable  operations.  This excludes the  $1,300,000  required under the Filco
agreement.  As of December 31, 2004, we have loaned  $2,699,999 to Filco.  If we
are  unable to  complete  the terms of the Filco  agreement  and loan  Filco the
required  amounts  necessary  to fund its  operations,  Filco  may be  unable to
continue its  operations  and the repayment of amounts loaned to Filco by us may
be jeopardized.

FINAL TESTING OF OUR PRODUCT  COULD RESULT IN COMPONENT  REFINEMENT OR REDESIGN,
WHICH COULD DELAY THE COMMERCIAL INTRODUCTION OR CONTINUED SALE OF THE FORKLIFT.

We have developed pilot versions of our unique,  omni-directional  forklift. The
commercial  introduction  of the  product is  subject,  however,  to  additional
testing and component  refinement.  Due to the unique performance  attributes of
the forklift, the forklift will undergo a series of unprecedented tests relating
to these  attributes.  Although  management has performed  substantially  all of
these tests or is otherwise  confident of the  performance  capabilities  of the
forklift, final testing has not been completed. In addition, our product must be
sufficiently  durable to withstand the day-to-day rigors of its anticipated work
environment.  As stated above,  although we have conducted  numerous tests,  the
product has not been subjected to the normal day-to-day usage typically required
of forklifts.  Therefore,  it is conceivable  that final testing,  or durability
issues after  prolonged use,  could result in component  refinement or redesign,
which could delay the commercial introduction or continued sale of the forklift.

THE PRICING POLICY FOR OUR FORKLIFTS MAY BE SUBJECT TO CHANGE,  AND ACTUAL SALES
OR OPERATING MARGINS MAY BE LESS THAN PROJECTED.

We are assessing present and projected component pricing in order to establish a
pricing  policy  for the  SIDEWINDER  Lift  Truck.  We have  not  finalized  our
assessment as current prices for certain  forklift  components  reflect  special
development  charges  which are  expected to be reduced as order volume for such
components  increase and as  manufacturing  efficiencies  improve.  We intend to
price our  forklifts so as to maximize  sales yet provide  sufficient  operating
margins.  Given the uniqueness of our product, we have not yet established final
pricing  sensitivity  in the market.  Consequently,  the pricing  policy for its
forklifts may be subject to change, and actual sales or operating margins may be
less than projected.

WE HAVE RECEIVED  LIMITED  INDICATIONS  OF THE COMMERCIAL  ACCEPTABILITY  OF OUR
OMNI-DIRECTIONAL   FORKLIFT.   ACCORDINGLY,   WE  CANNOT  PREDICT   WHETHER  OUR
OMNI-DIRECTIONAL PRODUCTS CAN BE MARKETED AND SOLD IN A COMMERCIAL MANNER.


                                       26
<PAGE>
Our success will be dependent upon our ability to sell omni-directional products
in quantities  sufficient to yield profitable results. To date, we have received
limited  indications of the  commercial  acceptability  of our  omni-directional
forklift.  Accordingly,  we cannot predict whether the omni-directional  product
can be marketed and sold in a commercial manner.

WE  CANNOT   ASSURE  THAT  WE  WILL  HAVE  IN  PLACE   PATENT   PROTECTION   AND
CONFIDENTIALITY  AGREEMENTS  FOR  OUR  PROPRIETARY  TECHNOLOGY.  IF  WE  DO  NOT
ADEQUATELY PROTECT OUR INTELLECTUAL  PROPERTY RIGHTS,  THERE IS A RISK THAT THEY
WILL  BE  INFRINGED  UPON OR  THAT  OUR  TECHNOLOGY  INFRINGES  UPON  ONE OF OUR
COMPETITOR'S  PATENTS.  AS A RESULT, WE MAY EXPERIENCE A LOSS OF REVENUE AND OUR
OPERATIONS MAY BE MATERIALLY HARMED.

Our success will be dependent,  in part,  upon the protection of our proprietary
omni-directional technology from competitive use. A form of our omni-directional
technology  was  originally  patented  in 1973 and was  sold to the US Navy.  We
secured a transfer of this technology from the Navy in 1996 under the terms of a
CRADA agreement  (Cooperative  Research and  Development  Agreement) and we have
worked since that time to commercialize omni-directional products. We received 3
patents  regarding the  "redesign" of the wheel.  In addition,  we have received
patent protection  regarding the algorithms used to control vehicular  movement.
Further,  we have applied for patents for a movable  operator's  control station
and a munitions handler.  Notwithstanding the foregoing,  we believe our lack of
patent protection is a material  competitive risk. Our competitors could reverse
engineer our technology to build similar products.  Also,  certain variations to
the  technology  could be made whereby our  competitors  may use the  technology
without  infringing  upon  our  intellectual   property.   The  patent  for  the
omni-directional  wheel  expired in 1990.  We,  however,  have  received  patent
protection  of certain  other  aspects of its  omni-directional  wheel,  and for
features specific to our forklift.  In addition to the patent  applications,  we
rely on a  combination  of trade  secrets,  nondisclosure  agreements  and other
contractual   provisions   to  protect   our   intellectual   property   rights.
Nevertheless,  these  measures may be  inadequate  to safeguard  our  underlying
technology.  If these measures do not protect the intellectual  property rights,
third parties could use our technology, and our ability to compete in the market
would be reduced significantly.  In addition, if the sale of our product extends
to foreign countries, we may not be able to effectively protect its intellectual
property rights in such foreign countries.

In the  future,  we may be required to protect or enforce our patents and patent
rights through patent  litigation  against third parties,  such as  infringement
suits or  interference  proceedings.  These  lawsuits  could be expensive,  take
significant  time, and could divert  management's  attention from other business
concerns.  These actions could put our patents at risk of being  invalidated  or
interpreted  narrowly,  and any patent  applications at risk of not issuing.  In
defense of any such action, these third parties may assert claims against us. We
cannot  provide any assurance that we will have  sufficient  funds to vigorously
prosecute any patent litigation,  that we will prevail in any of these suits, or
that the  damages  or  other  remedies  awarded,  if any,  will be  commercially
valuable. During the course of these suits, there may be public announcements of
the results of hearings,  motions and other interim  proceedings or developments
in the  litigation.  If securities  analysts or investors  perceive any of these
results to be negative, it could cause the price of our common stock to decline.


                                       27
<PAGE>
WE CURRENTLY LACK  ESTABLISHED  DISTRIBUTION  CHANNELS FOR OUR FORKLIFT  PRODUCT
LINE

We do not have an established  channel of distribution  for our forklift product
line. We have  initiated  efforts to establish a network of  designated  dealers
throughout the United States.  Although we have received indications of interest
from a number of equipment  distributors,  to date, such  indications  have been
limited.  We cannot predict  whether we will be successful in  establishing  our
intended dealer network.

If we are unable to retain the  services of our  President  and  Chairman of the
Board,  Mr. Peter Amico, or if we are unable to successfully  recruit  qualified
personnel, we may not be able to continue operations.

Our ability to successfully  conduct our business affairs will be dependent upon
the  capabilities  and business  acumen of current  management  including  Peter
Amico.  Accordingly,  shareholders must be willing to entrust all aspects of our
business affairs to our current management.  Further, the loss of any one of our
management team could have a material adverse impact on our continued operation.

OUR INDUSTRY AND PRODUCTS ARE  CONSIDERED TO BE HIGH-RISK  WITH A HIGH INCIDENCE
OF SERIES PERSONAL  INJURY OR PROPERTY LOSS WHICH COULD HAVE A MATERIAL  ADVERSE
IMPACT ON OUR BUSINESS.

The manufacture,  sale and use of omni-directional  forklifts and other mobility
or material  handling  equipment is generally  considered to be an industry of a
high risk with a high incidence of serious  personal injury or property loss. In
addition,  although  we intend to provide  on-site  safety  demonstrations,  the
unique,  sideways movement of the forklift may heighten  potential safety risks.
Despite the fact that we intend to maintain  sufficient  liability insurance for
the  manufacture  and use of our  products,  one or more  incidents  of personal
injury or property loss  resulting from the operation of our products could have
a material adverse impact on our business.

If  we  do  not  successfully   distinguish  and   commercialize  our  developed
proprietary  products and services,  we will not attract a sufficient  number of
customers.  Accordingly,  we may be  unable  to  compete  successfully  with our
competitors or to generate revenue significant to sustain our operations.

Although  management  believes  our product  will have  significant  competitive
advantages  over  conventional  forklifts,  we  are  competing  in  an  industry
populated by some of the foremost  equipment  and vehicle  manufacturers  in the
world.  All of these  companies have greater  financial,  engineering  and other
resources than us. No assurances can be given that any advances or  developments
made by such  companies  will not  supersede the  competitive  advantages of our
omni-directional   forklift.   In  addition,   many  of  our  competitors   have
long-standing  arrangements with equipment distributors and carry one or more of
competitive   products  in  addition  to  forklifts.   These   distributors  are
prospective  dealers for our  company.  It therefore  is  conceivable  that some
distributors  may be loath to enter into any  relationships  with us for fear of
jeopardizing existing relationships with one or more competitors.

THERE CAN BE NO ASSURANCE  THAT WE WILL  COMPLETE OUR  PROPOSED  ACQUISITION  OF
FILCO GMBH OR RAISE SUFFICIENT FUNDS NECESSARY TO FUND THE WORKING CAPITAL NEEDS
OF FILCO.  IF WE DO NOT  COMPLETE  THE  PROPOSED  ACQUISITION,  WE WOULD HAVE TO
ATTEMPT TO RECOVER OUR LOANS IN THE AGGREGATE AMOUNT OF $2,670,000 MADE TO FILCO
AND THERE CAN BE NO ASSURANCE THAT WE WILL BE ABLE TO DO SO.

In March of 2004, a tentative  agreement was  negotiated  with the principals of
Filco in connection with the proposed acquisition.  Our management determined to
provide Filco limited  funding in the form of loans,  until  financing  could be
obtained which would help guarantee that the operating  capital needed for Filco
operations  could, in fact, be obtained.  The tentative  agreement  reached with
Filco provided that we would take a 51% controlling ownership interest in Filco.
The tentative agreement required that we provide $1.3 million to be allocated in
the form of equity in Filco and Filipov would also  capitalize 1.3 million Euros
that he had loaned  Filco.  The  tentative  agreement  required that we secure a
guaranteed  credit  line for  Filco of not less  than $5  million  to be used as
operating capital. Further, once we complete the acquisition, we are responsible
to provide adequate operating capital to insure a successful  business.  A later
addendum  to  the  tentative  agreement  stated  that  we  would  acquire  75.1%
controlling ownership interest in Filco.

There  can be no  assurance  that we will be able to secure  financing  on terms
which are  favorable  to us, or at all,  which would be  sufficient  to fund the
working capital needs of Filco GmbH. Accordingly, there can be no assurance that
we will  complete the proposed  acquisition.  If we do not complete the proposed
acquisition,  we would have to attempt  to  recover  our loans in the  aggregate
amount of  $2,670,000,  exclusive of  principal  and interest at 8% per annum in
accord with the loan agreements made to Filco and there can be no assurance that
we will be able to do so. If we are unable to recover our loans,  we may have to
curtail our operations or seek additional financing.


RISKS RELATING TO OUR COMMON STOCK

THE MARKET PRICE OF OUR COMMON STOCK MAY DECLINE BECAUSE THERE ARE WARRANTS THAT
MAY BE  AVAILABLE  FOR FUTURE SALE AND THE SALE OF THESE  SHARES MAY DEPRESS THE
MARKET PRICE.

The  market  price of our common  stock may  decline  because  there are a large
number of warrants that may be available for future sale,  and the sale of these
shares may depress the market price. As of March 31, 2005, we had  approximately
21,256,215   shares  of  common  stock  issued  and  outstanding  and  7,725,238
outstanding  options and warrants to purchase up to  7,725,238  shares of common
stock.  The sale of these  shares may  adversely  affect the market price of our
common stock.

OUR  COMMON  STOCK IS  SUBJECT  TO THE  "PENNY  STOCK"  RULES OF THE SEC AND THE
TRADING MARKET IN OUR  SECURITIES IS LIMITED,  WHICH MAKES  TRANSACTIONS  IN OUR
STOCK CUMBERSOME AND MAY REDUCE THE VALUE OF AN INVESTMENT IN OUR STOCK.


                                       28
<PAGE>
The Securities and Exchange  Commission has adopted Rule 15g-9 which establishes
the  definition  of a "penny  stock,"  for the  purposes  relevant to us, as any
equity  security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions.  For
any transaction involving a penny stock, unless exempt, the rules require:

o that a broker or dealer approve a person's  account for  transactions in penny
stocks; and

o the broker or dealer  receive  from the  investor a written  agreement  to the
transaction,  setting  forth the  identity and quantity of the penny stock to be
purchased.

In order to approve a person's  account for  transactions  in penny stocks,  the
broker or dealer must:

o obtain  financial  information  and  investment  experience  objectives of the
person; and

o make a  reasonable  determination  that the  transactions  in penny stocks are
suitable for that person and the person has sufficient  knowledge and experience
in financial  matters to be capable of evaluating the risks of  transactions  in
penny stocks.

The broker or dealer  must also  deliver,  prior to any  transaction  in a penny
stock, a disclosure  schedule prescribed by the Commission relating to the penny
stock market, which, in highlight form:

o sets  forth  the basis on which the  broker  or  dealer  made the  suitability
determination; and

o that the  broker  or dealer  received  a signed,  written  agreement  from the
investor prior to the transaction.

Generally,  brokers may be less willing to execute  transactions  in  securities
subject  to the  "penny  stock"  rules.  This  may  make it more  difficult  for
investors to dispose of our common stock and cause a decline in the market value
of our stock.

Disclosure  also has to be made about the risks of  investing in penny stocks in
both public offerings and in secondary trading and about the commissions payable
to both the broker-dealer and the registered representative,  current quotations
for the securities and the rights and remedies available to an investor in cases
of fraud in penny stock  transactions.  Finally,  monthly  statements have to be
sent disclosing recent price information for the penny stock held in the account
and information on the limited market in penny stocks.


                                       29
<PAGE>
ITEM 7. FINANCIAL STATEMENTS

                                  AIRTRAX, INC.
                          (A Development Stage Company)

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004
                                DECEMBER 31, 2003



                                                                          Page
                                                                         ------

Report of Independent Certified Public Accountants.......................F - 1
Balance Sheet............................................................F - 2
Statements of Operations and Deficit Accumulated
During Development Stage.................................................F - 3
Statements of Changes in Stockholder's Equity............................F - 4
Statements of Cash Flows.................................................F - 5
Notes to Financial Statements............................................F - 6



                                       30
<PAGE>
                                ROBERT G. JEFFREY
                           CERTIFIED PUBLIC ACCOUNTANT
                                61 BERDAN AVENUE
                             WAYNE, NEW JERSEY 07470

LICENSED TO PRACTICE                                        TEL:  973-628-0022
    IN NEW YORK AND NEW JERSEY                              FAX:  973-696-9002
MEMBER OF AICPA                                      E-MAIL:  rgjcpa@erols.com
    PRIVATE COMPANIES PRACTICE SECTION



             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors
AirTrax, Inc.

I have audited the  accompanying  balance sheet of AirTrax,  Inc. (a development
stage company) as of December 31, 2004, and the related statements of operations
and deficit  accumulated  during  development  stage,  changes in  stockholders'
equity,  and cash flows for the years ended  December 31, 2004 and 2003, and for
the period from May 19, 1997  (inception) to December 31, 2004.  These financial
statements are the responsibility of the Company  management.  My responsibility
is to express an opinion on these financial statements based on my audit.

I  conducted  the audit in  accordance  with the  standards  of  Public  Company
Accounting Oversight Board (United States).  Those standards require that I plan
and perform the audit to obtain reasonable assurance about whether the financial
statements  are free of material  misstatement.  The Company is not  required to
have,  nor was I engaged  to  perform,  an audit of its  internal  control  over
financial  reporting.  My audit included  consideration of internal control over
financial  reporting  as  a  basis  for  designing  audit  procedures  that  are
appropriate  under the  circumstances,  but not for the purpose of expressing an
opinion on the  effectiveness  of the Company's  internal control over financial
reporting.  Accordingly, I express no such opinion. An audit includes examining,
on a  test  basis,  evidence  supporting  the  amounts  and  disclosures  in the
financial statements. An audit also includes assessing the accounting principles
used and  significant  estimates made by  management,  as well as evaluating the
overall  financial  statement  presentation.  I believe that my audit provides a
reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects,  the financial  position of AirTrax,  Inc. as of December 31,
2004,  and the results of its  operations and its cash flows for the years ended
December 31, 2004 and 2003, and for the period from May 19, 1997  (inception) to
December  31,  2004,  in  conformity  with U.S.  generally  accepted  accounting
principles.

As  discussed  in  Note 2 to  the  financial  statements,  certain  errors  were
discovered  in the  financial  statements  of the year ended  December 31, 2003.
Accordingly,  the 2003  statement of operations and deficit  accumulated  during
development  stage has been  restated to correct the errors and the  balances of
common stock and deficit  accumulated during development stage of 2004 have been
restated to correct the opening balances.

Robert G. Jeffrey
Certified Public Accountant


Wayne, New Jersey
October 3, 2005, except for Notes 4, 6, and 13, which is December 30, 2005.



<PAGE>
                                       F-1
                                  AIRTRAX, INC.
                          (A Development Stage Company)
                                  BALANCE SHEET
                                December 31, 2004

                                     ASSETS



Current Assets
   Cash                                                          $    641,477
   Accrued interest receivable                                         86,667
   Inventory                                                          709,281
   Prepaid expenses                                                     5,113
   Vendor advance                                                      52,017
   Deferred tax asset                                                 224,414
                                                                 ------------
            Total current assets                                 $  1,718,969

Fixed Assets
   Office furniture and equipment                                      90,714
   Automotive equipment                                                21,221
   Shop equipment                                                      24,553
   Casts and tooling                                                  205,485
                                                                 ------------
                                                                      341,973
   Less, accumulated depreciation                                     248,386
                                                                 ------------
            Net fixed assets                                           93,587

Other Assets
   Advances to Filco Gmbh                                           2,670,000
   Patents - net                                                      117,402
   Utility deposits                                                        65
                                                                 ------------
            Total other assets                                      2,787,467
                                                                 ------------

        TOTAL ASSETS                                             $  4,600,023
                                                                 ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
   Accounts payable                                              $    394,959
   Accrued liabilities                                                459,565
   Shareholder deposits for stock                                   1,403,174
   Shareholder notes payable                                           33,455
                                                                 ------------

            Total current liabilities                            $  2,291,153
                                                                 ------------

Stockholders' Equity
   Common stock - authorized, 20,000,000 shares without
      par value; 15,089,342 issued and outstanding                 10,822,854
   Preferred stock - authorized, 500,000 shares without
      par value; 275,000 issued and outstanding                        12,950
   Deficit accumulated during the development stage                (8,319,982)
   Deficit prior to development stage                                (206,952)
                                                                 ------------
            Total stockholders' equity                              2,308,870

   TOTAL LIABILITIES AND                                         ------------
     STOCKHOLDERS' EQUITY                                        $  4,600,023
                                                                 ============



The accompanying notes are an integral part of these financial statements.

                                      F-2
<PAGE>

                                  AIRTRAX, INC.
                          (A Development Stage Company)
                      STATEMENTS OF OPERATIONS AND DEFICIT
                      ACCUMULATED DURING DEVELOPMENT STAGE
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003



<TABLE>
<CAPTION>

                                                                                May 19, 1997
                                                                             (Date of Inception)
                                          YEAR 2004       YEAR 2003         to December 31, 2004
                                          ---------       ---------         --------------------
<S>                                       <C>              <C>                <C>
CONSULTING REVENUE                      $         --     $     21,879        $  1,023,123

COST OF PROVIDING CONSULTING REVENUE              --           91,283             470,371
                                        -------------    ------------       --------------

                  Gross Profit (Loss)             --          (69,404)            552,752

OPERATING AND ADMINISTRATIVE EXPENSES      2,529,775        2,108,370          (8,948,221)
                                        -------------    ------------       --------------

OPERATING LOSS                            (2,529,775)      (2,177,774)         (8,395,469)

OTHER INCOME AND (EXPENSE)
         Interest expense                    (30,894)         (43,938)           (175,064)
         Interest income                      86,667            7,914              86,667
         Other income                          2,979               --              78,294
                                        -------------    ------------       --------------

NET LOSS BEFORE INCOME TAXES              (2,471,023)      (2,213,798)         (8,405,572)
                                        -------------    ------------       --------------

INCOME TAX BENEFIT (STATE):
         Current                             198,823          210,553             198,823
         Prior years                              --               --             518,319
                                        -------------    ------------       --------------
                  Total Benefit              198,823          210,553             717,142
                                        -------------    ------------       --------------

NET LOSS BEFORE DIVIDENDS                 (2,272,200)      (2,003,245)         (7,688,430)

DEEMED DIVIDENDS ON PREFERRED STOCK               --          188,412             188,412
                                        -------------    -------------       --------------

NET LOSS ATTRIBUTABLE TO COMMON
    SHAREHOLDERS                          (2,272,200)      (2,191,657)         (7,876,842)

PREFERRED STOCK DIVIDENDS DURING
    DEVELOPMENT STAGE                       (131,771)         (80,749)           (443,140)
                                        -------------    -------------       --------------

DEFICIT ACCUMULATED                     $ (2,403,971)    $ (2,272,406)      $  (8,319,982)
                                        =============    =============      ==============

EARNINGS PER SHARE:
NET LOSS ATTRIBUTABLE TO COMMON
    SHAREHOLDERS                        $ (2,272,200)    $ (2,191,657)
ADJUSTMENT FOR PREFERRED SHARE DIVIDENDS
    ACCUMULATED BUT UNPAID                    68,750           68,750
                                        -------------    -------------
LESS ALLOCABLE TO COMMON SHAREHOLDERS   $ (2,340,950)    $ (2,260,407)
                                        =============    =============

NET LOSS PER SHARE - Basic and Diluted  $       (.19)    $       (.29)
                                        =============    =============

WEIGHTED AVERAGE SHARES OUTSTANDING       12,075,448        7,818,400
                                        =============    =============
</TABLE>


The accompanying notes are an integral part of these financial statements.


                                       F-3
<PAGE>
                                  AIRTRAX, INC.
                          (A Development Stage Company)
                  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                      For the Year Ended December 31, 2004


<TABLE>
<CAPTION>

                                                                                           DEFICIT        DEFICIT
                                            COMMON                   PREFERRED           ACCUMULATED       PRIOR
                                            STOCK                      STOCK               DURING            TO
                                  -----------------------      ----------------------    DEVELOPMENT     DEVELOPMENT
                                    Shares        Amount        Shares        Amount        STAGE           STAGE           TOTAL
                                  ---------      --------      --------      --------   -------------   -------------   ------------
<S>                                <C>         <C>              <C>        <C>           <C>             <C>             <C>
Balance, December 31, 2002        6,247,730   $  3,663,424     275,000    $    12,950   $ (3,643,605)   $ (206,952)   $    (174,183)

Adjustment                          (21,912)

Sales of stock under
    Regulation D offering           715,000        659,000                                                                  659,000

Shares issued for services        1,509,003      1,618,411                                                                1,618,411

Shares in lieu of preferred
    dividends                       246,731        269,161                                   (80,749)                       188,412

Net loss for the period                                                                   (2,191,657)                    (2,191,657)

                                  ---------   ------------   ---------    -----------    -----------     -----------     -----------
Balance, December 31, 2003        8,696,552      6,209,996     275,000         12,950     (5,916,011)     (206,952)          99,983

Issuance of shares sold in the
    prior year                      130,000        130,000                                                                  130,000

Sales of stock under
    Regulation D offering         5,500,125      3,727,802                                                                3,727,802

Exercise of warrants                 75,000         93,750                                                                   93,750

Shares issued for services          687,665        661,306                                                                  661,306

Dividends - outstanding                                                                     (131,771)                      (131,771)

Dividends paid

Net loss for the period                                                                   (2,272,200)                    (2,272,200)
                                 ----------   ------------   ---------    -----------   ------------    ------------    -----------
Balance, December 31, 2004       15,089,342   $ 10,822,854     275,000    $    12,950   $ (8,319,982)   $ (206,952)     $ 2,308,870
                                 ==========   ============   =========    ===========   ============    ============    ===========
</TABLE>


The accompanying notes are an integral part of these financial statements.

                                       F-4
<PAGE>
                                  AIRTRAX, INC.
                          (A Development Stage Company)
                            STATEMENTS OF CASH FLOWS
                 For the Years Ended December 31, 2004 and 2003


<TABLE>
<CAPTION>

                                                                                            May 19, 1997
                                                                                         (Date of Inception)
                                                        Year 2004          Year 2003    to December 31, 2004
                                                        ---------          ---------    --------------------

CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                     <C>                <C>                <C>
Net Loss                                              $(2,272,200)       $(2,191,657)       $(7,876,842)
Adjustments to reconcile net income to net cash
   consumed by operating activities:
        Charges not requiring the outlay of cash:
         Depreciation and amortization                    100,507             36,214            301,197
         Value of equity securities issued for services   812,643          1,332,989          2,939,223
         Deemed dividends on preferred stock                                 188,412            188,412
         Interest accrued on shareholder loan               4,566             11,478             21,641
         (Increase) decrease in accrual of deferred
             tax benefit                                  (23,409)          (150,262)          (224,414)
        Changes in current assets and liabilities:
         Decrease (increase) in inventory                (324,527)          (197,914)          (709,281)
         (Increase) decrease in receivables              (138,684)            50,936           (138,684)
         Increase (decrease) in accounts payable
            and accrued liabilities                       226,417            214,014            920,321
         Increase in prepaid expense                         --                 --             (146,957)
                                                      -----------        -----------        -----------
                  Net Cash Consumed By
                       Operating Activities            (1,614,687)          (705,790)        (4,725,384)
                                                      -----------        -----------        -----------


CASH FLOWS USED IN INVESTING ACTIVITIES

Acquisitions of equipment                                 (49,306)           (90,045)          (348,284)
Additions to patent cost                                  (80,939)            (9,385)          (157,931)
Advances to Filco Gmbh                                 (2,670,000)                           (2,670,000)
                                                      -----------        -----------        -----------
                  Net Cash Consumed By
                        Investing Activities           (2,800,245)           (99,430)        (3,176,215)
                                                      -----------        -----------        -----------


CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds of common stock sales                      5,103,103            789,000          8,572,611
Proceeds from exercise of warrants                         93,750               --               93,750
Proceeds of option exercises                                5,944              5,900             14,344
Proceeds of sales of preferred stock                         --                 --               12,950
Proceeds (repayment) of stockholder loans                 (52,005)            (3,298)            35,120
Preferred stock dividends paid in cash                   (131,771)              --             (185,274)
Partial repayment of equipment note                          --                 (425)              (425)
                                                      -----------        -----------        -----------

                  Net Cash Provided By
                      Financing Activities              5,019,021            791,177          8,543,076
                                                      -----------        -----------        -----------
                  Net Increase (Decrease) In Cash         604,089            (14,043)           641,477
         Balance at beginning of period                    37,388             51,431               --
                                                      -----------        -----------        -----------
         Balance at end of period                     $   641,477        $    37,388        $   641,477
                                                      ===========        ===========        ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                       F-5
<PAGE>
                                  AIRTRAX, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2004

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business
The Company was formed April 17, 1997. It has designed a forklift  vehicle using
omni-directional  technology  obtained  under a contract  with the United States
Navy Surface Warfare Center in Panama City,  Florida.  The right to exploit this
technology grew out of a Cooperative Research and Development Agreement with the
Navy.  Significant resources have been devoted during the past four years to the
construction of a prototype of this omni-directional forklift vehicle.

The Company has also developed a traditional  helicopter ground handling machine
which has been marketed by the Company on a limited basis.

Development Stage Accounting
The Company is a development stage company, as defined in Statement of Financial
Accounting Standards No. 7. Generally accepted accounting  principles that apply
to  established  operating  enterprises  govern the  recognition of revenue by a
development  stage  enterprise and the  accounting for costs and expenses.  From
inception to May 19, 1997, the Company has been in the development stage and all
its efforts  have been  devoted to the  development  of a forklift  vehicle with
omni-directional  technology that is suitable for market.  Only relatively small
amounts of revenue have been realized through December 31, 2004.

Basis of Presentation
The Company has incurred losses from inception of the  development  stage to May
19, 1997 of $7,876,842.  Activities have been financed primarily through private
placements  of  equity  securities.  The  Company  may need to raise  additional
capital  through  the  issuance  of  debt  or  equity  securities  to  fund  its
operations.

Cash
For  purposes  of the  statements  of cash  flows,  the  Company  considers  all
short-term debt securities  purchased with a maturity of three months or less to
be cash equivalents.

Inventory
Inventory  consists  principally  of component  parts and supplies which will be
used to assemble forklift vehicles.  Inventories are stated at the lower of cost
(determined on a first in-first out basis) or market.


                                      F-6

<PAGE>

                                  AIRTRAX, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2004

1. (continued)

Fixed Assets
Fixed assets are recorded at cost. Depreciation is computed by using accelerated
methods,  with useful lives of seven years for furniture and shop  equipment and
five years for computers and automobiles.

Income Taxes
Deferred  income taxes are recorded to reflect the tax  consequences or benefits
to future  years of  temporary  differences  between the tax bases of assets and
liabilities, and of net operating loss carryforwards.

Intangible Assets
Patents
The Company  incurred costs to acquire  certain patent rights.  These costs were
capitalized  and are  being  amortized  over a  period  of  fifteen  years  on a
straight-line basis.

Prototype Equipment
The  cost  of  developing  and  constructing   the  prototype   omni-directional
helicopter  handling  vehicle  and  the  omni-directional  forklift  vehicle  is
expensed as incurred.

Use of Estimates
The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  certain  reported  amounts  and  disclosures  of  contingent  assets and
liabilities at the date of the financial  statements and the reported amounts of
revenues and expenses during the reporting periods.  Actual results could differ
from those estimated.


Fair Value of Financial Instruments
The carrying amounts of the Company's financial instruments,  which include cash
equivalents,  accounts  receivable,  accounts  payable and accrued  liabilities,
approximate  their fair values at December  31,  2004.  This applies also to the
advances to FILCO GmBH, since they are fully secured.


Research and Development Cost
The Company  expenses  all  research  and  development  cost unless the criteria
required by FASB #2 are met. To date there have been no research and development
cost  capitalized.  During  the  years  2004 and 2003 a total  of  $519,804  and
$297,862, respectively, was spent on development activity.

Advertising Costs
The Company expenses advertising costs when the advertisement occurs. There were
no advertising costs incurred during 2004 and 2003.



                                       F-7
<PAGE>
                                  AIRTRAX, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2004

1. (continued)

Stock Options
Stock options are awarded to employees as compensation for services. Such awards
have  been  immediately  exercisable.   The  Company  accounts  for  stock-based
compensation under the intrinsic method permitted by Accounting Principles Board
Opinion No. 25. The following represents information about net loss and loss per
share as if the Company had applied the  provisions  of  Statement  of Financial
Accounting Standards  ("SFAS")123.  Accounting for Stock Based Compensation,  to
all options granted.

                                                  Year Ended  December 31,
                                                          ($000's)

                                                       2004        2003
                                                       ----        ----

Net loss as reported                                $(2,272)    $(2,192)

Less Stock-based employee compensation
    determined under the Intrinsic Method               223          35

Add:  Stock based compensation determined
    under the Fair Value Method                        -260         -35

Pro forma net loss                                  $(2,309)    $(2,192)
                                                    --------    --------

Loss per share:

Basic and diluted as reported                       $  (.19)    $  (.29)
                                                    ========    ========

Basic and diluted-pro forma                         $  (.19)    $  (.29)
                                                    ========    ========



Pursuant to the  requirements  of SFAS 123, the  weighted  average fair value of
options  granted during 2004 and 2003 were $.49 and $.98,  respectively,  on the
dates  of  grant.  The  fair  values  were  determined  using  a  Black  Scholes
option-pricing model, using the following major assumptions:



                                              2004           2003
                                              ----           ----

Volatility                                   91.45%         130.4%
Risk-free interest rate                       3.63%          2.51%
Expected Life - years                         4.33           3.89



                                       F-8
<PAGE>
                                  AIRTRAX, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2004

In December 2004, the FASB issued SFAS 123 (revise  2004),  Share-Based  Payment
("SFAS 123R"), which revised SFAS 123, Accounting for Stock-Based  Compensation.
SFAS 123R also supersedes APB 25, Accounting for Stock Issued to Employees,  and
amends SFAS 95, Statement of Cash Flows. In general,  the accounting required by
AFAS 123R is similar to that of SFAS 123.  However,  SFAS 123 gave  companies  a
choice to either  recognize  the fair  value of stock  options  in their  income
statements  or to disclose  the pro forma  income  statement  effect of the fair
value  stock  options  in the  notes  to the  financial  statements.  SFAS  123R
eliminates that choice and requires the fair value of all  share-based  payments
to employees,  including the fair value of grants of employee stock options,  be
recognized in the income  statement,  generally over the option vesting  period.
SFAS 123R must be adopted no later than July 1, 2005.

SFAS 123R  permits  adoption  of its  requirements  using one of two  transition
methods:

1. A modified  prospective  transition ("MPT") method in which compensation cost
is recognized beginning with the effective date (a) for all share-based payments
granted  after the  effective  date and (b) for all awards  granted to employees
prior to the effective date that remain unvested on the effective date.

2  A  modified  retrospective  transition  ("MRT")  method  which  includes  the
requirements of the MPT method described above, but also permits  restatement of
financial  statements based on the amounts previously disclosed under SFAS 123's
pro forma disclosure  requirements either for (a) all prior periods presented or
(b) prior interim periods of the year of adoption.

The Company is currently evaluating the timing and manner in which it will adopt
SFAS 123R.

As  permitted  by SFAS 123,  the  Company  currently  accounts  for  share-based
payments to employees  using APB 25's intrinsic  value method.  The Company will
adopt SFAS 123R (fair  value  method) in 2006.  This  change is not  expected to
impact  overall  financial  position.  The  impact of  adoption  of SFAS 123R on
results of operations cannot be predicted at this time because it will depend on
levels of share-based payments granted in the future.

RECENT ACCOUTNING PRONOUNCEMENTS

Except for the  expected  effect of SEAS 123R which is described in Note 1 under
Stock Options,  the Company does not expect adoption of rectly issued accounting
pronouncements  to  have a  significant  effect  on  the  Company's  results  of
operations, financial position or cash flows.

Segment Reporting
Management treats the operations of the Company as one segment.

Revenue Recognition
Revenue  will be  realized  from  product  sales.  Recognition  will  occur upon
shipment to  customers,  and where the  following  criteria are met:  persuasive
evidence of an  arrangement  exists;  delivery has occurred;  the sales price is
fixed or determinable;  and collectability is reasonably  assured.  Some revenue
has been realized from performing services.  Revenue from services is recognized
when the  service  is  performed  and  where  the  following  criteria  are met:
persuasive  evidence of an  arrangement  exists;  the contract price is fixed or
determinable; and collectability is reasonably assured.

Common Stock
Common stock is often issued in return for product,  services,  and as dividends
on the preferred  stock.  These issuances are assigned values equal to the value
of the common stock on the dates of issuance.



                                       F-9
<PAGE>
                                  AIRTRAX, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2004

2. RESTATEMENTS

Certain errors  affecting the 2003  financial  statements  have been  discovered
during an internal  review.  Correcting  these errors resulted in changes in the
net loss attributable to common  shareholders  with a resultant  increase in the
deficit  accumulated  during development stage, an increase in common stock, and
certain  changes in the  statement of cash flows as of December 31, 2003 and for
the year  then  ended.  The 2003  financial  statements  have,  therefore,  been
restated to correct  these  errors.  The restated  amounts are compared with the
amounts previously reported, in the following table.

    STATEMENT OF OPERATIONS AND DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE



                                 As Originally
                                 Presented        Adjustments      As Restated

Operating and Administrative
    Expenses                     $ 2,199,659       $  91,289 (1)  $ 2,108,370
                                                   ----------
Loss Accumulated During
    Development Stage            $(2,282,946)      $  91,289      $(2,191,657)
                                                   ==========



                             STATEMENT OF CASH FLOWS



                                As Originally
Operating Activities             Presented          Adjustments    As Restated
Net Loss                        $ 2,282,946         $ 91,289 (2)  $(2,191,657)
Value of equity securities
    issued for services           1,424,278          (91,289)(1)    1,332,989
                                                    ---------
Net Cash Consumed By
    Operating Activities        $  (705,790)        $      -      $  (705,790)
                                                    =========



(1) Correction of recording expenses of stock options and stock grants.
(2) Net amount of Changes on Statement  of  Operations  and Deficit  Accumulated
During Development Stage.

These  corrections  caused  changes  in the  opening  balances  of  the  deficit
accumulated during development stage, as follows:



Retained Deficit At Beginning
        of year:                                    2004               2003
As previously reported                        $ (5,804,156)        $(3,440,461)
Adjustment to correct accounting
      for stock options and stock grants          (111,855)           (203,144)
Balance at beginning of year, as
      Restated                                  (5,916,011)         (3,643,605)
Net loss, as restated                           (2,272,200)         (2,191,657)
Dividends on preferred stock                      (131,771)            (80,749)
                                              -------------        ------------
Retained Deficit at End of Year                $(8,319,982)        $(5,916,011)
-------------------------------               =============        ============


                                      F-10
<PAGE>

                                  AIRTRAX, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2004

3. RELATED PARTY TRANSACTIONS

The majority shareholder corporation and the Company president make loans to the
Company from time to time. The related notes accrue  interest at 12% and are due
on demand.  The combined unpaid balance of principal and interest on these notes
was $33,455 at December 31, 2004.

During 2003, two Company employees exercised options, receiving a total of 7,500
shares of common stock in return for $877.  The same two employees each received
bonuses of 15,000  shares.  Each  member of the Board of  Directors  was awarded
10,000 shares for services as directors;  these shares were valued at a total of
$47,500.  One  director  purchased  10,000  shares  in  return  for  $5,000;  an
additional $5,000 was treated as compensation of the director. An affiliate of a
director  received $3,940 for legal services.  The Company  president  exercised
options for 180,000 shares (see Note 9) in return for $25,202.

During 2004,  each member of the Board of Directors  received  10,000 shares for
services as directors; these were valued at $50,500,  reflecting the stock price
at time of award.

In 2004,  the president of the Company was granted  550,000  options,  valued at
$187,500.

Three employees were  previously  entitled under their  employment  contracts to
25,000  options each for each year of their  contracts.  One of these  employees
retired  during  2004,  exercising  his  remaining  options.   Another  employee
exercised his prior  options and his 2004  options,  for a total cost of $5,943.
The last employee has outstanding options granted during 2002, 2003, and 2004.

Since June 1999 the Company has made its  headquarters  in premises owned by the
company president which to date has been rent free. If rent was charged for this
space, it would be insignificant.


                                      F-11
<PAGE>
                                  AIRTRAX, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2004

4. ADVANCES TO FILCO GMBH

The Company has a tentative  agreement  to purchase  the capital  stock of FiLCO
Gmbh(FILCO),  which is described in Note 13. In connection therewith the Company
has made advances to FILCO which totaled  $2,670,000 at December 31, 2004. These
advances are due December 31, 2005 and bear interest at 8%. Additional  advances
were made to FILCO in 2005.  All of the advances are  collateralized  by all the
machinery and equipment  owned by FiLCO.  The due date of all FILCO advances was
subsequently extended to December 31, 2006.

5. STOCK OPTIONS

The Company has awarded options under employment  contracts with four employees.
These  options  entitle the  employees to purchase  Company  stock at discounted
prices. These options have been immediately exercisable. There are no expiration
dates to these options;  and none was forfeited during either year. A summary of
option activity is presented below.



                                                 2004               2003
                                                 ----               ----
                                               Weighted           Weighted
                                               Average             Average
                                              Excerised           Excerised
                                             -----------         ------------
                                          Shares      Price    Shares    Price
                                          -----------------    ----------------

Options outstanding at beginning of year    115,000    $.38     247,500    $.20
Options granted during year                 600,000     .74      50,000     .41
Options exercised during year               (95,000)    .39    (182,500)    .14
                                           ---------           ---------
Options outstanding at end of year          620,000    $.73     115,000    $.38
                                           =========           =========
Weighted average Fair Value of
 options granted                                       $.47                %.92
Weighted average remaining
 life of outstanding options                   4.33    3.89



6. PRIVATE PLACEMENT OFFERINGS

The  Company  conducted  private  placement  offerings  during  2004  and  2003,
primarily through an NASD registered broker dealer.  These offerings were exempt
under the  Securities  Act of 1933,  as amended,  and the rules and  regulations
promulgated  thereunder.  A total of  7,218,687  shares of common stock was sold
under the offerings during 2004, and 845,000 shares were sold during 2003. These
sales resulted in net proceeds of $5,103,103 and $789,000,  respectively. Of the
shares sole during 2004,  1,718,562 had not been issued at year end.  There were
130,000  shares which had  similarly  not been issued at the end of 2003;  these
were issued in 2004.


Included in the funds  raised  during 2004  through  stock sales was  $1,312,000
raised  through the sale of 1,640,000  shares under a Purchase  Agreement  dated
November  22,  2004.  That  agreement  required,  among  other  things,  that  a
registration  statements  be  filed  with  the SEC  and  that  the  registration
statement be declared effective by the SEC within a prescribed time. The Company
did not fulfill these obligations. As a result, it is subject to penalties equal
to 2% of the amount invested for each 30 day period  following the default date.
On  May  31,  2005,  the  Company  entered  into  a  letter   agreement  with  a
representative of this shareholder group under which $120,429 was paid to settle
the  penalties  which had accrued.  These  penalties  will be charged to expense
during 2005. Under the May 31, 2005 agreement,  no further penalties will accrue
until  after June 30,  2005.  The  obligation  concerning  effectiveness  of the
registration  statement has not been  satisfied and penalties have accrued since
June 30, 2005 at the rate of $26,240 per month. The penalties paid thusfar,  and
penalties  that accrue  subsequent to June 30, 2005,  will be charged to expense
during 2005.

There  have been  three  private  placement  offerings  during  2005.  Under the
provisions  of the first of these  offerings,  penalties  will not accrue as the
registration requirements of that offering have been satisfied. Under the second
such  offering,  there is no  provision  for  penalties.  Under the  third  such
offering,  penalties will accrue beginning 150 days after October 18, 2005. Such
penalties  would accrue at the rate of 2% of the amount raised in that offering,
which was $1,000,000.

On February 11, 2005, the Company issued $5,000,000 of 6% convertible promissory
notes,  which were  convertible  into  Company  common  stock and two classes of
warrants to purchase  Company  common stock.  The notes were to mature on August
10, 2005. The Company retained the right to require conversion of the notes at a
price of $1.30 per shae.  Conversion  occurred on March 29,  2005 and  3,846,154
shares of common stock were issued.  In  addition,  warrants to purchase  common
stock were issued in connection  with this the sale of the promissory  notes, as
follows:  1,923,077  Class A warrants and 961,538 Class B warrants.  The Class A
warrants are  exercisable  for a five year period at a price per share of $1.85.
The Class B warrants are exercisable for a five year period at a price per share
of $2.11.  As  partial  compensation,  the  broker-dealer  which  arranged  this
transaction  was awarded 484,616  warrants to purchase common stock,  384,616 at
$1.85 per share,  and  100,000 at $1.00 per share.  These  transactions  will be
accounted for under the requirements of Emerging Issues Task Force (EITF) 98-5,


                                      F-12
<PAGE>
                                  AIRTRAX, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2004

"Accounting for Convertible  Securities with Beneficial  Conversion  Features or
Contingently  Adjustable  Conversion  Ratios",  and EITF 00-27,  "Application of
Issue No. 98-5 to Certain Convertible Investments". Accordingly, expense will be
increased by $944,500  representing  the value of the warrants and by $3,269,231
representing the value of the conversion privilege.

The shares issued through the registered  broker dealer were sold as units, with
each unit  consisting  of one share of stock and a warrant to purchase 50% of an
additional  share of stock.  Other warrants were issued as  compensation  to the
broker dealer. At December 31, 2004, there were 5,537,763  warrants  outstanding
at exercise price ranging between $1.00 and $2.50 per share.

A schedule of changes in the outstanding warrants is presented below.



Warrants outstanding, December 31, 2003             845,000
Warrants issued during 2004                       4,767,763
                                                  ---------
                                                  5,612,763
Warrants exercised during 2004                       75,000
                                                  ---------
Warrants outstanding, December 31, 2004           5,537,763
                                                  =========



A total of 6,157,763  shares were  reserved for options and warrants at December
31, 2004.

The 4,767,373 warrants issued during 2004,  described below, relate primarily to
private placements of securities.


                                            Shares Issued           Warrants

Issuances Under Private Placements:

First quarter 2004                            1,640,000            1,084,000
Third quarter 2004                              260,000              206,250
Fourth quarter 2004                           3,600,125            2,260,063
Fourth quarter 2004 (related stock
    issued in 2005)                                                  832,060

Total private placements                      5,500,125            4,382,373
                                              =========            =========

Warrants issued for investment
    relations services, partially
    voided in 2005                                                   350,000

Warrants issued for dealer sales
    liaison                                      35,000
                                              ---------
    Total warrants issued during 2004         4,767,373
                                              =========



                                      F-13
<PAGE>
                                  AIRTRAX, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2004

7. PREFERRED STOCK

The Company is authorized to issue 500,000  shares of preferred  stock,  without
par value. At December 31, 2004,  275,000 of these shares had been issued.  Each
of these shares  entitles the holder to a 5% cumulative  dividend  based on a $5
per share stated value. If sufficient cash is not available, or at the option of
the  shareholder,  these dividends may be paid in common stock. If payment is in
stock,  it is to be valued at a price  calculated at thirty percent of the lower
of the last price  traded in either a public or private  transaction  during the
applicable  quarter.  This issue of preferred stock also provides a voting right
of 10 votes for each share.  The holder of this preferred stock is a corporation
wholly owned by the Company president and chairman.

At December 31, 2000,  $11,999 of dividends had accrued on the  preferred  stock
but remained unpaid. An additional $68,750 of dividends accrued during 2001. The
$80,749 combination of these two amounts was satisfied in March 2003 through the
issuance of 246,731  shares of common  stock.  Additional  dividends  of $68,750
accrued  during  each of the years  2002,  2003,  and 2004.  Cash  dividends  of
$131,771 were paid during 2004, leaving a balance of unpaid dividends of $74,479
at December 31, 2004.

The majority  shareholder  had the right at December 31, 2004 to acquire 248,263
shares of common stock as accrued and unpaid dividends under the features of the
preferred stock issue.

A deemed  dividend in the amount of $188,412  was charged to  operations  during
2003. This deemed dividend is the excess of the fair market value of the 246,731
shares issued in  satisfaction  of dividends on the preferred  stock during 2003
over the discounted  amount at which they were issued.  This deemed dividend was
added to paid in capital.

The  characteristics  of the remaining  225,000 preferred shares authorized have
not been specified.

During  December  2004 the Board of  Directors  approved the issuance of 100,000
shares of preferred stock to satisfy the remaining  balance of unpaid  preferred
dividends. On advice of Company attorneys, the stock has not been issued pending
stockholder  approval.  The 100,000  shares  authorized  by the Board would have
characteristics identical to those of the currently outstanding preferred stock.


                                      F-14
<PAGE>
                                  AIRTRAX, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2004

8. EQUITY TRANSACTIONS

A schedule detailing equity transactions of the Company in non-cash transactions
during the years 2004 and 2003 is presented below.

                          YEAR ENDED DECEMBER 31, 2003



                                 Number       Grant        Grant Date
                                of shares     Date       Price      Value
                                ---------     -----    ----------    ---------
CONSULTANTS:
Financial consulting services     35,999      3/14        1.02   $   36,719

Marketing services               200,000      1/28        1.20      240,000

Financial consulting services    200,000       4/1        0.95      190,000
                                                                     40,480(1)

Legal award                       50,000       4/1        0.95       47,500

Marketing services                70,000       4/2        1.00       70,000
                                                                     33,754(1)

Stock in lieu of legal services   15,700       1/7        0.53        8,370

Marketing services for
government contract              350,000       5/8        1.50      525,000
                                                                   (184,020)(2)

Marketing services                30,000      7/23        1.05       31,500

Contractor services                2,500      8/25        1.00        2,500

Investor relations                30,000       8/4        1.00       30,000
                                                                     72,658(1)

Financial consulting services     21,165     12/30        0.68        9,124

Consulting services               17,139     12/30        .068       11,655

Marketing services               165,000     10/20        0.90      148,500
                                                                   (130,600)(2)



Marketing services                15,000     12/30        0.68       13,500
------------------             ----------                         ----------

Total value of shares issued   1,202,503                          1,196,640
to consultants



OTHER:



Employee options exercised       187,500                                   - (3)
Value of employee options issued                                      27,999
Grants of shares to employees     30,000     12/30        0.68        20,400
Grants of shares to directors     50,000       4/1        0.95        47,500
Discount purchase by director     10,000      5/28         .71(4)      7,100
Shares in lieu of rent            29,000       1/7        1.15        33,350

Total equity instruments
  issued for services          1,509,003                          $1,332,989
                               =========                          ==========

(1) Amortization of the cost of grants made in prior periods.
(2)  Grants  were  issued for  commitments  for  future  service;  these are the
expenses  allocated to future  periods.  (3) The expense  associated  with these
options was recognized  when options were issued.  (4) This is the amount of the
discount per share.


                                      F-15
<PAGE>
                                  AIRTRAX, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2004

                           YEAR ENDED DECEMBER 31,2004



                             Number        Grant          Grant Date
                             of shares      Date       Price       Value
                            ----------     -----     ----------     ---------
CONSULTANTS:
Consulting services            10,000        1/2     $    1.29      $12,900

Marketing services             15,000       6/14          1.12       16,800
                                                                    122,680(2)

Investor relations             26,020       6/14          1.12       29,142
Consulting services            24,075       6/14          1.12       26,964
Investor relations              5,000       6/14          1.12        5,600

Consulting services            40,000        9/8          0.89       34,000
                                                                     (5,113)(1)

Investor relations             50,000        8/9          0.86       43,000

Marketing services            165,000       3/15          1.05      173,250
                                                                    145,110(2)

Investor relations             15,000        2/2          0.68       10,200

Industrial Relations and
marketing services             16,500      10/14          1.05       17,325

Industrial Relations and
marketing services             69,550      10/20          1.01       70,245

Consulting services            23,775       10/1          0.82       19,258

Marketing services             24,000      10/30           0.9       21,600
                             ---------                            ---------


Total of shares issued to
consultants                   483,920                               742,961



OTHER:


Stock issued to settle
accounts payable               37,421                                     -
Employee options exercised    104,324                                10,182(3)
Stock issued in lieu of rent   12,000     various          .75        9,000
Director awards                50,000      10/20          1.01       50,500
Total equity instruments     ---------                             --------
issued for services           687,665                             $ 812,643
                             =========                             ========



(1) Grants were issued in return for commitments for future service; this is the
expense  allocated to future  periods.  (2)  Amortization  of the cost of grants
issued in prior  periods.  (3) Some  issuances  were  compensated by eliminating
liabilities  owed to the  optionee;  if the required  option price  exceeded the
liability, the excess was charged to expense.

Information detailing all equity transactions since inception of the development
stage is presented in the following schedule.

                                      F-16
<PAGE>

<TABLE>
<CAPTION>

                                            Common              Preferred
                                            Shares                Stock
                                   ---------------------- -----------------------     Deficit       Deficit     Treasury
                                      Number     Amount     Number     Amount    Pre-Development Development   Stock        Total
                                   ----------  ---------- ---------- ----------  --------------- ------------ ---------- ----------
<S>                           <C>     <C>      <C>          <C>          <C>          <C>             <C>        <C>        <C>
Shares to incorporators      1997    177,547  $    1,630                                                                 $   1,630

Subsequent sale to
 incorporators               1997                           275,000      2,750                                               2,750

Redemption of initial
 preferred stock             1997     88,340               (275,000)                                           (20,000)    (20,000)

Stock issued in conjunction
 with merger                 1997  3,127,500     214,768                            (206,952)                                7,816
                             2004     57,434
                                  ----------- -----------
                                   3,184,934     214,768
                                  ----------- -----------
Exchange of common stock
for preferred stock          1997 (1,500,000)    (30,200)   275,000     10,200                                  20,000

Stock sold in private
 placements                  1997     83,213     148,984                                                                   148,984
                             1998    471,962     493,119                                                                   493,119
                             2004    614,552     872,268                                                                   872,268
                             2000    330,719     430,858                                                                   430,858
                             2001    235,999     348,600                                                                   348,600
                             2002    392,834     396,630                                                                   396,630
                             2003    715,000     659,000                                                                   659,000
                             2004  5,630,125   3,857,802                                                                 3,857,802
                                   ----------  ----------                                                                ----------
                                   8,474,404   7,207,261                                                                 7,207,261
                                   ----------  ----------                                                                ----------

Stock issued for services    1997     30,000
                             1998     79,708
                             1999     18,629      17,238                                                                    17,238
                             2000     65,331      62,767                                                                    62,767
                             2001     97,183      95,746                                                                    95,746
                             2002    423,659     413,899                                                                   413,899
                             2003  1,509,003   1,618,411(A)                                                              1,618,411
                             2004    687,665     661,306(A)                                                                661,306
                                   ----------  ----------                                                                ----------
                                   2,911,178   2,869,367                                                                 2,869,367
                                   ----------  ----------                                                                ----------
</TABLE>


(A) See Note 13 for reconciliation with Statements of Cash Flows.


                                      F-17
<PAGE>
                                  AIRTRAX, INC.
             CUMULATIVE STATEMENT OF CHANGE IN STOCKHOLDERS' EQUITY
                        May 19, 1997 to December 31, 2004




<TABLE>
<CAPTION>

                               Common                    Preferred
                                 Shares                    Stock              Deficit          Deficit      Treasury
                            Number       Amount     Number     Amount   Pre-Development      Development      Stock           Net
                          ----------  ---------- ---------- ----------  ---------------      ------------  ----------   ----------
Net losses during
<S>                 <C>     <C>           <C>        <C>        <C>           <C>                <C>          <C>        <C>
 development stage  1997                                                                         (129,313)               (129,313)
                    1998                                                                         (490,014)               (490,014)
                    1999                                                                         (685,615)               (685,615)
                    2000                                                                         (497,381)               (497,381)
                    2001                                                                         (811,700)               (811,700)
                    2002                                                                         (798,962)               (798,962)
                    2003                                                                       (2,191,657)             (2,191,657)
                    2004                                                                       (2,272,200)             (2,272,200)
                                                                                               -----------             -----------
                                                                                               (7,876,842)             (7,876,842)
                                                                                               -----------             -----------

Stock split         1998  1,021,825

Dividends paid in
 common stock       1999    305,737     120,366                                                  (120,366)
                    2000     95,558      56,751                                                   (56,751)
                    2003    246,731     269,161                                                   (80,749)                188,412
                          ----------  ----------                                               -----------             -----------
                            648,026     446,278                                                  (257,866)                188,412
                          ----------  ----------

Dividends paid
 in cash            1998                                                                          (13,005)                (13,005)
                    1999                                                                          (40,498)                (40,498)
                    2004                                                                         (131,771)               (131,771)
                                                                                               -----------             -----------
                                                                                                 (185,274)               (185,274)
                                                                                               -----------             -----------
Adjustment          2003    (21,912)


Warrants exercised  2004     75,000      93,750                                                                            93,750
Redemptions of
 promissory note    1997     30,000      20,000                                                                            20,000




Balances, December
 31, 2004                15,089,342 $10,822,854    275,000      $12,950      $(206,952)       $(8,319,982)  $       0  $2,308,870
                         ========== =========== ===========   ==========     ==========       ============  ========== ===========

</TABLE>
                                      F-18

<PAGE>

                                  AIRTRAX, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2004

9. LOSS PER SHARE

Stock  options were granted to two Company  employees  during 2004. In addition,
dividends accrued on the preferred stock during 2004 and 2003 (see Note 4) which
at the option of the preferred  shareholder could be paid in common stock. There
also were  warrants  outstanding  to purchase  common  stock (see Note 3). These
shares and warrants were not included in the  calculation  of earnings per share
because such inclusion would have an antidilutive effect.

10. Operating and Administrative Expenses

Included in Operating and Administrative Expenses are the following:



                             Year Ended                Year Ended
                         December 31, 2004          December 31, 2003
                         -----------------          -----------------

Payroll                      $   217,454               $   190,266
Officer's Compensation           185,000                   114,978
Cost of stock options            202,000
Consulting Expense:
    Administration               721,361                   665,908
    Marketing                          -                   214,478
Marketing Expense                205,320                    47,301
Production Development Cost      369,567                   127,168
Director Awards                   50,500                    47,500
Other Expenses                   578,573                   700,771
                              -----------               -----------
Total Operating &
    Administarive
    Expense                   $2,529,775               $ 2,108,370
                              ===========              ===========



11. INCOME TAXES

The Company has experienced  losses each year since its inception.  As a result,
it has  incurred no Federal  income tax.  The  Internal  Revenue Code allows net
operating  losses  (NOL's) to be carried  forward  and  applied  against  future
profits for a period of twenty years.  At December 31, 2004, the Company had NOL
carryforwards  of $8,099,640  available for Federal taxes and $2,493,486 for New
Jersey taxes.  The potential tax benefit of the state NOL's has been  recognized
on the books of the Company; the potential benefit of the Federal NOL's has been
offset by a valuation allowance.  If not used, these Federal  carryforwards will
expire as follows:



                         2011      $   206,952
                         2012          129,092
                         2018          486,799
                         2019          682,589
                         2020          501,169
                         2021          775,403
                         2022          590,764
                         2023        2,233,386
                         2024        2,493,486



                                      F-19
<PAGE>

                                  AIRTRAX, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2004

During the year 2004, the Company realized  $175,414 from the sale, as permitted
by New Jersey law, of its rights to use the New Jersey  NOL'S and  research  and
development  credits that had accrued  during 2003.  Similar sales of New Jersey
tax benefits were made in prior years.  These  potential New Jersey  offsets for
periods prior to 2004 are, thus, no longer available to the Company.

Under  Statement of  Financial  Accounting  Standards  No. 109,  recognition  of
deferred  tax assets is  permitted  unless it is more  likely  than not that the
assets will not be  realized.  The Company has  recorded  deferred tax assets as
presented below, all stemming from NOL'S.



                                     Current      Non-current         Total
                                    --------     -------------       -------
Deferred Tax Assets                 $995,899     $  1,806,175     $ 2,802,074
Valuation Allowance                  771,485        1,806,175       2,577,660
                                    --------     ------------     -----------
      Balance Recognized            $224,414     $          -     $   224,414
                                    ========     ============     ===========



The entire balance of the valuation  allowance  relates to Federal taxes.  Since
state tax  benefits  for years prior to 2004 have been  realized,  no reserve is
deemed necessary for the benefit of state tax losses of 2004.

12. RENTALS UNDER OPERATING LEASES

At present,  the Company is not obligated under any operating lease. The Company
rents warehouse space on a month to month basis.

Rent expense amounted to $49,500 in 2004 and $36,000 in 2003.

13. SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION

Cash paid for interest and income taxes is presented below:


                               2004                         2003
                               ----                         ----

Interest                    $26,329                      $35,828
Income taxes                      0                          500



Equipment  purchases of $5,971 were paid with a promissory  note.  There were no
other noncash  investing  activities  during either 2004 or 2003.  The following
additional noncash financing activities occurred:

a. Shares of common stock were issued for services  during 2004 and 2003;  these
totaled 687,665 and 1,509,003 shares, respectively.

b. During 2004,  130,000  shares were issued in  settlement of stock sales which
took place during 2003.

c. Liabilities  were cancelled in consideration  for option exercises of $25,202
in 2003.

d.  Liabilities were cancelled in 2004 in return for capital stock in the amount
of $125,778.

There  traditionally is a difference between the amounts of "Equity  Instruments
Issued for Services" as reported on the  Statements of Cash Flow and the amounts
of "Shares  Issued for  Services"  as  reported on the  Statement  of Changes in
Stockholders'  Equity. The differences usually result when the expense of shares
issued in one year is spread  over more  than one year.  These  differences  are
detailed in the following schedules:

                                                          2004
Equity securities issued for services as reported
    on the Statements of Cash Flows                                $ 812,643

Change in unamortized cost of shares
  issued for services:
                  Balance 12/31/04                  $     5,113
                  Balance 12/31/03                     (267,790)    (262,677)
                                                        -------     ---------

Expense of options issued during 2004, but not
    exercised at year end                                            (15,307)
Stock issued in settlement of liabilities                            125,778
Other                                                                    869
                                                                         ---

Stock issued for services as reported on the
    Statement of Changes in Stockholders' Equity                    $661,306
                                                                     =======

                                                          2003

Equity securities issued for services
  as reported on the
    Statements of Cash Flows                                      $1,332,989

Change in unamortized cost of shares
  issued for service:
                  Balance 12/31/03                    $ 267,790
                  Balance 12/31/02                     (146,892)     120,898
                                                        -------      -------

Expense of options issued during 2003,
    but not exercised at year end                                    (21,376)
Option exercises in 2003, but accounted
    for as expense in prior years                                    154,798
Non-cash consideration for option exercise                            25,202
Cash consideration for option exercise                                 5,900

         Stock issued for services as reported on the
             Statement of Changes in Stockholders'
             Equity                                               $1,618,411
                                                                   =========




                                      F-20
<PAGE>
                                  AIRTRAX, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2004
14. CONTINGENCIES

On February  19,  2004,  the Company  reached a tentative  agreement to purchase
capital stock of FiLCO GmbH.,  a German  manufacturer  of fork trucks  (formerly
Clark  Material  Handling  Company of Europe) with a  manufacturing  facility in
Mulheim,  Germany (FiLCO). It is expected that the Company will acquire 75.1% of
FiLCO. Until the tentative agreement is finalized and closed, the Company agreed
to make  advances  to  FiLCO.  Through  December  31,  2004,  advances  totaling
$2,670,000  had been made.  The seller,  who will  continue to own the remaining
24.9% of the FiLCO stock, has agreed that if the Company converts  $1,220,000 of
its  advances  to  capital  he also  will  convert  to FiLCO  capital  a loan of
1,225,000  Euros that FiLCO owes to him. As  additional  consideration  for this
FiLCO stock  purchase,  FiLCO would pay the seller  12,750 Euros and the Company
would issue to the seller  900,000  warrants to purchase  Company  stock;  these
warrants would be  exercisable at $.01 per share.  The Company has appointed the
seller of the FiLCO  stock a director of the  Company  and,  if the  purchase is
concluded,  would grant him options to purchase  100,000 shares of Company stock
for $.01as  consideration  for his  service  as a  director.  Additionally,  the
Company agreed to advance funds, if needed,  to FiLCO to provide for its working
capital  needs.   Any  advances  made  under  the  latter   provision  would  be
collateralized  by the  remaining  24.9% of FiLCO stock and would be repaid only
from dividends paid on the stock.

The Company also agreed as part of the tentative  agreement to make available to
the  management of FiLCO 100,000  shares of Company  common stock and options to
purchase another 100,000 shares.

As of March 28,  2005,  the Company had not  concluded  the contract and had not
issued any of the warrants or options contemplated by the tentative agreement.

During May 2002, the Company signed an agreement with a broker-dealer to provide
investment banking and financial  advisory services,  which included the raising
of funds.  Under the agreement,  the broker-dealer was entitled to receive stock
warrants which if exercised  would produce 450,000 shares of common stock of the
Company during a four year term at an exercise price of approximately  $1.75 per
share.  A dispute  arose  between the parties  regarding  the  agreement and its
performance. The Company has asserted that the broker-dealer induced the Company
to enter into the agreement through material misstatements and has not otherwise
performed  its  services   under  the  agreement.   The  Company   believes  the
broker-dealer is not entitled to the stated compensation, and has not issued the
stock warrants.

The Company has  experienced  losses and negative  cash flows during each of its
years of  existence.  These  raise  doubts as to the  ability of the  Company to
continue as a going  concern.  Management of the Company has  consistently  been
successful in raising capital,  principally  through sales of equity securities.
Substantial  sales of equity  securities  occurred  during  2004 and other  such
capital  sales are  expected  in the future.  These are  expected to sustain the
Company as it  progresses  to full  operations.  For that reason,  the financial
statements do not include any adjustments that might be necessary if the Company
was unable to continue as a going concern.

                                      F-21

<PAGE>

                                  AIRTRAX, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2004

15. SUBSEQUENT EVENTS

On April 6, 2005, the certificate of incorporation of the Company was amended to
increase the number of authorized shares, as follows:

Common 100,000,000  shares of no par stock Preferred  5,000,000 shares of no par
stock

The characteristics of these shares are unchanged from the shares previous
authorized.

On February 11, 2005, the Company sold $5,000,000 of convertible debentures with
two issues of detachable  warrants.  Conversion of these bonds occurred on March
29, 2005 and 3,846,154 shares of common stock were issued in place of the bonds.


                                      F-22


<PAGE>



                                   FiLCO GmbH

                          Audited Financial Statements

                      Year ended December 31, 2004 and the
                        period from May 1, 2003 (date of
                         formation) to December 31, 2003

                                    Contents

Report of Independent Auditors.................................................1
Balance Sheets.................................................................2
Statement of Operations........................................................3
Statement of Cash Flows........................................................4
Notes to Financial Statements..................................................5



<PAGE>
                         Report of Independent Auditors

To the Shareholder
FiLCO GmbH

We have audited the accompanying  balance sheets of FiLCO GmbH (the Company),  a
German limited liability corporation,  as of December 31, 2004 and 2003, and the
related  statements of operations and cash flows for the year ended December 31,
2004 and the period from May 1, 2003 (date of  formation)  to December 31, 2003.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial position of FiLCO GmbH as of December 31,
2004 and 2003, and the results of its operations and its cash flows for the year
ended December 31, 2004 and the period May, 1, 2003 (date of formation)  through
December 31, 2003 in conformity with accounting principles generally accepted in
the United States.


/s/ Fiondella, Milone, & LaSaracina LLP.
----------------------------------------


Manchester, Connecticut
August 11, 2005



                                        1
<PAGE>
                                   FiLCO GmbH
                                 Balance Sheets
<TABLE>
<CAPTION>

                                                                       December 31
                                                                2004                2003
                                                        ------------------- -------------------
Assets
Current assets:
<S>                                                           <C>                 <C>
   Cash and cash equivalents                                $        31,654     $       247,920
   Restricted cash                                                  598,071             539,316
   Trade accounts receivable, net of allowance of
   $21,776 and $20,041 in 2004 and 2003, respectively               133,954             431,944
   Total inventories, less obsolescence reserve of
   $108,273 and $99,647 in 2004 and 2003, respectively            1,415,987           3,012,788
   Other receivables                                                293,821              97,421
   Other current assets                                             107,879             231,201
                                                        -------------------  -------------------
Total current assets                                              2,581,366           4,560,590

Property, plant and equipment, net                                3,616,788           4,622,054
Intangible assets, net                                               66,520              95,258
                                                        -------------------  -------------------
Total assets                                                      6,264,674           9,277,902
                                                        ===================  ===================

Liabilities and Shareholders' Equity (Deficit)
Current liabilities:
   Accounts payable                                                 964,698           1,806,049
   Accrued salaries & benefits                                    1,610,566             287,283
   Accrued indemnities                                              416,824             451,738
   Liability to German receiver                                     501,302              99,019
   Other accrued liabilities                                        373,740             478,519
   Deferred revenue                                                 916,807             879,122
   Shareholder note payable                                       1,832,880           1,629,047
   Related party loans                                            3,294,196             317,796
   Short-term debt                                                  719,934             746,766
                                                        -------------------  -------------------
Total current liabilities                                        10,630,947           6,695,339
Deferred tax liability                                            1,448,601           1,478,589
                                                        -------------------  -------------------
Total liabilities                                                12,079,548           8,173,928

Shareholders' Equity (Deficit):
   Capital shares, no par value, 3 and 2 shares
    authorized and outstanding, at December 31,                      27,938              27,938
    2004 and 2003, respectively
   Additional paid-in capital                                     3,170,607           3,170,607
   Accumulated deficit                                           (7,682,791)         (1,707,620)
   Accumulated other comprehensive income -
     foreign currency translation                                (1,330,628)           (386,951)
                                                        -------------------  -------------------
Total shareholders' equity (deficit)                             (5,814,874)          1,103,974
                                                        -------------------  -------------------
Total liabilities and shareholders' equity (deficit)        $     6,264,674     $     9,277,902
                                                         =================== ===================
</TABLE>

See accompanying notes.


                                        2
<PAGE>
                                  FiLCO GmbH
                             Statement of Operations


                                        Year ended        Period from May 1,
                                       December 31         2003 to December
                                           2004                31, 2003
                                    ------------------- -----------------------
Net sales                           $       1,366,143   $       7,726,962
Cost of sales                              (2,427,721)         (5,649,998)
                                    ------------------- -----------------------
Gross (loss) margin                        (1,061,578)          2,076,964

Selling and administrative                 (4,652,310)         (4,372,666)
                                    ------------------- -----------------------
Operating loss                             (5,713,888)         (2,295,702)

Other income                                   60,307             583,749
Currency exchange gains (losses)               14,735             (32,467)
Other expenses                                (98,597)            (48,516)
Interest expense                             (381,753)            (97,493)
                                    ------------------- -----------------------

Loss before income taxes                   (6,119,196)         (1,890,429)
Income tax benefit                            144,025             182,809
                                    ------------------- -----------------------
Net loss                            $      (5,975,171)  $      (1,707,620)
                                    =================== =======================

See accompanying notes.



                                        3
<PAGE>
                                   FiLCO GmbH
                             Statement of Cash Flows

<TABLE>
<CAPTION>

                                                            Year ended          Period from
                                                         December 31, 2004     May 1, 2003 to
                                                                             December 31, 2003
                                                      ------------------ ---------------------
Cash flows from operating activities
<S>                                                           <C>                <C>
Net loss                                                   $     (5,975,171)  $     (1,707,619)
Adjustments to reconcile net income to net
    cash used in operating activities:
   Depreciation and amortization expense                            907,477            527,670
   Bad debt expense                                                    -                18,505
   Deferred taxes                                                  (144,025)          (182,809)
Changes in operating assets and liabilities:
     Accounts receivable                                            335,382           (451,985)
     Inventories                                                  1,857,603         (2,586,846)
     Other receivables                                             (187,967)           (66,028)
     Other current assets                                           143,336           (231,201)
     Accounts payable                                              (997,693)         1,806,049
     Accrued expenses                                             1,078,194          1,217,541
     Liabilities to receiver                                        393,711             99,019
     Deferred revenue                                               (38,416)           879,122
                                                           ----------------- ------------------
Net cash used in operating activities                            (2,627,569)          (678,582)

Cash flows from investing activities:
    Business acquisition, net of cash                                  -            (1,040,254)
    Purchases of property and equipment                             (12,088)              -
    Investment in restricted cash                                   (58,755)          (539,316)
                                                           ----------------- ------------------
Net cash used in investing activities                               (70,843)        (1,579,570)

Cash flows from financing activities:
    Net proceeds from shareholder note                                  -            1,569,625
    Net proceeds from related party loans                         3,099,579            415,206
    Net proceeds from short-term debt                                   -            1,455,646
    Payments on short-term debt                                    (163,505)          (689,632)
                                                              -------------- -----------------
Net cash provided by financing activities                         2,936,074          2,750,845
                                                              -------------- ------------------

Effect of exchange rate changes on cash                            (453,928)          (244,773)
Net (decrease) increase in cash                                    (216,266)           247,920
Cash and cash equivalents; beginning of year                        247,920               -
                                                              --------------- -----------------
Cash and cash equivalents; end of year                      $        31,654   $        247,920
                                                           ====================================
</TABLE>

See accompanying notes.



                                        4
<PAGE>
                                   FiLCO GmbH
                          Notes to Financial Statements


1. The Company

Effective May 1, 2003,  FiLCO GmbH (the Company) was formed as a German  limited
liability corporation located in Mulheim,  Germany. The Company manufactures and
sells  commercial  grade  forklifts to retailers,  resellers and directly to end
users.  In addition,  the Company  refurbishes  used  forklifts for resale.  The
Company's customers are located primarily in Europe and the Middle East.

In 2004 and 2003, a  significant  portion of the revenues  were derived from two
customers.  These two  customers  represented  70% and 72%,  of  revenues in the
statement  of  operations  in 2004 and 2003,  respectively,  and 0% and 21%,  of
accounts receivable balances as of December 31, 2004 and 2003, respectively.

On May 1,  2003,  the  Company  acquired  certain  assets  and  assumed  certain
liabilities of the former company, Clark Material Handling GmbH (Clark), through
a German  Receiver  (the  Acquisition)  for $558,750 and a note in the amount of
$481,504.  Effective February 1, 2003, the German Receiver (Seller) was assigned
to oversee  the  affairs of Clark when the  company  declared  insolvency  under
"German  Insolvency"  law. The Company has made the Acquisition to penetrate the
forklift truck market,  which they are currently not involved in. The assets and
liabilities  of the  Acquisition  were  recorded  at  estimated  fair  values as
determined  by  Company's  management  based  on  information  available  and on
assumptions  made.  The Company  provided to the Seller on the effective date of
the  Acquisition  an  advanced  payment  in the  amount of  $100,575  for future
operating  costs. In addition,  the sole shareholder of the Company was required
to provide a $1,117,500  personal  security payable on first call by the Seller.
The Company was also  responsible to make an offer of employment to at least 250
employees of Clark by the  effective  date of August 1, 2003 or pay the Seller a
penalty in the amount of $22,350 per person.  The purchase price  allocation for
this  Acquisition  has not resulted in the  recognition of the goodwill based on
the assets  acquired  and  liabilities  assumed.  The  statement  of  operations
includes the result of this business from the effective  date of  acquisition or
formation.

2.  Liquidity

At December  31, 2004,  the Company had an  accumulated  deficit of  $7,682,791,
incurred a net loss of $5,795,171  for the year ended  December 31, 2004 and had
negative  cash flows from  operations  of  $2,627,569  and $678,582 for 2004 and
2003, respectively.

Management  believes  that cash  provided  by capital  raising  activities  from
current investors will be sufficient to fund the Company's operating and capital
needs. Failure to generate sufficient cash flows from raising additional capital
could have a material  adverse effect on the Company's  ability to continue as a
going concern and to achieve its intended business objectives.



                                        5
<PAGE>
                                   FiLCO GmbH
                    Notes to Financial Statements (continued)


3. Accounting Policies

Use of Estimates

The  accompanying  financial  statements  have been prepared in conformity  with
accounting  principles  generally  accepted  in  the  United  States.  Financial
statements prepared in conformity therewith require management to make estimates
and  assumptions  that  affect  the  amounts  reported  in them,  including  the
accompanying  notes.  While  management  believes that the estimates and related
assumptions   used  in  the  preparation  of  these  financial   statements  are
appropriate, actual results could differ.

Certain Risks and Uncertainties

The  Company's  products  and services are  concentrated  in highly  competitive
markets  characterized  by rapid  technological  advances,  frequent  changes in
customer   requirements  and  evolving  regulatory   requirements  and  industry
standards.   Failure  to  anticipate  or  respond  adequately  to  technological
advances;   changes  in  customer   requirements   and  changes  in   regulatory
requirements or industry  standards could have a material  adverse effect on the
Company's  business and operating results.  Additionally,  certain other factors
could affect the Company's future operating  results and cause actual results to
differ materially from expectations, including but not limited to, dependence on
a third party  manufacturer,  difficulties in managing  growth,  difficulties in
attracting  and retaining  qualified  personnel,  dependence  on key  personnel,
enforcement  of  intellectual  property  rights,  and the  lengthening  of sales
cycles.

Accounting Principles

The Company's  financial  statements and accompanying  notes are prepared on the
accrual basis of accounting in accordance  with  generally  accepted  accounting
principles in the United States.

Cash and Cash Equivalents

All highly liquid  investments with a maturity date of three months or less when
purchased are considered cash equivalents.  The carrying amounts reported in the
balance sheet for cash and equivalents approximate those assets at fair value.

Restricted Cash

Restricted cash represents cash that is being utilized so that the Company could
enter into a lease agreement,  with the Seller, for their manufacturing facility
located in Mulheim,  Germany.  In addition,  the Company has  arrangements  with
certain  customers which required them,  prior to doing  business,  to set aside
cash with bank  institutions  which will be used as collateral  for the specific
projects.



                                        6
<PAGE>
                                   FiLCO GmbH
                    Notes to Financial Statements (continued)



3. Accounting Policies (continued)

Foreign Currency Translation

The functional  currency for the Company is their local currency the EURO. These
financial  statements have been translated into the U.S dollar for balance sheet
accounts at the current year-end  exchange rate;  income statement  accounts are
translated  at the  average  exchange  rate  for the year or  period.  Resulting
translation   adjustments   are  made  directly  to  a  separate   component  of
shareholders'  deficit-"Accumulated  other comprehensive income (loss) - foreign
currency translation".

Revenue Recognition/Accounts Receivable

The Company  recognizes  revenues  from sales when  products  are shipped to the
customer.  The  carrying  amounts  reported  in the balance  sheet for  accounts
receivable approximate those assets fair value. Accounts receivable are reserved
for at the time that management determines them to be uncollectible.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined by the
first-in, first-out method.

Property, Plant and Equipment

Property,  plant and equipment are recorded at cost.  Depreciation  of property,
plant and equipment is computed using the straight-line  method over a period of
five to seven years based on the asset.

Impairment of Long-Lived Assets

Statement of Financial  Accounting Standards (SFAS) No. 144. "Accounting for the
Impairment  or  Disposal  of  Long-Lived  Assets,"  (SFAS  144),  requires  that
long-lived  assets and  certain  intangible  assets be reviewed  for  impairment
whenever  events or changes in  circumstances  indicate that the carrying amount
may not be  recoverable.  No impairment  losses have been  recognized in 2004 or
2003.



                                        7
<PAGE>
                                   FiLCO GmbH
                    Notes to Financial Statements (continued)



3. Accounting Policies (continued)

Income Taxes

The Company  accounts for income taxes in accordance with Statement of Financial
Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. This statement
requires the Company to recognize  deferred tax assets and  liabilities  for the
expected  future tax  consequences  of events that have been  recognized  in the
Company's balance sheet or tax returns.  Under this method,  deferred tax assets
and liabilities  are measured based on the difference  between the balance sheet
carrying  amounts and the respective tax bases of assets and liabilities and net
operating loss carryforwards  available for tax reporting purposes.  A valuation
allowance is recorded on deferred tax assets unless realization is determined to
be more likely than not.

4. Inventories

Inventories consist of:

                                            December 31
                                       2004            2003
                                  --------------- ----------------
Raw materials                     $  1,086,133    $  2,062,229
Work-in-process                         95,370         620,343
Finished goods                         234,484         330,216
                                  --------------- ----------------
                                  $  1,415,987    $  3,012,788
                                  =============== ================

5.  Property, Plant and Equipment

Property and equipment consist of the following:

                                                December 31
                                         2004                 2003
                                  -------------------- --------------------

Machinery and equipment           $       4,376,960    $       4,376,960
Tooling                                     618,060              607,176
Office equipment                            148,467              148,467
Computer equipment                           44,173               44,173

Less accumulated depreciation             1,570,872              554,722
                                  -------------------- --------------------
                                  $       3,616,788    $       4,622,054
                                  ==================== ====================

Depreciation  expense for the year ended December 31, 2004 and the period May 1,
2003 through December 31, 2003 was $882,600 and $512,211, respectively.



                                        8
<PAGE>
                                   FiLCO GmbH
                    Notes to Financial Statements (continued)



6.  Intangible Assets

Intangible assets consist of the following:

                                                           December 31
                                                     2004              2003
                                               ---------------- ----------------
Forklift Schematics, net of amortization of
   $45,480 for 2004 and $16,742 for 2003       $        66,520  $         95,258
                                               ---------------- ----------------
                                               $        66,520  $         95,258
                                               ================ ================

Amortization  expense for the year ended December 31, 2004 and the period May 1,
2003 through December 31, 2003 was $24,877 and $15,459, respectively.  Estimated
amortization expense for the next five years is as follows: 2005- $24,877, 2006-
$24,877, 2007- $24,877 and 2008- $9,418.

7. Leases

The Company  occupies a facility in Mulheim,  Germany.  The lease  agreement for
this  facility  commenced on August 1, 2003 and expired  January 31,  2005,  and
provided  for monthly rent of $40,932.  Rent  expense  under the above lease was
$447,790  and  $186,579  for year ended  December 31, 2004 and the period May 1,
2003 through December 31, 2003, respectively. The Company was required to make a
deposit of $223,895 with a financial  institution as  collateral,  classified as
restricted  cash,  based on the  requirements  of the Acquisition and Industrial
Tenancy Agreement to obtain the lease.

Total future minimum lease payments under the above lease agreements are as
follows:

                               2005       $40,932

8.  Debt

Short term debt consists of the following:



<TABLE>
<CAPTION>

                                                                    December 31
                                                               2004                   2003
                                                    ------------------- ----------------------
Demand note payable to sole shareholder with
<S>                                                    <C>                   <C>
    interest at 6%                                  $      1,832,880      $        1,629,047
Demand note payable to related party, Fanger,
    with interest at 6%                                      366,355                 317,796
Term note payable to Vectra Ltd. with interest
    at 12%; matured on January 31, 2004                      719,934                 746,766
Demand note payable to related party, Airtrax,
    with interest at 8%                                    2,927,841                    -
                                                   ------------------- ----------------------
                                                   $       5,847,010      $        2,693,609
                                                   ============================================
</TABLE>



                                        9
<PAGE>
                                   FiLCO GmbH
                    Notes to Financial Statements (continued)



8. Debt (continued)

The  intangible  asset of the Company  has been  pledged as  collateral  for the
demand note payable to Fanger.

The Company has pledged  with regard to the term note payable to Vectra Ltd. two
capital shares of the Company as collateral.  In addition,  the Company assigned
the proceeds of several identified customer's accounts receivable to Vectra Ltd.
to secure the outstanding balance of the term note payable.

All debt  related  costs are being  expensed in the current  year in lieu of all
debt being classified as current.

The  carrying  value  of  the  amounts  due  under  the  above  debt  agreements
approximates fair values at December 31, 2004 and 2003, respectively.

9. Legal Proceedings

The Company is not aware of any pending legal proceedings that,  individually or
in the  aggregate,  would  have  a  material  adverse  effect  on the  Company's
business,  operating results,  or financial  condition.  We may in the future be
party to litigation arising in the ordinary course of business, including claims
that  allegedly  infringe  upon  third-party  trademarks  or other  intellectual
property  rights.  Such  claims,  even if not  meritorious,  could result in the
expenditure of significant financial and managerial resources.

10. Income Taxes

The provision for income taxes consisted of the following:

                                                     December 31
                                              2004                 2003
                                      --------------------- --------------------
Current income tax expense:
     Foreign                          $                -    $                -
Deferred income tax expense:
     Foreign                                    (144,025)             (182,809)
                                      --------------------- --------------------
Total income tax expense/(benefit)    $         (144,025)   $         (182,809)
                                      ===================== ====================



                                       10
<PAGE>
                                   FiLCO GmbH
                    Notes to Financial Statements (continued)



10. Income Taxes (continued)

Significant components of deferred income taxes follow:

                                                   December 31
                                            2004                 2003
                                    --------------------- --------------------
Gross deferred tax assets:
     Net operating losses           $        2,293,506    $          457,162
     Reserves                                   39,665                38,300
                                    --------------------- --------------------
                                             2,333,171               495,462
Gross deferred tax liability:
     Fixed assets                           (1,488,266)           (1,516,889)
                                    --------------------- --------------------
                                               844,905            (1,021,427)
Less - valuation allowance                   2,293,506               457,162
                                    --------------------- --------------------
Net deferred tax asset/(liability)  $       (1,448,601)   $       (1,478,589)
                                    ===================== ====================

Due to the  Company's net operating  loss  position,  the Company has recorded a
full valuation  allowance against its deferred tax asset because management does
not believe it is more likely than not that this asset will be realized.

The  deferred  tax  liability  represents  the tax  effect of the  fixed  assets
adjustment to estimated fair value as a result of the acquisition. This deferred
tax  liability  will  reverse as the fixed assets are  depreciated  and will not
impact future tax payments or require any additional cash outflows.

As of December  31,  2004 and 2003,  the  effective  tax rate  differs  from the
statutory rate primarily due to the increase in the valuation allowance.

As of December 31, 2004 and 2003, the Company had  approximately  $7,519,691 and
$1,428,631,  respectively,  of foreign net  operating  loss carry  forwards that
carry forward indefinitely.

11.  Shareholder's Equity

The  authorized  capital  stock of the Company  consists  of two capital  shares
authorized  and issued  upon the  Acquisition  of the  Company.  Both  shares of
capital shares issued are owned by the sole shareholder of the Company.

Effective  February  16,  2004,  the Company  split the shares into three shares
authorized and outstanding to the sole shareholder.



                                       11
<PAGE>
                                   FiLCO GmbH
                    Notes to Financial Statements (continued)



12.  Related Party

The Company had an outstanding demand note payable to the sole shareholder.  The
amount  outstanding  was  $1,832,880  and $1,629,047 as of December 31, 2004 and
2003, respectively.

The  Company had an  outstanding  demand note  payable to a  consultant  and the
former general manager of the Company.  The amount  outstanding was $366,355 and
$317,796 as of December 31, 2004 and 2003, respectively.

The Company had an outstanding demand note payable to Airtrax, Inc. by which the
owner of  FiLCO  GmbH is a member  of the  board.  The  amount  outstanding  was
$2,927,841 as of December 31, 2004.

The Company maintains a consulting  agreement with the former general manager of
the  Company for the annual  amount of  $114,610 to be paid in 12 equal  monthly
installments.  The effective date of this contract is June 1, 2003. The contract
is indefinite and can be terminated by either party by giving one month notice.

13. Subsequent Event

Effective October 7, 2004, Airtrax,  Inc. (a New Jersey company) signed a letter
of intent to purchase 75.1% of the stock of the Company.  During the pendency of
the agreement,  Airtrax, Inc. has agreed to make advances to the Company to fund
operations.  Through  August 11,  2005,  the  Company  received  loans  totaling
$5,827,171.  Based on the  pending  agreement,  a  portion  of the  loans may be
converted to capital.  The sole  shareholder of the Company will continue to own
the remaining 24.9% of the Company's  stock.  The shareholder has agreed that if
Airtrax,  Inc. converts a portion of the loans to capital,  the shareholder will
also convert the  shareholder  loan to capital,  and the  consultant  and former
general manager, and Vectra Ltd. will exchange their notes for Airtrax stock.

Effective  March 15, 2005, the Company has  consummated a signed  purchase order
with  Mitsubishi to produce  forklift  engines in the amount of $1,227,960.  The
delivery date for the engines are due in November 2005.

The  Company  is  currently  renegotiating  a  new  lease  agreement  for  their
manufacturing facility. They are currently paying rent on a month-to-month basis
until the  agreement is signed.  During  February  2005,  the Seller  called the
restricted cash of $245,592 for past rent due.



                                       12
<PAGE>
                                  AIRTRAX, INC.
                     PROFORMA CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)


On February  19,  2004,  the Company  reached a tentative  agreement  to acquire
capital  stock of  FiLCO  GmBH,  a German  manufacturer  of fork  trucks  with a
manufacturing  facility in  Mulheim,  Germany  (FiLCO).  As later  amended,  the
tentative  agreement  calls for the acquisition of 75.1% of the capital stock of
FiLCO.  In return,  the Company  would issue to the seller  900,000  warrants to
purchase  Company  stock at $.01 per share;  the Company  would  arrange for the
seller to be paid 12,750 Euros and would appoint the seller to the Company Board
of Directors.

During the  pendancy of this  tentative  agreement,  the Company  agreed to make
advances to FiLCO.  Through December 31, 2004,  advances totaling $2,670,000 had
been made;  this total was increased to  $6,255,462  at September 30, 2005.  The
seller, who will continue to own the remaining 24.9% of the FiLCO capital stock,
had  advanced  to FiLCO  1,225,000  Euros.  The seller has agreed  that,  if the
Company  converts  $1,300,000  of its advances to the capital of FiLCO,  he also
will convert to FiLCO capital his loan in the amount of 1,225,000 Euros.

The estimated fair value of the proposed  consideration  consists of the options
and the 12,750 euro  payment,  which are  described  above,  and the  $1,300,000
advance  which would be  converted  to capital.  The options were valued using a
Black Scholes options pricing model, using the following major assumptions:

                  Volatility                        87.1%
                  Risk-free interest rate           3.95%
                  Expected life-years                .03

The accompanying  condensed  financial  statements  illustrate the effect of the
acquisition  (proforma) on the financial position of the Company and the results
of its operations. The condensed balance sheet as of September 30, 2005 is based
on the combined  historical  balance  sheets of the Company and FiLCO as of that
date and  assumes  the  acquisition  took  place  on that  date.  The  condensed
statements of operations  for the year ended  December 31, 2004 and for the nine
month period ended September 30, 2005 are based on the historical  statements of
operations of the Company and FiLCO for those periods and assume the acquisition
took place on January 1, 2004.

The proforma condensed financial  statements may not be indicative of the actual
results of the  acquisition.  In particular,  the proforma  condensed  financial
statements are based on the current  estimate of management of the allocation of
the purchase price; the actual allocation may differ.

The accompanying  proforma  financial  statements  should be read in conjunction
with the historical financial statements of the Company and FiLCO.



                                      F-23
<PAGE>
                                  AIRTRAX, INC.
                  PRO-FORMA CONDENSED STATEMENTS OF OPERATIONS
                        FOR YEAR ENDED DECEMBER 31, 2004
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                      Pro-Forma
                             Airtrax        Filco     Combined     Adjustments         Amounts
                          ------------   ------------   ------------ ------------    ------------
<S>                             <C>         <C>           <C>           <C>             <C>
SALES                    $          -    $ 1,366,143    $ 1,366,143   $        -     $ 1,366,143

COST OF GOODS SOLD                  -      2,427,721      2,427,721            -       2,427,721
                          ------------   ------------   ------------ ------------    ------------


GROSS PROFIT (LOSS)                 -     (1,061,578)    (1,061,578)           -      (1,061,578)

SELLING, OPERATING
AND ADMINISTRATIVE
EXPENSES                    2,529,775      4,652,310      7,182,085      295,000 (1)   7,477,085
                          ------------   ------------   ------------ ------------    ------------

OPERATING LOSS             (2,529,775)    (5,713,888)    (8,243,663)    (295,000)     (8,538,663)

OTHER INCOME AND
    EXPENSE:
      Interest expense        (30,894)      (381,753)      (412,647)      86,667 (2)
                                                                         100,283 (3)    (225,697)

      Interest income          86,667              -         86,667      (86,667)(2)           -
      Other income              2,979         75,042         78,021            -          78,021
      Other expenses                -        (98,597)       (98,597)                     (98,597)
                          ------------   ------------   ------------ ------------    ------------

LOSS BEFORE MINORITY
    INTEREST AND TAXES     (2,471,023)    (6,119,196)    (8,590,219)    (194,717)     (8,784,936)


MINORITY INTEREST                   -              -             -       680,522 (4)     680,522

INCOME TAX BENEFIT            198,823        144,025        342,848            -         342,848
                          ------------   ------------   ------------ ------------    ------------

NET LOSS ATTRIBUTABLE
    TO COMMON
    SHAREHOLDERS           (2,272,200)    (5,975,171)    (8,247,371)     485,805      (7,761,566)

PREFERRED STOCK
    DIVIDENDS DURING
    DEVELOPMENT STAGE        (131,771)                     (131,771)                    (131,771)
                          ------------   ------------   ------------ ------------   -------------

DEFICIT ACCUMULATED       $(2,403,971)   $(5,975,171)  $ (8,379,142)    $485,805     $(7,893,337)
                          ============   ============  ============= ===========    =============

NET LOSS PER SHARE-
    Basic and Diluted     $      (.64)

WEIGHTED AVERAGE
SHARES OUTSTANDING         12,075,448
</TABLE>

     (1)  To record issuances of 100,000 options to prior sole owner of FiLCO,
          as per tentative acquisition agreement.
     (2)  Elimination of intercompany interest income against related interest
          expense.
     (3)  Elimination of interest expense associated with loan capitalized per
          tentative acquisition agreement.
     (4)  Minority interest in loss, provided for up to the amount of the
          minority interest at 12/31/03.



                                      F-24
<PAGE>


                                  AIRTRAX, INC.
                  PRO-FORMA CONDENSED STATEMENTS OF OPERATIONS
                         NINE MONTHS ENDED SEPTEMBER 30, 2005
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                     Pro-Forma
                             Airtrax        Filco       Combined     Adjustment        Amounts

<S>                            <C>            <C>            <C>        <C>               <C>
SALES                     $   167,545    $   464,297    $   631,842                  $   631,842

COST OF GOODS SOLD            160,126        455,455        615,581                      615,581
                          ------------   ------------   ------------ ------------    ------------

GROSS PROFIT (LOSS)             7,419          8,842         16,261                       16,261

SELLING, OPERATING
AND ADMINISTRATIVE
EXPENSES                    3,987,695      5,002,196      8,989,891                    8,989,891
                          ------------   ------------   ------------ ------------    ------------
OPERATING LOSS             (3,980,276)    (4,993,354)    (8,973,630)                  (8,973,630)

OTHER INCOME AND
  EXPENSE
  Interest expense        (4,374,595)       (453,182)    (4,827,774)     275,245 (1)  (4,552,529)
  Interest income            291,208                        291,208     (275,245)(1)      15,963
  Other income                   211           5,861          6,072                        6,072
  Other expenses                             (53,133)       (53,133)                     (53,133)
                          ------------   ------------   ------------ ------------    ------------
NET LOSS BEFORE
  INCOME TAXES             (8,063,449)    (5,493,808)   (13,557,257)                 (13,557,257)

INCOME TAX BENEFIT            371,838        205,191        577,029                      577,029
                          ------------   ------------   ------------ ------------    ------------

NET LOSS BEFORE
  DIVIDENDS                (7,691,611)    (5,288,617)   (12,980,228)                 (12,980,228)

DEEMED DIVIDENDS
  ON PREFERRED STOCK          480,978              -        480,978            -         480,978
                          ------------   ------------   ------------ ------------    ------------

NET LOSS ATTRIBUTABLE
  TO COMMON
  SHAREHOLDERS             (8,172,589)    (5,288,617)   (13,461,206)          -      (13,461,206)
                          ------------   ------------   ------------ ------------    ------------

PREFERRED STOCK
  DIVIDENDS DURING
  DEVELOPMENT STAGE           (51,563)             -        (51,563)           -         (51,563)


DEFICIT
ACCUMULATED               $(8,224,152)   $(5,288,617)  $(13,512,769) $         -    $(13,512,769)
                          ============   ============  ============= ===========    =============

NET LOSS PER SHARE-
    Basic and Diluted     $      (.75)
                          ============
WEIGHTED AVERAGE
SHARES OUTSTANDING         18,138,064
                          ============
</TABLE>

 (1) To eliminate intercompany interest on the Airtrax loan to FiLCO

<PAGE>
                                  AIRTRAX, INC.
                       PRO-FORMA CONDENSED BALANCE SHEETS
                               SEPTEMBER 30, 2005
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                      Pro-Forma
                            Airtrax          Filco         Combined  Adjustments        Amounts
                          ------------   ------------   ------------ ------------    ------------
<S>                          <C>             <C>            <C>         <C>               <C>
ASSETS:
Current Assets            $ 3,378,657    $ 2,096,945    $ 5,475,602 $   (361,912)(4)$  5,113,690

Fixed Assets (net)            204,274      3,158,631      3,362,905                    3,362,905

Intangibles                   147,601         53,731        201,332                      201,332

Advances to FiLCO           6,255,462              -      6,255,462   (1,300,000)(1)           -
                                                         (4,955,462)(3)
Unamortized debt
  fees                        416,732              -        416,732                      416,732
Goodwill                                                  1,300,000 (1)
                                                          2,826,000 (6)
                                                          9,981,329 (7)4,107,329
                          ------------   ------------   ------------ ------------    ------------
TOTAL ASSETS              $10,402,726    $ 5,309,307    $15,712,033  $ 7,489,955     $23,201,988
                          ============   ============   ===========  ============    ============

LIABILITIES AND
    STOCKHOLDERS' EQUITY:
Current Liabilities:
  Accounts payable          1,258,715      1,263,155      2,521,870                    2,521,870
  Accrued expenses          1,504,195      2,936,176      4,440,371      295,000 (5)   4,735,371
    Customer advances               -        860,214        860,214            -         860,214
    Short-term debt           100,000        652,967        752,967                      752,967
    Related party loans             -      6,617,374      6,617,374   (1,300,000)(1)
                                                         (4,955,462)(3)
                                                           (361,912)(4)
Deposits for unissued
  stock                        70,875                                     70,875          70,875

Advances from
  shareholders                 34,474      1,875,934      1,910,408   (1,875,934)(2)      34,474
                          ------------   ------------   ------------ ------------    ------------
Total current
  liabilities               2,968,259     14,205,820     17,174,079   (8,198,308)      8,975,771

Long Term Debt                500,000              -        500,000            -         500,000
Deferred Taxes                      -      1,084,816      1,084,816            -       1,084,816
                          ------------   ------------   ------------ ------------    ------------
Total Liabilities           3,468,259     15,290,636     18,758,895   (8,198,308)     10,560,587
V
Stockholders' Equity:
Common stock               20,773,723      3,198,545     23,972,268    1,300,000 (1)  26,775,657
                                                          1,875,934 (2)
                                                          2,826,000 (6)
                                                         (3,198,545)(7)
Additional Paid In
Capital-Warrants            2,366,339              -      2,366,339                    2,366,339

Deficit                   (16,751,086)   (12,941,408)   (29,692,494)    (295,000)(5) (17,046,086)
                                                                      12,941,408 (7)

Preferred stock               545,491              -        545,491            -         545,491
Comprehensive
  income                            -       (238,466)      (238,466)     238,466 (7)           -
                          ------------   ------------   ------------ ------------    ------------
Stockholders'
  Equity (Deficit)          6,934,467     (9,981,329)    (3,046,862)  15,688,263      12,641,401
                          ------------   ------------   ------------ ------------    ------------
TOTAL LIABILITIES
AND STOCKHOLDERS'
EQUITY                   $ 10,402,726    $ 5,309,307    $15,712,033  $ 7,489,955     $23,201,988
                         =============   ============   ============ ============    ============
</TABLE>


(1)  To  capitalize  Airtrax  advances  to FiLCO,  as per  proposed  acquisition
     agreement,  and reflect  amount as part of goodwill in accordance  with the
     purchase method of accounting.
(2)  To capitalize advance from FiLCO shareholder,  as per proposed  acquisition
     agreement.
(3)  To eliminate inter company advances against the related liabilities.
(4)  To  eliminate  inter  company  interest   receivable  against  the  related
     liability.
(5)  To reflect options granted in consideration of services on Airtrax Board of
     Directors, as per proposed acquisition agreement.
(6)  To reflect  issuance  of  options  as  required  by  tentative  acquisition
     agreement.
(7)  To eliminate FiLCO stockholders' equity.



                                      F-26
<PAGE>
ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE.

None.

ITEM 8A. CONTROLS AND PROCEDURES

As of the end of the period covered by this report,  we conducted an evaluation,
under  the  supervision  and  with  the  participation  of our  chief  executive
officer/chief  financial  officer of our disclosure  controls and procedures (as
defined in Rule 13a-15(e) and Rule  15d-15(e) of the Exchange  Act).  Based upon
this evaluation,  our chief executive  officer/chief financial officer concluded
that our  disclosure  controls  and  procedures  are  effective  to ensure  that
information required to be disclosed by us in the reports that we file or submit
under the Exchange Act is recorded,  processed,  summarized and reported, within
the time periods  specified in the  Commission's  rules and forms.  There was no
change in our  internal  controls or in other  factors  that could  affect these
controls  during our last fiscal  quarter that has  materially  affected,  or is
reasonably  likely to materially  affect,  our internal  control over  financial
reporting.

ITEM 8B. OTHER INFORMATION

None.

                                       31
<PAGE>
                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.

Directors are elected at each meeting of stockholders  and hold office until the
next annual meeting of stockholders and the election and qualifications of their
successors. Executive officers are elected by and serve at the discretion of the
board of directors.

Our executive officers and directors are as follows:



Name                     Age    Position
----                     ---    --------

Peter Amico              61     President and Chairman of the Board of Directors

D. Barney Harris         43     Executive Vice President and Director

James Hudson             61     Director

William Hungerville      68     Director

Fil Filipov              58     Director



Peter Amico - Mr. Amico is the founder of the Company and has been President and
Chairman of the Company and its predecessor since their inception in April 1995.
Prior to 1995,  Mr.  Amico  was  president  and  majority  shareholder  of Titan
Aviation and Helicopter Services, Inc. ("Titan"). He has an extensive background
in sales and in structural  steel  design.  His career in sales has spanned over
thirty  years and he has held sales  positions  at  Firestone  Tire & Rubber and
Union Steel Products,  Inc. As a consequence of separate helicopter and airplane
accidents involving Titan, Mr. Amico filed for bankruptcy protection in 1996.

D. Barney Harris* - Mr. Harris has been a Director of the Company since December
1998 and a Vice  President  since July 1999.  From 1997 to July 1999, Mr. Harris
was employed by UTD,  Inc.  Manassas,  Virginia.  Prior to 1997,  Mr. Harris was
employed by EG&G WASC, Inc.,  Gaithersburg,  Maryland,  as a Senior Engineer and
Manager  of the  Ocean  Systems  Department  where  he was  responsible  for the
activities of 45 scientists, engineers and technicians. During this period while
performing contract services for the US Navy, he was principally responsible for
the design of the  omni-directional  wheel  presently  used by the Company.  Mr.
Harris received his B.S.M.E.  from the United States Merchants Marine Academy in
1982.

Fil Filipov - Mr. Filipov is the Chairman of Supervisory Board of Tatra, a Czech
Company, which is producing off highway trucks. He is the former President & CEO
of Terex Cranes,  a Division of Terex Corp.  From 1994 through 1996, Mr. Filipov
served as Executive Vice President of the Terex Corp.,  where he was responsible
for  strategic  acquisitions  and was the  Managing  Director of Clark  Material
Handling  Company in Germany (Filco GmbH).  If the  acquisition of Filco GmbH is
completed Mr. Filipov will retain 24.9% of Filco GmbH.

James  Hudson - Mr.  Hudson has been a Director of the  Company  since May 1998.
From 1980 to present, he has been President of Grammer,  Dempsey & Hudson, Inc.,
a steel distributor located in Newark, New Jersey.

William  Hungerville - Mr.  Hungerville has been a director since February 2002.
Since 1998, Mr.  Hungerville  has been retired from full time  employment.  From
1974 to 1998,  he was the sole owner of a pension  administrative  service firm.
Mr. Hungerville is a graduate of Boston College,  and attended an MBA program at
Harvard University for 2 years.

*Our engineers  including the team initially lead by D. Barney Harris,  Nicholas
Fenelli  and Robert  Mullowney  designed  and tested the  "Airtrax"  wheel which
corrected  the "bumpy" ride in the  technology  as received  from the US Navy at
speeds of 11  m.p.h.  or more and  alleviated  it to the  point  wherein  it was
considered  acceptable  in the  materials  handling  industry.  This  design and
methods to achieve the design were  patented by us as follows:  (i)  6,340,065 -
low  vibration  omni-directional  wheel on January 22,  2002,  (ii)  6,394,203 -
method for designing low-vibration  omni-directional wheels on May 28, 2002, and
(iii) 6,547,340 - low vibration omni-directional wheel on April 15, 2003.


                                       32
<PAGE>
CODE OF ETHICS

We have not  adopted  a Code of Ethics  that  applies  to all of our  directors,
officers and employees,  including our principal  executive  officer,  principal
financial officer and principal accounting officer.

COMMITTEES OF THE BOARD OF DIRECTORS

As of December 31, 2004,  we have an audit  committee of our board of directors,
which was formed on November 30, 2004. The audit committee's charter was adopted
on April 13, 2005.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT, AS AMENDED.

Based  solely upon our review of copies of Forms 3, 4 and 5, and any  subsequent
amendments  thereto,  furnished  to the Company by our  directors,  officers and
beneficial owners of more than ten percent of our common stock, we are not aware
of any  Forms  3, 4  and/or  5  which  certain  of our  directors,  officers  or
beneficial  owners of more than ten percent of our common stock that, during our
fiscal year ended  December 31, 2004,  failed to file on a timely basis  reports
required by Section 16(a) of the Securities Exchange Act of 1934

ITEM 10. EXECUTIVE COMPENSATION.

The following  table sets forth for the fiscal year  indicated the  compensation
paid by our company to our Chief Executive Officer and other executive  officers
with annual compensation exceeding $100,000:

                           Summary Compensation Table:
                           SUMMARY COMPENSATION TABLE

                               ANNUAL COMPENSATION


<TABLE>
<CAPTION>


                               Other
                         Annual Restricted Options LTIP
   Name & Principal           Salary   Bonus   Compen-     Stock       SARs    Payouts  All Other
       Position       Year       ($)    ($)    sation($)  Awards($)     (#)      ($)   Compensation
------------------- ------ ----------- ------ ----------- ------------ -------- ------ ------------
<S>                  <C>     <C>           <C>  <C>            <C>         <C>     <C>       <C>
Peter Amico          2004   185,000(1)    0    187,500(3)      -          -        -          -
President and
Chairman             2003   100,000(1)    0      1,000(2)      -          -        -          -
of the Board
of Directors         2002    87,500(1)    0     89,399(2)      -          -        -          -
------------------- ------ ----------- ------ ----------- ------------ -------- ------ ------------
</TABLE>


(1) During 2004,  Mr.  Amico was  entitled to receive a salary of  $185,000,  of
which  $116,825.62  was paid and the balance was  deferred  for future  payment.
During 2003,  Mr.  Amico was entitled to receive a salary of $100,000,  of which
$88,461.68  was paid and the balance was deferred for future  payment.  In 2002,
Mr. Amico was entitled to receive a salary of $87,500, of which $84,135 was paid
as salary to Mr. Amico and the balance was deferred for future payment.  In 2002
and 2003, Mr. Amico received the use of a company  automobile which we valued at
$1,000.

(2) Pursuant to his  employment  agreement for the year 2004 through  2005,  Mr.
Amico had  outstanding  options to acquire a total of 500,000  shares at a total
price of $0.85 per share.  The fair market value of the underlying  common stock
was $1.14 per share (which was the closing price of our common stock on the date
of grant, July 1, 2004).  Pursuant to his employment agreement for the year 2003
through  2004,  Mr. Amico had  outstanding  options to acquire a total of 50,000
shares at a total price of $0.01. The fair market value of the underlying common
stock was $.85 per share (which was the closing price of our common stock on the
date of grant,  June 30,  2004).  The amount for 2002  represents  the number of
options  (50,000)  multiplied by the fair market ($2.20) less his exercise costs
of $12,601.  The fair market value of the underlying  common stock was $2.20 per
share which was the closing price of our common stock on July 1, 2002,  the date
of  grant.  The  amount  for 2003  represents  the  number of  options  (50,000)
multiplied  by the fair  market  ($.85)  less his  exercise  costs of $0.01.  In
addition,  for 2002 and 2003,  the  amounts  include  $1,000 for the value of an
automobile usage.

(3) The value for the year 2004 is based upon the intrinsic value of the options
granted in 2004 which were calculated in accordance with APB #25.

EMPLOYMENT AGREEMENTS

The Company and Peter Amico have entered into written employment  agreements for
Mr.  Amico's  role as  President  of the  Company.  The parties  entered into an
agreement  covering  the  period  from April  1997 to June 30,  2002  ("Original
Employment  Agreement").  Effective  July 1, 2002,  the parties  entered  into a
second employment agreement for a one year term ("Second Employment Agreement").
Agreements  for the year 2003  through 2004 and 2004 through 2006 were agreed to
on November30, 2004.

Under the Original Employment Agreement,  Mr. Amico received an annual salary of
$75,000 per year,  and received stock options to acquire up to 50,000 shares per
annum. Of the options,  10,000 shares were exercisable for a total consideration
of a $1.00 beginning in April 2000, 25,000 shares were exercisable at 30% of the
lowest price paid for the stock in the 30 day period preceding such exercise for
each year of the  contract,  and 15,000  shares were  exercisable  at 15% of the
lowest  price paid for the stock in the 30 day period  preceding  such  exercise
beginning in April 2000.

Under the Second  Employment  Agreement,  Mr.  Amico was  entitled to receive an
annual  salary of $100,000,  and receive an option to acquire  50,000  shares of
common stock of the Company for a total exercise price of $0.01. The Company may
terminate  the  agreement  without  cause  upon 14 days'  written  notice to the
Employee.  The Company and Mr. Amico entered into new  employment  agreements as
further described below.

Under a one year  Employment  Agreement,  ratified by the Board of  Directors on
November 30, 2004 for the period of July,  1 2003  through  June 30,  2004,  Mr.
Amico was  entitled  to receive an annual  salary of  $135,000,  and  receive an
option to acquire  50,000 shares of our common stock for a total  exercise price
of $0.01.  We may terminate  the  agreement  without cause upon 14 days' written
notice to the Mr. Amico.


                                       34
<PAGE>
Under a two year  employment  agreement  (covering July 1, 2004 through June 30,
2006)  ratified by the Board of Directors on November 30, 2004 for the period of
July 1, 2004 through  June 30, 2005,  Mr. Amico is entitled to receive an annual
salary of $200,000, and receives options to purchase up to 500,000 shares of our
common  stock at a rate  equal to the "bid"  price of the stock per share on the
beginning date of the employment  agreement.  accordingly,  the bid price of our
common stock on July 1, 2004, the beginning  date of the  employment  agreement,
was $0.80 per share and all options, if exercised,  will be at an exercise price
$0.80 per share.  All options have a cashless  exercise.  We may  terminate  the
agreement  without  cause upon 14 days' written  notice to Mr. Amico.  under the
second year of this employment agreement, for the period of July 1, 2005 through
June 30,2006, Mr. Amico is entitled to receive an annual salary of $250,000, and
options to purchase up to 750,000  shares of our common  stock at the rate equal
to the  "bid"  price  of the  stock  per  share  on the  beginning  date  of the
employment agreement.  Accordingly, the bid price of our common stock on July 1,
2004, the beginning date of the  employment  agreement,  was $0.80 per share and
all options,  if exercised,  will be at an exercise  price $0.80 per share.  All
options have a cashless  exercise.  We may terminate the agreement without cause
upon 14 days' written notice to Mr. Amico.

Two of our  employees  maintain  annual stock options for 25,000 shares for each
year of employment  during the term of their respective  employment  agreements.
The  employment  agreements may be terminated by either party with 14 days prior
notice,  and do not  contain  a fixed  term.  Accordingly,  the  amount of stock
options issuable to such employees is 77,500 shares as of September 30, 2005.

The stock options for the 25,000 shares of our common stock are  exercisable  as
follows; 2,500 shares are exercisable for a total consideration of $1.00, 10,000
shares are  exercisable  at 35% of the lowest price paid for the stock in the 30
day period preceding exercise, and 12,500 shares are exercisable at 17.5% of the
lowest  price  paid  for the  stock  in the 30 day  period  preceding  exercise.
Accordingly,  the amount of stock options  issuable to such employees is 112,500
as of December 31, 2004 and 97,500 as of June 30,  2005.The  112,500 options had
not been exercised as of December 31, 2004

DIRECTORS' COMPENSATION

The Company's  directors are compensated at the rate of $250 per meeting and are
reimbursed  for  expenses  incurred  by them in  connection  with the  Company's
business. During 2002 and 2001, each director, other than Mr. Amico, received an
annual stock option to purchase  5,000  shares of common  stock  exercisable  at
$0.50 per share.  During 2003,  each  director  received a stock grant of 10,000
shares of the Company's  common  stock.  During 2004,  each director  received a
stock grant of 10,000 shares of the Company's  common stock. The Company's board
of  directors  approved a stock  grant in the amount of 20,000  shares of common
stock for its board of directors for 2005,  conditional  upon the Company having
revenues.

Other  than as  described  above,  the  Company  does not have any other form of
compensation  payable to its officers or  directors,  including any stock option
plans,  stock  appreciation  rights,  or long term incentive plan awards for the
periods  indicated in the table. The Company will approve  compensation to Board
members  serving on the Audit Committee of the Company during the next scheduled
Board meeting.

OPTION GRANTS IN LAST FISCAL YEAR

The following table contains information concerning options granted to executive
officers  named in the Summary  Compensation  Table during the fiscal year ended
December 31, 2004:

Individual Grants


                                       35
<PAGE>
<TABLE>
<CAPTION>

                          Number of
                          Securities         % of Total Options
                          Underlying         Granted to
                          Options Granted    Employees in Fiscal    Exercise        Expiration Date
Name                      (#)                Year                   Price ($/sh)
---------------------------------------------------------------------------------------------------
<S>                        <C>                <C>                     <C>             <C>
Peter Amico                50,000             8%(1)                 $  -(1)         None(1)
President and Chairman    500,000            83%(1)                 $.85(1)         None(1)
</TABLE>


(1) Pursuant to his  employment  agreement for the year 2004 through  2005,  Mr.
Amico has  outstanding  options to acquire a total of 500,000  shares at a total
price of $0.85 per share. Pursuant to his employment agreement for the year 2003
through  2004,  Mr. Amico has  outstanding  options to acquire a total of 50,000
shares at a total price of $0.01.

OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

The following  table contains  information  concerning the number and value,  at
December 31, 2004, of  unexercised  options held by executive  officers named in
the Summary Compensation Table:



<TABLE>
<CAPTION>

                                      Underlying Unexercised      Value  of  Unexercised
                                      Options at                    Options    at           In-the-Money
Name                  FY-End (#)     (Exercisable/Unexercisable) (Exercisable/Unexercisable) FY-End ($)
-------------- ----------------------------------------------------------------------------------------
<S>                    <C>                  <C>                            <C>                 <C>
Peter Amico           50,000               50,000                         .85                 $42,500
President and
Chairman             500,000              500,000                         .39                $195,000
</TABLE>


                               STOCK OPTION PLANS

The  Company  provided a stock  grant for its board of  directors  for 2004,  as
described above under the heading entitled "Directors Compensation".

Other  than as  described  above,  the  Company  does not have any other form of
compensation  payable to its officers or  directors,  including any stock option
plans,  stock  appreciation  rights,  or long term incentive plan awards for the
periods indicated in the table.


                                       36
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICAL OWNERS AND MANAGEMENT.

The following table  identifies as of March 31, 2005  information  regarding the
current  directors  and  executive  officers of the Company and those persons or
entities who  beneficially  own more than 5% of its common  stock and  Preferred
Stock of the Company,  the number of and percent of the  Company's  common stock
beneficially owned by:

o    all directors and nominees, naming them,
o    our executive officers,
o    our directors and executive officers as a group, without naming them, and o
     persons or groups known by us to own  beneficially 5% or more of our common
     stock:

The Company  believes  that all persons  named in the table have sole voting and
investment power with respect to all shares of common stock  beneficially  owned
by them.

A person is deemed to be the beneficial owner of securities that can be acquired
by him within 60 days from March 31, 2005 upon the exercise of options, warrants
or convertible  securities.  Each  beneficial  owner's  percentage  ownership is
determined by assuming that options, warrants or convertible securities that are
held by him, but not those held by any other person,  and which are  exercisable
within 60 days of March 31, 2005 have been exercised and converted.



Peter Amico(1)                     Common Stock     1,870,623 (6)     8.80% (2)
870B Central Avenue             Preferred Stock     3,750,000 (3)(5)   100%
Hammonton, NJ 08037

D. Barney Harris(1)                Common Stock       236,025 (7)     1.11% (2)
870B Central Avenue             Preferred Stock             0            0%
Hammonton, NJ 08037

Frank Basile(1)                    Common Stock       142,873 (8)         *
870B Central Avenue             Preferred Stock             0            0%
Hammonton, NJ 08037

James Hudson(1)                    Common Stock        75,800 (9)         *
870B Central Avenue             Preferred Stock             0            0%
Hammonton, NJ 08037

William Hungerville(1)             Common Stock       165,950 (10)     *(2)
870B Central Avenue             Preferred Stock             0            0%
Hammonton, NJ 08037

All Officers and Directors         Common Stock     2,491,271 (11)   11.72% (2)
As a Group (5 persons)          Preferred Stock     3,750,000          100%


Arcon Corp.                        Common Stock     1,580,623 (4)     7.44% (2)
870B Central Avenue             Preferred Stock     3,750,000 (3)(5)   100%
Hammonton, NJ 08037


*Less than 1%

(1) The address of each beneficial owner is the address of the Company.

(2) Based on 21,256,215 shares of common stock outstanding as of March 31, 2005,
except that shares of common stock  underlying  options or warrants  exercisable
within 60 days of the date hereof are deemed to be  outstanding  for purposes of
calculating the beneficial ownership of securities of the holder of such options
or warrants.

(3) Based upon 375,000 outstanding shares of preferred stock after giving effect
to the 10 for 1 voting  rights.  Arcon was  authorized  to receive an additional
100,000  shares of preferred  stock in lieu of 221,892 shares of common stock of
the Company in lieu of the cash payment for the balance of the dividend.

(4) Represents  1,580,623 shares held by Arcon Corp., a corporation wholly owned
by Mr. Amico ("Arcon"), and however, excludes common stock that may be issued to
Arcon as a dividend on the preferred stock.

(5) Represents shares held by Arcon.

(6)  Represents  1,580,623  shares  of common  stock  held by Arcon as stated in
footnote (4) above, and 305,000 shares of common stock held  individually by Mr.
Amico.


                                       37
<PAGE>
(7) Represents 200,625 shares of common stock held  individually,  25,000 shares
of common stock  issuable under his  employment  agreement,  and 5,000 shares of
common stock issuable upon exercise of director's options for 2002.

(8) Represents 100,000 shares held  individually,  15,000 shares of common stock
issuable upon exercise under director's options for 2002 and 2001, 12,046 shares
held by an affiliate,  and 10,000 shares held by his spouse. The amount excludes
shares of common stock to the Company's that may be granted to directors  during
2005.

(9)  Represents  41,300 shares of common stock held by an affiliate.  The amount
excludes  shares  of  common  stock  to the  Company's  that may be  granted  to
directors during 2005.

(10) Represents 34,300 shares of common stock held individually, 700 shares held
by his spouse and 10,000  shares  held by a family  trust.  The amount  excludes
shares of common stock to the Company's that may be granted to directors  during
2005.

(11) Includes (4), (6), (7), (8), (9), and (10).

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Arcon Corp.,  a  corporation  wholly owned by our chairman and  president  Peter
Amico, owns 375,000 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 375,000 shares of preferred
stock  with 10 votes per  share,  or a total of  3,750,000  voting  shares.  The
aforementioned equals a total of 5,620,623 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
lowest  private  offering or trading  price of the common  stock.  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  metthod  it was  determined  to  provide  a
dividend. The $5.00 per share was the price used to satisfy the issue.


                                       38
<PAGE>


For fiscal year 2001,  Arcon received 246,731 shares of our common stock in lieu
of the cash  dividend  which was deemed to have a fair market value of $188.412.
For  explanatory  purposes,  in 2001 the $188,412 fair market value of the stock
represents  the $68,750  yearly  dividend due for 275,000  shares owned in 2001,
valued at $5.00  per  share,  which is used to  purchase  common  stock at a 30%
discount. This equates to $188,412 divided by 30% ($56,524) minus the difference
of the actual stock price which varied  during the purchase  period.  For fiscal
year 2002,  Arcon received a cash dividend of $17,187.50,  and received  100,000
preferred  shares in lieu of 221,892  shares of our common  stock in lieu of the
cash payment for the balance of the  dividend.  The 100,000  shares of preferred
stock were  issued in 2004 in  satisfaction  of 2002  preferred  dividends.  The
221,892  shares of common  stock  payable to Arcon were  valued  based upon date
obligation was settled  (deemed to be April 1, 2005).  The value of those shares
was $532,541,  221,892 multiplied by $2.40 per share and represents the value of
the additional  shares of preferred stock. This value ($532,541) was compared to
dividends  being settled in order to determine the deemed  dividend  ($480,978).
For fiscal year 2003,  Arcon expects to receive 19,097 shares of common stock in
lieu of the cash payment of the dividend.  In 2004,  Arcon received  payments of
$17,187.50  for dividends due in 2002,  $63,020.86 for dividends due in 2003 and
$51,562.52  for dividends due in 2004, of which  $17,187.50  remains  payable in
accrued dividends to Arcon.

From time to time,  we issue  options to purchase  shares of our common stock to
our President,  Peter Amico, as compensation for services performed on behalf of
our company under Mr. Amico's employment  agreements.  For a further description
of such options,  and the terms and valuations related thereto,  see the section
of this annual report entitled "Executive Compensation".

Arcon Corp. and our President have made loans from time to time to us in varying
amounts. The loan is due on demand and bears interest at 12%. As of December 31,
2004, the loan balance was $33,455.

Mrs. Patricia Amico, the wife of our President,  performed services to us during
2004, 2003, 2002, and 2001 for which she received $13,030,  $11,579, $9,930, and
$9,126, respectively.

Mr. Frank Basile, a former director of our company,  was a partner of a law firm
that  performed  legal  services to us during  fiscal 2004,  2003 and 2002.  The
billing amount for such services for each year was less than $10,000.

During  2002 and 2001,  each  director  of our  company,  other than Mr.  Amico,
received a stock  option to acquire  5,000 shares of common stock at a price per
share of $0.50,  and in 2003,  each director,  other than Mr. Amico,  received a
grant  from us of 10,000  shares of common  stock,  and in 2004,  each  director
received a grant from us in the amount of 10,000 shares of common stock.

From May 5, 2003  through  September 2, 2003,  we loaned Filco GmbH  $365,435 to
acquire our initial interest in Filco. Such funds were provided in the form of a
loan because we were not able to come up with sufficient  funding to acquire our
initial interest. Filco repaid principal and interest under this loan to us.

In March of 2004, a tentative  agreement was  negotiated  with the principals of
Filco in connection with the proposed acquisition.  Our management determined to
provide Filco limited  funding in the form of loans,  until  financing  could be
obtained which would help guarantee that the operating  capital needed for Filco
operations  could, in fact, be obtained.  The tentative  agreement  reached with
Filco provided that we would take a 51% controlling ownership interest in Filco.
The tentative agreement required that we provide sufficient  funding,  which the
parties  estimated  would be  approximately  $1.3 million to be allocated in the
form of equity in  Filco.  The  tentative  agreement  required  that we secure a
guaranteed  credit  line for  Filco of not less  than $5  million  to be used as
operating  capital.  A later addendum to the tentative  agreement stated that we
would acquire 75.1% controlling ownership interest in Filco.

The amounts loaned to Filco to date, even if unrecoverable, would not prevent us
from commencing the manufacture of the Sidewinder  Omni-Directional  Lift Truck.
The manufacture and sale of omni-directional  material handling equipment is our
primary goal.  During the second quarter of 2005, we realized limited revenues f
from the first sales of the Sidewinder Omni-Directional Lift Truck.

We believe that our  unsecured  loans to Filco are  recoverable  if the proposed
acquisition is not completed.  Should Filco default with loan repayment, if such
payment  were due and  requested,  it would be much  easier  to put  Filco  into
bankruptcy in Germany than it would be in the United States. Should Filco be put
into bankruptcy, we, as the largest creditor, would be in position to do a legal
takeover through bankruptcy administrators.

We loaned Filco approximately $2.7 million through the end of 2004 and loaned an
additional  $1.5 million  during the first quarter of 2005. We intend to provide
another $5 million to Filco,  either in the form of  guaranteed  credit lines or
through additional sales our securities.

Fil  Filipov is to be issued  options to purchase  100,000  shares of our common
stock at an exercise price of $.0001 as compensation  for services  performed as
our  director.  If the  proposed  acquisition  of Filco GmbH is  completed,  the
tentative  agreement  provides that Mr. Filipov will receive options to purchase
an additional 900,000 shares of our common stock at an exercise price of $.0001.
Accordingly,  Mr.  Filipov  cannot  exercise the options to receive more than an
aggregate of 112,500  shares of our common stock per year.  Any increase on this
exercise limit is subject to the approval of our board of directors.


                                       39
<PAGE>
ITEM 13. EXHIBITS.

(a) Exhibits.

The following  exhibits are included as part of this Form 10-KSB.  References to
"the Company" in this Exhibit List mean Airtrax, Inc., a New Jersey corporation.

3.1 Certificate of Incorporation of Airtrax,  Inc. dated April 11, 1997.  (Filed
as an exhibit to the Company's  Form 8-K filed with the  Securities and Exchange
Commission on November 19, 1999).

3.2  Certificate  of Correction of the Company dated April 30, 2000 (Filed as an
exhibit to Company's Form 8-K filed with the Securities and Exchange  Commission
on November 17, 1999).

3.3  Certificate of Amendment of Certificate  of  Incorporation  dated March 19,
2001 (Filed as an exhibit to Company's  Form 8-K filed with the  Securities  and
Exchange Commission on November 17, 1999).

3.4 Amended and  Restated  By-Laws of the  Company.  (Filed as an exhibit to the
Company's Form 8-K filed with the Securities and Exchange Commission on November
19, 1999).

4.1 Form of Common Stock Purchase  Warrant  issued to investors  pursuant to the
May 2004 private placement.

4.2 Form of Common  Stock  Purchase  Warrant  dated as of November  22, 2004 and
November 23, 2004. (Filed as an exhibit to the Company's Form 8-K filed with the
Securities and Exchange Commission on November 30, 2004).

10.1  Agreement and Plan of Merger by and between MAS  Acquisition  IX Corp. and
Airtrax , Inc.  dated  November 5, 1999.  (Filed as an exhibit to the  Company's
Form 8-K filed with the Securities and Exchange Commission on January 13, 2000).

10.2  Employment  agreement  dated  April 1, 1997 by and between the Company and
Peter  Amico.  (Filed as an exhibit to the  Company's  Form 8-K/A filed with the
Securities and Exchange Commission on January 13, 2000).

10.3 Employment agreement dated July 12, 1999, by and between the Company and D.
Barney  Harris.  (Filed as an exhibit to the Company's Form 8-K/A filed with the
Securities and Exchange Commission on November 19, 1999).

10.4 Consulting  Agreement by and between MAS Financial Corp. and Airtrax,  Inc.
dated October 26, 1999.  (Filed as exhibit to the Company's  Form 8-K filed with
the Securities and Exchange Commission on November 19, 1999).

10.5 Employment  Agreement effective July 1, 2002 by and between the Company and
Peter  Amico  (filed as an exhibit to the  Company's  Form 10-KSB for the period
ended December 31, 2002)

10.6  Agreement  dated July 15, 2002 by and between the Company and  Swingbridge
Capital LLC and Brian  Klanica.  (Filed as an exhibit to the Company's  Form 8-K
filed on August 7, 2002).

10.7 Purchase Agreement, dated November 22, 2004, by and among Airtrax, Inc. and
Excalibur  Limited  Partnership,  Stonestreet  Limited  Partnership,  Whalehaven
Capital Fund.  (Filed as an exhibit to the Company's  Form 8-K filed on November
30, 2004).

10.8 Joinder to the Purchase  Agreement,  dated  November 23, 2004, by and among
Airtrax, Inc. and Excalibur Limited Partnership, Stonestreet Limited Partnership
and Linda  Hechter.  (Filed as an  exhibit  to the  Company's  Form 8-K filed on
November 30, 2004).

10.9  Registration  Rights  Agreement,  dated  November 22,  2004,  by and among
Airtrax,   Inc.  and  Excalibur   Limited   Partnership,   Stonestreet   Limited
Partnership,  Whalehaven  Capital Fund and First Montauk Securities Corp. (Filed
as an exhibit to the Company's Form 8-K filed on November 30, 2004).

10.10 Joinder to the Registration Rights Agreement,  dated November 23, 2004, by
and among Airtrax,  Inc. and Excalibur Limited Partnership,  Stonestreet Limited
Partnership,  Linda  Hechter and First  Montauk  Securities  Corp.  (Filed as an
exhibit to the Company's Form 8-K filed on November 30, 2004).


                                       40
<PAGE>
10.11  Subscription  Agreement,  dated  February 11, 2005, by and among Airtrax,
Inc. and the investors  named on the signature page thereto (Filed as an exhibit
to the Company's Form 8-K filed on February 11, 2005).

10.12 Form of Series A Convertible  Note of Airtrax,  Inc.  dated as of February
11, 2005 (Filed as an exhibit to the  Company's  Form 8-K filed on February  11,
2005).

10.13 Form of Class A Common Stock Purchase Warrant of Airtrax, Inc. dated as of
February  11,  2005  (Filed as an  exhibit  to the  Company's  Form 8-K filed on
February 11, 2005).

10.14 Form of Class B Common Stock Purchase Warrant of Airtrax, Inc. dated as of
February  11,  2005  (Filed as an  exhibit  to the  Company's  Form 8-K filed on
February 11, 2005).

10.15 Amended and Restated Stock Acquisition  Agreement effective as of February
19, 2004 by and between Airtrax, Inc. and Fil Filipov (incorporated by reference
to our registration statement on Form SB-2 filed on November 3, 2005).

10.16  Promissory  Note of Filco  GmbH dated as of January  15,  2005  issued to
Airtrax,  Inc. (Filed as an exhibit to our  registration  statement on Form SB-2
filed on January 11, 2006).

10.17  Promissory Note of Filco GmbH dated as of June 5, 2005 issued to Airtrax,
Inc.  (Filed as an exhibit to our  registration  statement on Form SB-2 filed on
January 11, 2006).

10.18  Assignment  and  Purchase  Agreement  dated as of August 25,  2005 by and
between  Werner  Faenger  and  Airtrax,   Inc.  (Filed  as  an  exhibit  to  our
registration statement on Form SB-2 filed on January 11, 2006).

10.19  Promissory  Note of Filco GmbH with  Guarantees  dated as of November 25,
2005 issued to Airtrax, Inc. (Filed as an exhibit to our registration  statement
on Form SB-2 filed on January 11, 2006).

31.1  Certification  by Chief  Executive  Officer  and Chief  Financial  Officer
pursuant to Sarbanes-Oxley Section 302 (filed herewith).

32.1  Certification  by Chief  Executive  Officer  and Chief  Financial  Officer
pursuant to 18 U.S.C. Section 1350 (filed herewith).

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES

The aggregate fees billed for  professional  services  rendered by our principal
accountants for the audit of our financial statements and for the reviews of the
financial  statements  included in our annual  report on Form 10-KSB and 10-QSBs
respectively,  and for other  services  normally  provided  in  connection  with
statutory  filings were $21,012 and $19,307,  respectively,  for the years ended
December 31, 2004 and December 31, 2003.

AUDIT-RELATED FEES

We incurred fees of $0 and $0,  respectively,  for the years ended  December 31,
2004 and December 31, 2003 for professional services rendered by our independent
auditors that are reasonably  related to the  performance of the audit or review
of our financial statements and not included in "Audit Fees."

TAX FEES

The aggregate fees billed by our auditors for tax  compliance  matters were $780
and $745 respectively, for the fiscal years ended December 31, 2004 and December
31, 2003.

ALL OTHER FEES

We did not  incur  any fees for  other  professional  services  rendered  by our
independent  auditors  during the years ended December 31, 2004 and December 31,
2003.


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<PAGE>
                                   SIGNATURES

In  accordance  with  Section 13 or 15(d) of the Exchange  Act,  the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                     AIRTRAX, INC., A NEW JERSEY CORPORATION





                      By: /s/ Peter Amico
                      -----------------
                      Peter Amico, President,
                      Chief Executive Officer, Chairman of
                      the Board of Directors, and Acting
                      Chief Financial Officer

                      January 17, 2006


In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the  registrant and in the capacities and on the
dates indicated.


         SIGNATURE                        TITLE                    DATE
----------------------------  -----------------------------  -------------------

By: /s/ Peter Amico                President, Chief
   ----------------             Executive Officer, Acting    January 20, 2006
        Peter Amico             Chief Financial Officer
                                     and Director


By: /s/ D. Barney Harris
   -----------------------
        D. Barney Harris               Director              January 20, 2006


By: /s/James Hudson
   -----------------------
       James Hudson                    Director              January 20, 2006


By: /s/William Hungerville
   -----------------------
       William Hungerville             Director              January 20, 2006


By: /s/Fil Filipov
  ------------------------
       Fil Filipov                     Director              January 20, 2006



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