UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                       ----------------------------------

                                   FORM 10-KSB

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

                   For the fiscal year ended December 31, 2006

                        Commission file number: 001-16237

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                                  AIRTRAX, INC.
                                 --------------
                (Exact name of small business issuer as specified
                                 in its charter)

         New Jersey                                            22-3506376
  -----------------------------                            ----------------
 (State or other jurisdiction of                          (I.R.S. Employer
  incorporation or organization)                          Identification No.)

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

                       ----------------------------------


         Issuer's telephone number, including area code: (856) 232-3000

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


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

--------------------------------------------------------------------------------

     Check  whether  the issuer is not  required  to file  reports  pursuant  to
Section 13 or 15(d) of the Exchange Act. |_|

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

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of Regulation  S-B and no disclosure  will be contained,  to the best of the
issuer'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. |_|

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

     The  issuer's  revenues  for the fiscal year ended  December  31, 2006 were
$1,346,000.

     The aggregate  market value of the Common Stock held by  non-affiliates  of
the issuer as of April 12, 2007 was $13,301,732.

     The number of shares  outstanding of the issuer's  Common Stock as of April
12, 2007 was 24,376,887 shares.

                    DOCUMENTS INCORPORATED BY REFERENCE: NONE

    Transitional Small Business Disclosure Format (check one): Yes |_| No |X|

<PAGE>
                                  AIRTRAX, INC.

                         2006 FORM 10-KSB ANNUAL REPORT

                                TABLE OF CONTENTS

                                                                           Page

PART I   ....................................................................2

Item 1.  Description of Business.............................................2

Item 2.  Description of Property.............................................9

Item 3.  Legal Proceedings...................................................9

Item 4.  Submission of Matters to a Vote of Security Holders.................9

PART II  ....................................................................10


Item 5.  Market for Common Equity and Related Stockholder Matters............10

Item 6.  Management's Discussion and Analysis or Plan of Operation...........12

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

Item 8.  Changes in and Disagreements with Accountants on Accounting
         and Financial Disclosure............................................22

Item 8A. Controls and Procedures.............................................22

Item 8B. Other Information...................................................22

PART III      ...............................................................23

Item  9. Directors, Executive Officers, Promoters and Control Persons:
         Compliance  with Section 16(a) of the Exchange Act..................23

Item 10. Executive Compensation..............................................26

Item 11. Security Ownership of Certain Beneficial Owners and
         Management and Related Stockholders.................................27

Item 12. Certain Relationships and Related Transactions,
         and Director Independence...........................................28

Item 13. Exhibits ...........................................................29

Item 14. Principal Accountant Fees and Services..............................32

                                       i
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                                     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,"  and similar  words 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

Corporate Information and History

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

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

     In March 2004,  we reached an  agreement in  principal,  subject to certain
closing  conditions,  with Fil Filipov to acquire  51% of the  capital  stock of
Filco GmbH, a German corporation.  In October 2004, Mr. Filipov and we agreed to
modify our  agreement in principal so as to increase the number of shares of the
capital  stock of Filco GmbH which we could  acquire,  if we had  finalized  the
acquisition,  from 51% to 75.1%.  Through December 31, 2005, we had loaned Filco
GmbH an aggregate  principal  amount of  $6,275,881  with no loans made by us in
2006,  exclusive  of interest  at 8% per annum,  pursuant to a series of secured
promissory notes. Security for these loans consisted of Filco's plant machinery,
equipment and other plant property, and intellectual property, including designs
and  drawings.  We used proceeds from the private  placement  offerings  that we
completed during 2004 and 2005 to fund the Filco loans.

     On January 20, 2006, Filco filed for insolvency in Germany.  As a result of
the filing by Filco,  we  terminated  the  Acquisition  Agreement on February 7,
2006.  An auction sale of Filco's  assets  occurred on May 10, 2006.  Due to the
uncertainty of our position under German bankruptcy law, $4,275,881 of the Filco
advances was written off in 2005,  and the remaining  $2,000,000 was written off
in 2006. Accordingly, any inventory,  equipment or outstanding advances to Filco
have been written off during 2006 and there is no  indication  that the proceeds
of any inventory or equipment at the Filco plant will be returned to us.


Introduction

     Our principal executive offices are located at 200 Freeway Drive, Unit One,
Blackwood,  NJ  08012  and  our  telephone  number  is  (856)  232-3000.  We are
incorporated in the State of New Jersey.

     Since 1995,  substantially  all of our resources and  operations  have been
directed  towards  the  development  of  the  Omni-Directional   wheel,  related
components,  Omni-Directional Lift Trucks and other  Omni-Directional  Vehicles.
Many of the components,  including the unique shaped wheels, motors, and frames,
have been designed by Airtrax and are specially manufactured for us.

                                       2
<PAGE>
     Omni-Directional means that vehicles designed and built by us can travel in
any direction. Our Omni-directional vehicles are controlled with a joystick. The
vehicle will travel in the  direction  the  joystick is pushed.  If the operator
pushes the joystick sideways,  the vehicle will travel sideways. If the operator
were  to  twist  the  joystick   the  vehicle   will  travel  in  circles.   Our
omni-directional  vehicles  have one  motor and one  motor  controller  for each
wheel.  The  omni-directional  movement is caused by coordinating  the speed and
direction   of  each  motor  with   joystick   inputs  which  are  routed  to  a
micro-processor,  then from the  micro-processor  to the motor  controllers  and
finally to the motor itself.

     During the year ended  December 31, 2006, we continued  development  of the
COBRA and KING COBRA  scissor  lifts and the  Omni-Directional  power chair.  We
anticipate  incurring more costs on these products and plan to begin  production
of the first COBRA model and the KING COBRA in 2007. The growth and  development
of our business will require a significant amount of additional working capital.
We currently have limited financial resources and based on our current operating
plan, we will need to raise additional capital in order to continue  operations.
However,  we are in  discussions  with  lenders  to  raise  capital  in order to
continue operating,  although we have no contracts or commitments for additional
capital at this time.  We currently do not have  adequate cash to meet our short
or long term objectives.  In the event additional capital is raised, it may have
a  dilutive  effect  on our  existing  stockholders.  However,  there  can be no
assurance that additional financing will be available at terms that are suitable
to us.

     The  assembly  of our  products  is  conducted  at our  executive  offices.
Currently  100% of our vehicle frames are being  manufactured  in the USA. These
frames  are  shipped  to the  Blackwood  plant for final  assembly.  Previously,
partially  assembled  vehicles were shipped to the  Blackwood  facility from the
Filco plant in Germany.  Fourteen were shipped to the USA for final assembly.  A
total of  approximately  sixty frames were  shipped  from  Bulgaria to the Filco
plant for partial assembly. None of the frames shipped from Bulgaria were within
specification.  The  twenty-seven  frames shipped to the United States  required
re-machining  in order to make them  useable.  The  balance  were  rejected  and
abandoned with other parts inventory that was stored in the Filco plant.


OMNI-DIRECTIONAL TECHNOLOGY

Prior History

     Omni  directional  vehicle  technology has been the subject of research and
development by universities, the Department of Defense, and industry for over 25
years.  A Swedish  inventor  patented  an early  stage  omni-directional  wheel.
Thereafter,  the  technology  was  purchased  by the United  States Navy and was
advanced at the Naval Surface Warfare Center.  The US Navy held the patent until
its expiration in 1990. In 1996, the Navy  transferred this technology to us for
commercialization  through a  Cooperative  Research  and  Development  Agreement
(CRADA).

Technology Description

     Since the technology  transfer under the CRADA agreement,  we have examined
and  redesigned  many  aspects of the  system  for use in  various  applications
including lift trucks and other material handling equipment.  In this regard, we
refined control  software and hardware,  and tested a variety of drive component
features  on  our  pilot  Omni-Directional  lift  trucks,   scissor-lifts,   and
multi-purpose mobility platforms. Extensive demonstrations of prototype vehicles
for  commercial  and military  users in  combination  with market  research have
enabled us to direct our development  efforts towards the products  offering the
best probability of success in the market.

     Our engineers  have designed other aspects of our machine to complement the
unique  functionality  of  our  Omni-Directional  technology.  In so  doing,  we
achieved a virtually maintenance free drive system which allows the vehicle free
and  unrestricted  movement  during  operation.  Each  vehicle is  powered  with
electric  motors that  eliminate  brushes and  commutators  of  conventional  DC
motors. The motors also are lubricated for life thereby eliminating the need for
additional  greasing and fittings.  The ATX-3000  transmission  uses a synthetic
lubricant,  and is sealed for life. The joysticks  control all vehicle movement.
Conventional  drive trains,  steering racks,  hydraulic  valve levers,  and foot
petals for braking and acceleration are all non-existent.

                                       3
<PAGE>
     On vehicles employing our Omni-Directional  Technology,  each wheel powered
wheel has a separate electric motor,  making the vehicle capable of traveling in
any  direction.  The motion of the vehicle is  controlled  by  coordinating  all
powered   wheels   through  a   microprocessor   that  receives  input  from  an
operator-controlled  joystick(s).  The joystick(s)  control all vehicle movement
(starting,  steering, and stopping). The frame of our ATX-3000  Omni-Directional
Lift  Truck  consists  of a steel  main frame and  attached  articulating  axle,
mobilized  with four  Omni-Directional  wheels.  The AC electric  motor for each
wheel  turns its own  wheel  hub.  Each  wheel hub is  encircled  with  multiple
specially   shaped  rollers  that  are  offset  45  degrees.   By  independently
controlling the forward or rearward  rotation of each wheel, the vehicle has the
capability of traveling in any direction.  The technology  allows the vehicle to
move  forward,  laterally,  diagonally,  or  completely  rotate  within  its own
footprint,  thereby allowing it to move into confined spaces without difficulty.
The navigational options of an Omni-Directional vehicle are virtually limitless.

EXISTING AND PROPOSED PRODUCTS

     SIDEWINDER  Omni-Directional  Lift Trucks.  We anticipate  that we will add
additional models of lift trucks to the SIDEWINDER line, including a Reach truck
and an Order Picker truck..

     Omni-Directional  Aerial  Work  Platform.  In late  February  2004,  we, in
collaboration  with MEC Aerial Platform Sales Corporation of Fresno,  California
("MEC"),  introduced a concept  version of a scissor lift at the American Rental
Association  trade show in Atlanta.  The scissor lift called the  "PHOENIX(TM)",
incorporated our Omni-Directional technology along with an MEC platform and lift
mechanisms.

     On March 13, 2004, we entered into a draft Product  Development,  Sales and
Representation  Agreement  with MEC.  The draft  agreement  called for the joint
development  of a  proto-type  and  production  versions of an  Omni-Directional
aerial work platform called the "3068ODS".  During the development  stage,  each
party  was  to  provide  the  parts,   which  apply  to  that  party's  area  of
responsibility.   We  would   provide  all  of  the  parts   required   for  the
Omni-Directional  traction  system and related  control  systems,  and MEC would
provide all of the parts required for the scissor lift and lifting apparatus and
the control  systems for the scissor lift  apparatus.  After  development of the
prototype  version,  the  parties  were to  establish  the cost of a  commercial
product,  and if the cost of a commercial  product was  considered  commercially
viable,  the parties  would jointly  develop a commercial  version of the aerial
work platform. If commercial production resulted, we would have been responsible
for product manufacturing,  and MEC or its affiliate would have been responsible
to promote,  market and sell the product to their network of  approximately  200
distributors.  Aerial  work  platform  sales  made by MEC would be  subject to a
royalty  to us and,  likewise  sales made by us would be subject to a royalty to
MEC. The amount of the respective royalties would be subject to agreement by the
parties.  Orders  placed  by MEC  would be  financed  by MEC  subject  to agreed
production schedules. We also planned to manufacture the COBRA(TM) AWP using the
lifting  mechanism as designed by us or procured from MEC and vendors other than
MEC.

     During 2004, MEC was  repositioned to perform  manufacturing  in the United
States thus removing their  obligation  under the  agreement.  During the latter
part of 2004,  we  presented  MEC with  invoices  for  payment  of  tooling  and
engineering  costs related to development of the PHOENIX(TM).  The invoices were
not paid by MEC who was,  at that  time,  in the  process  of  realigning  their
finances. As a result of the aforementioned changes, the agreement was modified.
The  modification  stated that the 3068ODS aerial work platform project would be
products of our company instead of an MEC designed or built vehicle.  This meant
that the project would be  henceforth  designed and built by us. MEC would still
have the ability to make suggestions  regarding  vehicle design or construction,
but the final  product  would be our product.  In addition,  the  agreement  was
revised to provide that we would build another  vehicle product line, the COBRA,
which will be marketed  exclusively by our dealers.  The parties mutually agreed
to the dissolution of the agreement and Airtrax has decided to design, build and
market  the AWP's  under  the  COBRA  brand  exclusively.  Discussions  with MEC
regarding  ways that they can make  Omni-Directional  AWP's  available  to their
customers are on going.

                                       4
<PAGE>
     Omni-Directional  Personal Mobility Devices.  We have begun the development
of  new   technologies   which  will  enable  us  in  the  future,   to  develop
Omni-Directional  Personal Mobility Devices such as Power Chairs,  Scooters, and
patient  beds  or  lifts.  We  have  had  discussions  with  several   equipment
manufacturers  who may be interested in developing  and marketing  such products
using  these  technologies.  No  agreements  have  been  made.  We will  require
additional  funds to complete  structural  and ergonomic  designs and proto-type
vehicles,  for further evaluation and testing. We cannot predict whether we will
be able to successfully develop these products.

     Military Products. During 1999, we were awarded a Phase I research contract
under the Department of Defense's  Small Business  Innovation  Research  program
(SBIR) to develop an Omni-Directional  Multiple Purpose Mobility Platform (MP2).
Under  the  Phase  I  base   contract,   we  studied  the   application  of  the
omni-directional  technology  for military use and were  supervised by the Naval
Air Warfare Center Aircraft  Division  (NAWC-AD) in Lakehurst,  New Jersey.  The
contemplated use includes the  installation of jet engines on military  aircraft
and the  transportation  of munitions and other military goods. We completed the
Phase I base  contract  in 1999 and were  subsequently  awarded a Phase I option
from  NAWC-AD to  further  define  the uses of the MP2.  In July  2000,  we were
awarded a Phase II research contract under the SBIR program.  Under the Phase II
contract,  we studied the  feasibility  of the MP2 for  military  purposes,  and
constructed two proto-type devices. This contract (with the option) was extended
twice for 6 months each past the 42-month  contract  time  period..  A completed
proto-type  MP2 was delivered to the US Navy during the end of the first quarter
of 2004 for testing purposes.  A second design, an  Omni-Directional  Jet Engine
Handler conversion kit was constructed,  and demonstrated as proof of concept of
the  modularity  of the  design.  We have  been  advised  by the US Navy  that a
non-SBIR sponsor for the MP2 program must be identified before a Phase II option
is  exercised.  A Phase III  contract  could be awarded  without such a sponsor.
Although our management believes the underlying  Omni-Directional Technology for
the proposed MP2 has  significant  potential  for both  commercial  and military
applications,  we cannot predict  whether any sales beyond the Phase II contract
will result from the SBIR program.  It is the belief of management that sales to
the US military  for  products  such as the MP2 will not  materialize  until the
Omni-Directional  Technology  achieves  commercial  acceptance.  We do  believe,
however,  that  products  such as the  ATX-3000 or the COBRA AWP can and will be
sold to the US  government,  possibly  including  the  military,  through  a GSA
Multiple Awards Contract. We have begun the application process and hope it will
be awarded by mid-2007.  We cannot predict  whether we will be successful in our
application.

     On  September 7, 2006,  we were  awarded a $415,000  contract to design and
build a customized  MP2 Equipment  Handling Unit for the Israeli Air Force.  The
contract includes an option to build 5 additional units at $95,000 each upon the
acceptance  of the first unit.  It is  estimated  that the follow on orders that
could result from this contract  would be from 29 to 100 units over the next one
to three years.  The Critical  Design Review was completed in November 2006, the
design was approved and initial  deliverables  were  provided.  As a result,  we
received a first process  payment of $170,000 on December 12, 2006. We expect to
begin the  Acceptance  Test  Procedure  in  mid-April  2007 and upon  successful
completion, will receive a second payment of $162,000. We cannot predict whether
we will be able to  successfully  pass all of the acceptance  tests and complete
the contract, or that if we do so, that any subsequent orders will result.

CURRENT OPERATIONS

     Since 1995, substantially all of our resources and operations have directed
towards the  development  of the  Omni-Directional  wheel,  related  components,
Omni-Directional Lift Trucks and other  Omni-Directional  Vehicles.  Many of the
components,  including the unique shaped wheels,  motors, and frames,  have been
designed  by  Airtrax  and  are  specially  manufactured  for  us.  29  ATX-3000
Omni-Directional lift trucks, carrying ANSI certification and the UL Label, have
been  shipped to  customers  in 2006,  and nine others are ready to ship pending
receipt of orders in the beginning of 2007.

                                       5
<PAGE>
     ANSI testing refers to a series of tests including tilt testing the vehicle
with masts it will use to make  certain that it will not tip over in normal use.
In addition,  ANSI testing includes drop testing specified loads on the overhead
guard to make  certain  that the  overhead  guard  will not fail and  crush  the
operator.  These tests  require us to turn the vehicle on its side to prove that
the  battery  door lock will  retain  the  battery  in the event the  vehicle is
overturned.  ANSI  testing  was  performed  and  documented  by us and  we  have
certified  that the tests have been  completed and the vehicle has passed in all
respects.  This  testing was  required  prior to the  vehicle  being sold to the
public in the United States.

     UL testing is  completed  on lift trucks to certify that is free of hazards
with respect to fire and electrical shock. Completion of UL testing is generally
considered  the mark of companies who will take extra steps and  precautions  to
protect their customers.

MANUFACTURING AND SUPPLIERS

     There was limited production in the second through fourth quarters of 2006.
All of the units shipped in 2006 and our current inventory were assembled in the
last quarter of 2005 and the first  quarter 2006.  Frank Cooper,  a former plant
manager for GM, has  established the production  assembly  process and procedure
for our vehicle assembly. His efforts have helped to develop procedures,  and to
incorporate  inventory control and quality  assurance  programs so that we stand
ready to rapidly scale production capacity at the Blackwood facility.  Initially
this plant was equipped for nominal monthly production but is capable of ramping
up for  anticipated  demand before year's end. We also plan to  manufacture  the
KING COBRA  Omni-Directional  AWP in the Blackwood  plant beginning in the third
quarter of 2007.

     Components  for our  products  consist  of over the  counter  products  and
proprietary  products  that have been  specially  designed and  manufactured  by
various   suppliers  in  collaboration   with  us.  We  believe  that  continual
refinements  of certain  components  will  occur  during the first six months of
initial  KING COBRA  production  in response  to user  feedback  and  additional
product  testing.  We will  strive to improve  product  functionality  which may
require additional refinements in the future. We consider the specially designed
and  manufactured  products   proprietary,   and  have  entered  into  exclusive
contractual  agreements with certain suppliers to protect the proprietary nature
of these products.  These arrangements  prohibit the supplier from producing the
same or similar  products for other companies who would want to compete directly
with us in the omni-directional  vehicle market. In addition,  while we maintain
single  sources for some of the over the counter  components,  we are engaged in
qualifying  and  securing  agreements  with  second  sources  for  all  possible
components

DISTRIBUTION AND PRODUCT MARKETING

     We intend to establish a national and international network of distributors
and dealers to sell our  SIDEWINDER  and COBRA lines to users,  however,  we may
sell  directly to select  national and  international  accounts  and  retailers.
National and international  accounts or retailers  include,  but are not limited
to, nationally  recognized  businesses with national or international  locations
having facilities in numerous states or countries.

                                       6
<PAGE>
     During  2004  and  2005,  in  anticipation  of  commercial  production,  we
solicited interest from targeted dealers  nationwide,  and in certain instances,
received  contracts  from a  number  of  these  dealers.  Due to  the  delay  in
establishing  commercial production,  the contracts were not fulfilled. In 2004,
we began  soliciting  dealers  nationwide and  distributors  in several  foreign
countries.  Principal terms of the agreement  reached is that these dealers will
purchase our products  which  include the  SIDEWINDER  or the COBRA AWP (scissor
lift),  or both  and  sell  these  products  to their  clients.  Certain  of the
distributors were given "exclusive" territories, such as Airtrax Canada (Airtrax
Canada is not owned or  operated by us but we have  authorized  their use of the
Airtrax  Name).  Airtrax  Canada was  required to  purchase a minimum  number of
SIDEWINDER units to maintain the "exclusivity"  portion of the agreement between
firms.  Airtrax Canada lost their  exclusivity in 2006, as they did not meet the
minimum  requirements of the agreement.  Presently,  we are unable to distribute
quantities of vehicles in Europe due to our inability to be certified  compliant
("CE") with Europe. We expect to be CE compliant and able to distribute vehicles
in 2007,  although no assurances  can be given.  The dealers in the US generally
have not been given exclusive  territorial rights, but that has occurred in some
areas. They are required to purchase one or more vehicles,  however, to become a
dealer.  Credit  terms are now  available  to  approved  dealers  while  foreign
distributors  are only sold under the terms of letters  of credit.  All  foreign
sales are paid in  advance,  under terms of an  irrevocable  letter of credit or
approved credit terms. Targeted dealers for the SIDEWINDER brand will consist of
selected premier equipment dealers, currently selling other lift truck products.
The dealer network will consist of dealers who have substantial  market share in
the US,  with a history  of being  able to sell and repair  lift  trucks  and/or
related  material  handling  solutions.  Several  of the  targeted  dealers  are
significant  sized entities,  having annual sales in excess of $100 million.  We
expect to provide a sales  incentive to dealers  through an  aggressive  pricing
structure.  Typically,  a dealer  will earn a  commission  ranging  from $500 to
$1,000 on the sale of a  competitive  lift  truck.  Our pricing  structure  will
enable  the  dealer to  receive  much  higher  commissions  from the sale of the
SIDEWINDER products.

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

Product Warranty Policies

     Our product  warranty  policy is similar to the warranty  policies of other
major  manufacturers,  i.e., one-year warranties on all parts and labor, and two
years on major parts,  however,  our vehicles  have fewer parts to warranty.  In
addition,  manufacturers  of our  parts and  vehicles  have  their own  warranty
policies that, in effect,  take the financial  exposure from our company.  There
are exceptions to the one year rule,  such as the frame and  significantly,  the
motors and controllers. These parts have an eighteen-month warranty, because the
coverage  begins  when the  product is shipped to us and not when the product is
purchased.

MARKETS

Lift Trucks

     Our initial market focus was directed to the lift truck market.  We believe
that  commercial  versions of  Omni-Directional  Lift  Trucks  will  improve the
materials  handling  and  warehousing   industries  creating  potential  markets
globally. Industry data shows that during 2003 approximately 174,000 and 550,000
units  were  sold in the  United  States  and  worldwide,  respectively  (Modern
Materials  Handling).  Based  upon an  average  per unit sale  price of  $28,500
(Modern  Materials  Handling  estimate),  the total market in the United  States
would  approximate $5 billion in 2003. This amount  represents  sales of a broad
range of  vehicles  with price  ranges  from  $18,000 to $31,000  for a standard
3,000-pound  rated vehicle to $75,000 or greater for  specialty  narrow aisle or
side loader  vehicles.  We expect to continue to make  inroads  into this market
with the introduction of additional  SIDEWINDER brand material handling vehicles
in the future.

                                       7
<PAGE>
Aerial Work Platforms

     Aerial  Work  Platforms  are  used  in  the  construction  and  warehousing
industries,  and  are  ideally  suited  for  our  Omni-Directional   Technology.
According to data  provided by the United States  Department  of Commerce,  this
market  consists of  approximately  $1.2  billion in annual  sales.  Aerial Work
Platforms  and man lifts  range in size from single user lifts to large off road
machines.  Of the total market,  we expect to compete with a range of indoor man
lifts.  Great strides were made in our  development  of our AWP products  during
2006, and we now plan to introduce two models under the COBRA brand in 2007, and
additional units in 2008.

COMPETITION

     We expect to confront competition from existing products,  such as standard
and  "Narrow  Aisle  or  NA"  lift  trucks,  and  from  competing  technologies.
Competition  with  standard  lift trucks,  which retail from $16,000 to $31,000,
will be on the basis of utility, price, and reliability. We believe that we will
compete  favorably  with a  standard  lift  truck  for  reliability,  and that a
purchase decision will be based upon weighing the operational  advantages of our
products against its higher purchase price. NA and sideloader lift trucks retail
at $45,000 or greater.  While our SIDEWINDER  Omni-Directional Lift Truck cannot
be classified as "narrow aisle",  it can perform  "narrow aisle"  functions at a
significantly less cost. We also are aware of multi-directional  lift trucks now
being offered by other manufacturers that retail from $42,000 and higher for the
standard  version.  These newer  products  have improved  operational  features,
however,  they are  unable  to  travel  in all  directions,  and  hence  are not
omni-directional.  These machines have to stop,  turn all four wheels,  and then
proceed to drive in the sideward direction.  Despite these improved  operational
features,   management  believes  these  manufacturers  have  adhered  to  older
conventional  methods and have added a substantial amount of parts to their lift
trucks to achieve  improved  functionality,  which contrasts with the design and
features of our  product as  discussed  previously  herein.  Therefore,  to that
extent,  we believe  that we  maintain a  competitive  advantage  to these newer
products.

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

PATENTS AND PROPRIETARY RIGHTS

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

                                       8
<PAGE>
     On  September  8, 2003,  we entered an  exclusive  license  agreement  with
Excalibur Design Services,  Inc. and Nicholas Fenelli (Inventor),  to secure and
use  certain   proprietary   intellectual   properties  known   collectively  as
"Omni-Directional  Vehicle  Control  Algorithms".  Mr. Fenelli is also our Chief
Operating Officer.  Due to severe cash flow restrictions in 2006, we were unable
to  fulfill  our  obligations  under the terms of the  agreement  and  Excalibur
rescinded the exclusivity portion of the agreement.  As of December 31, 2006, no
other  party was granted  rights to use the  property.  On February  19, 2007 we
negotiated an amendment with Excalibur to reinstate our exclusive  rights to the
"Omni-Directional  Vehicle Control Algorithms".  We expect to resolve all issues
to the mutual benefit of the two companies during 2007.

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

PRODUCT LIABILITY

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

     Presently,  we maintain  product  liability  insurance  in the amount of $1
million.  This amount will be increased to $10 million in the future, as we deem
necessary  to do so. We obtained  our  insurance  commensurate  with the initial
shipment of our Omni-Directional Lift Trucks.

EMPLOYEES

     As of March 31,  2007,  we have 13 full time  employees,  and one  contract
employee,  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 and  assembly  facilities  at 200
Freeway Drive, Unit One, Blackwood, NJ 08012. This facility is a total of 30,000
square  feet with 3,000  square  feet  allocated  to offices  and cost a monthly
rental fee of $12,750.

Item 3. Legal Proceedings

     We are not  currently a party to any legal  proceedings.  There has been no
bankruptcy, receivership or similar proceedings.

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.


                                       9
<PAGE>
                                     PART II

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

     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
                                                    ----           ----
            2007    First Quarter                   0.97           0.48

            2006    First Quarter                   2.39           1.08
                    Second Quarter                  2.17           1.15
                    Third Quarter                   2.03           0.92
                    Fourth Quarter                  1.01           0.42

            2005    First Quarter                   3.07           1.83
                    Second Quarter                  2.95           1.85
                    Third Quarter                   4.70           2.07
                    Fourth Quarter                  3.40           2.20

Common Stock

     Our Amended Articles of Incorporation authorize the issuance of 100,000,000
shares of common  stock,  no par value per  share.  Holders  of shares of common
stock are  entitled  to one vote for each share on all matters to be voted on by
the stockholders. Holders of common stock have cumulative voting rights. Holders
of shares of common stock are entitled to share ratably in dividends, if any, as
may be declared,  from time to time by the Board of Directors in its discretion,
from  funds  legally  available  therefore.  In  the  event  of  a  liquidation,
dissolution, or winding up of our company, the holders of shares of common stock
are entitled to share pro rata all assets remaining after payment in full of all
liabilities.  Holders of common stock have no preemptive  or other  subscription
rights,  and there  are no  conversion  rights or  redemption  or  sinking  fund
provisions with respect to such shares.

     As of April  12,  2007,  there  were  24,379,887  shares  of  common  stock
outstanding.

     As of April 12, 2007, there were  approximately  878 stockholders of record
of our common  stock,  respectively.  This does not  reflect  those  shares held
beneficially or those shares held in "street" name.

Dividend Policy

     We have never declared or paid any cash  dividends on our common stock.  We
do not anticipate  paying any cash dividends to  stockholders in the foreseeable
future. In addition,  any future  determination to pay cash dividends will be at
the  discretion  of the  board  of  directors  and  will be  dependent  upon our
financial condition, results of operations, capital requirements, and such other
factors as the Board of Directors deem relevant.  There are no  restrictions  in
our  articles  of  incorporation  or  bylaws  that  restrict  us from  declaring
dividends on our common stock.

                                       10
<PAGE>
Preferred Stock

     As of April  12,  2007,  there  were  275,000  shares  of  preferred  stock
outstanding.  We held a special  meeting of our  shareholders  on March 28, 2005
pursuant to which a majority of our  shareholders  approved an  amendment to our
certificate of  incorporation  to increase our authorized  preferred  stock from
500,000 to  5,000,000  shares.  Accordingly,  we are  authorized  to issue up to
5,000,000  shares of preferred stock. In addition,  pursuant to said meeting,  a
majority  of our  shareholders  approved  an  amendment  to our  certificate  of
incorporation  to provide  that the shares of  preferred  stock may be issued in
series, and shall have such voting powers, full or limited, or no voting powers,
and such designations, preferences and relative participating, optional or other
special rights,  and  qualifications,  limitations or restrictions  thereof,  as
shall be stated and expressed in the resolution or resolutions providing for the
issuance  of such  stock  adopted  from time to time by the board of  directors.
Accordingly,  our board of directors is expressly  vested with the  authority to
determine and fix in the resolution or  resolutions  providing for the issuances
of preferred stock the voting powers, designations,  preferences and rights, and
the qualifications,  limitations or restrictions thereof, of each such series to
the full  extent  now or  hereafter  permitted  by the laws of the  State of New
Jersey.

     The holders of the preferred  stock are entitled to receive,  when, as, and
if declared by our board of directors, out of funds legally available therefore,
cash dividends on each share of preferred  stock at the rate of 5% per annum, or
if cash is not legally  available,  in additional  shares of common  stock.  The
preferred stock, in respect of dividends and distributions upon our liquidation,
winding-up,  and  dissolution,  shall rank  senior to all  classes of our common
stock and each other class of capital stock or series of preferred stock created
that does not  expressly  provide  that it ranks senior to, or on a parity with,
the  preferred  stock.  The holders of  preferred  stock are entitled to cast 10
votes for each share held of the preferred Stock on all matters presented to our
shareholders for shareholder vote.

     On April 1, 2005, we issued 100,000  shares of preferred  stock to the sole
holder of the preferred  stock as payment of dividends in lieu of cash dividends
with  respect to  previously  issued  shares of  preferred  stock.  Our original
Articles of  Incorporation,  as amended,  including  on April 30,  2000,  do not
support  the  issuance of  additional  shares of  preferred  stock as payment of
dividends on shares of issued and outstanding preferred stock. Accordingly,  the
100,000  shares of  preferred  stock which were issued to the holder on April 1,
2005 , were issued in error.

     Our  Articles of  Incorporation,  as amended,  including on April 30, 2000,
similarly do not support the  calculation we used in  determining  the number of
shares of common stock used to pay preferred  stock  dividends.  The  difference
being the date used in determining  the stock price at the end of each preferred
dividend  period,  as  opposed  to the  lowest  common  stock  price  during the
preferred dividend period, subject to a 70% discount, for calculating the number
of common shares  issued as payment of the period's  preferred  stock  dividend.
Accordingly,  the  number  of  shares  was  greater  than the  number  of shares
required,., and were issued in error.

     Our  financial  statements at December 31, 2004 reflect  275,000  shares of
preferred stock  outstanding and disclosed that an additional  100,000 shares of
preferred  stock were deemed the  equivalent  of 221,892  shares of common stock
that  would  have been  required  to settle an  equivalent  amount of  preferred
dividends. We have determined that the number of shares deemed the equivalent of
the  preferred  stock  dividend has been  recalculated  based on our Articles of
Incorporation,  as amended,  including on April 30, 2000.  Accordingly,  we will
issue 136,041  shares of common stock to the sole holder of the preferred  stock
as payment  of  $51,561 of  preferred  stock  dividends  less other  adjustments
resulting from the  recalculation of the number of common shares required to pay
preferred stock dividends,  subsequently approved.  During the period January 1,
2003 through June 30, 2006, 200,238 shares of common stock were issued in excess
of the amount required.

Equity Compensation Plan Information

     The  following  table  shows   information  with  respect  to  each  equity
compensation  plan under which our common stock is authorized for issuance as of
December 31, 2006.

<TABLE>
<CAPTION>
                      EQUITY COMPENSATION PLAN INFORMATION

<S>                                     <C>                         <C>                       <C>

                                      Number of securities                                Number of securities
                                       to be issued upon                                 remaining available for
                                          exercise of            Weighted average      uture issuance under equity
                                      outstanding options,       exercise price of         compensation plans
                                      warrants and rights      outstanding options,   f   (excluding securities
Plan category                                                   warrants and rights      reflected in column (a)
-------------------------------------------------------------------------------------------------------------------
                                              (a)                       (b)                        (c)
-------------------------------------------------------------------------------------------------------------------
Equity compensation plans approved            -0-                       -0-                        -0-
by security holders

Equity compensation plans not                 -0-                       -0-                        -0-
approved by security holders

Total                                         -0-                       -0-                        -0-
</TABLE>

Currently,  we do not have a formalized equity compensation plan under which our
common stock is authorized for issuance.

                                       11
<PAGE>
Unregistered Sales of Equity Securities

     Following is a summary of unregistered  securities issued during the fourth
quarter of 2006.

     o    194,000 shares of common stock were issued for  professional  services
          valued at $141,919.

     o    184,000  shares of common  stock  were  issued  in  connection  with a
          settlement of a default on a convertible promissory note. These shares
          were valued at $93,490.

     o    41,666shares  of common  stock were issued in exchange of a $65,000 of
          convertible note.

     o    5,000 shares were issued as an Employee bonus valued at $3,570.

     o    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 OPERATIONS

     Special  Note  on   Forward-Looking   Statements.   Certain  statements  in
"Management's Discussion and Analysis or Plan of Operation" below, and elsewhere
in  this  annual  report,  are  not  related  to  historical  results,  and  are
forward-looking statements.  Forward-looking statements present our expectations
or forecasts of future  events.  You can identify  these  statements by the fact
that  they  do not  relate  strictly  to  historical  or  current  facts.  These
statements involve known and unknown risks, uncertainties and other factors that
may cause our actual results, levels of activity, performance or achievements to
be materially different from any future results, levels of activity, performance
or  achievements  expressed  or  implied  by  such  forward-looking  statements.
Forward-looking  statements  frequently  are  accompanied  by such words such as
"may," "will," "should," "could," "expects," "plans," "intends,"  "anticipates,"
"believes,"  "estimates," "predicts," "potential" or "continue," or the negative
of such terms or other words and terms of similar  meaning.  Although we believe
that  the  expectations   reflected  in  the   forward-looking   statements  are
reasonable, we cannot guarantee future results, levels of activity, performance,
achievements,  or timeliness of such results. Moreover, neither we nor any other
person  assumes  responsibility  for  the  accuracy  and  completeness  of  such
forward-looking  statements.  We  are  under  no  duty  to  update  any  of  the
forward-looking  statements  after the date of this  annual  report.  Subsequent
written and oral forward  looking  statements  attributable  to us or to persons
acting in our behalf are expressly qualified in their entirety by the cautionary
statements and risk factors set forth below and elsewhere in this annual report,
and in other reports filed by us with the SEC.

     You should read the following  description  of our financial  condition and
results  of  operations  in  conjunction  with  the  financial   statements  and
accompanying notes included in this report beginning on page F-1.

                                       12
<PAGE>
Overview


     Since 1995,  substantially  all of our resources and  operations  have been
directed  towards  the  development  of  the  Omni-Directional   wheel,  related
components,  Omni-Directional Lift Trucks and other  Omni-Directional  Vehicles.
Many of the components,  including the unique shaped wheels, motors, and frames,
have been designed by Airtrax and are specially manufactured for us.

     Omni-Directional means that vehicles designed and built by us can travel in
any direction. Our Omni-directional vehicles are controlled with a joystick. The
vehicle will travel in the  direction  the  joystick is pushed.  If the operator
pushes the joystick sideways,  the vehicle will travel sideways. If the operator
were  to  twist  the  joystick   the  vehicle   will  travel  in  circles.   Our
omni-directional  vehicles  have one  motor and one  motor  controller  for each
wheel.  The  omni-directional  movement is caused by coordinating  the speed and
direction   of  each  motor  with   joystick   inputs  which  are  routed  to  a
micro-processor,  then from the  micro-processor  to the motor  controllers  and
finally to the motor itself.

     During the year ended  December 31, 2006, we continued  development  of the
COBRA and KING COBRA  scissor  lifts and the  Omni-Directional  power chair.  We
anticipate  incurring more costs on these products and plan to begin  production
of the first COBRA and the KING COBRA models in 2007. The growth and development
of our business will require a significant amount of additional working capital.
We currently have limited financial resources and based on our current operating
plan, we will need to raise additional capital in order to continue  operations.
However,  we are in  discussions  with  lenders  to  raise  capital  in order to
continue operating.  We currently do not have adequate cash to meet our short or
long term objectives.  In the event additional  capital is raised, it may have a
dilutive  effect on our existing  stockholders.  There can be no assurance  that
additional financing will be available at terms that are suitable to us.

     We have incurred losses and experienced  negative operating cash flow since
our inception.  For the twelve month period ended December 31, 2006 and 2005, we
had net losses attributable to common shareholders of approximately $4.5 million
and  $15.2  million,  respectively.  The  net  loss  in  both  periods  includes
conversion   expenses  of  $1  million  and  $6.6  million  in  2006  and  2005,
respectively,  offset by revaluation  income $3.1 million and $1 million in 2006
and 2005,  respectively,  in  connection  with the  repricing of the  conversion
ratios of convertible debenture issues and of warrant conversion prices. We also
wrote  down the  advances  to Filco of $6.6  million  and $2 million in 2006 and
2005,  respectively  (See  Note  13in the  financial  statements).  We expect to
continue to incur significant expenses. Our operating expenses have been and are
expected to continue to outpace  revenue and result in additional  losses in the
near term. We may never be able to reduce these losses, which will require us to
seek  additional  debt or equity  financing.  While we are in  discussions  with
several  prospective  lenders,  we do not currently have  commitments  for these
funds and there can be no assurance that additional financing will be available,
or if available, will be on acceptable terms.

Results of Operations  for the Year Ended December 31, 2006 Compared to the Year
Ended December 31, 2005

     Due to liquidity  constraints and limited access to additional  capital for
production  in 2004 and 2005 and the  unexpected  death of our  Chief  Executive
Officer and President,  Peter Amico in August 2006 limited  production and sales
of  omni-directional  technology.  Consequently,  management  believes  that the
year-to-year   comparisons   described   below  are  not  indicative  of  future
year-to-year comparative results.

     In September  2006,  Airtrax was awarded a $415,000  contract to design and
build a customized  MP2 Equipment  Handling Unit for the Israeli Air Force.  The
contract  includes an option to build five additional units at $95,000 each upon
the acceptance of the first unit. It is estimated that the follow on orders that
could result from this contract  would be from 29 to 100 units over the next one
to three years.  The Critical  Design Review was completed in November 2006, the
design was approved and initial  deliverables  were  provided.  As a result,  we
received a first  process  payment of $170,000 on December 12 2006. We expect to
begin  the  Acceptance  Test  Procedure  in mid April  2007 and upon  successful
completion, will receive a second payment of $162,000. We cannot predict whether
we will be able to  successfully  pass all of the acceptance  tests and complete
the contract, or that if we do so, that any subsequent orders will result.

     We believe that the joint cooperation between us and the United States Navy
with the MP2 contract,  including building the ETU-110  omni-directional  engine
handler and our contract to design and build a customized MP2 Equipment Handling
Unit  for  the  Israeli  Air  Force,  has  bolstered  the  potential  use of our
technology within the military.  We do not intend to incur additional costs with
the US Navy  unless we incur  potential  expenses in  demonstrating  the ETU-110
omni-directional   engine  handler,  or  other   omni-directional   vehicles  in
connection with the Israeli contract.

                                       13
<PAGE>
Revenue


     Revenue  for  the   twelve-month   period  ended   December  31,  2006  was
approximately $1.3 million,  representing an increase of approximately  $600,000
from revenue of $719,000 for the  comparable  period in 2005.  This  increase in
revenue, is primarily, attributed to sales of our SIDEWINDER ATX-3000.

Cost of Goods Sold

     Our cost of goods sold for the twelve  month period  months ended  December
31, 2006 amounted to  approximately  $1.5 million,  an increase of approximately
$800,000  from  $729,000  for the twelve  months ended  December 31, 2005.  This
increase  in cost of  goods  sold,  is  primarily,  attributed  to  sales of our
SIDEWINDER ATX-3000.

Operating and Administrative Expenses.

     Operating  and   administrative   expenses  which  include   administrative
salaries, depreciation and other expenses for twelve month period ended December
31, 2006 totaled  $4.5 million  which  represents  an decrease of  approximately
$600,000  from $5.1 million  incurred in the twelve month period ended  December
31, 2005. The decrease is primarily due to recording of stock option expenses of
$1.1  million in 2005,  compared  to $76,000 in 2006,  partially  by  additional
expenses  relating to the increase in production of our SIDEWINDER  ATX-3000 and
Cobra and King Cobra scissor lift and  Omni-Directional  Power Chair development
costs.

Loss Attributable to Common Shareholders.

     Loss  attributable  to common  shareholders  for the  twelve  months  ended
December  31, 2006 was  approximately  $(4.6)  million  compared  with a loss of
$(15.2)  million for the same period in 2005.  The decrease is due  primarily to
the recording of stock option  expenses of  approximately  $1.1 million in 2005,
compared with $76,000 in the current period, and revaluation expense recorded in
the twelve months ended December 31, 2005 of approximately $6.6 million compared
with $1.1 million in 2006. Additionally,  we recorded revaluation income of $3.1
million  in 2006  compared  with $1  million  in 2005  in  connection  with  the
repricing of certain  conversion  ratios of convertible  debenture issues and of
warrant conversion prices. We also wrote down the remaining Filco advance of $2.
million  during  2006  compared  with $4.7  million  in 2005.  We also  recorded
approximately $300,000 of deemed dividend expense in each year.

Research and Development

     We incurred  $519,134  and $544,933 in research  and  development  expenses
during the year ended  December  31, 2006 and 2005,  respectively.  Research and
development  activities during fiscal 2005 primarily  involved continued testing
and evaluation of omni-directional components and preparing these components for
production  in  2005.  Our  wheel  design  was  changed  from the  "concept"  to
"production"  phase. This was and is an ongoing process between our 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.

                                       14
<PAGE>
Liquidity and Capital Resources

     Since our inception,  we have financed our  operations  through the private
placement of our common stock and sales of convertible  debt.  During the twelve
months  ended  December  31,  2006 and 2005,  we raised  net of  offering  costs
approximately  $1.3  million and $5.9  million,  respectively,  from the private
placement of our securities.

     During 2000, we were approved by the State of New Jersey for our technology
tax transfer  program  pursuant to which we could sell our net operating  losses
and research and development credits as calculated under state law. In the years
2006 and 2005, we recorded credits of $493,258 and $867,413,  respectively, from
the sale of our losses and credits.

     We have consistently demonstrated our ability to meet our cash requirements
through private  placements of our common stock and  convertible  notes. We have
continued to similarly satisfy those requirements during the twelve months ended
December  31,  2006.  However,  there  can be no  assurances  that  we  will  be
successful  in raising the required  capital to continue  our current  operating
plan.

     We anticipate that our cash requirements for the foreseeable future will be
significant.  In particular,  management  expects  substantial  expenditures for
inventory,   product   production,   and  advertising  with  production  of  its
Omni-Directional   lift   truck  and  the   start  of  Cobra   and  King   Cobra
(Scissors-Lift) production.

     We will  require  additional  funds to continue our  operations  beyond the
initial  production run. We anticipate  that operating  capital in the amount of
approximately  $3 to 5 million  will be  required  during  the next 12 months to
sufficiently   fund   operations.   We  expect  to  recognize   lower  per  unit
manufacturing and part costs in the future due to volume  discounts,  as well as
lower  per  unit  shipping  costs as we  transition  from  the  initial  rate to
larger-scale  production.  While we are in discussions with several  prospective
lenders, we do not currently have commitments for additional funds and there can
be no assurance that  additional  financing will be available,  or if available,
will be on acceptable  terms. If we are unable to obtain sufficient funds during
the next six months we will further reduce the size of our  organization and may
be forced to reduce and/or curtail our production and  operations,  all of which
could have a material adverse impact on our business prospects.

     As a result of our  liquidity  issues,  we have  experienced  delays in the
repayment of certain  promissory notes upon maturity and payments to vendors and
others.  If in the  future,  the  holders  of our  promissory  notes may  demand
repayment of principal  and accrued  interest  instead of electing to extend the
due date  and if we are  unable  to repay  our  debt  when  due  because  of our
liquidity  issues,  we may be  forced to  refinance  these  notes on terms  less
favorable  to us than the  existing  notes,  seek  protection  under the federal
bankruptcy laws or be forced into an involuntary bankruptcy filing.

     As of December 31, 2006, our working capital deficit was $3,249,339.  Fixed
assets,  net of accumulated  depreciation,  and total assets, as of December 31,
2006 and 2005, were $283,920 and $190,893, respectively.  Current liabilities as
of December 31, 2006 were $5,700,754 compared with $6,186,390 as of December 31,
2005.

February 2007 Financing

     On February 20, 2007, we entered into a Securities  Purchase Agreement with
certain accredited and/or qualified institutional investors pursuant to which we
sold an aggregate of $3,734,040 principal amount secured convertible  debentures
convertible into shares of our common stock at a conversion price equal to $0.45
for an aggregate  purchase  price of $3,219,000.  In addition,  we issued to the
investors  (i) warrants to purchase  8,297,866  shares of our common stock at an
exercise price equal to $0.54 per share,  which represents 100% of the number of
shares  issuable upon conversion of the  debentures;  (ii) callable  warrants to
purchase  4,148,933  shares of our common  stock at an  exercise  price equal to
$0.75 per share,  which  represents  50% of the number of shares  issuable  upon
conversion of the debentures;  and (iii) callable warrants to purchase 4,148,933
shares of our common stock at an exercise price equal to $1.25 per share,  which
represents  50%  of  the  number  of  shares  issuable  upon  conversion  of the
debentures.

     The debentures mature on February 20, 2009. We may in our discretion redeem
the  debentures,  subject to certain  equity  conditions  being met by us as set
forth in the  debentures,  at a price  equal to 150% of the  principal  balance,
accrued interest, and all liquidated damages, if any, thereon that are requested
to be redeemed.  Our obligations under the securities  purchase  agreement,  the
debentures  and  the  additional  definitive  agreements  with  respect  to this
transaction  are secured by all of our assets.  In  addition,  our wholly  owned
subsidiaries,  Airtrax Financial Services LLC and Airtrax  Manufacturing  Corp.,
are  guaranteeing  the  satisfaction  of our  obligations  under the  securities
purchase agreement, the debentures and the additional definitive agreements with
respect to this transaction.

                                       15
<PAGE>
Off-Balance Sheet Arrangements.

     We do not have  any off  balance  sheet  arrangements  that are  reasonably
likely to have a current or future effect on our financial  condition,  revenue,
results of operations, liquidity or capital expenditures.

Liquidated Damages

     In connection  with  financings  we entered into with various  investors in
November 2004 and October 2005, we provided such investors  registration rights.
Pursuant  to those  registration  rights,  in the  event  that we did not file a
registration statement by a certain date registering for resale shares of common
stock  issuable upon  conversion of their  securities or have such  registration
statement  effective  by  another  date,  we  agreed  to pay to  such  investors
liquidated damages. To date, we have not filed such registration statement,  and
as a result, we have accrued the required obligation for liquidated damages.

     During 2006, to the investors in the November 2004 financing,  we issued an
aggregate principal amount $198,248 of our 4% Unsecured  Convertible  Debentures
and 5 year  warrants  to purchase an  aggregate  of 72,201  shares of our common
stock in exchange for the settlement of $244,632 in accrued  liquidated  damages
through June 30, 2006. The debentures mature on March 1, 2008, and September 30,
2008,  respectively,  pay  simple  interest  at a rate of 4% per  annum  and are
convertible into shares of our common stock at a price equal to $0.45 per share.
The warrants are exercisable into shares of our common stock at a price equal to
$1.56 per share. In addition,  the investors agreed to forego any future accrual
and payment of such liquidated damages.

     As of December 31, 2006, an aggregate amount of approximately  $279,514 has
been accrued in liquidated  damages payable to the investors in our October 2005
financing. We have begun discussions with the lead investor and intend to engage
in negotiations with the remaining  investors,  to settle the liquidated damages
which we currently, and in the future will, owe to such investors.

Critical Accounting Policies and Estimates

Revenue

     Revenues 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.


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

                                       16
<PAGE>

Intangibles

     We continually evaluate whether events and changes in circumstances warrant
revised  estimates of useful lives or recognition  of an impairment  loss of our
intangibles, which as of December 31, 2006, consist mainly patents and licensing
agreements.  The conditions  that would trigger an impairment  assessment of our
intangible  assets  include  a  significant,  sustained  negative  trend  in our
operating results or cash flows, a decrease in demand for our products, a change
in the competitive environment and other industry and economic factors.

Accounting for Income Taxes

     As part of the  process  of  preparing  our  financial  statements,  we are
required to estimate our income  taxes.  This process  involves  estimating  our
actual  current tax  exposure  together  with  assessing  temporary  differences
resulting  from differing  treatment of items for tax and  accounting  purposes.
These  differences  result in  deferred  tax assets and  liabilities,  which are
included  within  our  consolidated  balance  sheet.  We must  then  assess  the
likelihood  that our deferred tax assets will be recovered  from future  taxable
income.  If there is not persuasive  evidence that recovery will occur, we would
establish  a  valuation  allowance.  To the  extent  we  establish  a  valuation
allowance or increase  this  allowance  in a period,  we must include an expense
within the tax provision in the consolidated statement of operations.

     Significant  management  judgment is required in determining  our provision
for income  taxes,  our deferred tax assets and  liabilities  and any  valuation
allowance  recorded  against our net  deferred  tax assets.  We have  recorded a
valuation  allowance of $8,257,629 as of December 31, 2006, due to uncertainties
related to our ability to utilize  some of our  deferred  tax assets,  primarily
consisting of certain net operating  losses  carried  forward before they expire
and certain accrued  expenses,  which are deferred for income tax purposes until
paid.  The valuation  allowance is based on our estimates of taxable  income and
the period  over which our  deferred  tax assets  will be  recoverable.  The net
deferred tax asset as of December 31, 2006 was  $919,889,  net of the  valuation
allowance.

Issuances of Common Stock

     Because  of the  significant  liquidity  issues  we have  faced  since  our
inception,  we have been  required to issue common stock to third party  vendors
and others in order to pay for services rendered. Such issuances are recorded as
an expense in the period in which the services are  performed.  During 2006,  we
issued an  aggregate  of  651,257  shares of common  stock to third  parties  in
exchange for services  performed.  These  services  were valued at $$859,856 for
year ended December 31, 2006.

Recent Accounting Pronouncement

     The Financial  Accounting  Standards Board (FASB) has recently issued "FASB
Staff  Position  EITF  00-19-2  which  modifies  the  accounting   treatment  of
derivatives that flow from financings involving embedded derivatives. This Staff
Position is effective for financial  statements for periods beginning January 1,
2007. Management believes that this will cause some change in the way we account
for  derivatives.  Management  is  evaluating  this  position and has not made a
determination as to the effective it will have on our financial statements.


                                       17
<PAGE>
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  because  we  have  incurred  losses  and
experienced  negative  operating cash flow since our  formation.  For our fiscal
years ended December 31, 2006 and 2005, we had a net loss of approximately $(4.6
million)  and $(15.2  million),  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 anticipate  that our cash  requirements  to fund  operating or investing cash
requirements  over the next 12 months will be greater  than our current  cash on
hand. We may never be able to reduce these losses, which will require us to seek
additional debt or equity  financing.  We do not currently have  commitments for
additional funds and there can be no assurance that additional financing will be
available,  or if available,  will be on acceptable  terms.  If we are unable to
obtain  sufficient  funds during the next 12 months we will  further  reduce the
size  of our  organization  and may be  forced  to  reduce  and/or  curtail  our
production and operations,  all of which could have a material adverse impact on
our business prospects.

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

     Our  business  operations  will  be  harmed  if we  are  unable  to  obtain
additional  funding.  We do not know if additional  financing  will be available
when needed, or if it is available, if it will be available on acceptable terms.
Insufficient funds may prevent us from implementing our business strategy or may
require  us to delay,  scale back or  eliminate  certain  opportunities  for the
provision of our technology  and products.  As of March 31, 2007, we have loaned
$6,275,881 to Filco.

     On January 20, 2006,  Filco filed for  insolvency in Germany and a receiver
was  appointed.  As a result,  on February 7, 2006, we terminated  the tentative
agreement to acquired  Filco stock and began  negotiations  with the receiver to
acquire some or all of the Filco  assets.  The  $6,275,881  of advances to Filco
that were  outstanding at December 31, 2005, were secured by liens filed against
the  machinery  and  equipment  owned by Filco  which in 2003 was  appraised  at
$5,400,000,  and by liens filed against its intellectual property, which had not
been appraised.  Due to the uncertainty of our position under German  bankruptcy
law,  $4,275,881  of the  Filco  advances  were  written  off in  2005,  and the
remaining  $2,000,000  was written  off in 2006.  In  addition,  $413,174 of our
inventory  stored at the Filco plant was  abandoned and written off during 2006.
During 2006,  an auction of Filco  assets was  conducted by the receiver who did
not acknowledge our liens against property and equipment.

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

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

                                       18
<PAGE>
WE HAVE RECEIVED  LIMITED  INDICATIONS  OF THE COMMERCIAL  ACCEPTABILITY  OF OUR
OMNI-DIRECTIONAL  LIFT  TRUCK.  ACCORDINGLY,   WE  CANNOT  PREDICT  WHETHER  OUR
OMNI-DIRECTIONAL PRODUCTS CAN BE MARKETED AND SOLD IN A COMMERCIAL MANNER.

     Our success  will be  dependent  upon our ability to sell  Omni-Directional
products in quantities  sufficient to yield profitable results. To date, we have
received   limited   indications   of  the  commercial   acceptability   of  our
Omni-Directional  lift  truck.  Accordingly,   we  cannot  predict  whether  the
Omni-Directional product can be marketed and sold in a commercial manner.

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

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

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

WE CURRENTLY LACK ESTABLISHED  DISTRIBUTION  CHANNELS FOR OUR LIFT TRUCK PRODUCT
LINE.

                                       19
<PAGE>
     We do not have an established  channel of  distribution  for our lift truck
product  line.  We have  initiated  efforts to establish a network of designated
dealers throughout the United States.  Although we have received  indications of
interest from a number of equipment distributors, to date, such indications have
been limited.  We cannot predict  whether we will be successful in  establishing
our intended dealer network.

IF WE ARE UNABLE TO RETAIN THE SERVICES OF ROBERT  WATSON,  OUR CHIEF  EXECUTIVE
OFFICER, OR IF WE ARE UNABLE TO SUCCESSFULLY  RECRUIT,  QUALIFIED PERSONNEL,  WE
MAY NOT BE ABLE TO CONTINUE OPERATIONS.

     Our ability to successfully  conduct our business affairs will be dependent
upon the capabilities and business acumen of current management including Robert
Watson,  our  President  and Chief  Executive  Officer.  We have entered into an
employment  agreement with Mr. Watson,  however, we do not maintain key man life
insurance with respect to Mr. Watson. Accordingly,  shareholders must be willing
to entrust  all  aspects of our  business  affairs  to our  current  management.
Further,  the  loss of any one of our  management  team  could  have a  material
adverse impact on our continued operation.

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

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

IF  WE  DO  NOT  SUCCESSFULLY   DISTINGUISH  AND   COMMERCIALIZE  OUR  DEVELOPED
PROPRIETARY  PRODUCTS AND SERVICES,  WE WILL NOT ATTRACT A SUFFICIENT  NUMBER OF
CUSTOMERS.  ACCORDINGLY,  WE MAY BE  UNABLE  TO  COMPETE  SUCCESSFULLY  WITH OUR
COMPETITORS OR TO GENERATE REVENUE SIGNIFICANT TO SUSTAIN OUR OPERATIONS.

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

                                       20
<PAGE>

                       RISKS RELATING TO OUR COMMON STOCK

WE HAVE ISSUED COMMON STOCK, WARRANTS, AND CONVERTIBLE NOTES TO INVESTORS AND IN
EXCHANGE  FOR FEES AND  SERVICES AT A DISCOUNT TO THE MARKET PRICE OF OUR COMMON
STOCK AT THE TIME OF SUCH  ISSUANCE.  THIS  RESULTS IN A LARGE  NUMBER OF SHARES
WHICH HAVE BEEN ISSUED AND A LARGE NUMBER OF SHARES  UNDERLYING OUR WARRANTS AND
OTHER  CONVERTIBLE  SECURITIES  THAT ARE OR MAY BE AVAILABLE FOR FUTURE SALE AND
THE SALE OF THESE SHARES MAY DEPRESS THE MARKET PRICE OF OUR COMMON STOCK.

     We had 24,376,887  shares of common stock outstanding as of April 12, 2007,
and we had convertible notes which require the issuance of 5,505,227  additional
shares of common stock  pursuant to our May and October 2005 private  placements
and 2006  note  issuances,  in which  the  conversion  price  has been  adjusted
resulting from the February 20, 2007 issuance of $3,734,040 Secured  Convertible
Promissory Notes,  convertible into 8,297,867  additional shares of common stock
at $0.45 per common share. Additionally,  warrants which require the issuance of
10,383,323  additional shares of common stock pursuant to our November 2004, and
February,  May,  and October 2005 private  placements  and 2006 note  issuances.
Further,  we issued 16,959,726 warrants in connection with the February 20, 2007
issuance of $3,734,040 Secured Convertible  Promissory Notes.  Further, we often
issue  common stock and warrants in exchange for fees and services at a discount
to the  market  price of our  common  stock at the time of such  issuance.  This
results in a large number of shares,  which have been issued,  a large number of
shares underlying our warrants and other convertible  securities that are or may
be available for future sale, and may create an overhang of securities for sale.
The  sale  of  these  shares  which  were or will be  issued  upon  exercise  or
conversion  of our  securities  at a discount to the market  price of our common
stock at the time of issuance  may depress the market  price of our common stock
and is dilutive to shareholder value.

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

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

     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.


                                       21
<PAGE>
Item 7. Financial Statements.

Index to Consolidated Financial Statements

<TABLE>
<CAPTION>
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<S>                                                                                                <C>
Report of Independent Registered Public Accounting Firm                                          F-2

Consolidated Balance Sheets as of December 31, 2006 and 2005                                     F-3

Consolidated Statements of Operations for the years ended December 31, 2006 and 2005             F-4

Consolidated Statement of Changes in Shareholders' Equity (Deficiency) for the years             F-5
ended December 31, 2006 and 2005

Consolidated Statements of Cash Flows for the year ended December 31, 2006 and 2005              F-6

Notes to Consolidated Financial Statements as of December 31, 2006 and 2005                      F-7
</TABLE>

<PAGE>
Report of Independent Registered Public Accounting Firm


The Board of Directors and shareholders
Airtrax, Inc.


     We have  audited  the  accompanying  balance  sheet of Airtrax,  Inc.  (the
"Company")  as of December 31, 2006 and the related  statements  of  operations,
changes in shareholders' deficit and cash flows for the years ended December 31,
2006  and  2005.  These  financial  statements  are  the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

     We  conducted  our audits in  accordance  with the  standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audits to obtain reasonable  assurance about whether the
financial  statements  are free of  material  misstatement.  The  Company is not
required to have, nor was I engaged to perform, an audit of its internal control
over financial reporting.  Our audits included consideration of internal control
over  financial  reporting as a basis for designing  audit  procedures  that are
appropriate  under the  circumstances,  but not for the purpose of expressing an
opinion on the  effectiveness  of the Company's  internal control over financial
reporting.  Accordingly, 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.  We believe that our audits provide a
reasonable basis for our opinion.

     In our opinion,  based on our audits, the financial  statements referred to
above  present  fairly,  in all material  respects,  the  financial  position of
Airtrax, Inc. as of December 31, 2006, and the results of its operations and its
cash flows for the years ended  December  31, 2006 and 2005 in  accordance  with
U.S. generally accepted accounting principles.

     The  accompanying  consolidated  financial  statements  have been  prepared
assuming  that the Company  will  continue as a going  concern.  As shown in the
accompanying  consolidated  financial  statements,  at December  31,  2006,  the
Company  had a  working  capital  deficiency  of  $3.3  million  as  well  as an
accumulated  deficit  of $29.8  million.  In  addition,  the  Company  has had a
continuing  record of losses.  These factors  among other  things,  discussed in
Notes 15 to the financial statements,  raise substantial doubt about the ability
of the Company to continue as a going concern.  The financial  statements do not
include any adjustments  relating to the  recoverability  and  classification of
recorded  asset amounts or the amounts or  classification  of  liabilities  that
might be necessary should the Company be unable to continue in operation.

/S/ Robert G. Jeffrey, Certified Public Accountant
April 16, 2007
Wayne, New Jersey



                                      F-2
<PAGE>

                                  AIRTRAX, INC.
                                 Balance Sheets
                        As of December 31, 2006 and 2005
<TABLE>
<CAPTION>

                                                                       2006                    2005

Assets
                                                                      ------------------     -------------------
<S>                                                                            <C>                      <C>
Current Assets:                                                                                   (Restated)
    Cash                                                                       $ 327,737                $ 19,288
    Accounts receivable                                                           50,704                  94,357
    Inventory                                                                  1,049,457               2,005,139
    Vendor advance                                                               103,628                 163,517
    Deferred tax asset                                                           919,889                 977,302
                                                                      ------------------     -------------------
      Total current assets                                                     2,451,415               3,259,603
                                                                      ------------------     -------------------

Property and Equipment, net of accumulated
      depreciation of $339,216 and $301886, respectively                         283,920                 190,893
                                                                      ------------------     -------------------
Other Assets
      Advances to Filco Gmbh                                                           -               2,000,000
      Patents, net                                                               148,151                 154,263
      Deferred charges                                                                 0                  388392
      Other                                                                           65                      65
                                                                      ------------------     -------------------
      Total other assets                                                         148,216               2,542,720
                                                                      ------------------     -------------------
      Total Assets                                                           $ 2,883,551             $ 5,993,216
                                                                      ==================     ===================

Liabilities and Shareholders' Deficiency
Current Liabilities:
    Accounts payable                                                         $ 1,097,361               $ 885,463
    Notes payable, shareholder                                                    75,713                 186,961
    Convertible notes payable                                                  2,129,797                       -
    Obligation for outstanding options                                         1,407,299               1,330,948
    Warrant and conversion option liability                                      249,971               3,516,462
    Accrued liabilities                                                          740,613                 266,556
                                                                      ------------------     -------------------
      Total current liabilities                                                5,700,754               6,186,390

Convertible Notes Payable                                                        198,248               2,048,000

                                                                                       -                       -
                                                                      ------------------     -------------------
Total Liabilities                                                              5,899,002               8,234,390
                                                                      ------------------     -------------------


Shareholders' Deficiency;
    Preferred stock, no par value; 5,000,000 shares authorized,
       275,000 issued and outstanding                                             12,950                  12,950
    Common stock, no par value; 100,000,000 shares authorized,
      24,260,352 and 21,939,360 shares issued and outstanding,
      respectively                                                            25,133,164              21,712,179
    Additional paid-in capital, warrants                                       1,587,500               1,042,400
    Accumulated Deficit                                                      (29,749,065)            (25,008,703)
                                                                      ------------------     -------------------
      Total shareholders' (deficiency)                                      $ (3,015,451)           $ (2,241,174)
                                                                      ==================     ===================


      Total Liabilities and Shareholders' Deficiency                         $ 2,883,551             $ 5,993,216
                                                                      ==================     ===================
                                                                                      -                       -

</TABLE>
                 The accompanying notes are an integral part of
                     these consolidated financial statements

                                      F-3
<PAGE>

                                  AIRTRAX, INC.
                            Statements of Operations
                 For the Years Ended December 31, 2006 and 2005
                                    (Audited)
<TABLE>
<CAPTION>

                                                                                    2006                     2005
                                                                           ----------------------     ------------------
<S>                                                                       <C>                        <C>
                                                                                                           (Restated)

Revenues                                                                  $             1,346,913    $           718,842
Cost of sales and services performed                                                    1,470,542                729,080
                                                                           ----------------------     ------------------
    Gross profit                                                                         (123,629)               (10,238)
                                                                           ----------------------     ------------------

Operating Expenses
    General and administrative costs                                                    4,452,179              5,057,596
    Impairment of Filco advances                                                        2,000,000              4,700,839
                                                                           ----------------------     ------------------
          Total operating expenses                                                      6,452,179              9,758,435
                                                                           ----------------------     ------------------
          Operating loss                                                               (6,575,808)            (9,768,673)

Other Income and Expenses
    Conversion expense                                                                 (1,009,069)            (6,571,454)
    Interest expense                                                                     (230,149)              (488,342)
    Revaluation income                                                                  3,054,716                993,837
    Other income and expense                                                               (2,255)                31,741
                                                                           ----------------------     ------------------
          Loss before income taxes and preferred stock expenses                        (4,762,565)           (15,802,891)

IncomeTax Benefit                                                                         437,803                867,413

                                                                           ----------------------     ------------------
          Loss before dividends                                                        (4,324,762)           (14,935,478)

Deemed dividends on preferred stock                                                      (303,100)              (274,978)
                                                                           ----------------------     ------------------

Net loss attributable to common shareholders                                           (4,627,862)           (15,210,456)

          Preferred stock dividend paid                                                  (112,500)               (51,563)
                                                                           ----------------------     ------------------

Deficit accumulated                                                                  $ (4,740,362)         $ (15,262,019)
                                                                           ======================     ==================

Net loss per share;
    Loss attributable to common shareholders                                         $ (4,324,762)         $ (14,935,478)
    Adjustment for preferred shares dividends accumulated but unpaid                       34,375                 68,750
                                                                           ----------------------     ------------------
Loss allocable to common shareholders                                                $ (4,359,137)         $ (15,004,228)
                                                                           ======================     ==================

Net loss pershre; basic and diluted                                                       $ (0.18)               $ (0.71)
                                                                           ======================     ==================
Weighted average common shares outstanding -
    Basic and diluted                                                                  24,151,352             20,951,187
                                                                           ======================     ==================
</TABLE>
                 The accompanying notes are an integral part of
                     these consolidated financial statements

                                      F-4

<PAGE>
                                  AIRTRAX, INC.
                Statement of Changes in Shareholders' Deficiency
                 For the Years Ended December 31, 2006 and 2005
                                    Restated

<TABLE>
<CAPTION>
                                             Common       Common    Preferred  Preferred               Accumulated
                                             Shares       Amount    Shares     Amount     Warrants     Deficit           Total
                                          ------------------------------------------------------------------------------------------
 Balance at December 31, 2004             15,089,342   $ 9,780,454  275,000    $ 12,950  $ 1,042,400  $ (9,746,684)    $ 1,089,120
                                          ------------------------------------------------------------------------------------------
<S>                                           <C>           <C>                                                             <C>
 Shares issued in  private placement          68,750        55,000        -           -            -             -          55,000
 Warrants exercised                          593,000       718,486        -           -            -             -         718,486
 Options exercised                            45,000        19,619        -           -            -             -          19,619
 Shares issued for services                  291,695       735,387        -           -                                    735,387
 Employee stock awards                        20,000        48,000        -           -            -             -          48,000
 Shares issued in lieu of rent                19,200        48,000        -           -                                     48,000
 Issuance of shares sold in prior year     1,749,827     1,401,172        -           -            -             -       1,401,172
 Shares issued in settlement of interest      28,453        66,295        -           -                                     66,295
 Transfer from liability on exercise of
        warrants                                   -       181,000        -           -                                    181,000
 Conversion of convertible debt            3,846,154     4,277,500        -           -            -             -       4,277,500
 Conversion benefit capitalized                    -     3,596,154        -           -            -             -       3,596,154
 Shares issued for Filco investment          187,939       458,571        -           -            -                       458,571
 Dividends on preferred stock                      -             -        -           -            -       (51,563)        (51,563)
 Preferred stock dividend                                  326,541                    -                          -         326,541
 Net Loss                                          -                      -           -                (15,210,456)    (15,210,456)
                                          ------------------------------------------------------------------------------------------
 Balance at December 31, 2005             21,939,360  $ 21,712,179  275,000       12,950  $ 1,042,400 $(25,008,703)   $ (2,241,174)
                                          ------------------------------------------------------------------------------------------

 Warrants issued in connection with
        convertible debt                           -             -        -            -    $ 333,325            -       $ 333,325
 Warrants no longer subject to
        revaluation                                -             -        -            -      211,775            -         211,775
 Employee stock awards                        75,000     $ 115,470        -            -            -            -         115,470
 Shares issued for services                  651,257       859,856        -            -            -            -         859,856
 Shares issued to directors                  145,000       222,500        -            -            -            -         222,500
 Shares issued in settlement of
  Note default                               184,000        93,490        -            -            -            -          93,490
 Conversion of convertible debt              811,033     1,204,519        -            -            -            -       1,204,519
 Shares issued for preferred dividend        418,979       415,610        -            -            -            -         415,610
 Shares issued for cash                       35,723        65,500        -            -            -            -          65,500
 Proceeds from warrant extesions             117,000                      -            -       117,000
 Value of debt conversion priviledge         327,040                                             -         327,040
 Dividends on preferred stock                      -             -        -            -            -     (112,500)       (112,500)
 Net Loss                                          -             -        -            -            -   (4,627,862)     (4,627,862)

                                          ----------                                                                     ----------
                                          ------------------------------------------------------------------------------------------
 Balance at December 31, 2006             24,260,352   $25,133,164  275,000     $ 12,950  $ 1,587,500 $(29,749,065)    $(3,015,451)
                                          ==========================================================================================
</TABLE>
                 The accompanying notes are an integral part of
                     these consolidated financial statements

                                      F-5
<PAGE>


                                  AIRTRAX, INC.
                            Statements of Cash Flows
           For the Years Ended December 31, 2006 and December 31, 2005
<TABLE>
<CAPTION>

                                                                                  2006                     2005
                                                                           --------------------    ---------------------
Cash flows from operating activities:                                                                    (Restated)
<S>                                                                                <C>                      <C>
     Net loss                                                                      $ (4,627,862)            $(15,210,456)
     Adjustments to reconcile net loss to net cash
        used in operating activities:
           Depreciation and amortization                                                 69,019                   59,500
           Cost of conversion                                                           961,569                7,068,174
           Common stock issued as payment for services                                1,197,826                  836,500
           Options granted for services                                                  76,351                1,082,250
           Cost of settling liquidated damages                                           44,266
           Value of converted interest                                                   66,464
           Loss on abandonment of vehicle                                                 2,443
           Accrued interest on shareholder advances                                       4,693                    4,015
           Value of shares issued to settle liabilities                                  93,490                  149,589
           Deemed dividend on preferred stock                                           303,100                  274,978
           Decrease in accual of deferred tax benefit                                     7,413                 (752,888)
           Revaluation of warrant liabilities                                        (3,054,716)                (992,757)
           Impairment of Filco investment                                             2,000,000                4,700,839
     Change in assets and liabilties;
           Decrease (increase) in accounts receivables                                   43,653                 (205,857)
           Decrease in advances                                                          59,889                        -
           Decrease( increase) in inventory                                             955,682               (1,295,858)
           Increase in accounts payable                                                 211,898                  490,504
           Increase in accrued liabilities                                              715,279                   89,592
                                                                           --------------------    ---------------------
                       Net cash used in operating activities                           (869,543)              (3,701,875)
                                                                           --------------------    ---------------------
Cash flows from investing activities:
     Acquisitions of equipment                                                         (151,577)                (150,806)
     Additions to patent cost                                                            (6,800)                 (42,861)
     Advances to Filco                                                                        -               (3,605,881)
                                                                           --------------------    ---------------------
Net cash used in investing activities                                                  (158,377)              (3,799,548)
                                                                           --------------------    ---------------------

Cash flows from financing activities:
     Proceeds from converted debt                                                     1,219,800                4,277,500
     Proceeds from the sale of common stock                                              65,500                   55,000
     Proceeds from convertible debt                                                           -                1,659,138
     Proceeds from notes payable to related parties                                      35,000                  151,493
     Payment of notes payable to related parties                                       (100,941)                  (2,002)
     Proceeds from exercise of warrants                                                 117,000                  718,486
     Proceeds from exercise of options                                                        -                   19,619
                                                                           --------------------    ---------------------
                       Net cash provided by financing activities                      1,336,359                6,879,234
                                                                           --------------------    ---------------------
                       Net increase (decrease) in cash                                  308,439                 (622,189)
Cash, beginning of year                                                                  19,288                  641,477
                                                                           ====================    =====================
Cash, end of year                                                                     $ 327,727                 $ 19,288
                                                                           ====================    =====================


                 The accompanying notes are an integral part of
                     these consolidated financial statements
</TABLE>

                                      F-6
<PAGE>
AIRTRAX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2006

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

     The Company was formed April 17, 1997. It has designed a lift truck vehicle
using  omni-directional  technology  obtained  under a contract  with the United
States Navy Surface Warfare Center in Panama City, Florida. The right to exploit
this  technology grew out of a Cooperative  Research and  Development  Agreement
with the Navy. Significant resources have been devoted during prior years to the
construction  of a prototype  of this  omni-directional  forklift  vehicle.  The
Company recognized its first revenues from sales of this product during the year
2005.

Development Stage Accounting

     In prior periods the Company was a development stage company, as defined in
Statement  of  Financial  Accounting  Standards  (FASB) No. 7. The Company is no
longer considered a development stage company.

     The Company has incurred  losses from  inception  to December 31, 2005,  of
$24.8 million and $4.6 million in 2006. Until the end of 2004, these losses were
financed by private placements of equity  securities.  During 2005 and 2006, the
Company obtained  financing almost  exclusively from the issuance of convertible
debentures.  The  Company  will need to raise  additional  capital  through  the
issuance of debt or equity securities to continue to fund operations.

Cash

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

Inventory

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

Fixed Assets

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

Income Taxes

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

Intangible Assets

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

Prototype Equipment

     The cost of developing  and  constructing  the  prototype  omni-directional
helicopter  handling  vehicle  and the  omni-directional  lift truck  vehicle is
expensed as incurred.


                                      F-7
<PAGE>

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, 2006.

Research and Development Cost

     The Company  expenses all research and development cost unless the criteria
required  by FASB  No.  2 are met.  To date  there  have  been no  research  and
development  costs  capitalized.  During  the  years  2006  and  2005 a total of
$519,314 and $544,933, respectively, was spent on development activity.

Advertising Costs

     The Company expenses advertising costs when the advertisement occurs. There
were no advertising costs incurred during 2006 and 2005.

Stock Options

     Stock options are occasionally awarded to employees,  directors and outside
parties  as  compensation  for  services.  Such  awards  have  been  immediately
exercisable.  The Company adopted SFAS 123R, "Share Based Payment" and SFAS 148,
"Accounting for Stock Based Compensation - Transition and Disclosure" on January
1, 2006.  Prior to 2006,  these awards were  accounted  for under the  intrinsic
method as permitted by Accounting Principles Board Opinion No. 25.

     The following presents information about the net loss and loss per share of
the year 2005 as if the Company had applied the  provisions of SFAS 123R and 148
to all options granted during the year 2005.



           Net loss as reported                               $   (15,416)
           Less: Stock-based employee compensation
            determined under the Intrinsic Method                   1,082
           Add:  Stock bases compensation determined
            under the Fair Value Method                            (1,105)
                                                                ----------
           Pro forma net loss                                 $   (15,393)
                                                                ----------
           Loss per share:
           Basic and diluted as reported                      $    (.72)
                                                                ==========
           Basic and diluted-pro forma                        $    (.72)
                                                                ==========

     Pursuant to the  requirements of SFAS 123R, the weighted average fair value
of options granted during 2005, as determined on the dates of grant,  was $1.37.
The fair values were  determined  using a Black  Scholes  option-pricing  model,
using the following major assumptions:



           Volatility                        91.10%
           Risk-free interest rate            3.71%
           Expected Life - years              4.52

Segment Reporting

     Management treats the operations of the Company as one segment.

Revenue Recognition

     Revenue will be realized from product  sales.  Recognition  will occur upon
shipment to  customers,  and where the  following  criteria are met;  persuasive
evidence of an  arrangement  exists;  delivery has occurred;  the sales price is
fixed or determinable; and collectability is reasonably assured.

     Some  revenue has been  realized  from  performing  services.  Revenue from
services is  recognized  when the service is performed  and where the  following
criteria are met:  persuasive  evidence of an arrangement  exists;  the contract
price is fixed or determinable; and collectability is reasonably assured.

                                      F-8
<PAGE>

Common Stock

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

Reclassifications

     Certain  amounts  from  prior  year have been  reclassified  to  conform to
current year presentation.

2.   RESTATEMENTS

     On March 21,  2007,the  Company  determined,  after  consultation  with its
independent  registered  public  accounting  firm,  that  a  restatement  of its
financial  statements for the year ended December 31, 2005 filed on Form 10-KSB,
together with its  subsequent  quarterly  reports on Form 10-QSB for the periods
ending June 30 and  September  30, 2005 and March 31, June 30, and September 30,
2006,  respectively  (collectively,  the  "Reports"),  is  necessary  due to the
issuance of the  Company's  preferred  stock as payment of  dividends in lieu of
cash  dividends on April 1, 2005 with  respect to  previously  issued  shares of
preferred stock. The Company's  original Articles of Incorporation,  as amended,
including on April 30,  2000,  prohibit  the  issuance of  additional  shares of
preferred  stock as payment  of  dividends  on shares of issued and  outstanding
preferred stock.  Accordingly,  the 100,000 shares of preferred stock which were
issued  to the  holder  on April 1, 2005  were  issued  in  error.  The  Company
determined  that it  should  take this  action to  prevent  future  reliance  on
previously issued financial statements set forth in its Reports.  Such financial
statements should no longer be relied upon.

     The Company's Articles of Incorporation, as amended, including on April 30,
2000,  similarly  do  not  support  the  calculation  used  by  the  Company  in
determining  the number of shares of common  stock used to pay  preferred  stock
dividends.  The difference being the date used in determining the stock price at
the end of each preferred dividend period, as opposed to the lowest common stock
price during the  preferred  dividend  period,  subject to a 70%  discount,  for
calculating  the  number of common  shares  issued as  payment  of the  period's
preferred  stock dividend.  Accordingly,  the number of shares were greater that
the number of shares  required,  and were issued in error resulting in increased
preferred dividend expenses and preferred stock equity. The financial statements
at December 31, 2004 reflect 275,000 shares of preferred  stock  outstanding and
disclosed that an additional  100,000 shares of preferred  stock were deemed the
equivalent  of 221,892  shares of common stock that would have been  required to
settle an  equivalent  amount of  preferred  dividends.  On April 1,  2005,  the
preferred  shares were  issued.  The Company has  determined  that the number of
shares  deemed  the   equivalent  of  the  preferred   stock  dividend  will  be
recalculated  based on the  Company's  Articles  of  Incorporation,  as amended,
including on April 30, 2000.


                                      F-9
<PAGE>

     In addition, on March 15, 2007, management of the Company determined, after
consultation  with its independent  registered  public  accounting  firm, that a
restatement of its Quarterly Reports on Form 10-QSB for the three and six months
ended June 30, 2005 and the three months  ended March 31, 2005 was  necessary in
light of the Company's  review of its  accounting for  derivatives  and based on
recent interpretations of the accounting for certain financial instruments under
SFAS 133 "Accounting for Derivative  Instruments and Hedging  Activities" ("SFAS
133") and the Emerging  Issues Task Force No. 00-19  "Accounting  for Derivative
Financial  Instruments  Indexed to, and Potentially  Settled in, a Company's Own
Stock" ("EITF No. 00-19").

     The Company  concluded  that its 6% Series A Convertible  Promissory  Notes
("Notes") and the Class A and Class B Warrants  (collectively,  the  "Warrants")
issued to certain accredited and/or qualified institutional  purchasers pursuant
to that certain Subscription Agreement (the "Subscription Agreement) dated as of
February 11, 2005 contained embedded  derivatives due to the registration rights
and liquidated damages provisions contained in the Subscription  Agreement.  The
embedded  derivative  provisions  provided that the Company will pay  liquidated
damages in connection  with the delay in filing of a  registration  statement on
Form SB-2 in the event that the Company did not file such registration statement
which  registers the shares of the Company's  common stock  underlying the Notes
and the Warrants,  or cause the  Securities  and Exchange  Commission to declare
such registration statement effective,  each within specified time frames as set
forth in the Subscription Agreement. Accordingly, the Company determined that it
should take action to prevent  future  reliance on previously  issued  financial
statements  set forth in its Quarterly  Reports on Form 10-QSB for the three and
six  months  ended  June 30,  2005 and the three  months  ended  March 31,  2005
(collectively  the "Quarterly  Reports").  Such financial  statements  should no
longer be relied upon.

     In particular,  the Company will restate its financial statements contained
in  the  Quarterly   Reports  to  reflect  the  reduction  in  preferred   stock
outstanding,  preferred  stock  dividend  expense and deemed  dividend  expenses
recorded in 2005 and 2006.  In addition,  the Company will restate its financial
statements  contained in the Reports to reflect a liability in  connection  with
issuance of the Notes and the Warrants that contained an embedded derivative and
conversion privileges, as of March 31, 2005 and June 30, 2005 as follows:

                                      F-10
<PAGE>
The  effect  on the  Company's  previously  issued  audited  December  31,  2005
financial statements are summarized as follows:

Loss attributable to common shareholders as originally
reported at Dec. 31, 2005                                          $(15,416,456)

Less;
      Adjustment to restate dividend expense on preferred stock        (206,000)
                                                                   ------------
Loss attributable to common shareholders at December 31,
2005 as restated                                                   $(15,210,456)
                                                                   ------------

Balance Sheet as of December 31, 2005:

                                          Previously    Increase
                                           Reported    (Decrease)    Restated
                                         ------------  ---------    -----------
 Current Assets                          $  3,259,603         --    $ 3,259,603
 All Other Assets                           2,733,613         --      2,733,613
                                         ------------               -----------
 Total Assets                            $  5,99,3216         --    $ 5,99,3216
                                         ============               ===========
 Current Liabilities                     $  6,186,390         --    $ 6,186,390
 Long Term Debt                             2,048,000         --      2,048,000
                                         ------------               -----------
 Total Liabilities                       $  8,234,390         --    $ 8,234,390
                                         ------------               -----------
 Stockholders' Deficit:
      Common Stock                       $ 21,385,638    326,541    $21,712,179
       Warrants                             1,042,400                 1,042,400
      Preferred stock                         545,491   (532,541)        12,950
      Accumulated deficit                 (25,214,703)   206,000    (25,008,703)
                                         ------------  ---------    -----------
 Total Liabilities and Shareholders'
  Deficiency                             $  5,993,216  $      --    $ 5,993,216
                                         ============  =========    ===========
3. RELATED PARTY TRANSACTIONS

     The Chairman of the Board of Directors  made periodic  loans to the Company
during  2006.  The loans did not accrued  interest  and were due on demand.  The
combined  loans  amounted to $35,000.  The unpaid  balance of principal on these
loans at December 31, 2006 was $0. The Majority  shareholder of the  corporation
and the  Company  President  has made  loans to the  Company  from time to time.
Certain  related  notes  accrued  interest  at 12% and are  due on  demand.  The
combined unpaid balance of principal and interest on these notes at December 31,
2006 was $75,713.

     During 2006, the Board of Directors received 145,000 shares for services as
directors;  these were valued at $222,500,  reflecting  the fair market value of
the stock at time of award.

     On August 25, 2006, the Company's CEO, President and Chairman ("President")
died. The  President's  employment  contact expired on June 30, 2006 and was not
renewed.  The  employment  agreement  did not  provide  for the  exercise of the
options upon death.  The options  granted in 2004 to the president  were 550,000
options,  valued  at  $187,500  and in 2005 he  President  was  granted  750,000
options,  valued at $975,000.  Subsequent  to his death,  the Board of Directors
extended  for one  year  from  the  date of the  termination  of the  employment
contract, the time during which the options can be exercised.

     In 2006, the Company granted 300,000 options to its Chief Executive Officer

4. STOCK OPTIONS

     The  Company  has  periodically  awarded  stock  options  under  employment
contracts with three employees.  These options entitle the employees to purchase
company stock at discounted prices. These options were 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.


                                                2006                    2005
                                                ----                    ----
                                              Weighted                Weighted
                                               Average                 Average
                                              Exercised               Exercised
                                           Shares    Price       Shares    Price
Options outstanding at beginning of
   year                                 1,375,000     $ .80     620,000    $ .73
Options granted during year               350,000       .46     800,000      .83
Options exercised during year              (7,500)              (45,000)     .44
                                        ---------     -----    --------    -----
Options outstanding at end of year
                                        1,715,500     $ .73   1,375,000    $ .80
                                        =========     =====   =========    =====
Weighted average Fair Value of
options granted                                       $0.34               $ 1.37
Weighted average remaining life of
outstanding options - years
                                                       4.79                 4.33


                                      F-11
<PAGE>
5. PRIVATE PLACEMENT OFFERINGS

     During 2006,  there have been four  issuances  of  convertible  debt.  None
contains a liquidated damages provision.  The first,  $819,800 of 8% convertible
debt, has been converted into equity, along with associated  interest,  at $1.56
per share, resulting in the issuance of 534,352 additional shares of stock. This
issue was accompanied by an equal number of warrants, exercisable at $1.75 for a
period of five years.

     A second 2006 issue was  $400,000 of 12%  convertible  debt due October 20,
2006. After commissions, the Company received net proceeds of $342,500. The debt
is convertible to stock at $1.56 per share. The issue was accompanied by 282,052
warrants exercisable at $1.56 for five years.

     The  third  and  fourth  issues,  of 4%  convertible  debt,  which  totaled
$198,248,  were made in  settlement  of  liquidated  damages  associated  with a
November, 2004 issue, as described above.

     At  December  31,  2006,  the  Company  was in  default on its 12% Series A
Convertible Note in the principal amount of $400,000 which the Company issued to
a qualified  institutional buyer on July 26, 2006. All principal and accrued and
unpaid  interest was due on October 20, 2006. The Company did not repay the note
in the  amount of  $412,000,  inclusive  of  principal  and  accrued  and unpaid
interest,  on or prior to October  20,  2006.  The Company  negotiated  with the
holder to extend the note  through  the  payment of cash,  and the  issuance  of
shares of common  stock.  The Note is due and  payable  in full,  including  all
unpaid Interest on November 29, 2007.

     On March 22, 2007, the Company made a $100,000  principal  payment and paid
interest of $30,233.  The Note was reduced to $300,000  and interest on the Note
was reduced to 10%.  Additionally,  the Company  issued 184,000 shares of common
stock as  settlement  of the default  period and paid a fee of $15,000 to Source
Capital Group, Inc., a registered representative of the Note-holder. The Company
also agreed to make monthly  interest  payments.  The conversion price was reset
per the terms of the original Note.

     On March 1, 2006, the Company issued  $150,000 of 4% Convertible  Notes due
March 1, 2008,  accompanied by 48,077 warrants to purchase common stock at $1.65
over a five year period.  On June 30,  2006,  the Company  issued an  additional
$48,248 in 4%  convertible  notes due September 30, 2008,  accompanied by 24,124
warrants  exercisable  at $1.65 per share over five years in  settlement  of the
liquidated  damages  described above.  These notes are also convertible at $1.56
over two years. As of June 30, 2006, all damages payable to all of the investors
in the Company's November 2004 private placement have been settled, and pursuant
to a modification  agreement  which the Company entered into with such investors
on March 1, 2006 and June 30, 2006,  no  liquidated  damages will accrue for the
non-effectiveness   of  the  registration   statement  after  the  date  of  the
modification agreements.

     The  Company's  private  placements of  convertible  notes and common stock
purchase warrants in 2005 also contained liquidated damages provisions.  For two
of the financings,  February and May, no liquidated damages have accrued despite
the fact  that the  shares  underlying  the notes  and  warrants  issued in such
private  placements  have not been  registered,  since the payment of damages is
linked to the  effectiveness of the  registration  statement which was initially
filed in February 2005 and said registration statement has been withdrawn. Under
the third  such  offering,  liquidated  damages  were  effective  150 days after
October 18, 2005. Such liquidated  damages accrue at the rate of 2% per month of
the amount raised in that offering, which was $1,548,000.  Liquidated damages of
$278,640,  which is the maximum amount allowed under the provisions of the Notes
for the October,  2005,  issue have been  accrued and charged to expense  during
2006.

                                      F-12
<PAGE>

     During 2005, the Company sold 68,750 shares in private placements, yielding
proceeds of $55,000. It also issued three convertible debt issues. Each of these
issues included detachable warrants.

     One of these debt issues  ($5,000,000)  yielded  proceeds of $4,277,500 and
was converted in 2005 into 3,846,154 shares of common stock; this issue was sold
with warrants to purchase 2,884,616 shares of common stock. The remaining issues
that have not yet been converted to stock, bear interest at 8% and have two year
conversion terms. They are further described below:

-----------------------------------------------------------------------------
Balance of 2005 convertible notes and Warrants issuances;

-----------------------------------------------------------------------------
                                                            Exercise
  Remaining debt      Conversion Price        Warrants         Price
-----------------------------------------------------------------------------
$     246,797             $.45                384,615        $.45
-----------------------------------------------------------------------------
    1,483,000             $.45                774,000         .45
-----------------------------------------------------------------------------
$   1,729,797
$==============



-----------------------------------------------------------------------------
Balance of 2006 convertible notes and Warrants issuances;

-----------------------------------------------------------------------------
                                                            Exercise
  Remaining debt      Conversion Price        Warrants         Price
-----------------------------------------------------------------------------
$    150,000             $1.56                 48,077        $1.56
-----------------------------------------------------------------------------
      48,248             $1.56                 24,124        $1.56
-----------------------------------------------------------------------------

     400,000             $ .45                282,051        $ .45
-----------------------------------------------------------------------------
$    598,248
=============

     The options not yet  converted,  and the  outstanding  warrants,  have been
classified  as  liabilities,  as required by Emerging  Issues Task Force  (EITF)
00-19, having met the definitions of embedded derivatives.

     Included in funds  raised  during 2004 through  stock sales was  $1,312,000
raised  under a Purchase  Agreement  dated  November 22,  2004.  That  agreement
required,  among other things,  that a registration  statement be filed with the
SEC and that the registration  statement be declared effective by the SEC within
a prescribed  time.  The Company did not satisfy its obligation to cause the SEC
to declare the registration  statement  effective within the timeframe specified
in the November 2004 Registration Rights Agreement.  As a result, it was subject
to,  and  accruing  liquidated  damages  in an amount  equal to 2% of the amount
invested for each 30 day period following the default date. On May 31, 2005, the
Company  entered  into  a  letter  agreement  with  a  representative   of  this
shareholder  group  under  which  $120,429  was paid to  settle  the  liquidated
damages, which had accrued. Under that agreement,  no further liquidated damages
would accrue until after June 30, 2005. The obligation concerning  effectiveness
of the  registration  statement has not been  satisfied and  liquidated  damages
accrued since June 30, 2005 at the rate of approximately  $26,240 per month. The
liquidated damages paid thus far, and liquidated damages that accrued subsequent
to June 30,  2005,  were  charged  to expense  during the  periods in which they
accrued.  For the year  ended  December  31,  2005 an  additional  $160,851  had
accrued;  and $88,126 accrued during 2006. All liquidated damages for this issue
were settled by the issuance on June 30, 2006 of  convertible  notes,  which are
described below.

     There  were  three  private  placement  offerings  during  2005.  Under the
provisions  of the first of these  offerings,  penalties  will not accrue as the
registration requirements of that offering have been satisfied. Under the second
such  offering,  there is no  provision  for  penalties.  Under the  third  such
offering,  penalties  began to accrue on March  18,  2006,  for a period of nine
months.  The full amount of these  penalties  ($278,640) are included in accrued
expenses.  Such  penalties will accrue at the rate of 2% per month of the amount
raised in that offering,  which was  $1,548,000.  These  penalties will start to
accrue on March 18, 2006 and will accrue for no more than nine months.

                                      F-13
<PAGE>

     On February  20,  2007,  the Company  entered  into a  Securities  Purchase
Agreement (the "Purchase  Agreement") with certain  accredited  and/or qualified
institutional  investors  pursuant to which we sold an aggregate  of  $3,734,040
principal amount secured convertible  debentures (the "Debentures")  convertible
into  shares  of our  common  stock,  no par value  (the  "Common  Stock")  at a
conversion  price  equal to $0.45 (the  "Conversion  Price"),  for an  aggregate
purchase price of $3,219,000.  In addition,  the Company issued to the investors
(i) warrants to purchase  8,297,866  shares of the  Company's  Common Stock (the
"Warrants") at an exercise price equal to $0.54 per share, which represents 100%
of the  number  of shares  issuable  upon  conversion  of the  Debentures;  (ii)
callable  warrants  to  purchase  4,148,933  shares  of our  Common  Stock at an
exercise price equal to $0.75 per share,  which  represents 50% of the number of
shares issuable upon conversion of the Debentures;  and (iii) callable  warrants
to purchase  4,148,933  shares of our Common Stock at an exercise price equal to
$1.25 per share,  which  represents  50% of the number of shares  issuable  upon
conversion of the Debentures (collectively, the "Callable Warrants"). (see "Note
16 Subsequent Events")

     Previous  Convertible  Issues had contained "Most Favored  Nations" clauses
that guaranteed the investors that subsequent issues of stock or notes would not
be made on more favorable terms. If the Company  subsequently  issues any shares
of common stock or securities  convertible or exercisable into common stock at a
per share purchase price which is less than the conversion or exercise prices of
outstanding  notes and warrants,  such  conversion  or exercise  prices would be
adjusted  downward in accordance with their respective terms. As a result of the
issuance of the  convertible  notes set forth above,  the following  warrant and
conversion prices were adjusted:

1.  The  exercise  price  for  warrants  associated  with  a May  2005  $500,000
convertible  debenture  offering,  which were  adjusted  from $2.11 per share to
$1.56 per share,  are now set at $0.45.  2. The conversion  price for an October
2005  $1,548,000  issuance of convertible  debentures,  which were adjusted from
$2.00 per share to $1.56 per share,  are now set at $0.45. 3. The exercise price
for 774,000  warrants  issued  pursuant to the October  2005debenture  offering,
which were previously  adjusted from $3.25 per share to $1.56 per share, are now
set at $0.45.

     The affect of these changes will included in the calculation of revaluation
income during the first quarter of 2007.

6. PREFERRED STOCK

     The Company is authorized  to issue  5,000,000  shares of preferred  stock,
without  par value.  At  December  31,  2005,  275,000 of these  shares had been
issued.  Each of these shares  entitles the holder to a 5%  cumulative  dividend
based on a $5 per share stated value. If sufficient cash is not available, or at
the option of the shareholder, these dividends may be paid in common stock. This
issue of preferred  stock also provides the  shareholder  with 10 votes for each
share of preferred  stock.  The holder of this preferred  stock is a corporation
wholly owned by the estate of the Company's former President and Chairman.

     Dividends  of $68,750  accrued on the  preferred  stock  during each of the
years 2002 through  2006.  Cash  dividends of $131,771  were paid during 2004. A
stock dividend of 136,041 common shares will be paid in 2007, satisfying $51,563
of the unpaid dividends. The balance of unpaid dividends at of December 31, 2006
was $47,917.

     On March 21,  2007,the  Company  determined,  after  consultation  with its
independent  registered  public  accounting  firm,  that  a  restatement  of its
financial  statements  for the year ended December 31, 2005 filed on Form 10-KSB
is necessary due to the issuance of the Company's  preferred stock as payment of
dividends in lieu of cash  dividends on April 1, 2005 with respect to previously
issued  shares  of  preferred   stock.  The  Company's   original   Articles  of
Incorporation,  as  amended,  including  on April  30,  2000,  do not  allow the
issuance of  additional  shares of  preferred  stock as payment of  dividends on
shares of issued and  outstanding  preferred  stock.  Accordingly,  the  100,000
shares of preferred  stock which were issued to the holder on April 1, 2005 were
issued in error

                                      F-14
<PAGE>

     The Company's Articles of Incorporation, as amended, including on April 30,
2000,  similarly  do  not  support  the  calculation  used  by  the  Company  in
determining  the number of shares of common  stock used to pay  preferred  stock
dividends.  The difference being the date used in determining the stock price at
the end of each preferred dividend period, as opposed to the lowest common stock
price during the  preferred  dividend  period,  subject to a 70%  discount,  for
calculating  the  number of common  shares  issued as  payment  of the  period's
preferred  stock dividend.  Accordingly,  the number of shares were greater than
the number of shares  required,  and were issued in error resulting in increased
preferred  dividend  expenses  and  preferred  stock  equity.  The  Company  has
determined  that the number of shares  deemed the  equivalent  of the  preferred
stock  dividend  will  be  recalculated  based  on  the  Company's  Articles  of
Incorporation,   as  amended,   including  on  April  30,  2000.  (see  "Note  2
Restatements")

     The Company has determined  that the number of shares deemed the equivalent
of the  preferred  stock  dividend will be  recalculated  based on the Company's
Articles of Incorporation, as amended, including on April 30, 2000. Accordingly,
the Company will issue 136,041  shares of common stock to the sole holder of the
preferred  stock as payment of $51,561 of preferred  stock  dividends less other
adjustments  resulting  from the  recalculation  of the number of common  shares
required to pay preferred stock  dividends,  subsequently  approved.  During the
period  January 1, 2003 through June 30,  2006,  200,238  shares of common stock
were issued in excess of the amount required.

7. SHARES ISSUED FOR SERVICES

     Stock options were granted to two Company  employees  during 2006 and 2005.
In addition, there were shares awarded as compensation for other services. These
issuances for 2006 are detailed below by type of service performed.

                                      F-15
<PAGE>
The following shares were issued for services in 2006
<TABLE>
<CAPTION>
                                                       Number                 Price at
                                                         of                    Grant              Value at
          Services Rendered                            Shares        Date      Date              Grant Date
<S>                                                    <C>            <C>       <C>                <C>
 ----------------------------------------------------------------------------------------------------------
    Employee awards                                    32,500         1/26      $1.64              $53,250
 ----------------------------------------------------------------------------------------------------------
    Investor relations                                 22,500         1/26       2.13               47,925
 ----------------------------------------------------------------------------------------------------------
    Professional Services                               2,500         1/26       2.20                5,500
 ----------------------------------------------------------------------------------------------------------
    Professional Services                               6,712          2/1       1.57               10,534
 ----------------------------------------------------------------------------------------------------------
    Legal Services                                     25,000         2/5        1.95               48,750
 ----------------------------------------------------------------------------------------------------------
    Professional Services                               5,000         2/9        1.73                8,650
 ----------------------------------------------------------------------------------------------------------
    Product Development services                       30,000         2/28       1.49               44,700
 ----------------------------------------------------------------------------------------------------------
    Marketing services                                 25,000         3/27       1.08               27,000
 ----------------------------------------------------------------------------------------------------------
    Software Consulting services                        1,440         3/22       1.31                1,886
 ----------------------------------------------------------------------------------------------------------
    Legal Services                                      1,304         3/22       1.51                1,969
 ----------------------------------------------------------------------------------------------------------
    Investor relations                                 85,000         4/12       1.49              126,650
 ----------------------------------------------------------------------------------------------------------
    Professional Services                               5,847         4/12       1.49                8,712
 ----------------------------------------------------------------------------------------------------------
    Employee awards                                    25,000         4/12       1.49               37,253
 ----------------------------------------------------------------------------------------------------------
    Professional Services                               5,599          5/1       1.64                9,182
 ----------------------------------------------------------------------------------------------------------
    Director awards                                   145,000          5/1       1.53              222,500
 ----------------------------------------------------------------------------------------------------------
    Investor relations                                 26,000          5/10      1.27               33,020
 ----------------------------------------------------------------------------------------------------------
    Professional Services                               6,142          5/10      1.27                7,804
 ----------------------------------------------------------------------------------------------------------
    Professional Services                              26,000          5/11      1.30               33,800
 ----------------------------------------------------------------------------------------------------------
    Investor relations                                 15,000          6/1       1.64               24,600
 ---------------------------------------------------------------------------------------------------------
    Professional Services                              22,900          6/5       1.80               41,220
 ----------------------------------------------------------------------------------------------------------
    Marketing services                                 10,000          6/22      1.85               18,500
 ----------------------------------------------------------------------------------------------------------
    Professional Services                               6,750          6/22      1.85               12,488
 ----------------------------------------------------------------------------------------------------------
    Professional Services                              25,000          6/30      1.90               47,500
 ----------------------------------------------------------------------------------------------------------
    Professional Services                              15,000          7/1       1.27               19,050
 ----------------------------------------------------------------------------------------------------------
    Professional Services                              13,560          9/9       1.31               17,764
 ----------------------------------------------------------------------------------------------------------
    Employee awards                                    12,500          9/28      1.71               21,400
 ---------------------------------------------------------------------------------------------------------
    Investor relations  s                              75,000          9/28      1.61              120,736
 ---------------------------------------------------------------------------------------------------------
    Professional Services                             100,000          10/9       .75               74,800
 ----------------------------------------------------------------------------------------------------------
    Marketing services                                 35,000          10/20      .71               24,990
 ---------------------------------------------------------------------------------------------------------
    Legal Services                                     10,000          10/20      .71                7,140
 ---------------------------------------------------------------------------------------------------------
    Professional Services                              49,000          10/20      .84               34,986
 ----------------------------------------------------------------------------------------------------------
    Employee awards                                     5,000          10/20      .84                3,570
 ---------------------------------------------------------------------------------------------------------
    Total shares issued for services                  871,257                                    1,197,826
                                                    =========                                    =========

                                      F-16
<PAGE>
 The following shares were issued for services in 2005

                                                         Number                 Price at
                                                           of                    Grant          Value at
          Services Rendered                              Shares        Date      Date          Grant Date
 ----------------------------------------------------------------------------------------------------------
    Advertising                                         5,000        2/24      2.50               12,500
 ----------------------------------------------------------------------------------------------------------
    Lega1 services                                     11,000         5/2       2.78               30,580
 ----------------------------------------------------------------------------------------------------------
    Financial consulting                              100,000         5/6       2.60              260,000
 ----------------------------------------------------------------------------------------------------------
    Legal services                                     50,000         5/6       2.60              130,000
 ----------------------------------------------------------------------------------------------------------
    Investor relations                                 15,000         4/1       2.40               36,000
 ----------------------------------------------------------------------------------------------------------
    Public relations                                   20,000         5/1       2.55               51,000
 ----------------------------------------------------------------------------------------------------------
    Facility search                                     5,000         5/1       2.55               12,750
 ----------------------------------------------------------------------------------------------------------
    Marketing services                                  9,009        7/29       2.25               20,270
 ----------------------------------------------------------------------------------------------------------
    Investor relations                                 15,000         9/6       2.25               33,750
 ----------------------------------------------------------------------------------------------------------
    Financial services                                  2,500        12/1       2.60                6,500
 ----------------------------------------------------------------------------------------------------------
    Investor relations                                 21,186        12/9       2.35               49,787
 ----------------------------------------------------------------------------------------------------------
  Public relations                                     18,000        12/9       2.35               42,300
 ----------------------------------------------------------------------------------------------------------
  Investor relations                                   15,000        12/9       2.35               35,250
 ----------------------------------------------------------------------------------------------------------
  Total shares issued to consultants                  286,695                                     720 687
 ----------------------------------------------------------------------------------------------------------
  Other Issuances:
 ----------------------------------------------------------------------------------------------------------
  Employee awards                                      20,000                   2.40               48,000
 ----------------------------------------------------------------------------------------------------------
  Shares issued in lieu of rent                        19,200       various                        48,000
 ----------------------------------------------------------------------------------------------------------
  Shares issued as partial                              5,000       various                        14,700
  compensation of financing
 ----------------------------------------------------------------------------------------------------------
  Amortization of cost of grants made                                                               5,113
  in prior periods
 ----------------------------------------------------------------------------------------------------------
 Total Value of stock issued for services             330,895                                     836,500
 ----------------------------------------------------------------------------------------------------------
 Value of options granted for services                      -                                   1,082,250
 ----------------------------------------------------------------------------------------------------------
 Value of equity items issued for services            330,895                                   1,918,750
                                                      =======                                   =========
 ----------------------------------------------------------------------------------------------------------
</TABLE>

                                      F-17
<PAGE>
8. WARRANTS

     The Company  has issued  warrants  both as part of "stock  units" and as an
integral  part of  convertible  note  issues.  The  value  of the  warrants  and
conversion  options  which are  classified  as  liabilities  are  revalued  each
reporting  period.  These values are  determined  by a Black  Scholes  valuation
model,  consistent  with the  requirements  of SFAS No.133.  The  following is a
schedule of changes in warrants outstanding during the years 2006 and 2005. Each
of these warrants are exercisable  over five year periods from dates of issuance
at prices ranging from $0.45-$1.56 per share.  They were recorded at fair values
determined by a Black Scholes valuation model.


 -------------------------------------------------------------------------------
  Balance December 31, 2004                                        5,537,763
 -------------------------------------------------------------------------------
 Warrants issued in conjunction with issuances of
 convertible debt:
 -------------------------------------------------------------------------------
   February issue                                     2,884,615
 -------------------------------------------------------------------------------
   May issue                                            384,615
 -------------------------------------------------------------------------------
   October issue                                        774,000    4,043,230
 -------------------------------------------------------------------------------
 Awarded as partial fees to brokers:
 -------------------------------------------------------------------------------
   February issue                                       484,615
 -------------------------------------------------------------------------------
    May issue                                            38,462
 -------------------------------------------------------------------------------
    October issue                                       154,800      677,877
 -------------------------------------------------------------------------------
  Warrants exercised during 2005                                    (593,000)
 -------------------------------------------------------------------------------
  Warrants voided during 2005                                       (200,000)
 -------------------------------------------------------------------------------
  Warrants issued for services                                        37,688
 -------------------------------------------------------------------------------
  Balance December 31 2005                                         9,503,558

 -------------------------------------------------------------------------------
  Warrants issued in conjunction with issuances of 2006
  convertible debt:
 -------------------------------------------------------------------------------
  Warrants issued with $819,800 convertible debt through
  May, subsequently converted to equity                              525,513
 -------------------------------------------------------------------------------

  Warrants issued with $150,000 convertible debt, March               48,077
 -------------------------------------------------------------------------------

  Warrants issued with $48,248 convertible debt, June                 24,124
 -------------------------------------------------------------------------------

  Warrants issued with $400,000 convertible debt, July               282,051
                                                                 -----------
 -------------------------------------------------------------------------------

  Total warrants issued during 2006                                  875,765
                                                                 -----------
 -------------------------------------------------------------------------------
  Balance December 31, 2006                                       10,383,323
                                                                 ===========
 -------------------------------------------------------------------------------

                                      F-18
<PAGE>
9. OPERATING AND ADMINISTRATIVE EXPENSES

     Details of operating and administrative expenses are presented below:

-------------------------------- ---------------------- ------------------------
                                 Twelve Months ended      Twelve Months ended
                                   December 31, 2006       December 31, 2005
-------------------------------- ---------------------- ------------------------
 Salaries and payroll taxes           $1,123,791              $  626,450
-------------------------------- ---------------------- ------------------------
 Options expense                         93,000                1,082,250
-------------------------------- ---------------------- ------------------------
 Marketing expense                      228,501                  272,879
-------------------------------- ---------------------- ------------------------
 Development costs                      519,134                  544,933
-------------------------------- ---------------------- ------------------------
 Professional fees                      665,945                  580,961
-------------------------------- ---------------------- ------------------------
 Consulting - administrative            411,433                  610,550
-------------------------------- ---------------------- ------------------------
 Settlement expense                     151,495                  281,281
-------------------------------- ---------------------- ------------------------
 Liquidated damages                     359,823                        0
-------------------------------- ---------------------- ------------------------
 Depreciation & Amortizations            69,019                   59,500
-------------------------------- ---------------------- ------------------------
 Rent                                   160,571                   87,627
-------------------------------- ---------------------- ------------------------
 Insurance                              145,379                  179,739
-------------------------------- ---------------------- ------------------------
 Director awards                        222,500                        0
-------------------------------- ---------------------- ------------------------
 Office expense                          59,617                  224,235
-------------------------------- ---------------------- ------------------------
 Other expenses                         230,342                  507,191
                                      ---------               ----------
-------------------------------- ---------------------- ------------------------
 Totals                              $4,452,179               $5,057,596
                                      =========               ==========
-------------------------------- ---------------------- ------------------------

                                      F-19
<PAGE>

10.  INCOME TAXES

     `The Company has  experienced  losses each year since its  inception.  As a
result,  it has incurred no Federal income tax. The Internal Revenue Code allows
net operating  losses (NOL's) to be carried  forward and applied  against future
profits for a period of twenty  years.  At December 31, 2006 the Company had NOL
carryforwards of $25,191,409 available for Federal taxes and $17,091,769 for New
Jersey taxes.  The potential tax benefit of the state NOL's has been  recognized
on the books of the Company; the potential benefit of the Federal NOL's has been
offset by a valuation allowance.  If not used, these Federal  carryforwards will
expire as follows:

                    ------------- -----------------
                    2011          $     206,952
                    ------------- -----------------
                    2012                129,092
                    ------------- -----------------
                    2018                486,799
                    ------------- -----------------
                    2019                682,589
                    ------------- -----------------
                    2020                501,169
                    ------------- -----------------
                    2021                775,403
                    ------------- -----------------
                    2022                590,764
                    ------------- -----------------
                    2023              2,233,386
                    ------------- -----------------
                    2024              2,493,486
                    ------------- -----------------
                    2025             10,309,634
                    ------------- -----------------
                    2026              6,782,135
                    ------------- -----------------

     During the year 2006,  the  Company  realized  $445,216  from the sale,  as
permitted  by New Jersey  law,  of its  rights to use the New  Jersey  NOL's and
research and development  credits that had accrued during 2005.  These potential
New Jersey offsets for periods prior to 2005 are,  thus, no longer  available to
the Company.

     Under Statement of Financial  Accounting  Standards No. 109, recognition of
deferred  tax assets is  permitted  unless it is more  likely  than not that the
assets will not be  realized.  The Company has  recorded  deferred tax assets as
follows:

---------------------------------- ---------- ------------------- --------------
                                   Current         Non-current        Total
---------------------------------- ---------- ------------------- --------------
Deferred Tax Assets                $3,018,282      $6,159,236       $9,177,518
---------------------------------- ---------- ------------------- --------------
Valuation Allowance                 2,098,393       6,159,236        8,257,629
                                    ---------       ---------        ---------
---------------------------------- ---------- ------------------- --------------
    Balance Recognized             $  919,889     $         -       $  919,889
                                    =========      ==========       ==========
---------------------------------- ---------- ------------------- --------------

     The entire  balance of the valuation  allowance  relates to Federal  taxes.
Since state tax benefits for years prior to 2005 have been realized,  no reserve
is deemed  necessary for the benefit of state tax losses of 2006.  The valuation
reserve increased by $2,413,868 during the year.

                                      F-20
<PAGE>
11. RENTALS UNDER OPERATING LEASES

     At present, the Company is not obligated under any operating lease.

     Rent expense amount to $160,571 in 2006 and $87,627 in 2005.

12. SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION

     Cash paid for interest and income taxes is presented below:

                                        2006        2005
                                        ----        ----

                  Interest             $1,971      $9,741
                  Income taxes            500         500

     There were no non-cash investing activities during either 2006 or 2005. The
following non-cash financing activities occurred:

a) Shares of common stock were issued for services  during 2006 and 2005;  these
totaled 687,665 and 330,895 shares, respectively.

b) During 2006, the following amounts were converted from debt to equity:

     o    $819,800 of  convertible  debt was  converted  into 525,513  shares of
          common stock.

     o    $253,203 of the May 2005  convertible  debt issue was  converted  into
          180,925 shares of stock.

     o    $65,000 of the October, 2005 convertible debt issue was converted into
          41,666 shares of common stock.

c) During 2005,  $5,000,000 of  convertible  debt was converted  into  3,846,154
shares of common stock.

d) During  2006,  the holder of the  preferred  stock  issue  elected to receive
common stock in lieu of $112,500 of cash dividends. A total of 218,742 shares of
common stock will be issued to satisfy this dividend.

During  2005,  the holder of the  preferred  stock issue also elected to receive
common stock in lieu of a $51,563 cash dividend.  A total of 136,041 shares will
be issued to satisfy this dividend.

e)  During  2006,  $66,464  of  interest  that  had  accrued  on the  May,  2005
convertible debt issue and the $819,800 2006  convertible  issue were settled by
the issuance of 54,373 shares of common stock.

f) During  2006,  the  Company  issued  $198,248 of 4%  debentures  as part of a
Modification  Agreement  with  investors,  whereby the  investors  yielded their
rights to liquidated damages on the November, 2004 stock issue.

g) During 2005, the Company issued 1,749,827 shares in settlement of stock sales
that took place during 2004.

h) During 2005,  the Company  issued 28,453 shares in settlement of interest due
to investors.

i) During 2005,  the Company  issued 187,939 shares in settlement of third party
debt of a German company that the Company planned to acquire - see Note on FiLCO
acquisition.

                                      F-21
<PAGE>
13. PROPOSED ACQUISITION OF FILCO

     On February 19, 2004, the Company reached a tentative agreement to purchase
capital stock of FiLCO GmgH.,  a German  manufacturer  of fork trucks  (formerly
Clark  Material  Handling  Company of Europe) with a  manufacturing  facility in
Mulheim,  Germany (FiLCO).  It was expected that the Company would acquire 75.1%
of  FiLCO.  While  negotiations  were  continuing,  the  Company  agreed to make
advances to FiLCO.  Through December 31, 2005 advances  totaling  $6,255,462 had
thus been made.

     On January 20, 2006,  Filco filed for  insolvency in Germany and a receiver
was  appointed.  As a result,  on February 7, 2006 the  Company  terminated  the
tentative  agreement  to acquired  Filco stock and began  negotiations  with the
receiver to acquire some or all of the Filco assets.  The $6,275,881 of advances
to Filco that were outstanding at December 31, 2005, were secured by liens filed
against the machinery  and equipment  owned by Filco which in 2003 was appraised
at $5,400,000,  and by liens filed against its intellectual property,  which had
not been  appraised.  Due to the  uncertainty  of the Company's  position  under
German  bankruptcy  law,  $4,275,881  of the Filco  advances were written off in
2005,  and the  remaining  $2,000,000  was  written  off in 2006.  In  addition,
$413,000  of  Company  inventory  stored at the Filco  plant was  abandoned  and
written off during 2006.  During 2006,  an auction of Filco assets was conducted
by the receiver who did not acknowledge  the Airtrax liens against  property and
equipment.

14. RECENT ACCOUNTING PRONOUNCEMENTS

     The Financial  Accounting  Standards Board (FASB) has recently issued "FASB
Staff  Position  EITF  00-19-2  which  modifies  the  accounting   treatment  of
derivatives that flow from financings involving embedded derivatives. This Staff
Position is effective for financial  statements for periods beginning January 1,
2007.  Management  believes  that this  will  cause  some  change in the way the
Company accounts for derivatives. Management is evaluating this position and has
not made a  determination  as to the  effective  it will  have on its  financial
statements.

15. GOING CONCERN

     The accompanying  financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial  statements,
the Company had a material working capital deficiency and an accumulated deficit
as of December 31, 2006 and has  experienced  continuing  losses.  These factors
raise  substantial doubt about the ability of the Company to continue as a going
concern.  The financial  statements do not include  adjustments  relating to the
recoverability  of  assets  and  classification  of  liabilities  that  might be
necessary  should the Company be unable to continue in operation.  The Company's
present plans,  the  realization  of which cannot be assured,  to overcome these
difficulties  include  but are not  limited  to the  continuing  effort to raise
capital in the public and private markets.

16. COMMITMENTS AND CONTINGENCIES

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

                                      F-22
<PAGE>

17. SUBSEQUENT EVENTS

     On February  20,  2007,  the Company  entered  into a  Securities  Purchase
Agreement (the "Purchase  Agreement") with certain  accredited  and/or qualified
institutional  investors  pursuant to which we sold an aggregate  of  $3,734,040
principal amount secured convertible  debentures (the "Debentures")  convertible
into  shares  of our  common  stock,  no par value  (the  "Common  Stock")  at a
conversion  price  equal to $0.45 (the  "Conversion  Price"),  for an  aggregate
purchase price of $3,219,000.  In addition,  the Company issued to the investors
(i) warrants to purchase  8,297,866  shares of the  Company's  Common Stock (the
"Warrants") at an exercise price equal to $0.54 per share, which represents 100%
of the  number  of shares  issuable  upon  conversion  of the  Debentures;  (ii)
callable  warrants  to  purchase  4,148,933  shares  of our  Common  Stock at an
exercise price equal to $0.75 per share,  which  represents 50% of the number of
shares issuable upon conversion of the Debentures;  and (iii) callable  warrants
to purchase  4,148,933  shares of our Common Stock at an exercise price equal to
$1.25 per share,  which  represents  50% of the number of shares  issuable  upon
conversion of the Debentures (collectively, the "Callable Warrants").

     The  Debentures  mature  on  February  20,  2009.  The  Company  may in our
discretion redeem the Debentures, subject to certain equity conditions being met
by us as set forth in the Debentures,  at a price equal to 150% of the principal
balance,  accrued interest, and all liquidated damages, if any, thereon that are
requested  to  be  redeemed.   The  Company's  obligations  under  the  Purchase
Agreement,  the Debentures and the additional definitive agreements with respect
to this  transaction are secured by all of our assets.  The Conversion  Price of
the Debentures is subject to adjustments for any failure by the Company to cause
the  Securities  and  Exchange  Commission  (the  "SEC") to declare  the initial
registration  statement  covering  the shares  underlying  the  Debentures,  the
Warrants and the Callable Warrants effective.

     The Conversion  Price of the Debentures and the respective  exercise prices
of the Warrants and the Callable  Warrants are subject to  adjustment in certain
events, including, without limitation, upon the Company's consolidation,  merger
or sale of all of substantially all of the Company's assets, a  reclassification
of our Common Stock, or any stock splits, combinations or dividends with respect
to the Company's Common Stock.

     In addition, after such time as the SEC declares the registration statement
effective,  if  (i)  the  volume  weighted  average  price  for  each  of the 10
consecutive trading days (the "Measurement Period") exceeds $1.50 per share with
respect  to the $0.75  Callable  Warrants  and $2.50  with  respect to the $1.25
Callable  Warrants,  (ii)  the  daily  volume  for  each  trading  day  in  such
Measurement  Period exceeds  250,000 shares of Common Stock per trading day, and
(iii) the holder is not in possession of any information  that  constitutes,  or
might  constitute,  material  non-public  information,  then we may,  within one
trading day of the end of such Measurement  Period, call for cancellation of all
or any portion of the Callable  Warrants  which have not yet been exercised at a
price equal to $.001 per share.

     Under the Registration  Rights Agreement we entered into with the investors
on February 20, 2007, we are obligated to file a registration  statement on Form
SB-2 to  effect  the  registration  of  130%  the  Common  Stock  issuable  upon
conversion of the Debentures and exercise of the Warrants, the Callable Warrants
and the selling  agent  warrants (as  described  below) on the earlier of (i) 15
calendar days from the filing of our annual report on Form 10-KSB for the fiscal
year ended December 31, 2006, or (ii) April 15, 2007 (the "Filing Date"). We are
obligated  to use our best  efforts to cause the  registration  statement  to be
declared  effective  no later than 90 days after the Filing  Date.  If we do not
file the  registration  statement  by the Filing  Date,  or if the  registration
statement is not declared  effective by the SEC within the deadline specified in
the preceding sentence, we shall pay to the investors, as liquidated damages, an
amount equal to 1.25% of the  principal  amount of the  Debentures on a pro rata
basis for each 30-day period of such registration default.

     On March 22, 2007, the Company made a $100,000  principal  payment and paid
interest of $30,213.  The Note was reduced to $300,000  and interest on the Note
was reduced to 10%.  Additionally,  the Company  issued 184,000 shares of common
stock as  settlement  of the default  period and paid a fee of $12,000 to Source
Capital Group, Inc., a registered representative of the Note-holder. The Company
also agreed to make monthly  interest  payments.  The conversion price was reset
per the terms of the original Note.

     On August 25, 2006, the Company's CEO, President and Chairman ("President")
died. The  President's  employment  contact expired on June 30, 2006 and was not
renewed.  The  employment  agreement  did not  provide  for the  exercise of the
options upon death.  The options  granted in 2004 to the president  were 550,000
options,  valued  at  $187,500  and in 2005 he  President  was  granted  750,000
options,  valued at $975,000. On April 11, 2007, the Board of Directors extended
the option for an 18 month period  commencing on the date Mr.  Amico's  contract
expired.

                                      F-23
<PAGE>
Item  8.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure

     None

Item 8A.  Controls and Procedures

(a) Evaluation of disclosure controls and procedures.

     Our management,  with the  participation of our chief executive officer and
chief financial officer,  evaluated the effectiveness of our disclosure controls
and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934
as of December 31, 2006. In designing and evaluating the disclosure controls and
procedures,  management  recognizes that any controls and procedures,  no matter
how well  designed  and  operated,  can provide  only  reasonable  assurance  of
achieving the desired control objectives.  In addition, the design of disclosure
controls  and  procedures   must  reflect  the  fact  that  there  are  resource
constraints  and that management is required to apply its judgment in evaluating
the benefits of possible controls and procedures relative to their costs.

     Based on our evaluation,  our chief  executive  officer and chief financial
officer concluded that our disclosure  controls and procedures are designed at a
reasonable  assurance  level and are effective to provide  reasonable  assurance
that  information  we are required to disclose in reports that we file or submit
under the Exchange Act is recorded,  processed,  summarized and reported  within
the time periods  specified in  Securities  and  Exchange  Commission  rules and
forms,  and  that  such  information  is  accumulated  and  communicated  to our
management,  including our chief executive officer and chief financial  officer,
as appropriate, to allow timely decisions regarding required disclosure.

(b) Changes in internal control over financial reporting.

     We regularly review our system of internal control over financial reporting
and make changes to our processes  and systems to improve  controls and increase
efficiency,  while  ensuring  that we maintain  an  effective  internal  control
environment.  Changes may include such  activities  as  implementing  new,  more
efficient systems, consolidating activities, and migrating processes.

     There were no changes in our internal control over financial reporting that
occurred  during the period  covered by this  Annual  Report on Form 10-KSB that
have materially  affected,  or are reasonably likely to materially  affect,  our
internal control over financial reporting.

Item 8B - Other Information

         None.


                                       22
<PAGE>
                                    PART III

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

Directors and Executive Officers

Name                                   Age    Position
Robert M. Watson                       59     Chief Executive Officer,
                                              Acting Chief Financial Officer
                                              and Director
D. Barney Harris                       46     Director
James Hudson                           64     Director
William Hungerville                    71     Director
Fil Filipov                            60     Director
Andrew Guzzetti                        59     Chairman of the Board of Directors
Peter Amico, Jr.                       42     Director
Robert Borski, Jr.                     58     Director
Nicholas Fenelli                       52     Chief Operations Officer

     Directors  serve until the next annual  meeting and until their  successors
are elected and qualified.  The Directors of our company are elected by the vote
of a majority in interest of the holders of the voting  stock of our company and
hold office until the expiration of the term for which he or she was elected and
until a successor has been elected and qualified.

     A majority of the  authorized  number of directors  constitutes a quorum of
the Board for the transaction of business.  The directors must be present at the
meeting to constitute a quorum.  However, any action required or permitted to be
taken by the Board may be taken  without a meeting  if all  members of the Board
individually or collectively consent in writing to the action.

     Officers are appointed to serve for one year until the meeting of the board
of  directors  following  the annual  meeting of  stockholders  and until  their
successors have been elected and qualified.

     The principal  occupations for the past five years (and, in some instances,
for prior years) of each of our executive  officers and  directors,  followed by
our key employees, are as follows:

     Robert  Watson - Mr.  Watson  has been our Chief  Executive  Officer  and a
Director  since  November 1, 2006.  From 2001 until October 2006, Mr. Watson was
President and CEO of Hartz & Company, a manufacturer of tailored clothing,  with
two production  facilities in the United States with sales and marketing offices
in New York City.  From 1996 to 2001,  Mr. Watson served as the Vice  President,
CFO and COO of America's Best Contacts and  Eyeglasses,  a retail chain with 118
locations,  a full service laboratory and distribution center. His experience in
the public arena was with Continental Can Company, from 1967 through 1986, where
he served as Controller  for the food  packaging  company with 29  manufacturing
facilities  and sales in excess  of $1  billion.  Mr.  Watson  received  a BS in
accounting from Fairleigh  Dickinson  University and an EMBA from the University
of New Haven.

     D. Barney Harris - Mr. Harris has been a Director since December 1998 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.

                                       23
<PAGE>
     James Hudson - Mr. Hudson has been a Director since May 1998.  From 1980 to
present,  he has been  President  of Grammer,  Dempsey & Hudson,  Inc.,  a steel
distributor located in Newark, New Jersey.

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

     Fil Filipov - Mr.  Filipov has been a Director  since  December  2004.  Mr.
Filipov  has  served as the  Chairman  of  Supervisory  Board of Tatra,  a Czech
Company,  which is producing off highway  trucks.  . Mr. Filipov was President &
CEO of Terex Cranes, a $1 billion dollar business segment of Terex  Corporation.
He was  responsible for strategic  acquisitions  and served as President and CEO
from March 1995 through  December 2003.  From 1994 through 1996, Mr. Filipov was
the  Managing  Director of Clark  Material  Handling  Company in Germany  (Filco
GmbH).

     Andrew  Guzzetti - Mr. Guzzetti has been a director since April 1, 2006 and
Chairman since August 31, 2006.  From  September 2004 to the present,  Andrew G.
Guzzetti has served as Managing  Director of the Private  Client Group of McGinn
Smith and Co., Inc., an investment  banking and retail  brokerage firm, where he
is responsible for building the wealth  management  private client group through
recruitment  and  training.  From  February  2004 through  September  2004,  Mr.
Guzzetti  served as  Managing  Director of the  Private  Client  Division of The
Keystone  Equities  Group in which he was  responsible  for  building the retail
brokerage arm of this company.  From February 2002 through  February  2004,  Mr.
Guzzetti was a private investor  consultant in which he assisted start-up public
and private  companies in raising  funds.  From November  1995 through  February
2002, Mr. Guzzetti served as Senior Vice President and Branch Manager of Salomon
Smith Barney where he was  responsible  for increasing the financial  consultant
population  through  recruitment and training.  Mr. Guzzetti  received his BA in
Economics from Utica College in 1969.

     Peter  Amico,  Jr. - From 1988 to the  present,  Mr.  Amico has served as a
police  officer  in the State of New Jersey  where he has  managed  and  trained
personnel  and  directed  police  operations.  Mr.  Amico  served  as  a  Police
Investigator from 1994 to 1995 and was promoted to Supervisor in 1996. From 1983
to 1987, he served in the United States Marine Corps. where his service included
police  duties and training  coordination.  In addition,  Mr. Amico  received an
Associates Degree in Law Enforcement from Gloucester County College in 2003.

     Robert Borski,  Jr. - From 1982 to 2003, Mr. Borski  represented  the Third
Congressional  District of Pennsylvania for ten terms in the United States House
of Representatives, where he was a senior member of the House Transportation and
Infrastructure   Committee  and  a  vocal  advocate  for  an  improved  national
transportation  system.  He  was  awarded  the  American  Public  Transportation
Association's  National Distinguished Service Award in 2002 and the Silver Order
of the de Fleury  Medal  from the Army  Engineering  Association.  In 2003,  Mr.
Borski formed Borski  Associates,  a government  relations firm  specializing in
transportation  and economic  development  issues.  He is a driving force behind
efforts  to  revitalize  the North  Delaware  riverfront,  an area of  abandoned
industrial  sites,  into  a  center  of  residential  and  commercial  activity.
Currently,  Mr. Borski serves on the Board of Directors of the Northeast-Midwest
Institute,  an organization  promoting  economic  vitality for  Northeastern and
Midwestern states, and on the Board of Directors of Pennoni Associates,  a civil
engineering  firm.  Mr.  Borski  received a  Bachelor  of Arts  degree  from the
University of Baltimore in 1971.

     Nicholas Fenelli - Nicholas E. Fenelli has been with our company since 2001
serving first as Project Engineer, and as Vice President of Concept Development.
From 1996 to 1998,  Mr.  Fenelli  served as  Project  Engineer  NACCO  Materials
Handling Group, Inc, where his work included the ergonomic  improvement  project
for the  Hyster/Yale  order picker  trucks,  and work on the  development of the
three  wheeled sit down rider truck.  From 1990 to 1995,  Mr.  Fenelli was Plant
Manager for Cammerzell  Machinery  Company,  a manufacturer of powder compaction
and robotic conveying equipment for the Ceramic,  Refractory, and Pharmaceutical
industries.  Between 1988 and 2002,  Mr.  Fenelli  served as Treasurer  and as a
member of the Board of Directors of the Engineers Club of Trenton. He received a
BS in Mechanical Engineering from Lehigh University in 1978.

                                       24
<PAGE>
COMMITTEES OF THE BOARD

     We currently have no audit committee,  compensation committee,  nominations
and governance committee of our board of directors.

INDEBTEDNESS OF EXECUTIVE OFFICERS AND DIRECTORS

     No  executive  officer,  director  or  any  member  of  these  individuals'
immediate  families or any  corporation or  organization  with whom any of these
individuals is an affiliate is or has been indebted to us since the beginning of
our last fiscal year.

FAMILY RELATIONSHIPS

     There  are  no  family  relationships  among  our  executive  officers  and
directors.

LEGAL PROCEEDINGS

     As of the date of this  prospectus,  there are no material  proceedings  to
which any of our directors,  executive officers, affiliates or stockholders is a
party adverse to us.

CODE OF ETHICS

     We have not  adopted a Code of Ethics  within the meaning of Item 406(b) of
Regulation S-B of the Securities Exchange Act of 1934.

Section 16(a) Beneficial Ownership Compliance

     Section 16(a) of the Securities Exchange Act of 1934 requires our directors
and executive officers and persons who beneficially own more than ten percent of
a registered class of our equity securities to file with the SEC initial reports
of ownership and reports of change in ownership of common stock and other equity
securities  of our  company.  Officers,  directors  and greater than ten percent
stockholders  are required by SEC  regulations  to furnish us with copies of all
Section  16(a) forms they file.  Based solely upon a review of Forms 3 and 4 and
amendments  thereto  furnished to us under Rule 16a-3(e)  during the fiscal year
ended December 31, 2006, and Forms 5 and amendments thereto furnished to us with
respect to the fiscal year ended  December 31, 2006,  we believe that during the
year ended December 31, 2006, our executive officers,  directors and all persons
who own more than ten  percent of a  registered  class of our equity  securities
complied with all Section 16(a) filing requirements.


                                       25
<PAGE>
Item 10.      Executive Compensation

     The  following  table  sets  forth the cash  compensation  (including  cash
bonuses) paid or accrued by us to our Chief Executive  Officer and our four most
highly  compensated  officers  other  than the  Chief  Executive  Officer  as of
December 31, 2006 and December 31, 2005.
<TABLE>
<CAPTION>
                                                                             Change in
                                                                           Pension Value
                                                                               and
                                                                Non-Equity  on-Qualified
                                                                Incentive    Deferred
Name &                                    Stock     Option         Plan     Compensation    All Other
Principal             Salary     Bonus    Awards    Awards     Compensation  Earnings     Compensation     Total
Position     Year      ($)        ($)      ($)        ($)          ($)           ($)            ($)           ($)
------------------------------------------------------------------------------------------------------------------------
<S>                    <C>             <C>   <C>       <C>            <C>         <C>           <C>        <C>
Peter
Amico,
CEO,
President      2006    $168,269        $0    0         0              0           0             0          $168,269
& Director     2005    $303,751        $0    0     $975,000           0           0             0          $303,751

Nicholas
Fenelli,
Vice
President      2006     $96,798        $0    0      $24,000           0           0             0           $96,798
& COO          2005     $78,202        $0    0      $53,500           0           0             0           $78,202

Robert M.
Watson.
CEO,
President      2006     $11,538   $50,000           $45,000           0           0             0           $61,538
& Director     2005          $0         0                 0           0           0             0                 0






Outstanding Equity Awards at Fiscal Year-End Table.

     The  following  table  sets  forth  information  with  respect to grants of
options to purchase our common stock to the named executive officers at December
31, 2006.

                           Option Awards                                             Stock Awards
                           -------------                                             ------------
Name      Number       Number        Equity     Option   Option      Number  Market    Equity             Equity
          of           of            Incentive  Exercise Expiration  of      Value of  Incentive          Incentive
          Securities   Securities    Plan       Price    Date        Shares  Shares or Plan Awards:       Plan
          Underlying   Underlying    Awards:    ($)                  or      Units of  Number             Awards:
          Unexercised  Unexercised   Number                          Units   Stock     of                 Market or
          Options      Options       of                              of      That Have Unearned           Payout
          (#)          (#)           Securities                      Stock   Not       Shares,            Value
          Exercisable  Unexercisable Underlying                      That    Vested    Units or           of
                                     Unexercised                     Have    ($)       Other Rights       Unearned
                                     Unearned                        Not               That Have          Shares,
                                     Options                         Vested            Not                Units or
                                     (#)                             (#)               Vested             Other
                                                                                                          (#) Rights
                                                                                                          That Have
                                                                                                          Not
                                                                                                          Vested
                                                                                                          ($)
--------------------------------------------------------------------------------------------------------------------
Robert
M. Watson  300,000      0             400,000     $0.46  Nov. 30, 2008    0       0         0                  0



Director Compensation

     The  following  table  sets  forth  with  respect  to the named  directors,
compensation  information  inclusive  of  equity  awards  and  payments  made at
December 31, 2006.

     Name     Fees         Stock      Option    Non-Equity Incentive      Change in         All Other       Total
     (a)      Earned or    Awards   Awards     Plan Compensation ($)    Pension Value     Compensation       ($)
              Paid in       ($)        ($)              (e)           and Nonqualified         ($)           (h)
                 Cash       (c)        (d)                                Deferred             (g)
                 ($)                                                    Compensation
                 (b)                                                      Earnings
                                                                             (f)
--------------------------------------------------------------------------------------------------------------------
   Andrew          -        20,000    $32,800             0                   0                0         $32,800
   Guzzetti        -
--------------------------------------------------------------------------------------------------------------------

   Robert M.       -             0          -             0                   0                0               -
   Watson
--------------------------------------------------------------------------------------------------------------------
James Hudson       -        35,000    $52,300             0                   0                0         $52,300
    (1)
--------------------------------------------------------------------------------------------------------------------
   William         -        35,000    $52,300             0                   0                0         $52,300
 Hungerville
    (1)-
--------------------------------------------------------------------------------------------------------------------
 D. Barney         -        35,000    $52,300             0                   0                0         $52,300
 Harris (1)
--------------------------------------------------------------------------------------------------------------------
Fil Filipov        -             0          -             0                   0                0               -
--------------------------------------------------------------------------------------------------------------------
   Robert
   Borski-         -        20,000    $32,800             0                   0                0         $32,800
--------------------------------------------------------------------------------------------------------------------

 Peter Amico,
     Jr,           -             0          -             0                   0                0               -
--------------------------------------------------------------------------------------------------------------------
</TABLE>
(1.) Includes 15,000 shares issued for director fees earned in 2005.

                                       26
<PAGE>
EMPLOYMENT AGREEMENTS

     On December 26, 2006, we entered into an Employment  Agreement  dated as of
December  1, 2006 with  Robert M.  Watson,  our  President  and Chief  Executive
Officer.

     Pursuant  to the  Employment  Agreement,  we will  employ Mr.  Watson for a
period of 2 years  commencing  December 1, 2006 unless  terminated  upon 30 days
prior written  notice by either party  pursuant to the terms set forth  therein.
From  December 1, 2006 through  November 30,  2007,  Mr.  Watson will be paid an
annual base salary of $150,000 ("Base Salary"). In addition, Mr. Watson was paid
a start-up  bonus in the amount of $50,000 for  services  rendered by him to our
company prior to the execution of the  Employment  Agreement and Mr. Watson will
be issued  options to  purchase  300,000  shares of our common  stock at a price
equal to $0.46 per share.  From December 1, 2007 through  November 30, 2008, Mr.
Watson's Base Salary will increase to $200,000 per year. On December 1, 2007 and
June 1, 2008, Mr. Watson shall be issued options to purchase 200,000 and 200,000
shares of our common  stock,  respectively,  each at a price  equal to $0.46 per
share.  Further, Mr. Watson will be eligible to earn an annual cash bonus at the
discretion of our Board of Directors based on meeting performance objectives and
bonus criteria.

     During the term of his employment and for a period  thereafter,  Mr. Watson
will be subject to confidentiality  and non-competition  provisions,  subject to
standard exceptions.

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

     The following  table sets forth certain  information  regarding  beneficial
ownership of our common stock as of April 12, 2007.

     o    by each person who is known by us to beneficially  own more than 5% of
          our common stock;

     o    by each of our officers and directors; and

     o    by all of our officers and directors as a group.

  NAME AND ADDRESS                TITLE OF     NUMBER OF SHARES   PERCENTAGE OF
    OF OWNER                      CLASS          OWNED (1)          CLASS (2)

 Robert M. Watson                Common Stock      320,000 (4)        1.30%
 200 Freeway Drive, Unit 1
 Blackwood, NJ 08012

 D. Barney Harris                Common Stock      221,562               *
 200 Freeway Drive, Unit 1
 Blackwood, NJ 08012

 James Hudson                    Common Stock      140,800 (3)           *
 200 Freeway Drive, Unit 1
 Blackwood, NJ 08012

 William Hungerville             Common Stock      221,000               *
 200 Freeway Drive, Unit 1
 Blackwood, NJ 08012

 Fil Filipov                     Common Stock       60,000               *
 200 Freeway Drive, Unit 1
 Blackwood, NJ 08012

 Andrew Guzzetti                 Common Stock      190,000               *
 200 Freeway Drive, Unit 1
 Blackwood, NJ 08012

 Peter Amico, Jr.                Common Stock       52,500               *
 200 Freeway Drive, Unit 1
 Blackwood, NJ 08012



                                       27
<PAGE>
 Robert Borski, Jr.              Common Stock       78,504              *
 200 Freeway Drive, Unit 1
 Blackwood, NJ 08012

 Nicholas Fenelli                Common Stock      138,500              *
 200 Freeway Drive, Unit 1
 Blackwood, NJ 08012

 All Officers and Directors      Common Stock    1,442,866            5.9%
 As a Group (9 persons)


* Less than 1%.

(1)  Beneficial  Ownership is  determined  in  accordance  with the rules of the
Securities and Exchange  Commission and generally  includes voting or investment
power with respect to  securities.  Shares of common stock subject to options or
warrants  currently  exercisable or  convertible,  or exercisable or convertible
within  60 days of April 12,  2007 are  deemed  outstanding  for  computing  the
percentage  of the person  holding  such  option or  warrant  but are not deemed
outstanding for computing the percentage of any other person.

(2) Based upon 24,376,887 shares issued and outstanding on April 12, 2007.

(3) Includes 44,500 shares owned by a corporation owned by Mr. Hudson.

(4) Includes 300,000 options for common stock issued in connection with Mr.
Watson's employment contract dated December 1, 2006.

Item  12.  Certain   Relationships  and  Related   Transactions,   and  Director
Independence


     Arcon  Corp.,  a  corporation  wholly  owned by the  estate  of our  former
chairman and president Peter Amico,  owns 275,000 shares of our preferred stock.
Each share of  Preferred  Stock is entitled to 10 votes per share on all matters
on which  shareholders are entitled to vote. The holders of our common stock and
preferred  stock vote as one single  class.  Mr. Amico and Arcon Corp.  together
have  1,870,623  shares of common  stock,  representing  1,870,623  votes,  plus
275,000  shares  of  preferred  stock  with 10 votes  per  share,  or a total of
2,750,000 voting shares. The  aforementioned  equals a total of 4,620,623 voting
shares of capital stock by Mr. Amico and Arcon. The preferred stock has a stated
value per share of $5.00 and an  annual  dividend  per share  equal to 5% of the
stated  value.  The annual cash  dividend as of December  31, 2004 was  $68,750.
Dividends are  cumulative and the holder has a right during any quarter to waive
any cash  dividend  and  receive the  dividend in the form of common  stock at a
price per share  equal to 30% of the  trading  price of the common  stock on the
last day of the dividend  period.  The preferred stock is not  convertible  into
common  stock,   however,   has  a  preference  over  common  stockholders  upon
liquidation equal to the stated value per share.

     The  consideration  paid by Mr. Amico and Arcon for the initial issuance of
275,000  shares of our  preferred  stock is as  follows:  Air Tracks,  Inc.  was
incorporated in May 1995. Peter Amico, our President and the largest shareholder
of Air Tracks, Inc., capitalized Air Tracks, Inc. with $20,000. In exchange, Mr.
Amico was issued 3.5 million shares of common stock of Air Tracks,  Inc. We were
formed in April 1997 by Louis  Perosi and Albert  Walla.  In April 1997,  it was
agreed to merge our company with Air Tracks,  Inc.  Pursuant to the merger,  Mr.
Amico  exchanged  3.5  million  shares of Air Tracks,  Inc.  stock for 1 million
shares of our common  stock,  plus  275,000  shares of preferred  stock.  It was
determined  by the  parties  that the  voting  shares  that would be held by Mr.
Amico/Arcon  would be essentially the same.  Since the preferred  shares are not
convertible  and  thus  held no exit  method  it was  determined  to  provide  a
dividend. The $5.00 per share was the price used to satisfy the issue.

     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.

                                       28
<PAGE>
     The  financial  statements at December 31, 2004 reflect  275,000  shares of
preferred stock  outstanding and disclosed that an additional  100,000 shares of
preferred  stock were deemed the  equivalent  of 221,892  shares of common stock
that  would  have been  required  to settle an  equivalent  amount of  preferred
dividends. We have determined that the number of shares deemed the equivalent of
the preferred stock dividend and has been recalculated  based on our Articles of
Incorporation,  as amended,  including on April 30, 2000.  Accordingly,  we will
issue 136,041  shares of common stock to the sole holder of the preferred  stock
as payment  of  $51,561 of  preferred  stock  dividends  less other  adjustments
resulting from the  recalculation of the number of common shares required to pay
preferred stock dividends,  subsequently approved.  During the period January 1,
2003 through June 30, 2006, 200,238 shares of common stock were issued in excess
of the amount required.

Item 13.      Exhibits.

Exhibit No.    Description

3.1

               Certificate  of  Incorporation  of Airtrax,  Inc. dated April 11,
               1997, filed as an exhibit to the Current Report on Form 8-K filed
               with the Securities and Exchange  Commission on November 19, 1999
               and incorporated herein by reference.

3.2            Certificate  of Correction of the  Certificate  of  Incorporation
               dated April 30, 2000,  filed as an exhibit to the Current  Report
               on Form 8-K filed with the Securities and Exchange  Commission on
               November 17, 1999 and incorporated herein by reference.

3.3            Certificate of Amendment of Certificate  of  Incorporation  dated
               March 19, 2001, filed as an exhibit to the Current Report on Form
               8-K filed with the Securities and Exchange Commission on November
               17, 1999 and incorporated herein by reference.

3.4            Amended and Restated By-Laws , filed as an exhibit to the Current
               Report  on Form  8-K  filed  with  the  Securities  and  Exchange
               Commission  on  November  19,  1999 and  incorporated  herein  by
               reference.

4.1            Form  of  Common  Stock  Purchase  Warrant  issued  to  investors
               pursuant  to the May  2004  private  placement.  To be filed at a
               later date


4.2            Form of Common Stock  Purchase  Warrant  dated as of November 22,
               2004 and November  23,  2004,  filed as an exhibit to the Current
               Report  on Form  8-K  filed  with  the  Securities  and  Exchange
               Commission  on  November  30,  2004 and  incorporated  herein  by
               reference.

4.3            Form of Series A Convertible  Note dated as of February 11, 2005,
               filed as an  exhibit to the  Current  Report on Form 8-K filed on
               February 11, 2005 and incorporated herein by reference.

4.4            Form  of  Class A  Common  Stock  Purchase  Warrant  dated  as of
               February 11, 2005,  filed as an exhibit to the Current  Report on
               Form 8-K filed on February  11, 2005 and  incorporated  herein by
               reference.

4.5            Form  of  Class B  Common  Stock  Purchase  Warrant  dated  as of
               February 11, 2005,  filed as an exhibit to the Current  Report on
               Form 8-K filed on February  11, 2005 and  incorporated  herein by
               reference.

4.6            Form of  Broker's  Common  Stock  Purchase  Warrant  dated  as of
               February 11, 2005,  filed as an exhibit to the Current  Report on
               Form 8-K filed on February  11, 2005 and  incorporated  herein by
               reference.

10.1           Employment agreement dated July 12, 1999, by and between Airtrax,
               Inc.  and D.  Barney  Harris,  filed as an exhibit to the Current
               Report on Form  8-K/A  filed  with the  Securities  and  Exchange
               Commission  on  January  13,  2000  and  incorporated  herein  by
               reference.

10.2           Consulting  Agreement  by and between  MAS  Financial  Corp.  and
               Airtrax,  Inc.  dated  October 26, 1999,  filed as exhibit to the
               Current Report on Form 8-K filed with the Securities and Exchange
               Commission  on  November  19,  1999 and  incorporated  herein  by
               reference.

                                       29
<PAGE>
10.3           Product  Development,   Sales  and  Manufacturing  Representation
               Agreement dated March 13, 2004 by and between Airtrax,  Inc., and
               MEC Aerial Platform Sales Corporation, filed as an exhibit to the
               Current   Report  on  Form  8-K  filed  on  March  15,  2004  and
               incorporated herein by reference.

10.4           Joinder to the Purchase  Agreement,  dated  November 23, 2004, by
               and  among  Airtrax,   Inc.,   Excalibur   Limited   Partnership,
               Stonestreet  Limited  Partnership and Linda Hechter,  filed as an
               exhibit to the Current  Report on Form 8-K filed on November  30,
               2004 and incorporated herein by reference.

10.5           Registration  Rights  Agreement,  dated November 22, 2004, by and
               among Airtrax,  Inc., Excalibur Limited Partnership,  Stonestreet
               Limited  Partnership,  Whalehaven  Capital Fund and First Montauk
               Securities  Corp,  filed as an exhibit to the  Current  Report on
               Form 8-K filed on November  30, 2004 and  incorporated  herein by
               reference.

10.6          Joinder to the Registration Rights Agreement,  dated November 23,
               2004, by and among Airtrax,  Inc., Excalibur Limited Partnership,
               Stonestreet Limited Partnership,  Linda Hechter and First Montauk
               Securities  Corp.,  filed as an exhibit to the Current  Report on
               Form 8-K filed on November  30, 2004 and  incorporated  herein by
               reference.

10.8           Subscription  Agreement  dated  February  11,  2005 by and  among
               Airtrax,  Inc. and the  investors  named in the  signature  pages
               thereto,  filed as an exhibit to the  Current  Report on Form 8-K
               filed on February 11, 2005 and incorporated herein by reference.

10.9           Series B Unsecured  Convertible  Debenture and Warrants  Purchase
               Agreement,  dated May 31, 2005, by and between Airtrax,  Inc. and
               the investor  named on the signature  page  thereto,  filed as an
               exhibit to the  Current  Report on Form 8-K filed on June 6, 2005
               and incorporated herein by reference.

10.10          Registration  Rights Agreement dated May 31, 2005, by and between
               Airtrax,  Inc.  and the  investor  named  on the  signature  page
               thereto,  filed as an exhibit to the  Current  Report on Form 8-K
               filed on June 6, 2005 and incorporated herein by reference.

10.11          Series B Unsecured Convertible Debenture of Airtrax,  Inc., filed
               as an exhibit to the Current  Report on Form 8-K filed on June 6,
               2005 and incorporated herein by reference.

10.12          Form of Stock  Purchase  Warrant of  Airtrax,  Inc.,  filed as an
               exhibit to the  Current  Report on Form 8-K filed on June 6, 2005
               and incorporated herein by reference.

10.13          Letter  Agreement  dated May 31, 2005 by and among Airtrax,  Inc.
               and the investors  named on the signature page thereto,  filed as
               an  exhibit  to the  Current  Report on Form 8-K filed on June 6,
               2005 and incorporated herein by reference.

10.14          Series C Unsecured  Convertible  Debenture and Warrants  Purchase
               Agreement,  dated October 18, 2005 by and between  Airtrax,  Inc.
               and the investor named on the signature page thereto, filed as an
               exhibit to the  Current  Report on Form 8-K filed on October  24,
               2005 and incorporated herein by reference.

10.15          Registration  Rights  Agreement  dated  October 18, 2005,  by and
               between  Airtrax,  Inc. and the investor  named on the  signature
               page thereto,  filed as an exhibit to the Current  Report on Form
               8-K  filed  on  October  24,  2005  and  incorporated  herein  by
               reference.

10.16          Series C Unsecured Convertible Debenture of Airtrax,  Inc., filed
               as an exhibit to the Current  Report on Form 8-K filed on October
               24, 2005 and incorporated herein by reference.

10.17          Form of Stock  Purchase  Warrant of  Airtrax,  Inc.,  filed as an
               exhibit to the  Current  Report on Form 8-K filed on October  24,
               2005 and incorporated herein by reference.

                                       30
<PAGE>
10.18          Amended and Restated Stock Acquisition  Agreement effective as of
               as of  February  19, 2004 by and between  Airtrax,  Inc.  and Fil
               Filipov,  filed as an exhibit to the  Registration  Statement  on
               Form SB-2 filed on January  11, 2006 and  incorporated  herein by
               reference.

10.19          Promissory Note of Filco GmbH dated as of January 15, 2005 issued
               to  Airtrax,  Inc.,  filed  as an  exhibit  to  the  Registration
               Statement on Form SB-2 filed on January 11, 2006 and incorporated
               herein by reference.

10.20          Promissory  Note of Filco GmbH dated as of June 5, 2005 issued to
               Airtrax,  Inc., filed as an exhibit to the Registration Statement
               on Form SB-2 filed on January 11, 2006 and incorporated herein by
               reference.

10.21          Assignment and Purchase  Agreement dated as of August 25, 2005 by
               and between Werner Faenger and Airtrax, Inc., filed as an exhibit
               to the  Registration  Statement on Form SB-2 filed on January 11,
               2006 and incorporated herein by reference.

10.22          Promissory  Note  of  Filco  GmbH  with  Guarantees  dated  as of
               November 25, 2005 issued to Airtrax, Inc., filed as an exhibit to
               the Registration Statement on Form SB-2 filed on January 11, 2006
               and incorporated herein by reference.

10.23          Form of  Subscription  Agreement  of  Airtrax,  Inc.  dated as of
               February 13, 2006,  filed as an exhibit to the Current  Report on
               Form 8-K filed on February  27, 2006 and  incorporated  herein by
               reference.

10.24          Series D Unsecured Convertible Debenture of Airtrax,  Inc., filed
               as an exhibit to the Current Report on Form 8-K filed on February
               27, 2006 and incorporated herein by reference.

10.25          Form of Stock  Purchase  Warrant of  Airtrax,  Inc.,  filed as an
               exhibit to the Current  Report on Form 8-K filed on February  27,
               2006 and incorporated herein by reference.

31.1           Certification of Chief Executive  Officer pursuant to Rule 13a-14
               and Rule 15d-14(a), promulgated under the Securities and Exchange
               Act of 1934, as amended.

31.2           Certification of Chief Financial  Officer pursuant to Rule 13a-14
               and Rule 15d 14(a), promulgated under the Securities and Exchange
               Act of 1934, as amended.

32.1           Certification  pursuant  to 18 U.S.C.  Section  1350,  as adopted
               pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002 (Chief
               Executive Officer).

32.2           Certification  pursuant  to 18 U.S.C.  Section  1350,  as adopted
               pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002 (Chief
               Financial Officer).

                                       31
<PAGE>
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 $76,803 and $23,000,  respectively,  for the years
ended December 31, 2006 and December 31, 2005.

AUDIT-RELATED FEES

     We incurred fees of $47,947 and $15,000,  respectively, for the years ended
December 31, 2006 and December 31, 2005 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." In
addition,  we incurred accounting (audit) fees of $75,000 for accounting fees to
audit Filco GmbH.

TAX FEES

     The aggregate fees billed by our auditors for tax  compliance  matters were
$1,045 and $750  respectively,  for the fiscal years ended December 31, 2006 and
December 31, 2005.

ALL OTHER FEES

     We did not incur any fees for other  professional  services rendered by our
independent  auditors  during the years ended December 31, 2006 and December 31,
2005.

     The Board of Directors  has  considered  whether the provision of non-audit
services is compatible with maintaining the principal accountant's independence.



                                       32
<PAGE>

                                   SIGNATURES

In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.

                                   AIRTRAX, INC.

Date:  April 16, 2007                By: /s/ ROBERT M. WATSON
                                        ---------------------
                                     Robert M. Watson
                                     Chief Executive Officer
                                     (Principal Executive Officer) and
                                     Acting Chief Financial Officer (
                                     Principal Financial and
                                     Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the dates indicated.

------------------------- -------------------------------------- ---------------
Name                      Position                               Date
------------------------- -------------------------------------- ---------------

------------------------- -------------------------------------- ---------------
/s/ ROBERT M. WATSON      Chief Executive Officer                April 16, 2007
--------------------      (Principal Executive Officer), Acting
Robert M. Watson          Chief Financial Officer
                          (Principal Financial and
                          Accounting Officer) and Director
------------------------- -------------------------------------- ---------------

------------------------- -------------------------------------- ---------------
/s/ ANDREW GUZZETTI       Chairman of the Board and Director     April 16, 2007
-------------------
Andrew Guzzetti
------------------------- -------------------------------------- ---------------

------------------------- -------------------------------------- ---------------
/s/ D. BARNEY HARRIS      Director                               April 16, 2007
--------------------
D. Barney Harris
------------------------- -------------------------------------- ---------------

------------------------- -------------------------------------- ---------------
/s/ JAMES HUDSON          Director                               April 16, 2007
----------------
James Hudson
------------------------- -------------------------------------- ---------------

------------------------- -------------------------------------- ---------------
/s/ WILLIAM HUNGERVILLE   Director                               April 16, 2007
-----------------------
William Hungerville
------------------------- -------------------------------------- ---------------

------------------------- -------------------------------------- ---------------
                          Director                               April 16, 2007
---------------
Fil Filipov
------------------------- -------------------------------------- ---------------

------------------------- -------------------------------------- ---------------
                          Director                               April 16, 2007
--------------------
Peter Amico, Jr.
------------------------- -------------------------------------- ---------------

------------------------- -------------------------------------- ---------------
/s/ ROBERT BORSKI, JR.    Director                               April 16, 2007
----------------------
Robert Borski, Jr.
------------------------- -------------------------------------- ---------------

                                       33