UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
FORM 10-Q
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended: December 31, 2017September 30, 2021
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ____________________ to ____________________.
Commission file number: 000-50053
000-50053
(Exact name of small business issuer as specified in its charter)
NEVADA | 87-0535207 |
(State or other jurisdiction of | (I.R.S. Employer |
incorporation or organization) | Identification No.) |
1501 | 89005 |
(Address of principal executive offices) | (Zip Code) |
(702) 293-1930
(Issuer’s telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See definitionthe definitions of “large accelerated filer,” accelerated“accelerated filer” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:Act.
Large accelerated filer ☐ | Accelerated filer ☐ | Non-accelerated filer ☒ | Smaller reporting company ☒ |
Emerging Growth Companies ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
N/A | N/A | N/A |
The number of shares outstanding of Registrant’s Common Stock as of February 14, 2018: 43,976,346November 15, 2021: 73,047,868
TABLE OF CONTENTS
Page | ||
PART I | ||
Item 1. | 3 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operation | 10 |
Item 3. | 16 | |
Item 4. | 16 | |
PART II | ||
Item 1. | 17 | |
Item 1A. | 17 | |
Item 2. | 17 | |
Item 3. | 17 | |
Item 4. | 17 | |
Item 5. | 17 | |
Item 6. | 17 | |
18 | ||
PART I - FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
AMERITYRE CORPORATION
Balance Sheets
December 31, 2017 | June 30, 2017 | |||||||||||||||
| (Unaudited) | September 30, 2021 | June 30, 2021 | ||||||||||||||
| ASSETS | (Unaudited) | |||||||||||||||
| CURRENT ASSETS | ||||||||||||||||
| Cash | $ | 130,456 | $ | 340,256 | $ | 476,220 | $ | 516,192 | ||||||||
| Accounts receivable | 492,215 | 284,004 | 530,940 | 728,315 | ||||||||||||
| Inventory - net | 548,973 | 576,191 | ||||||||||||||
Current inventory - net | 739,188 | 659,333 | ||||||||||||||
| Prepaid and other current assets | 146,306 | 112,368 | 144,412 | 94,483 | ||||||||||||
| Total Current Assets | 1,317,950 | 1,312,819 | 1,890,760 | 1,998,323 | ||||||||||||
RIGHT TO USE LEASE ASSETS, OPERATING, NET | 506,473 | 544,070 | ||||||||||||||
| PROPERTY AND EQUIPMENT | ||||||||||||||||
| Leasehold improvements | 195,808 | 196,223 | ||||||||||||||
| Molds and models | 583,611 | 577,549 | 583,611 | 583,611 | ||||||||||||
| Equipment | 2,982,218 | 2,982,218 | 3,077,255 | 2,910,018 | ||||||||||||
| Furniture and fixtures | 59,057 | 74,921 | 73,423 | 73,423 | ||||||||||||
Software | 233,528 | 233,528 | ||||||||||||||
| Construction in progress | - | 17,351 | 14,006 | - | ||||||||||||
| Software | 339,009 | 339,009 | ||||||||||||||
| Less - accumulated depreciation | (3,930,413 | ) | (3,914,142 | ) | ||||||||||||
| Total Property and Equipment | 229,290 | 273,129 | ||||||||||||||
Less – accumulated depreciation | (3,705,284 | ) | (3,690,515 | ) | ||||||||||||
Property and Equipment - net | 276,539 | 110,065 | ||||||||||||||
| OTHER ASSETS | ||||||||||||||||
| Patents and trademarks - net | 144,036 | 155,952 | ||||||||||||||
Patents and trademarks – net | 71,043 | 75,977 | ||||||||||||||
| Non-current inventory | 202,648 | 228,403 | 164,171 | 163,289 | ||||||||||||
| Deposits | 11,000 | 11,000 | 11,000 | 11,000 | ||||||||||||
| Total Other Assets | 357,684 | 395,355 | 246,214 | 250,266 | ||||||||||||
| TOTAL ASSETS | $ | 1,904,924 | $ | 1,981,303 | $ | 2,919,986 | $ | 2,902,724 | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
| CURRENT LIABILITIES | ||||||||||||||||
| Accounts payable and accrued expenses | $ | 506,641 | $ | 468,489 | $ | 706,866 | $ | 767,193 | ||||||||
| Current portion of long-term debt | 19,872 | 19,382 | 2,000 | 2,000 | ||||||||||||
| Current portion of lease liability | 4,755 | 6,967 | 148,050 | 147,600 | ||||||||||||
| Deferred revenue | - | - | 42,125 | 25,892 | ||||||||||||
| Total Current Liabilities | 531,268 | 494,838 | 899,041 | 942,685 | ||||||||||||
| Long-term debt | 115,133 | 124,482 | 61,326 | 61,326 | ||||||||||||
| Long-term lease liability | - | 1,426 | 263,250 | 300,600 | ||||||||||||
| Total Long-Term Liabilities | 115,133 | 125,908 | ||||||||||||||
| TOTAL LIABILITIES | 646,401 | 620,746 | 1,223,617 | 1,304,611 | ||||||||||||
COMMITMENTS AND CONTINGENCIES | ||||||||||||||||
| STOCKHOLDERS’ EQUITY | ||||||||||||||||
| Preferred stock: 5,000,000 shares authorized of $0.001 par value, 2,000,000 shares issued and outstanding, respectively | 2,000 | 2,000 | ||||||||||||||
| Common Stock: 75,000,000 shares authorized of $0.001 par value, 43,312,107 and 43,312,107 shares issued and outstanding, respectively | 43,312 | 43,312 | ||||||||||||||
Common stock: 100,000,000 shares authorized of $0.001 par value, 73,047,868 and 73,047,868 shares issued and outstanding, respectively | 73,048 | 73,048 | ||||||||||||||
| Additional paid-in capital | 62,616,457 | 62,615,728 | 62,805,404 | 62,805,404 | ||||||||||||
| Stock payable | 13,462 | - | 33,156 | - | ||||||||||||
| Accumulated deficit | (61,416,708 | ) | (61,300,483 | ) | (61,215,239 | ) | (61,280,339 | ) | ||||||||
| Total Stockholders’ Equity | 1,258,523 | 1,360,557 | 1,696,369 | 1,598,113 | ||||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,904,924 | $ | 1,981,303 | $ | 2,919,986 | $ | 2,902,724 | ||||||||
The accompanying notes are an integral part of these financial statements.
AMERITYRE CORPORATION
Statements of Operations
(Unaudited)
For the Three Months Ended December 31, | For the Six Months Ended December 31, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| NET SALES | $ | 866,944 | $ | 879,607 | $ | 1,792,660 | $ | 1,715,760 | ||||||||
| COST OF GOODS SOLD | 592,335 | 612,336 | 1,244,152 | 1,167,788 | ||||||||||||
| GROSS PROFIT | 274,609 | 267,271 | 548,508 | 547,972 | ||||||||||||
| EXPENSES | ||||||||||||||||
| Research and development | 53,002 | 56,185 | 111,143 | 109,044 | ||||||||||||
| Sales and marketing | 49,583 | 58,961 | 115,318 | 126,191 | ||||||||||||
| General and administrative | 173,328 | 147,477 | 368,279 | 339,783 | ||||||||||||
| Total Expenses | 275,913 | 262,623 | 594,740 | 575,018 | ||||||||||||
| (LOSS) INCOME FROM OPERATIONS | (1,304 | ) | 4,648 | (46,232 | ) | (27,046 | ) | |||||||||
| OTHER (EXPENSE)/INCOME | ||||||||||||||||
| Interest expense | (1,331 | ) | (1,879 | ) | (2,814 | ) | (5,064 | ) | ||||||||
| Interest income | 66 | 47 | 174 | 100 | ||||||||||||
| Loss on asset abandonment | - | - | (17,352 | ) | - | |||||||||||
| Total Other (Expense)/Income | (1,265 | ) | (1,832 | ) | (19,992 | ) | (4,964 | ) | ||||||||
| NET (LOSS) INCOME | (2,569 | ) | 2,816 | (66,224 | ) | (32,010 | ) | |||||||||
| Preferred Stock Dividend | (25,000 | ) | (25,000 | ) | (50,000 | ) | (50,000 | ) | ||||||||
| NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | (27,569 | ) | $ | (22,184 | ) | $ | (116,224 | ) | $ | (82,010 | ) | ||||
| BASIC AND DILUTED LOSS PER SHARE | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||
| WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING | 43,312,107 | 42,325,287 | 43,312,107 | 42,313,874 | ||||||||||||
For the Three Months Ended September 30, | ||||||||
2021 | 2020 | |||||||
NET SALES | $ | 1,395,614 | $ | 1,051,286 | ||||
COST OF REVENUES | 1,010,842 | 707,566 | ||||||
GROSS PROFIT | 384,772 | 343,720 | ||||||
EXPENSES | ||||||||
Research and development | 21,567 | 20,471 | ||||||
Sales and marketing | 68,373 | 59,800 | ||||||
General and administrative | 232,848 | 210,486 | ||||||
Total Expenses | 322,788 | 290,757 | ||||||
INCOME FROM OPERATIONS | 61,984 | 52,963 | ||||||
OTHER INCOME (EXPENSE) | ||||||||
Interest income | 366 | 418 | ||||||
Loss on asset disposal | - | (2,853 | ) | |||||
Other income | 2,750 | 3,255 | ||||||
Total Other Income, net | 3,116 | 820 | ||||||
NET INCOME | $ | 65,100 | $ | 53,783 | ||||
BASIC AND DILUTED INCOME PER SHARE | $ | 0.00 | $ | 0.00 | ||||
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING | 73,047,868 | 70,172,868 | ||||||
The accompanying notes are an integral part of these financial statements.
AMERITYRE CORPORATION
Statements of Cash FlowsStockholders’ Equity
(Unaudited)
For the Six Months Ended December 31, | ||||||||
| 2017 | 2016 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | (66,224 | ) | $ | (32,010 | ) | ||
| Adjustments to reconcile net loss to net cash provided (used) by operating activities: | ||||||||
| Depreciation and amortization expense | 44,467 | 52,782 | ||||||
| Stock based compensation | 14,191 | 15,223 | ||||||
| Loss on asset abandonment | 17,352 | - | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (208,211 | ) | 49,405 | |||||
| Inventory and inventory reserve | 52,973 | 37,348 | ||||||
| Prepaid and other current assets | (33,938 | ) | (62,033 | ) | ||||
| Accounts payable and accrued expenses | (11,851 | ) | (9,218 | ) | ||||
| Net Cash Provided (Used) by Operating Activities | (191,241 | ) | 51,497 | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of property and equipment | (6,062 | ) | (11,424 | ) | ||||
| Net Cash Used by Investing Activities | (6,062 | ) | (11,424 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Payments on lease liability | (3,638 | ) | (2,965 | ) | ||||
| Payments on notes payable | (8,859 | ) | (5,609 | ) | ||||
| Net Cash (Used) by Financing Activities | (12,497 | ) | (8,574 | ) | ||||
| NET INCREASE (DECREASE) IN CASH | (209,800 | ) | 31,499 | |||||
| CASH AT BEGINNING OF PERIOD | 340,256 | 267,302 | ||||||
| CASH AT END OF PERIOD | $ | 130,456 | $ | 298,801 | ||||
Common Stock | Additional Paid in | Stock | Accumulated | |||||||||||||||||||||
Shares | Amount | Capital | Payable | Deficit | Total | |||||||||||||||||||
Balance, June 30, 2020 | 70,172,868 | $ | 70,173 | $ | 62,719,473 | $ | - | $ | (61,538,675 | ) | $ | 1,250,971 | ||||||||||||
Stock option based compensation expense – options | - | - | - | 12,323 | - | 12,323 | ||||||||||||||||||
Net income for the quarter | - | - | - | - | 53,783 | 53,783 | ||||||||||||||||||
Balance, September 30, 2020 | 70,172,868 | 70,173 | 62,719,473 | 12,323 | (61,484,892 | ) | 1,317,077 | |||||||||||||||||
Stock option based compensation expense – options | - | - | - | (12,323 | ) | - | (12,323 | ) | ||||||||||||||||
Stock based compensation expense for employee and Board of Director service | 1,250,000 | 1,250 | 22,560 | - | - | 23,810 | ||||||||||||||||||
Net loss for the quarter | - | - | - | - | 176,852 | 176,852 | ||||||||||||||||||
Balance, December 31, 2020 | 71,422,868 | 71,423 | 62,742,033 | - | (61,308,040 | ) | 1,505,416 | |||||||||||||||||
Stock option based compensation expense – options | - | - | - | 31,590 | - | 31,590 | ||||||||||||||||||
Net income for the quarter | - | - | - | - | 80,651 | 80,651 | ||||||||||||||||||
Balance, March 31, 2021 | 71,422,868 | 71,423 | 62,742,033 | 31,590 | (61,227,389 | ) | 1,617,657 | |||||||||||||||||
Stock option based compensation expense – options | - | - | - | 33,406 | - | 33,406 | ||||||||||||||||||
Stock based compensation expense for employee and Board of Director service | 1,625,000 | 1,625 | 63,371 | (64,996 | ) | - | - | |||||||||||||||||
Net loss for the quarter | - | - | - | - | (52,950 | ) | (52,950 | ) | ||||||||||||||||
Balance, June 30, 2021 | 73,047,868 | 73,048 | 62,805,404 | - | (61,280,339 | ) | 1,598,113 | |||||||||||||||||
Stock based compensation expense for employee and Board of Director service | - | - | - | 33,156 | - | 33,156 | ||||||||||||||||||
Net income for the quarter | - | - | - | - | 65,100 | 65,100 | ||||||||||||||||||
Balance, September 30, 2021 | 73,047,868 | $ | 73,048 | $ | 62,805,404 | $ | 33,156 | $ | (61,215,239 | ) | $ | 1,696,369 | ||||||||||||
| SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES | ||||||||
| Interest paid | $ | 2,815 | $ | 5,064 | ||||
| Income taxes paid | $ | - | $ | - | ||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Write off of previously reserved forklift tires | $ | - | $ | 81,224 | ||||
| Purchase of fixed assets through debt | $ | - | $ | 95,625 | ||||
| Accrued preferred stock dividends | $ | 50,000 | $ | 50,000 | ||||
| Issuance of stock for stock payable | $ | - | $ | 4,500 | ||||
| Write off fully depreciated fixed assets no longer in use | $ | 16,280 | $ | - | ||||
The accompanying notes are an integral part of these financial statements.
AMERITYRE CORPORATION
Statements of Cash Flows
(Unaudited)
For the Three Months Ended September 30, | ||||||||
2021 | 2020 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income | $ | 65,100 | $ | 53,783 | ||||
Adjustments to reconcile net income to net cash provided (used) by operating activities: | ||||||||
Depreciation and amortization expense | 60,050 | 55,062 | ||||||
Stock based compensation | 33,156 | 12,323 | ||||||
Loss on asset disposal | - | 2,853 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 197,375 | (30,611 | ) | |||||
Prepaid and other current assets | (86,256 | ) | (39,668 | ) | ||||
Inventory and any change in inventory reserve | (80,737 | ) | (13,144 | ) | ||||
Accounts payable and accrued expenses | (74,332 | ) | (57,116 | ) | ||||
Deferred revenue | 16,233 | 5,475 | ||||||
Lease liability payable, operating lease | (36,901 | ) | (36,450 | ) | ||||
Net Cash Provided (Used) by Operating Activities | 93,688 | (47,493 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchase of property and equipment | (130,910 | ) | - | |||||
Cash paid for leasehold improvements of an operating lease | (2,750 | ) | - | |||||
Net Cash Used by Investing Activities | (133,660 | ) | - | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Payments on notes payable | - | (263 | ) | |||||
Net Cash Used by Financing Activities | - | (263 | ) | |||||
NET DECREASE IN CASH | (39,972 | ) | (47,756 | ) | ||||
CASH AT BEGINNING OF PERIOD | 516,192 | 666,756 | ||||||
CASH AT END OF PERIOD | $ | 476,220 | $ | 619,000 | ||||
NON-CASH FINANCING ACTIVITIES | ||||||||
Interest paid | $ | - | $ | - | ||||
Income taxes paid | - | - | ||||||
SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES | ||||||||
Use of store inventory, capitalized as fixed asset | $ | - | $ | 6,600 | ||||
Prepaid asset applied to capitalized equipment | $ | 36,327 | $ | - | ||||
Costs accrued for construction in progress | $ | 14,006 | $ | - |
The accompanying notes are an integral part of these financial statements.
AMERITYRE CORPORATION
Notes to the Unaudited Condensed Financial Statements
September 30, 2021
NOTE 1 - – BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed financial statements have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission.Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in accordance with such rules and regulations. The information furnished in the interim condensed financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements. We believe the disclosures and information presented are adequate to make the information not misleading. These interim condensed financial statements should be read in conjunction with our most recent audited financial statements and notes thereto included in our June 30, 20172021 Annual Report on Form 10-K. Operating results for the quarter ended December 31, 2017September 30, 2021 are not necessarily indicative of the results that may be expected for the current fiscal year ending June 30, 2018.2022.
NOTE 2 - – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies disclosed thereinherein have not changed since our audited financial statements and notes thereto included in our June 30, 20172021 Annual Report on Form 10-K, except as noted below.
Revenue Recognition
The majority of our revenue is derived from short-term sales contracts. We account for revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers”, which we adopted on July 1, 2017, using the modified retrospective method..
Revenue for our products is recognized at the time in which our performance obligation is satisfied which we have defined as “control” of the product by the customer. “Control” is defined as a customer having “rights/obligations of physical control over the product or has the rights and intention to control the product.” Based on the terms of our contracts, a customer’s “control” is based on analysis of the following; (i) when a customer arranges their own shipping, and once the product has left our dock, Amerityre Corporation (“Amerityre” or the “Company”) recognizes revenue for the product. In effect by arranging their own shipping the customer is “taking control” of the product when it leaves our warehouse; or (ii) when a customer does not arrange their own shipping, we cannot recognize revenue until it is delivered and the customer takes “control” of the product.
Deferred revenue was $42,125, inclusive of $45 of shipping and handling revenue (see below), as of September 30, 2021. Deferred revenue was $17,667, inclusive of $1,633 of shipping and handling revenue (see below), as of September 30, 2020.
Shipping and Handling
Shipping and Handling Fees require that freight costs charged to customers be classified as revenues. Freight expenses are included in costs of sales and are recognized as incurred. However, dueDue to our adoption of ASC 606 as discussed above, we defer the revenues of shipping and handling until the related revenue is also recognized.
The result of this accounting change, and the routine December plant shut down, resulted in nois a deferral of $45 as of December 31, 2017.September 30, 2021 and $1,633 as of September 30, 2020.
Basic and Fully Diluted Net LossIncome (Loss) Per Share
Basic and Fully Diluted net lossincome (loss) per share is computed using the weighted-average number of common shares outstanding during the period.
Our outstanding stock options and warrants and shares issuable upon conversion of outstanding convertible notes have been excluded from the basic and fully diluted net lossincome per share calculation. We excluded 3,730,0001,030,000 and 3,800,0002,870,000 common stock equivalents for the periodsquarters ended December 31, 2017September 30, 2021 and 2016,2020, respectively, because they are anti-dilutive.
AMERITYRE CORPORATION
Notes to the Unaudited Condensed Financial Statements
September 30, 2021
Recent Accounting Pronouncements
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC, did not, or are not believed by management to, have a material impact on the Company’sCompany's present or future financial position, results of operations or cash flows.
NOTE 3 - – INVENTORY
Inventory is stated at the lower of cost (computed on a first-in, first-out basis) or net realizable value. The inventory consists primarily of chemicals, finished goods produced in our plant and products purchased for resale.
| December 31, 2017 | June 30, 2017 | September 30, 2021 | June 30, 2021 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Raw Materials | $ | 249,264 | $ | 262,187 | $ | 444,027 | $ | 416,709 | ||||||||
| Finished Goods | 557,793 | 595,910 | 579,110 | 525,565 | ||||||||||||
| Inventory reserve | (55,437 | ) | (53,503 | ) | (119,778 | ) | (119,652 | ) | ||||||||
| Inventory - net | $ | 751,620 | 804,594 | |||||||||||||
Inventory – net (current and long term) | $ | 903,359 | $ | 822,622 | ||||||||||||
Our inventory reserve reflects items that were deemed to be defective or obsolete based on an analysis of all inventories on hand.
The Company critically reviewedreviews all slow moving inventory to determine if it is defective or obsolete. If not defective or obsolete we presentedpresent these items as non-current inventory, although all inventory is ready and available for sale at any moment.
NOTE 4 - DEBT– RIGHT TO USE LEASE ASSETS
Based on our lease accounting policy, we have identified the following operating leases. As of September 30, 2021, we have no financing leases:
September 30, 2021 | June 30, 2021 | |||||||
(Unaudited) | ||||||||
Facility lease | $ | 411,300 | $ | 448,200 | ||||
Leasehold improvements related to our facility | 289,604 | 286,854 | ||||||
Accumulated amortization – leasehold improvements | (194,431 | ) | (190,984 | ) | ||||
Right to use leased assets, operating, net | $ | 506,473 | $ | 544,070 | ||||
In March 2019 we negotiated a five year extension of the lease on our executive office and manufacturing facility located at 1501 Industrial Road, Boulder City, Nevada. The property consists of a 49,200 square foot building. We currently occupy all 49,200 square feet, inclusive of approximately 5,500 square feet of office space, situated on approximately 4.15 acres. Our remaining liability under this agreement is $411,300, payable at amounts ranging from $11,750 to $12,600 a month until June 30, 2024.
NOTE 5 – DEBT
A former board member, Silas O. Kines, who passed away on January 11, 2012, was also the principal owner of Forklift Tire of Florida and K-2 Industrial Tire, Inc. In accordance with the Commission Agreement with Forklift Tire of Florida, dated February 2, 2011, between Amerityre Corporation and K-2 Industrial Tire, Inc., K-2 is due a five percent (5%) commission on all forklift tire sales. In exchange for the forklift models transferred to Amerityre under that agreement, the first $96,000 in commission payments will be used to extinguish the long term liability recorded on the transaction. As of December 31, 2017,September 30, 2021, $2,000 and $62,651$61,326 (June 30, 2017,2021, $2,000 and $62,940)$61,326) were recorded for the current and long-term portion, respectively, of the related liability.
| Payments due by period | ||||||||||||||||||||
| Total | Less than 1 year | 1 to 3 years | 3 to 5 years | After 5 years | ||||||||||||||||
| Bank debt (both US Bank facilities above) | $ | 88,614 | $ | 21,349 | $ | 67,265 | $ | - | $ | - | ||||||||||
| Total cash obligations | $ | 88,614 | $ | 21,349 | $ | 67,265 | $ | - | $ | - | ||||||||||
AMERITYRE CORPORATION
Notes to the Unaudited Condensed Financial Statements
September 30, 2021
| 2018 | $ | 4,349 | ||
| 2019 | 725 | |||
| 2020 | - | |||
| Total minimum lease payments | 5,074 | |||
| Less: executory costs | - | |||
| Net minimum lease payments | 5,074 | |||
| Less: amount representing interest | (345 | ) | ||
| Present value of net minimum payments | $ | 4,729 |
NOTE 6 -– STOCK TRANSACTIONS, OPTIONS AND WARRANTS
On July 22, 2020, the Board of Directors adopted the 2020 Equity Incentive Plan (the “2020 Plan”) which contains provisions for up to 2,500,000 stock-based instruments to be granted to employees, consultants and directors.
On October 26, 2021, the Board of optionsDirectors adopted the 2022 Equity Incentive Plan (the “2022 Plan”) which contains provisions for up to 10,000,000 stock-based instruments to be granted to employees, consultants and directors.
No stock or options were granted toduring the Company’s Chief Executive Officer as part of his employment offer. The options have a strike price of $0.10, vest December 1, 2017 and expire December 1, 2020. Year to date expense related to these options is $729 as of December 31, 2017. fiscal quarter ended September 30, 2021 or thus far in fiscal year 2022.
A summary of the status of our outstanding stock options as of December 31, 2017September 30, 2021 and June 30, 20172021, and changes during thethese periods then ended is presented below:
| December 31, 2017 | June 30, 2017 | September 30, 2021 | June 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||
| Weight Average | Intrinsic | Weight Average | Intrinsic | Weighted Average | Intrinsic | Weighted Average | Intrinsic | |||||||||||||||||||||||||||||||||||||||||
| Shares | Exercise Price | Value | Shares | Exercise Price | Value | Shares | Exercise Price | Value | Shares | Exercise Price | Value | |||||||||||||||||||||||||||||||||||||
| Outstanding beginning of period | 4,280,000 | $ | 0.12 | 3,800,000 | $ | 0.13 | 1,030,000 | $ | 0.12 | 2,870,000 | $ | 0.12 | ||||||||||||||||||||||||||||||||||||
| Granted | - | $ | 0.00 | 480,000 | $ | 0.10 | - | $ | 0.00 | - | $ | 0.00 | ||||||||||||||||||||||||||||||||||||
| Expired/Cancelled | (550,000 | ) | $ | (0.10 | ) | - | $ | 0.00 | - | $ | 0.00 | (1,840,000 | ) | $ | 0.12 | |||||||||||||||||||||||||||||||||
| Exercised | - | $ | 0.00 | - | $ | 0.00 | - | $ | 0.00 | - | $ | 0.00 | ||||||||||||||||||||||||||||||||||||
| Outstanding end of period | 3,730,000 | $ | 0.13 | $ | - | 4,280,000 | $ | 0.12 | $ | - | 1,030,000 | $ | 0.12 | $ | - | 1,030,000 | $ | 0.12 | $ | - | ||||||||||||||||||||||||||||
| Exercisable | 3,730,000 | $ | 0.13 | $ | - | 4,080,000 | $ | 0.12 | $ | - | 1,030,000 | $ | 0.12 | $ | - | 1,030,000 | $ | 0.12 | $ | - | ||||||||||||||||||||||||||||
Outstanding | Exercisable | |||||||||||||||||||||
Range of Exercise Prices | Number Outstanding at September 30, 2021 | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | Number Exercisable at September 30, 2021 | Weighted Average Remaining Contractual Life | |||||||||||||||||
$ | 0.08 | 150,000 | 0.17 | $ | 0.08 | 150,000 | 0.17 | |||||||||||||||
$ | 0.10 | 480,000 | 0.25 | $ | 0.10 | 480,000 | 0.25 | |||||||||||||||
$ | 0.17 | 400,000 | 0.17 | $ | 0.17 | 400,000 | 0.17 | |||||||||||||||
1,030,000 | 1,030,000 | |||||||||||||||||||||
| Outstanding | Exercisable | |||||||||||||||||||||
Range of Exercise Prices | Number Outstanding at December 31, 2017 | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | Number Exercisable at December 31, 2017 | Weighted Average Remaining Contractual Life | |||||||||||||||||
| $ | 0.08 | 150,000 | 3.92 | $ | 0.08 | 150,000 | 3.92 | |||||||||||||||
| $ | 0.10 | 2,130,000 | 1.61 | $ | 0.10 | 2,130,000 | 1.61 | |||||||||||||||
| $ | 0.17 | 1,450,000 | 2.92 | $ | 0.17 | 1,450,000 | 2.92 | |||||||||||||||
| 3,730,000 | 3,730,000 | |||||||||||||||||||||
NOTE 7 - – SUBSEQUENT EVENTS
On January 21, 2018, 60,000 shares wereOctober 26, 2021, the Board of Directors adopted the 2022 Equity Incentive Plan (the “2022 Plan”) which contains provisions for up to 10,000,000 stock-based instruments to be granted to the Company’s Chief Financial Officer as part her employment renewal. The shares are valued as of January 21, 2018employees, consultants and vest ratably through December 2018. In addition to the stock, her base compensation was adjusted to $36,000 per annum.directors.
ITEM 2. MANAGEMENT’SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis contains statements of a forward-looking nature relating to future events or our future financial performance or financial condition.Such statements are only predictions and the actual events or results may differ materially from the results disc-useddiscussed in or implied by the forward-looking statements.Factors that could cause or contribute to such differences include, but are not limited to, those discussed in “Part“Part I. Item 1A. Risk Factors”Factors” as well as those discussed elsewhere in this report.The historical results set forth in this discussion and analyses are not necessarily indicative of trends with respect to any actual or projected future financial performance.This discussion and analysis should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this report.
Overview
Amerityre engages in the research and development, manufacturing, and sale of solid polyurethane foam and polyurethane elastomer tires. We believe that we have developed unique polyurethane formulations that allow us to make products with superior performance characteristics, including high abrasion resistance, increased energy efficiency, and higher load-bearing capabilities, when compared to conventional rubber tires. We also believe that ourtires, in the areas of abrasion resistance, energy efficiency and load-bearing capabilities. Our manufacturing processes are more energy efficient than the traditional rubber tire manufacturing processes, in part because our polyurethane compounds do not require the multiple processing steps, extreme heat, and high pressure that are necessary to cure rubber. Using our polyurethane-based technologies, weWe believe tires can be produced whichwith our proprietary polyurethane formulations last longer, are less susceptible to failure and are friendlyfriendlier to the environment. environment when compared to competitor offerings.
We concentratefocus our business on three segments of the flat free tire market: light duty polyurethane foam tires, polyurethane elastomer industrial tires and agricultural tires. Our focus continues to be applications and markets where our advantages in product technology, and tire performance, and customer service give us an opportunity to obtain premium pricing. Our most recent activities in these areasproduct development and marketing efforts are set forth below:focused on building customer relationships and expanding sales with original equipment manufacturers and tire distributors. Our competitive advantage is creating unique product solutions for customers who have challenging tire performance requirements that cannot be met by competitor offerings.
Closed cell Polyurethane Foam Tires
– The sale of polyurethane foam tires to original equipment manufacturers, distributors, and dealers accounts for the majority of our sales revenue. WeDespite the ongoing negative effects of COVID-19 on creating unique product solutions for customers with specific tire performance requirements. During fiscal year 2017the overall US economy, we have seen increased interestexperienced higher than expected demand for our polyurethane foam tires in the recent quarter. Sales for the fiscal first quarter 2022 were 32.3% higher than the sales level in fiscal first quarter 2021. We continue to see strong sales trends that we saw during fiscal year 2021 as our current customer base is experiencing strong sales and our domestically produced tires are attractive to those new customers looking for a domestic source for their tires
Our industrial tire product line, which includes our golf cart and baggage cartcar tires, our 480 x 12 tires, and weour 570 x 12 tires, continues to see outstanding demand in the marketplace. We expect this trend to continue in the future. In general, our international sales over the past few years have been adversely affected by the strong US dollar, but recent weakening of the US dollar indicates that this headwind may be subsiding.coming quarters.
Polyurethane Elastomer Industrial Tires
Light Density Elastomer Tires – Demand for our light density elastomer formulation (ElastothaneTM 500) in applications requiring greater abrasion resistance and load bearing capability than our polyurethane foam tires. Lawn and garden tire applications continue to drive increased sales of this formulation, although we have seen some custom tire applications for this formulation as well. We expect Agricultural tires sales to continue to increase in the recent quarter. Our scissor lift tire also continuescoming quarters as farmers are seeing higher levels of disposable income than they have in years. However, economic challenges such as supply shortages could limit anticipated benefits or our ability to experience limited interest as OEMs have to date not approved the use of the tire as a replacement for their current offering.capitalize on them. We continue to utilizeapproach OEMs and large distributors about promoting and utilizing our researchtires for certain applications, and development resources to develop new elastomers that may offer specific advantages in certain tire applications. several are evaluating sample tires.
We have made identification of new customers for our elastomer products a key component of our sales/marketing plan. We continue to have discussions with various potential end-users and eventually expect some of these discussions to translate into higher sales
A major component of our strategic operating plan is to establish a partnership or other type of business combination with a larger OEM or tire manufacturer who would have a larger distribution channel as well as financial resources to fully leverage our current tire portfolio as well as new products that can be developed using our formulations. The wide availability of capital in the markets has increased the amount of equity investment and merger/acquisition activity in the market. We are open to discussions and will continue to pursue opportunities that we believe will maximize the potential of our intellectual property and the overall value of the business.
We continue to face supply chain issues and increases in raw material and operating costs which we expect will continue to pressure our Gross Profit Margins. We implemented another price increase in August 2021 on our tire assemblies to mitigate the effects of these increases in our current budget. These effortscosts. However, as evidenced by our lower Gross Margins for the quarter, the price increases were not successful at offsetting all cost increases during the quarter. We will continue to closely manage the cost drivers of our business and take appropriate corrective actions, including further price increases where warranted.
Our sales growth over the past year has been very strong. However, it is unclear if the environment of rising costs and the corresponding higher sales prices will affect demand for our products moving forward. Raw material availability is also expected to continue to be an issue in the upcoming quarters as the existing supply chain issues are primarily targetedbeing resolved. While we continue to have a very strong backlog of business, we may be restricted as to how much product we can produce if raw material is not available on developing improved ng polyurethane formulations for specific tire applicationsa timely basis. We are in constant contact with our target markets.suppliers to ensure that negative supply impacts are minimized, although in some cases this may result in Amerityre incurring higher material costs.
As described above, our product line covers diverse market segments which are unrelated in terms of customer base, product distribution, market demands and competition. Our sales team is comprised of our in-house sales department supplemented by three independent manufacturer representatives.representatives with inside sales support. The Company’s continued emphasis on proper product pricing and new marketing campaigns continues to drive more sales, as shown by our increase in sales revenue in the first half of fiscal year 2018 versus the same period in fiscal year 2017.profitable sales. Our upgraded website continues to educateeducates the marketplace about our products as well as generate someoffers an outlet for online sales. We have a solid backlog for orders to be delivered over the next 12 months. We continue to pursue relationships with large distributors and original equipment manufacturers in key market segments. These relationships will bring additional exposure for Amerityre products in the marketplace and lead to increased sales. Our future marketing activities will continue to target higher growth market segments and other opportunities where our premium performance products can address the needs of customers with unique applications.
Factors Affecting Results of Operations
Our operating expenses consisted primarily of the following:
Cost of sales, which consists primarily of raw materials, components and production of our products, including applied labor costs and benefits expenses, maintenance, facilities and other operating costs associated with the production of our products;
Selling, general and administrative expenses, which consist primarily of salaries, commissions and related benefits paid to our employees and related selling and administrative costs including professional fees;
Research and development expenses, which consist primarily of direct labor conducting research and development, equipment and materials used in new product development and product improvement using our technologies;
Consulting expenses, which consist primarily of amounts paid to third-parties for outside services;
Depreciation and amortization expenses which result from the depreciation of our property and equipment, including amortization of our intangible assets; and
Stock based compensation expense related to equity awards issued to directors, employees and consultants for services performed for the Company.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate our estimates, including those related to uncollectible receivables, inventory valuation, deferred compensation and contingencies. We base our estimates on historical performance and on various other assumptions that we believe to be reasonable under the circumstances. These estimates allow us to make judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
At present we do not have any critical accounting policies because they are important to the portrayal of our financial condition and results of operations and theythat require critical management judgments and estimates about matters that may be uncertain. If actual results or events differ materially from those contemplated by us in making these estimates, our reported financial condition and results of operations for future periods could be materially affected.
Results of Operations
Our management reviews and analyzes several key performance indicators in order to manage our business and assess the quality and potential variability of our sales and cash flows. These key performance indicators include:
Revenues, net of returns and trade discounts, which consists of product sales and services and is an indicator of our overall business growth and the success of our sales and marketing efforts;
Gross profit, which is an indicator of both competitive pricing pressures and the cost of goods sold of our products and the mix of product and license fees, if any;
Growth in our customer base, which is an indicator of the success of our sales efforts; and
Distribution of sales across our products offered.
The Company, in light of the impact COVID-19 has had on our business, implemented a price increase on most of its products starting on April 1, 2021. We have seen over the past 10 months significant increases in raw material pricing, caused in part due to supply chain disruptions arising from the COVID-19 pandemic. The January 2021 winter storms in Texas took all polyol manufacturing offline for several weeks as these facilities needed to be repaired and brought back online. Combined with COVID-19-related reductions in propylene manufacturing capacity, the Company was fortunate to receive enough material to maintain operations, albeit at significantly higher prices and an amount that limited our ability to fulfill orders on a timely basis. Shortages of other raw materials in the chemical markets may continue or increase in the coming months, and it is therefore not clear that raw material pricing will return to the lower levels of 2020, or even stabilize at current elevated levels. Management continues to monitor the situation and is prepared to make further product pricing adjustments if necessary. The following paragraphs address these factors and the effects on our business during the fiscal quarter ended September 30, 2021.
The following summary table presents a comparison of our results of operations for the fiscal quarters ended December 31, 2017September 30, 2021 and 20162020 with respect to certain key financial measures. The comparisons illustrated in the table are discussed in greater detail below.
For the Three Months Ended December 31, | For the Six Months Ended December 31 | Three Month Period Ended September 30, | Percent Change | |||||||||||||||||||||||||||||||||
| (in 000’s) | Change | (in 000’s) | Change | (in 000’s) | ||||||||||||||||||||||||||||||||
| 2017 | 2016 | 2017 vs. 2016 | 2017 | 2016 | 2017 vs. 2016 | 2021 | 2020 | 2021 vs. 2020 | ||||||||||||||||||||||||||||
| Net revenues | $ | 867 | $ | 879 | (1.4 | %) | $ | 1,793 | $ | 1,716 | 4.5 | % | $ | 1,396 | $ | 1,051 | 32.8 | % | ||||||||||||||||||
| Cost of revenues | (592 | ) | (612 | ) | (3.3 | %) | (1,244 | ) | (1,168 | ) | 6.5 | % | (1,011 | ) | (708 | ) | 42.8 | % | ||||||||||||||||||
| Gross profit | 275 | 267 | 2.7 | % | 549 | 548 | 0.1 | % | 385 | 343 | 11.9 | % | ||||||||||||||||||||||||
| Research and development expenses | (53 | ) | (56 | ) | (5.7 | %) | (111 | ) | (109 | ) | 1.9 | % | (22 | ) | (20 | ) | 10.0 | % | ||||||||||||||||||
| Sales and marketing expense | (50 | ) | (59 | ) | (15.9 | %) | (115 | ) | (126 | ) | (8.7 | %) | (68 | ) | (60 | ) | 13.3 | % | ||||||||||||||||||
| General and administrative expense | (173 | ) | (147 | ) | 17.5 | % | (368 | ) | (339 | ) | 8.6 | % | (233 | ) | (210 | ) | 10.4 | % | ||||||||||||||||||
| Loss on asset abandonment | - | - | 0.0 | % | (17 | ) | - | 100.0 | % | |||||||||||||||||||||||||||
| Other income (expense) | (2 | ) | (2 | ) | 0.0 | % | (4 | ) | (5 | ) | (20.0 | %) | ||||||||||||||||||||||||
| Net income (loss) | (3 | ) | 3 | (200.0 | %) | (65 | ) | (31 | ) | 106.9 | % | |||||||||||||||||||||||||
| Preferred stock dividend | (25 | ) | (25 | ) | 0.0 | % | (50 | ) | (50 | ) | 0.0 | % | ||||||||||||||||||||||||
| Net loss attributable to common shareholders | $ | (28 | ) | $ | (22 | ) | 24.3 | % | $ | (115 | ) | $ | (81 | ) | 42.0 | % | ||||||||||||||||||||
Loss on asset disposal | - | (3 | ) | (100.0 | )% | |||||||||||||||||||||||||||||||
Other income | 3 | 4 | (25.0 | )% | ||||||||||||||||||||||||||||||||
Net income (loss) attributable to common shareholders | $ | 65 | $ | 54 | 20.4 | % | ||||||||||||||||||||||||||||||
Quarter Ended December 31, 2017September 30, 2021 Compared to December 31, 2016September 30, 2020
Net Sales.
Cost of Revenues. Cost of revenues for the quarter ended December 31, 2017September 30, 2021 was $592,336$1,010,842 or 68.3%72.4% of sales compared to $612,336$707,566 or 69.6%67.3% of sales for the same period in 2016. Cost of revenues varied due to product mix differences between the two periods, with more profitable products being sold in2020. We experienced higher raw material costs, particularly chemical feedstocks, during the recent quarter versuswhich pressured gross profit margins. Our chemical suppliers have informed us that there will likely be continued price increases in the prior period. As mentioned earlier,coming months due to a slow recovery in manufacturing capacity for our raw materials as well as increased market demand. The supply chain issues in procuring material from China has caused higher costs and long delays for our steel rims. We expect these headwinds to continue to pressure our Gross Margins throughout fiscal year 2022. We have mitigated some of these issues by increasing the sales prices of our tires. However, continuing increases in raw material costs may result in reduced product sales if we are forced to turn away sales because they are at price increaseslevels that are expected to become a major headwind moving forward in FY 2018, putting pressure on our gross margins.unprofitable.
Gross Profit.
Gross profit for the quarter endedResearch & Development Expenses (R&D).
Research and development expenses for the quarter endedSales & Marketing Expenses.
Sales and marketing expenses for the quarter endedGeneral & Administrative Expenses
. General and administrative expenses for the quarter endedOther Expense.
Net (Loss) Income
Liquidity and Capital Resources
Cash Flows
The following table sets forth our cash flows for the quarters ended December 31, 2017September 30, 2021 and 2016.2020.
Periods ended Sept. 30, | ||||||||
(in 000’s) | ||||||||
2021 | 2020 | |||||||
Net cash provided (used) by operating activities | $ | 94 | $ | (48 | ) | |||
Net cash used by investing activities | (134 | ) | - | |||||
Net cash used by financing activities | - | - | ||||||
Net increase (decrease) in cash during the period | $ | (40 | ) | $ | (48 | ) | ||
The Company has evaluated its current cash position relative to its cash requirements in the future and has determined its cash levels are sufficient to cover its cash needs. The Company enjoys a strong level of cash on hand as well as an unused credit line facility. These cash resources have been critical during the past year as working capital needs have increased due to the extended time required to receive imported materials (which are paid for when they are ready to ship from the manufacturer, not after they are received for use by the Company) as well as Management’s decision to increase chemical stock levels when extra material became available for purchase. The Company completed its upgrade of its Production pouring systems in September 2021, which was completely paid from cash reserves.
| Six Months ended Dec. 31, | ||||||||
| �� | (in 000’s) | |||||||
| 2017 | 2016 | |||||||
| Net cash (used) provided by operating activities | $ | (191 | ) | $ | 51 | |||
| Net cash used in investing activities | (6 | ) | (11 | ) | ||||
| Net cash used by financing activities | (13 | ) | (9 | ) | ||||
| Net (decrease) increase in cash during the period | $ | (210 | ) | $ | 31 | |||
Our primaryprincipal sources of operatingliquidity consist of cash duringon hand and payments received from our customers. In February 2020, the period ended December 31, 2017 came from collections from customers, however, our period end receivables balance increased as we waited for several large customers to remit payment in early January 2018. Our primary useCompany secured a $50,000 line of operating cash was an increase in prepaid and other current assets, specifically related to renewal of insurance policies. Net cash used by operating activities was $191,242 for the period ended December 31, 2017 compared to net cash provided by operating activities of $51,497 for the same period in 2016.
Historically, the current management team has been reluctant to pursue financing at terms that subject the Company to the high costs of Contents
| Payments due by period | ||||||||||||||||||||
| Total | Less than 1 year | 1 to 3 years | 3 to 5 years | After 5 years | ||||||||||||||||
| Facility lease (1) | $ | 345,000 | $ | 138,000 | $ | 207,000 | $ | - | $ | - | ||||||||||
| Capital lease (2) | 4,755 | 4,755 | - | - | - | |||||||||||||||
| Bank debt (3) | 88,614 | 21,349 | 67,265 | - | - | |||||||||||||||
| Total contractual cash obligations | $ | 438,369 | $ | 164,104 | $ | 274,265 | $ | - | $ | - | ||||||||||
Cash Position, Outstanding Indebtedness and Future Capital Requirements
At February 9, 2018,November 10, 2021, our total cash balance was $305,209,$400,035, none of which is restricted; accounts receivables was $305,209;$474,123; and inventory, net of reserves for slow moving or obsolete inventory, and other current assets was $871.377.$779,907. Our total indebtedness, specifically which management reviews for cash management, was $557,007$774,243 and includes $298,848$324,217 in accounts payable and accrued expenses, $16,962$2,000 in current portion of long-term debt, $4,112 in capital lease liability and $115,133$61,326 in long-term debt.debt and $386,700 in total operating lease liability.
We have been working during the past yearcontinue to take actions to improve our liquidity and access to capital resources. In order to fully execute the annual strategic business plan discussed during our shareholder meeting in November 2017, we required more capital resources. However, managementManagement continues to maintain that an equity financing atin the current market conditionsenvironment would be too dilutive and not in the best interests of our shareholders. We will continue to pursue potential opportunities to secure short-term loans, long-term bank financing, revolving lines of credit with banking institutions and equity based transactions with interested financial firms and strategic industry partnershave been successful in our effort to improve the Company’s financial position and enhance shareholder value.
In assessing our liquidity, management reviews and analyzes our current cash, accounts receivable, accounts payable, capital expenditure commitments, cash requirements and other obligations. In connection with the preparation of our financial statements for the periodfiscal year ended December 31, 2017,June 30, 2021, we have analyzed our cash needs for the next twelve months. We have concluded that our available cash and accounts receivables are sufficient to meet our current minimum working capital, capital expenditure and other cash requirements for this period. However,Although we have seen a significant increase in business activity in recent quarters, there can be no assurance that a resurgence of the COVID-19 virus will not cause a disruption in our markets that causes a significant decrease in demand from our customers. While many government restrictions have been relaxed and the economy has continued to expand manufacturingopen in more jurisdictions, the emergence of new variants of COVID-19 may lead to possible resurgences of the virus. This could result in new restrictions on our customers located or servicing these affected jurisdictions. Among the adverse consequences caused by the pandemic have been continued supply chain disruptions, resulting in material shortages and sales operations beyonddelays, as well as increased material costs. The long-term financial impact on our business cannot be reasonably estimated at this time. As a result, the current level, additionaleffects of COVID-19 may not be fully reflected in our financial results until future periods. Refer to “Item 1A — Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021 for a description of the material risks that the Company currently faces including in connection with COVID-19. If there is a new shutdown of the economy, reduction in demand for our products or other adverse effect on our business, we may lack sufficient working capital may be required.to meet our needs for the next 12 months.
The Company has, on occasion, instituted initiatives to incentivize sales of slower movingslower-moving inventory through promotional pricing. These programs will continue to be selectively utilized in the upcoming quarters to monetize inventory, promote individual product lines, and improve our cash flow.
As of February 14, 2018,November 12, 2021, the Company has approximately 3,616,00023,427,000 shares authorized and available for issuance. Although we are reluctant to raise money through stock sales at what we believe are dilutive share prices, these authorized but unissued and unreserved shares of our common stock can be utilized, if necessary, to fund the expansion of our manufacturing operations or to obtain additional working capital.raise new funds.
Off-Balance Sheet Arrangements
We do not currently have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts.
Cautionary Note Regarding Forward Looking Statements
This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding economic conditions in general and in the agricultural market, in particular, positive sales trends and resulting profits, our intention to seek out and engage in a partnership or other arrangement with one or more OEMs, our sales prospects in light of new products such as the potential development of tires for large industrial and agricultural equipment, price increases in response to increases in raw material costs and the availability of capital and liquidity. All statements other than statements of historical facts contained in this report, including statements regarding our future financial position, liquidity, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.
These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021. In addition, there is a risk that the economic repercussions from COVID-19 and supply chain disruptions may be more severe or prolonged than we currently expect, particularly with the new strains emerging and the uncertainty if existing vaccinations will be effective against the new strains, and vaccine hesitancy. Additionally, there is a risk that our price increases or other challenges we face and actions we take in response may result in lower revenues, or that any strategic partnerships or business arrangements do not yield the positive results intended or result in unanticipated adverse consequences, including due to potential friction between the parties. New risk factors emerge from time-to-time and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any risk factor, or combination of risk factors, may cause actual results to differ materially from those contained in any forward-looking statements. Except as otherwise required by applicable laws, we undertake no obligation to publicly update or revise any forward-looking statements described in this report, whether as a result of new information, future events, changed circumstances or any other reason after the date this report is filed.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s 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. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
As required by SEC Rule 13a-15(b), an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive and Financial Officer,Officers, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective at the reasonable assurance level.
PART II - OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
For information regarding risk factors, see “Part I. Item 1A. Risk Factors,” in our 2021 Annual Report on Form 10-K for the year ended June 30, 2017.Report.
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5.OTHER INFORMATION
Our Annual Stockholders’ Meeting is scheduled for 10:00 am, Pacific Time on Wednesday, December 1, 2021 virtually. For more information about the Annual Stockholders’ Meeting, see the Company’s Definitive Proxy Statement on Schedule 14A which was filed with the Securities and Exchange Commission and mailed to our stockholders of record on October 22, 2021.
ITEM 6.EXHIBITS
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: February 14, 2018November 15, 2021
AMERITYRE CORPORATION | |||
By: | |||
/s/ Michael F. Sullivan | /s/ Lynda R. Keeton-Cardno | ||
Michael F. Sullivan Chief Executive Officer (Principal Executive Officer) | Lynda R. Keeton-Cardno Chief Financial Officer (Principal Financial and Accounting Officer) |