1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________.
Commission file number: 33-94318-C
AMERITYRE CORPORATION
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(Exact name of registrant as specified in its charter)
NEVADA 87-0535207
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
705 YUCCA STREET, BOULDER CITY, NEVADA 89005
------------------------------------------ ------------------
(Address of principal executive offices) (Zip Code)
(702) 293-1930
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(Registrant's telephone number, including area code)
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), Yes [X] No [ ] and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of each of the issuer's classes of common
stock, was 13,687,282 shares of common stock, par value $0.001, as of March
31, 2002.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB pursuant to the rules and
regulations of the Securities and Exchange Commission and, therefore, do not
include all information and footnotes necessary for a complete presentation of
the financial position, results of operations, cash flows, and stockholders'
equity in conformity with generally accepted accounting principles. In the
opinion of management, all adjustments considered necessary for a fair
presentation of the results of operations and financial position have been
included and all such adjustments are of a normal recurring nature.
Our unaudited balance sheet as of March 31, 2002; the related audited balance
sheet as of June 30, 2001; the related unaudited statements of operations and
cash flows for the three and nine month period ended March 31, 2002 and 2001
and from January 30, 1995 (inception) through March 31, 2002 are attached
hereto and incorporated herein by this reference.
3
AMERITYRE CORPORATION
(A Development Stage Company)
Balance Sheets
ASSETS
March 31, June 30,
2002 2001
(Unaudited)
------------ ------------
CURRENT ASSETS
Cash $ 228,086 $ 530,052
Accounts receivable - net 66,512 13,678
Inventory 545,532 400,920
Prepaid expenses 32,141 20,160
------------ ------------
Total Current Assets 872,271 964,810
------------ ------------
PROPERTY AND EQUIPMENT
Land - 59,000
Building and improvements 41,613 305,532
Equipment 1,304,936 1,265,200
Furniture and fixtures 7,692 7,692
Construction in progress 50,689 -
Automobiles 12,153 12,153
Less - accumulated depreciation (924,422) (807,460)
------------ ------------
Total Property and Equipment 492,661 842,117
------------ ------------
OTHER ASSETS
Patents and trademarks - net 73,656 41,940
Deposits 7,180 7,180
------------ ------------
Total Other Assets 80,836 49,120
------------ ------------
TOTAL ASSETS $ 1,445,768 $ 1,856,047
============ ============
The accompanying notes are an integral part of these financial statements.
4
AMERITYRE CORPORATION
(A Development Stage Company)
Balance Sheets (Continued)
March 31, June 30,
2002 2001
(Unaudited)
------------ ------------
CURRENT LIABILITIES
Accounts payable $ 17,752 $ 225,872
Accrued expenses 11,713 11,240
Note payable - related party - 77,000
Interest payable - related party - 16,597
Stock subscription deposit 87,000 25,000
------------ ------------
Total Current Liabilities 116,465 355,709
------------ ------------
Total Liabilities 116,465 355,709
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock: 5,000,000 shares authorized
of $0.001 par value, -0- shares issued and
outstanding - -
Common stock: 25,000,000 shares authorized of
$0.001 par value, 13,687,282 and 13,291,635
shares issued and outstanding, respectively 13,687 13,292
Additional paid-in capital 17,646,880 16,576,110
Stock subscriptions receivable (697,964) (1,458,307)
Prepaid expenses (264,000) (65,250)
Deficit accumulated during the development
stage (15,369,300) (13,565,507)
------------ ------------
Total Stockholders' Equity 1,329,303 1,500,338
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,445,768 $ 1,856,047
============ ============
The accompanying notes are an integral part of these financial statements.
5
AMERITYRE CORPORATION
(A Development Stage Company)
Statements of Operations
(Unaudited)
From
Inception on
For the For the January 30,
Three Months Ended Nine Months Ended 1995 Through
March 31, March 31, March 31,
2002 2001 2002 2001 2002
----------- ----------- ----------- ----------- -----------
NET SALES $ 136,988 $ 19,029 $ 227,367 $ 85,775 $ 486,698
COST OF SALES 103,380 10,456 164,971 90,240 557,007
----------- ----------- ----------- ----------- -----------
GROSS MARGIN 33,608 8,573 62,396 (4,465) (70,309)
----------- ----------- ----------- ----------- -----------
EXPENSES
Consulting 39,755 197,729 265,408 621,244 2,487,351
Payroll and payroll taxes 236,876 122,896 650,955 610,711 4,557,130
Depreciation and amortization 55,044 66,788 164,295 190,010 1,153,215
Bad debt expense - - - - 52,112
General and administrative 239,902 406,798 853,616 1,077,713 4,489,916
----------- ----------- ----------- ----------- -----------
Total Expenses 571,577 794,211 1,934,274 2,499,678 12,739,724
----------- ----------- ----------- ----------- -----------
LOSS BEFORE OTHER
INCOME (EXPENSE) (537,969) (785,638) (1,871,878) (2,504,143) (12,810,033)
----------- ----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest income 5,180 27,488 50,043 80,588 280,033
Other income 209 - 209 - 2,507
Asset impairment loss - - - - (1,752,537)
Gain (loss) on disposal of assets - - 18,036 (5,125) 54,549
Loss on termination of
employment agreement - - - - (240,000)
Interest expense (203) (1,632) (203) (4,931) (637,604)
----------- ----------- ----------- ----------- -----------
Total Other Income (Expense) 5,186 25,856 68,085 70,532 (2,293,052)
----------- ----------- ----------- ----------- -----------
NET LOSS BEFORE
DISCONTINUED OPERATIONS (532,783) (759,782) (1,803,793) (2,433,611) (15,103,085)
----------- ----------- ----------- ----------- -----------
DISCONTINUED OPERATIONS
Loss from discontinued
operations - - - - (495,108)
Loss on disposal of subsidiary - - - - 228,893
----------- ----------- ----------- ----------- -----------
Net Discontinued Operations - - - - (266,215)
----------- ----------- ----------- ----------- -----------
NET LOSS $ (532,783) $ (759,782) $ (1,803,793) $ (2,433,611) $(15,369,300)
=========== =========== =========== =========== ===========
BASIC LOSS PER SHARE
Loss before discontinued operations $ (0.04) $ (0.06) $ (0.13) $ (0.20)
Discontinued operations - - - -
----------- ----------- ----------- -----------
Basic (Loss) Per Share $ (0.04) $ (0.06) $ (0.13) $ (0.20)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 13,828,282 12,255,197 13,807,929 11,806,400
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
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AMERITYRE CORPORATION
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
From
For the For the Inception on
Nine Months Nine Months January 30,
Ended Ended 1995 Through
March 31, March 31, March 31,
2002 2001 2002
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,803,793) $ (2,433,611) $ (15,369,300)
Adjustments to reconcile net loss to net cash
(used) by operating activities:
Depreciation and amortization 164,295 190,010 1,153,215
Bad debt expense - - 52,112
(Gain) loss on disposition of assets (90,425) 5,125 (126,938)
Asset impairment loss - - 1,752,537
(Gain) on disposition of subsidiary - - (228,893)
Loss on termination of employment agreement - - 240,000
Loss from discontinued operations - - 495,108
Additional expense on stock options granted - - 313,818
Common stock issued for services 325,000 544,162 2,140,038
Services provided in lieu of cash payment on
subscriptions receivable - - 75,000
Common stock issued in lieu of interest - - 499,519
Interest on subscription receivable (9,571) (69,543) (117,664)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable
and accounts receivable - related (52,833) 2,199 (118,623)
(Increase) decrease in inventory (144,613) (49,775) (545,533)
(Increase) decrease in prepaid expenses 159,269 (76,196) 1,195,859
(Increase) decrease in other assets - (18,908) (19,861)
Increase (decrease) in accounts payable
and accrued expenses 27,923 (67,960) 134,828
------------ ------------ ------------
Net Cash (Used) by Operating Activities (1,424,748) (1,974,497) (8,474,778)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for patents (33,265) - (111,007)
Sale of fixed assets 322,920 - 398,420
Purchase of equipment (45,786) (119,803) (1,815,775)
Purchase of subsidiary - - (400,000)
------------ ------------ ------------
Net Cash Provided (Used) by Investing Activities $ 243,869 $ (119,830) $ (1,928,362)
------------ ------------ ------------
The accompanying notes are an integral part of these financial statements.
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AMERITYRE CORPORATION
(A Development Stage Company)
Statements of Cash Flows (Continued)
(Unaudited)
From
For the For the Inception on
Nine Months Nine Months January 30,
Ended Ended 1995 Through
March 31, March 31, March 31,
2002 2001 2002
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of common stock $ - $ - $ (439,862)
Receipt of subscriptions receivable 267,914 54,338 367,700
Payment of stock offering costs - - (160,401)
Proceeds from notes payable - - 2,298,838
Increase (decrease) in stock subscription deposit (25,000) 580,330 -
Payments made on notes payable and line of credit - - (429,838)
Payments made to related parties - - (16,000)
Common stock issued for cash 635,999 2,213,607 9,010,789
------------ ------------ ------------
Net Cash Provided by Financing Activities 878,913 2,848,275 10,631,226
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH (301,966) 753,948 228,086
CASH AT BEGINNING OF YEAR 530,052 22,483 -
------------ ------------ ------------
CASH AT END OF YEAR $ 228,086 $ 776,431 $ 228,086
============ ============ ============
SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES
CASH PAID FOR:
Interest $ - $ - $ 84,220
Income taxes $ - $ - $ -
NON-CASH FINANCING ACTIVITIES
Common stock issued for services rendered $ 325,000 $ 544,162 $ 2,140,038
Common stock issued in lieu of debt and interest $ 30,000 $ - $ 2,241,519
Common stock issued for acquisition of subsidiary $ - $ - $ 1,550,000
Common stock issued for prepaid expenses $ 370,000 $ - $ 1,382,000
Common stock issued for equipment $ - $ - $ 12,500
Common stock issued for subscriptions receivable $ - $ - $ 1,040,000
The accompanying notes are an integral part of these financial statements.
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AMERITYRE CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
March 31, 2002 and June 30, 2001
NOTE 1 -BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed financial statements have been prepared
by the Company pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted in accordance
with such rules and regulations. The information furnished in the interim
condensed financial statements include normal recurring adjustments and
reflects all adjustments, which, in the opinion of management, are necessary
for a fair presentation of such financial statements. Although management
believes the disclosures and information presented are adequate to make the
information not misleading, it is suggested that these interim condensed
financial statements be read in conjunction with the Company's most recent
audited financial statements and notes thereto included in its June 30, 2001
Annual Report on Form 10-KSB. Operating results for the three and nine months
ended March 31, 2002 are not necessarily indicative of the results that may be
expected for the year ending June 30, 2002.
NOTE 2 -GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. The Company has historically incurred significant losses which have
resulted in an accumulated deficit of $15,369,300 at March 31, 2002 which
raises substantial doubt about the Company's ability to continue as a going
concern. The accompanying financial statements do not include any adjustments
relating to the recoverability and classification of asset carrying amounts or
the amount and classification of liabilities that might result from the
outcome of this uncertainty. It is the intent of management to create
additional revenues through the development and sales of its patented tires
and to obtain additional equity financing if required to sustain operations
until revenues are adequate to cover the costs.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Statement Regarding Forward-looking Statements
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This report may contain "forward-looking" statements. Examples of forward-
looking statements include, but are not limited to: (a) projections of our
revenues, capital expenditures, growth, prospects, dividends, capital
structure and other financial matters; (b) statements of our plans and
objectives; (c) statements relating to our future economic performance; (d)
statements of our assumptions underlying other statements and statements about
us relating to the future; and (e) any statements we may make using the words
"anticipate," "expect," "may," "project," "intend" or similar expressions.
General
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We have proprietary and nonproprietary technology for the manufacturing of
flat-free specialty tires for bicycles and lawn and garden tires
("Products")from polyurethanes. Our primary marketing strategy has been to
introduce our Products through sales to original equipment manufacturers, tire
distributors and dealers, and direct market to customers via our internet
website www.amerityre.com.
In October 2001, we implemented a plan to place our Products in bicycle shops,
hardware stores and tire stores. Since implementing the plan we have placed
our products in over 3,000 retail outlets in 36 states. We are presently
negotiating with retail chains representing several thousand more retail
outlets and our goal is to have our Products carried in 10,000 such outlets
throughout the United States by the end of December 2002. Dealer locations can
be accessed through our website.
Our Results of Operations for the Three and Nine Month Periods ended March 31,
2002 compared to the Three and Nine Month Periods ended March 31, 2001
----------------------------------------------------------------------------
Revenue: Our net sales for the three and nine month periods ended March 31,
2002 were $136,988 and $227,367 respectively, compared to $19,029 and $85,775
for the comparable periods ended March 31, 2001. We have seen an increase in
the sales of our Products since implementing our direct marketing plan to
retail outlets in October 2001. Further, our increase in sales during the nine
month period ended March 31, 2002 as compared to the same nine month period in
2001 is directly attributed to our shift from marketing "Lazer" bicycles
to focusing on sales of Products through tire distributorships and dealer
networks. We expect our net sales will continue to increase as we expand
dealer locations, develop customer awareness of our Products and establish
pull-through marketing support.
Cost of Sales: Our cost of sales for three and nine month periods ended March
31, 2002 were $103,380 and $164,971 or 75.47% and 72.56% of sales,
respectively. Our cost of sales for the three and nine month periods ended
March 31, 2001 were $10,456 and $90,240, or 54.95% and 105.21% of sales,
respectively. The decrease in the percentage that our cost of sales represent
to our net revenues during the three and nine month periods ended March 31,
2002, compared to the prior year periods is directly related to the economies
of scale associated with producing our Products. We believe that our costs of
sales as a percentage of net revenues may continue to decrease as our costs
are spread over a broader range of Products.
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Operating Expenses: Our total operating expenses for the three and nine month
periods ended March 31, 2002, were $571,577 and $1,934,274, respectively.
These expenses consisted mainly of payroll and payroll taxes of $236,876 and
$650,955; consulting expenses of $39,755 and $265,408 ; depreciation and
amortization expenses of $55,044 and $164,295; and general and administrative
expenses of $239,902 and $853,616, resulting in losses from operations of
$537,969 and $1,871,878, respectively. Our total operating expenses for the
three and nine month periods ended March 31, 2001, were $794,211 and
$2,499,678, respectively. These expenses consisted mainly of payroll and
payroll taxes of $122,896 and $610,711; consulting expenses of $197,729 and
$621,244 ;depreciation and amortization expenses of $66,788 and $190,010 and
general and administrative expenses of $406,798 and $1,077,713 resulting in
losses from operations of $785,638 and $2,504,143, respectively.
For the three and nine month periods ended March 31, 2002, consulting expenses
decreased $157,974 and $423,515, respectively, from the comparable periods in
the prior year as we utilized less third-party consulting services. In the
2002 reporting periods, payroll and payroll taxes increased $113,980 and
$40,244, respectively, and general and administrative expenses decreased
$166,896 and $224,097 respectively, as we continued cost-cutting efforts and
reduced certain administrative expenses. In addition, our depreciation and
amortization expenses for the 2002 reporting periods decreased $11,744 and
$25,715, respectively, as a result of our sale of the Ravenna, Ohio facility.
We expect our operating expenses to be approximately $200,000 per month for
the remainder of the fiscal year based on our current operating requirements.
Other Income and Expense. During the three and nine month periods ended March
31, 2002, we had interest income of $5,180 and $50,043, respectively, compared
to $27,488 and $80,588, respectively, for the comparable periods in 2001. Our
interest income is derived from our cash held in interest bearing accounts, as
a result, more interest was earned on our cash accounts during the prior year
comparative periods because either we had more cash on deposit and/or the
interest rate on cash deposits may have been higher. During the 2002 reporting
periods we had interest expense of $203 and in the 2001 comparable periods we
had interest expense of $1,632 and $4,931, respectively. During the nine month
period ended March 31, 2002, we had a gain of $18,036 associated with the
disposition of our Ravenna, Ohio facility, for total other income of $68,085
compared to total other income of $70,532 for the comparable period in 2001,
which included a loss on disposition of assets of $5,125.
We experienced a net loss of $532,783 and $1,803,793, respectively, for the
three and nine month periods ended March 31, 2002, with a basic loss per share
of $0.04 and $0.13, based on the weighted average number of shares outstanding
of 13,828,282 and 13,807,929. For the comparative period in 2001, we
experienced a net loss of $759,782 and $2,433,611, respectively, with a basic
loss per share of $0.06 and $0.20, based on the weighted average number of
shares outstanding of 12,255,197 and 11,806,400.
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Liquidity and Capital Resources
---------------------------------
We had current assets of $872,271 at March 31, 2002. Our current assets
consisted largely of cash of $228,086 and inventory of $545,532, while
accounts receivable of $66,512 and prepaid expenses of $32,141 made up the
balance.
At March 31, 2002, we had net property and equipment of $492,661, after
deducting $924,422 in accumulated depreciation. Our property and equipment
consist mainly of equipment, $1,304,936; building and improvements, $41,613;
construction in progress, $50,689; and vehicles, $12,153. Our other assets at
March 31, 2002, consist of patents and trademarks, net of amortization of
$73,656, and deposits of $7,180.
Our current liabilities at March 31, 2002 were $116,465, consisting entirely
of a stock subscription deposit of $87,000, accounts payable of $17,752, and
accrued expenses of $11,713. At March 31, 2002 we have no long term
liabilities.
At March 31, 2002, we had current assets of $872,271 and current liabilities
of $116,465, for a working capital surplus of $755,806, However, we have an
accumulated deficit during the development stage of $15,369,300, and we had
limited working capital and internal financial resources. The report of our
auditor for our most recent fiscal year ended June 30, 2001, contains a going
concern modification as to our ability to continue. During fiscal 2002 (July
1, 2001 through June 30, 2002), we expect that we will be able to continue
measures that will (i) reduce unnecessary cash outflows, (ii) increase
revenues through our improved marketing effort; and (iii) raise needed working
capital through the issuance of our stock for services and cash.
During the nine month period ended March 31, 2002, we issued 50,000 shares of
our common stock for cash at $1.00 per share, and 368,000 shares for $2.00 per
share for aggregate cash proceeds of $786,000. In addition, we issued 237,500
shares valued at $2.00 per share for services; 10,000 shares valued at $2.00
per share for prepaid services; 7,646 shares valued at approximately $3.92 per
share in lieu of debt; and 22,500 shares valued at approximately $2.22 per
share in lieu of cash payment for royalties due on a technology license
agreement, for an aggregate value of approximately $575,000 during the
reporting period.
Net cash used in our operations was $1,424,748 and $1,974,497 for the nine
month period ended March 31, 2002 and March 31, 2001, respectively. Cash used
by our operating activities for the nine months ended March 31, 2002 was
funded primarily by cash received from the sale of our stock and the value of
stock issued in lieu of debt and for services.
Additionally, we believe we have implemented an overall strategy and certain
financing options to meet our ongoing needs through June 30, 2002. Due to our
constant need for working capital, when necessary, we will seek additional
equity financing from existing shareholders and other investment capital
resources. However, we have no commitments for any additional debt or equity
financing at this time and no assurance can be given that we will be able to
obtain any such commitments. Because we have limited financial resources, we
do not have any existing commitments and we do not anticipate expending any
substantial sums for new research and development during the remainder of our
fiscal year ending June 30, 2002.
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Impact of Inflation
-------------------
At this time we do not anticipate that inflation will have a material impact
on our current or future operations.
Principal Customers
-------------------
During the three and nine month periods ended March 31, 2002, we have had no
individual customer that accounted for more than 10% of our revenues.
Seasonality
-----------
At this time we know of no seasonal aspects relating to the nature of our
business operations that has a material effect on the financial condition or
results of our operations.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
At March 31, 2002, the end of the period for which this report is being filed,
we had no current or impending litigation.
ITEM 2. CHANGES IN SECURITIES
During the three month period ended March 31, 2002, we issued an aggregate of
159,000 shares of our common stock, consisting of 71,500 shares for $143,000
cash at $2.00 per share; 12,500 shares for legal fees valued at $25,000 for
$2.00 per share; and 75,000 shares for prepaid directors compensation for
twelve months ending December 31, 2002 valued at $150,000 at $2.00 per share.
All of our shares issued in the foregoing transactions were issued in reliance
on the exemption from registration and prospectus delivery requirements of the
Act set forth in Section 3(b) and/or Section 4(2) of the Securities Act and
the regulations promulgated thereunder.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We did not submit any matters to our securities holders during the quarter
ended March 31, 2002.
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ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS.
None.
(b) REPORTS ON FORM 8-K.
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERITYRE CORPORATION
Dated: May 15, 2002 /S/DAVID K. GRIFFITHS
-----------------------------------
Principal Accounting Officer