ITEM 2. MANAGEMENT’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 discussed in or implied by the forward-looking statements. The historical results set forth in this discussion and analysis 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 polyurethane tires. We believe that we possess unique polyurethane formulations that allow us to manufacture products with superior performance characteristics in the areas of abrasion resistance, energy efficiency and load-bearing capabilities, when compared to conventional rubber tires. We also believe that our manufacturing processes are more energy efficient than traditional rubber tire manufacturing processes, in part because our polyurethane compounds do not require the multiple processing steps and extreme heat and high pressure necessary to cure rubber. Using our polyurethane technologies, we believe we produce tires that last longer, are less susceptible to failure and are friendly to the environment.
We are concentrating on three segments of the tire market: closed-cell polyurethane foam tires, polyurethane elastomer tires and agricultural tires. We continue to focus on applications and markets where our advantages in product technology give us an opportunity to provide unique products and obtain premium pricing. Our most recent activities in these areas are set forth below:
Closed-Cell Polyurethane Tires
– The sale of polyurethane foam tires to original equipment manufacturers, tire distributors and tire dealers accounts for the majority of our revenue. During the recent quarter this market segment represented over 95% of our total sales. We have the ability to produce a broad range of products for the light duty tire market. Our efforts in product development and marketing focus on building customer relationships with original equipment manufacturers and tire distributors. We continue to create unique product solutions for customers with specific tire size and performance requirements.
Polyurethane Elastomer Tires
– During the fourth quarter of fiscal year 2016 we relaunched the forklift tire product line with select customers. Shipments of forklift tires restarted during the recent quarter. We continue to develop new elastomer tire products for specific customer applications, such as our new scissor lift tire. Sales in this market segment during the quarter were minimal, but we expect sales to increase in the coming quarters as our products are introduced to new customers and gain market acceptance.
Agricultural Tires
– Sales of agricultural tires continue to be negatively impacted by the downturn in farm commodity prices and farm income levels. Recent projections have indicated that crop prices and farm income will continue to remain at historically low levels during 2017, but there is optimism that these levels may have reached bottom, with improvement expected in 2018. We continue to invest in marketing initiatives to educate the agricultural community about the benefits of our products, so we are well positioned to take advantage of the eventual rebound in farm income. We continue to pursue additional distribution relationships, both domestically and internationally, to increase our market penetration for our agricultural tires. The strength of the US dollar continues to provide a headwind to our international business. We continue development of new products in our seeder and haybaler tire lines in response to specific customer requirements.
Due to the Company’s limited resources, tire projects which are contingent on additional significant investment for development, such as automotive tires, have been put on hold and will be revisited at a later date when funding becomes available.
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 three independent manufacturer representatives whose experience is complementary to our product portfolio, plus our in-house sales department. The Company’s emphasis on proper product pricing and new marketing campaigns continues to drive higher margin and more profitable sales, as shown by our record results in quarter three of FY2017. We continue to manage our costs to improve gross margins in the face of these difficult economic conditions in our target markets. We expect that this operational discipline will be key to maintaining profit margins going forward as we are beginning to experience increases in raw material costs.
During our Annual Meeting in November 2016, the Company’s Senior Management outlined its strategic plan for increasing the Company’s sales, profitability, and market presence. This presentation was an update of the plan we unveiled during our previous annual meeting in November 2015. The continued improvement in our quarterly and year to date results for FY2017 are evidence that this strategy has been successful. As part of the most recent presentation, it was communicated that all required investments associated with this effort would be paid primarily by internally generated cash flow rather than relying on external financing. We successfully upgraded and launched our new website during the recent quarter, utilizing funding from a previously secured term loan. We have successfully moved forward with marketing and product development initiatives in FY2017 at a pace that can be supported by our current level of business and cash generation. Consequently we are not anticipating the need to do any fundraising activities in the near future to support our current strategic plan.
Since the recent U.S. Presidential and Congressional elections, there have been reports of expected proposed changes to the U.S. tax code, tariffs on imported goods, and other legislation that could impact our business. To date none of this has come to pass. An emphasis on “Buy American” programs by our government, as well as OEMs who use flat free tires on their American made products, could positively impact our business, since Amerityre is a leading domestic manufacturer of flat free polyurethane tires. However, these types of changes are usually slow to be implemented and predicting when any benefits may appear is impossible, Amerityre management has chosen to proceed with its strategic plan irrespective of any potential or pending changes to trade legislation. We believe that this plan will be successful regardless of the political landscape, although we acknowledge that some of the rumored legislation could provide a tailwind for our business if it was to be enacted.
Factors Affecting Results of Operations
Our operating expenses consisted primarily of the following:
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·
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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;
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·
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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;
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·
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Research and development expenses, which consist primarily of contractor and direct labor conducting research and development, equipment and materials used in new product development and product improvement using our technologies;
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·
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Consulting expenses, which consist primarily of amounts paid to third-parties for outside services;
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·
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Depreciation and amortization expenses which result from the depreciation of our property and equipment, including amortization of our intangible assets; and
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·
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Stock based compensation expense related to stock and stock option awards issued to employees and consultants for services performed for the Company.
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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.
We believe the following accounting policies are our critical accounting policies because they are important to the portrayal of our financial condition and results of operations and they 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.
Revenue Recognition
Revenue for products is recognized when the sales amount is determined, shipment of goods to the customer has occurred and collection is reasonably assured. Generally, we ship all of our products FOB origination.
Valuation of Intangible Assets and Goodwill
Patent and trademark costs have been capitalized at March 31, 2017, totaling $479,633 with accumulated amortization of $324,727 for a net book value of $154,906. Patent and trademark costs capitalized at March 31, 2016, totaled $479,633 with accumulated amortization of $297,421 for a net book value of $182,212.
The patents which have been granted are being amortized over a period of 20 years. Patents which are pending or are being developed are not amortized. Amortization begins once the patents have been issued. As of March 31, 2017 and 2016, respectively, there were no pending patents. Annually, pending or expired patents are inventoried and analyzed, which resulted in the recognition of a loss on abandonment, expiration or retirement of patents and trademarks of $-0- for each of the years ended March 31, 2017 and 2016, respectively.
Amortization expense for the years ended March 31, 2017 and 2016 was $20,473 and $20,498 respectively. The Company evaluates the recoverability of intangibles and reviews the amortization period on a continual basis utilizing the guidance of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 350,
Intangibles – Goodwill and Other
. We consider the following indicators, among others, when determining whether or not our patents are impaired:
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·
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any changes in the market relating to the patents that would decrease the life of the asset;
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·
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any adverse change in the extent or manner in which the patents are being used;
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·
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any significant adverse change in legal factors relating to the use of the patents;
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·
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current period operating or cash flow loss combined with our history of operating or cash flow losses;
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·
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future cash flow values based on the expectation of commercialization through licensing; and
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·
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current expectations that, more likely than not, the patents will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.
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Inventory
Inventory is stated at the lower of cost (computed on a first-in, first-out basis) or net realizable. The cost of finished goods includes the cost of raw material, direct and indirect labor, and other indirect manufacturing costs. The inventory consists of chemicals, finished goods produced in the Company’s plant and products purchased for resale.
Stock-Based Compensation
We account for stock-based compensation under the provisions of FASB ASC 718,
Compensation – Stock Compensation
. Our financial statements as of and for the periods ended March 31, 2017 and 2016 reflect the impact of FASB ASC 718. Stock-based compensation expense recognized under FASB ASC 718 for the fiscal years ended March 31, 2017 and 2016 was $25,706 and $56,238, respectively, related to employee stock options and employee stock grants.
FASB ASC 718 requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in our Statement of Operations. Stock-based compensation expense recognized in our Statements of Operations for fiscal years ended March 31, 2017 and 2016 assume all awards will vest; therefore no reduction has been made for estimated forfeitures.
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:
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Sales consisting of product sales;
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·
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Sales, net of returns and trade discounts, which is an indicator of our overall business growth and the success of our sales and marketing efforts;
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·
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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;
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·
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Growth in our customer base, which is an indicator of the success of our sales efforts; and
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·
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Distribution of sales across our products offered.
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The following summary table presents a comparison of our results of operations for the three and nine months ended March 31, 2017 and 2016 with respect to certain key financial measures. The comparisons illustrated in the table are discussed in greater detail below.
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For the Three Months Ended
March 31,
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For the Nine Months Ended
March 31,
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(in 000’s)
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Change
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(in 000’s)
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Change
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2017
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2016
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2017 vs. 2016
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2017
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2016
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2017 vs. 2016
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Net revenues
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$
|
1,134
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$
|
936
|
|
|
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21.2
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%
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|
$
|
2,849
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|
|
$
|
2,865
|
|
|
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(0.6
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%)
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|
Cost of revenues
|
|
|
(694
|
)
|
|
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(618
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)
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12.3
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%
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(1,861
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)
|
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|
(2,082
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)
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|
(10.6
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%)
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Gross profit
|
|
|
440
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|
|
|
|
|
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38.4
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%
|
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|
988
|
|
|
|
|
|
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26.2
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%
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|
Research and development expenses
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|
|
(54
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)
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(57
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)
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(5.3
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%)
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(163
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)
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(166
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)
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(1.8
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%)
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Sales and marketing expense
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|
|
(65
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)
|
|
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(54
|
)
|
|
|
20.4
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%
|
|
|
(191
|
)
|
|
|
(220
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)
|
|
|
(13.2
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%)
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General and administrative expense
|
|
|
(171
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)
|
|
|
(172
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)
|
|
|
(0.5
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%)
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|
(511
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)
|
|
|
(667
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)
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|
(23.4
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%)
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Other income (expense)
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|
|
(2
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)
|
|
|
|
|
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100.0
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%
|
|
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(7
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)
|
|
|
(2
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)
|
|
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250.0
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%
|
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Net income (loss)
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|
148
|
|
|
|
|
|
|
|
322.9
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%
|
|
|
116
|
|
|
|
(272
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)
|
|
|
(142.6
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%)
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|
Preferred stock dividend
|
|
|
(25
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)
|
|
|
(25
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)
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0.0
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%
|
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|
(75
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)
|
|
|
(75
|
)
|
|
|
0.0
|
%
|
|
Net income (loss) attributable to common shareholders
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|
$
|
123
|
|
|
$
|
10
|
|
|
|
1130
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%
|
|
$
|
41
|
|
|
$
|
(347
|
)
|
|
|
(111.8
|
%)
|
Results for quarter three FY2017 represent record quarterly net income results for Amerityre. Increased closed cell foam tire sales were the main driver for the higher sales revenue for the quarter. As expected, the agricultural tire segment continued to be weak as farmers remained cautious with their equipment purchases in an environment of depressed farmer income. For the nine month period ending March 31, 2017, sales are basically flat year over year, but gross profit and net income show dramatic improvements over the period compared with the same period in FY2016. Like many businesses, we are cautiously optimistic that general economic conditions will continue to improve, which will help maintain revenues at the higher levels than we experienced during the recent quarter.
Three Months Ended March 31, 2017 Compared to March 31, 2016
Net Sales.
Net sales of $1,133,610 for the quarter ended March 31, 2017, represents a 21.2% increase over net sales of $936,612 for the same period in 2016. These results were better than our expectations as increased optimism for a better general economy improved demand from many of our customers. Our sales were driven primarily by closed cell foam tire sales, where we continue to have a positive response to our marketing and pricing plans. Our forecast for the remainder of fiscal 2017 anticipates continued depressed agricultural tire sales, due to the continuation of the conditions causing depressed farm income. We expect our polyurethane foam products to constitute the majority of our sales during the remainder of fiscal year 2017.
Cost of Revenues.
Cost of revenues for the quarter ended March 31, 2017 was $693,500 or 61.2% of sales compared to $618,366 or 66.0% of sales for the same period in 2016. Cost of revenues were higher due to increased sales levels, however as a percentage of sales cost of revenues was approximately 5% lower than the same period in 2016. This improvement was due to lower raw material costs compared with the previous year as well as better control of other costs due to better production efficiencies. The Company continues to maintain sufficient production capacity to meet anticipated customer demand without incurring a proportionate increase in overall production costs.
Gross Profit.
Gross profit for the quarter ended March 31, 2017 was $440,110 compared to $318,246 for the same period in 2016. Gross profit increased by $121,864, or 38.3% over the same period in 2016, due to increased sales as noted above. The March 31, 2017 gross profit reflects a 38.8% gross margin on product sales compared to a gross margin on product sales of 34.0% in the quarter ending March 31, 2016.
Research & Development Expenses (R&D).
Research and development expenses for the quarter ended March 31, 2017 were $54,130 compared to $56,839 for the same period in 2016. We continue to focus our R&D efforts on product formulation optimization and new product development. The Company plans to maintain this level of expenditure as R&D is a key component of the company’s business improvement initiatives.
Sales & Marketing Expenses.
Sales and marketing expenses for the quarter ended March 31, 2017 were $65,000 as compared to $53,639 for the same period in 2016. Sales and marketing expenses increased between periods primarily due to higher sales commissions offset by lower salary and travel costs.
General & Administrative Expenses
. General and administrative expenses for the quarter ended March 31, 2017 were $170,813 compared to $172,270 for the same period in 2016. These results remained level with the previous year’s results due to management’s continued focus on cost control as part of the Company’s strategic operating plan.
Other Expense.
Other expense for the quarter ended March 31, 2017 was ($1,703) compared to ($842) for the same period in 2016. Other expense consists solely of interest expense and increased in the period due to our new bank debt facilities.
Net Income
. Net income for the quarter ended March 31, 2017 of $148,464 represents a 322.9% improvement compared to the net income for the quarter ended March 31, 2016 of $34,656. Continued successful implementation of the Company’s strategic plan resulted in cost savings and improved revenues resulting in record quarterly results.
Nine months Ended March 31, 2017 Compared to March 31, 2016
Net Sales.
Net sales of $2,849,370 for the nine months ended March 31, 2017, represents a 0.6% decrease over net sales of $2,865,433 for the same period in 2016. These results were in line with our expectations as we anticipated that agricultural tire markets would remain weak. We continue to have a positive response to our marketing efforts for our polyurethane foam tires. Our forecast for remainder of fiscal 2017 anticipates continued depressed agricultural tire sales, due to the continuation of business conditions causing depressed farm income. We are optimistic that the increase in closed cell polyurethane foam product sales we saw in the recent quarter will continue for the 4
th
quarter of FY2017.
Cost of Revenues.
Cost of revenues for the nine months ended March 31, 2017 was $ 1,861,288 or 65.3% of sales compared to $2,081,813 or 72.7% of sales for the same period in 2016. Cost of revenues were lower due to better manufacturing efficiencies, use of fully depreciated assets causing manufacturing depreciation expense to be lower, lower manufacturing repairs and maintenance, and lower manufacturing and shipping supplies, offset by increases in raw materials expenditures related to increased sales and higher direct labor cost when compared to the prior period. The Company continues to maintain sufficient production capacity to meet anticipated customer demand without incurring a proportionate increase in overall production costs.
Gross Profit.
Gross profit for the nine months ended March 31, 2017 was $988,082 compared to $783,620 for the same period in 2016. Gross profit increased by $204,462 or 26.1% over the same period in 2016 due to the factors discussed previously. The March 31, 2017 gross profit reflects a 34.7% gross margin on product sales compared to a gross margin on product sales of 27.3% in the same period of 2016.
Research & Development Expenses (R&D).
Research and development expenses for the nine months ended March 31, 2017 were $163,174 compared to $166,406 for the same period in 2016. While research and development expenses are flat between the periods we continue to focus on product formulation research and new product development.
Sales & Marketing Expenses.
Sales and marketing expenses for the nine months ended March 31, 2017 were $191,191 compared to $219,898 for the same period in 2016. Sales and marketing expenses decreased $28,707 between periods primarily due to the impact of the company’s new commission program, lower salary costs, and lower travel costs, offset by increased trade show expenses related to our attendance at four trade shows during this nine month period.
General & Administrative Expenses
. General and administrative expenses for the nine months ended March 31, 2017 were $510,596 compared to $666,910 for the same period in 2016. This decrease between periods of $156,314 is driven by lower costs related to wages, stock based compensation, warranty expense and professional fees.
Other Expense.
Other expense for the nine months ended March 31, 2017 was ($6,667) compared to ($2,267) for the same period in 2016. Other expense consists solely of interest expense and increased in the period due to our new bank debt facilities.
Net Income (Loss)
. Net income for the nine months ended March 31, 2017 of $116,454 represents a 142.6% improvement from the net loss for the nine months ended March 31, 2016 of ($271,861).
Liquidity and Capital Resources
Our principal source of liquidity consists of cash and payments received from our customers. We do not have any significant revolving credit arrangements. Historically, our expenses have exceeded our sales, resulting in operating losses. From time to time, we have obtained additional liquidity to fund our operations through the sale of shares of our common stock and the placement of short-term debt instruments. At the end of fiscal years 2016 and early 2017, we were able to obtain term bank debt financing to finance critical manufacturing and facility equipment and operating enhancements which will be placed in service in fiscal year 2017. Improvements in our operating results and general cash position have prompted us to refrain from outside financing. Additionally, management has notified our preferred shareholder that we will be suspending future payments of their preferred cash dividend payments, so the Company can increase its working capital levels.
We have historically not succeeded in establishing favorable revolving short term financing such as lines of credit. In the quarter ended March 31, 2015, we entered into a short term receivable factoring agreement with a third party to sell our receivable invoices. This agreement enables us to sell individual customer invoices for faster cash flow to the Company as we deem needed. As of March 31, 2017, we have not needed to activate this financing option due to increased focus on executing established collection policies and proactive communication with repeat customers, including adjusting credit limits to allow for increased sales volume where warranted.
Cash Flows
The following table sets forth our cash flows for the quarters ended March 31, 2017 and 2016.
|
|
Nine months ended Mar. 31,
|
|
|
|
(in 000’s)
|
|
|
|
2017
|
|
2016
|
|
|
Net cash provided (used) by operating activities
|
|
$
|
273
|
|
|
$
|
(272
|
)
|
|
Net cash used by investing activities
|
|
|
(15
|
)
|
|
|
|
|
|
Net cash used by financing activities
|
|
|
(15
|
)
|
|
|
(80
|
)
|
|
Net increase (decrease) in cash during the period
|
|
$
|
243
|
|
|
$
|
(352
|
)
|
Net Cash Used by Operating Activities.
Our primary sources of operating cash for the nine months ended March 31, 2017 came from collections from customers. Our primary use of operating cash was an increase in prepaid and other current assets, specifically related to renewal of insurance policies, and a decrease of accounts payable and accrued expenses. Net cash provided by operating activities was $273,298 for the quarter ended March 31, 2017 compared to net cash used by operating activities of $272,473 for the same period in 2016.
Non-cash items include depreciation and amortization and stock based compensation. Our net income was $116,454 for the nine months ended March 31, 2017 compared to a net loss of ($271,861) for the same period in 2016. The net income for fiscal 2017 included non-cash expenses for depreciation and amortization of $77,171 and stock-based compensation (both stock issued and options) of $20,706. As of March 31, 2016, depreciation and amortization was $116,338 and stock-based compensation (both stock issued and options) totaled $56,238.
Net Cash Used by Investing Activities.
Net cash used by investing activities was $15,187 for the nine months ended March 31, 2017 and $0 for the same period in 2016. For the nine months ended March 31, 2017 we purchased critical facility equipment of which $15,187 was paid in cash the remainder financed through bank financing.
Net Cash Used by Financing Activities
. Net cash used by financing activities was $14,606 for the nine months ended March 31, 2017 and $79,925 for the same period in 2016. The primary use of cash for the quarter ended March 31, 2017 was payment toward the capital lease of $4,566 and payment of notes payable of $10,040.
Contractual Obligations and Commitments
The following table summarizes our contractual cash obligations and other commercial commitments at March 31, 2017.
|
|
Payments due by period
|
|
|
|
Total
|
|
|
Less than
1 year
|
|
|
1 to 3 years
|
|
|
3 to 5 years
|
|
|
After
5 years
|
|
|
|
|
|
|
Facility lease (1)
|
|
$
|
448,200
|
|
|
$
|
137,700
|
|
|
$
|
310,500
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Capital lease (2)
|
|
|
10,077
|
|
|
|
7,285
|
|
|
|
2,792
|
|
|
|
-
|
|
|
|
-
|
|
|
Bank debt (3)
|
|
|
83,119
|
|
|
|
17,141
|
|
|
|
59,726
|
|
|
|
6,252
|
|
|
|
-
|
|
|
Total contractual cash obligations
|
|
$
|
541,396
|
|
|
$
|
162,126
|
|
|
$
|
373,018
|
|
|
$
|
6,252
|
|
|
$
|
-
|
|
|
(1)
|
In May 2015, we negotiated a five (5) 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, inclusive of approximately 5,500 square feet of office space, situated on approximately 4.15 acres. All other terms and conditions of the building lease remain in effect.
|
|
(2)
|
In July 2015, we entered into a capital lease for research and development equipment for $19,337.
|
|
(3)
|
In June and July 2016, in two separate bank promissory notes, we financed critical manufacturing and facility equipment and operating enhancements which will be placed in service throughout fiscal year 2017.
|
Cash Position, Outstanding Indebtedness and Future Capital Requirements
At May 9, 2017, our total cash balance was $457,018, none of which is restricted; accounts receivables was $266,143; and inventory, net of reserves for slow moving or obsolete inventory, and other current assets was $694,154. Our total indebtedness was $499,409 and includes $344,245 in accounts payable and accrued expenses, $17,822 in current portion of long-term debt, $9,525 in capital lease liability and $127,629 in long-term debt.
We have been working during the past year to improve our liquidity and access to capital resources. As we discussed in our November 2016 Shareholder meeting, we require more capital resources to execute our strategic business plan. However, we have decided to finance these initiates out of internal cash flow rather than pursue financing with banks or other financial institutions. While this may delay the implementation of some initiatives, we believe that raising external capital at this time is not the prudent cost of action at this time, and the key initiatives can be adequately financed from operating cash flow.
The Company currently does not have an existing revolving credit facility. In June and July 2016, in two separate bank promissory notes, we financed critical manufacturing and facility equipment and operating enhancements which will be placed in service in fiscal year 2017. Over the past year, we have worked with our vendors to obtain extended credit terms and increase credit lines where needed. Additionally, we continue to focus on adherence to established collection policies and proactive communication with repeat customers, including adjusting credit limits to allow for increased sales volume where warranted.
We have entered into a short term receivable factoring agreement with a third party to sell our receivable invoices for faster cash flow if required.
We are intent on focusing on the sale and distribution of profitable product lines. We are limiting our capital expenditures to that required to maintain current manufacturing capability or support business initiatives identified in our strategic sales plan. We continue to work to reduce our overall costs wherever possible.
Management continues to execute its strategic plan focusing on “Profitability as a Mindset”. Our emphasis on proper product pricing and new marketing campaigns has driven more profitable sales. This analysis, in some cases, has resulted in lost revenues as unprofitable sales have been discontinued. The Company continues to achieve improvement in results as we improve our efficiency which enables us to reduce our breakeven level of sales. We believe our program to establish “Profitability as a Mindset” is a success and we are committed to continuing these efforts to achieve higher levels of profitability.
In assessing our liquidity, management reviews and analyzes our current cash, accounts receivable, accounts payable, capital expenditure commitments and other obligations. In connection with the preparation of our financial statements for the period ended March 31, 2017, 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.
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.