The accompanying notes are an integral part of these financial statements.
Notes to the Financial Statements
June 30, 2019 and 2018
NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Amerityre Corporation (the “Company”) incorporated as a Nevada corporation on January 30, 1995. The Company was organized to take advantage of existing proprietary and non-proprietary technology available for the manufacturing of specialty tires. The Company engages in the manufacturing, marketing, distribution and sales of “flat free” specialty tires and tire-wheel assemblies and currently is manufacturing these tires at its facility located in Boulder City, Nevada.
The Company’s financial statements are prepared using the accrual method of accounting. The Company has elected a June 30 year-end.
Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management routinely makes judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.
Reclassifications
In the process of adopting the new lease standard as disclosed below, we reclassified our leasehold improvements and the related accumulated amortization to right to use lease assets, operating. The result of this reclassification on our balance sheet did not affect our fiscal year 2018 net income.
Concentrations of Risk
The Company places its cash accounts with high credit quality financial institutions and generally limits the amount of credit exposure to the amount in excess of the FDIC insurance coverage limit of $250,000 for interest bearing accounts. As of June 30, 2019, the Company had one account exceeding this amount; as of 2018, the Company had no funds exceeding this limit. The Company has not experienced losses in such accounts and believes it is not exposed to any significant credit risk to cash.
Credit losses, if any, have been provided for in the financial statements and are based on management’s expectations. The Company’s accounts receivable are subject to potential concentrations of credit risk. The Company does not believe that it is subject to any unusual risks or significant risks in the normal course of its business.
We have one customer who accounted for 16% of our sales for the year ended June 30, 2019 and one customer who accounted for 25% of our sales for the year ended June 30, 2018.
Cash and Cash Equivalents
We consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. As of June 30, 2019 and 2018, respectively, we had no cash equivalents.
Trade Receivables
We generally charge-off trade receivables that are more than 120 days outstanding as bad-debt expense, unless management believes the amount to be collectable. The charge-off amounts are included in general and administrative expenses. As of June 30, 2019 and 2018, the reserve for uncollectible accounts was $0, respectively.
AMERITYRE CORPORATION
Notes to the Financial Statements
June 30, 2019 and 2018
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.
|
|
2019
|
|
|
2018
|
|
Raw materials
|
|
$
|
221,767
|
|
|
$
|
214,787
|
|
Finished goods
|
|
|
557,977
|
|
|
|
569,294
|
|
Inventory reserve
|
|
|
(61,513
|
)
|
|
|
(60,905
|
)
|
Inventory – net (current and long term)
|
|
$
|
718,231
|
|
|
$
|
723,176
|
|
Our inventory reserve reflects items that were deemed to be defective or obsolete based on an analysis of all inventories on hand.
In fiscal years 2019 and 2018, the Company critically reviewed all slow moving inventory to determine if defective or obsolete. If not defective or obsolete we presented these items as non-current inventory, although all inventory is ready and available for sale at any moment.
For those items that are spare maintenance materials or parts kept on hand as backup components of major production lines, or “store inventories”, the Company capitalizes the amount if above our capitalization policy for property and equipment.
Right to Use Assets – Leases
We account for all Company leases following a multi-step analysis process which includes:
|
●
|
Analysis of all agreements to determine if a lease exists, inclusive of this analysis is the length of the agreement and amount of the resulting liability. Based on this we have determined the following:
|
|
●
|
Assets with a length less than 1 year are not considered leases and,
|
|
●
|
Assets with a value of less than our capitalization policy of $2,500 are not considered a lease.
|
Items that do not qualify as leases are treated similar to service agreements and expensed as incurred.
Once an item qualifies for lease accounting we analyze the item for operating or finance lease treatment with the major difference that finance leases include interest as a term note would. In the case that a finance lease does not have a stated interest rate, we will impute the interest.
Both operating and finance leases result in a right to use asset and related lease liability on our balance sheet.
Items that enhance a lease asset, such as leasehold improvements, are capitalized with the related right to use asset. Amortization of that improvement is based on all known facts inclusive of the lease term.
AMERITYRE CORPORATION
Notes to the Financial Statements
June 30, 2019 and 2018
If we had applied this new accounting standard in fiscal year 2018, our financial results would have changed as follows:
|
|
As filed
|
|
|
|
|
|
|
Adjusted
|
|
|
|
June 30, 2018
|
|
|
Adjustment
|
|
|
June 30, 2018
|
|
Right to use assets, operating
|
|
$
|
-
|
|
|
$
|
315,754
|
|
|
$
|
315,754
|
|
Leasehold Improvements
|
|
$
|
201,074
|
|
|
$
|
(201,074
|
)
|
|
$
|
-
|
|
Accumulated depreciation
|
|
$
|
(161,320
|
)
|
|
$
|
161,320
|
|
|
|
-
|
|
Total assets
|
|
$
|
1,787,446
|
|
|
$
|
276,000
|
|
|
$
|
2,063,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease liability (current and long term)
|
|
$
|
-
|
|
|
$
|
276,000
|
|
|
$
|
276,000
|
|
Total liabilities
|
|
$
|
526,534
|
|
|
$
|
276,000
|
|
|
$
|
802,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated deficit
|
|
$
|
(61,438,919
|
)
|
|
$
|
-
|
|
|
$
|
(61,438,919
|
)
|
Total stockholders’ equity
|
|
$
|
1,260,912
|
|
|
$
|
-
|
|
|
$
|
1,260,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity
|
|
$
|
1,787,446
|
|
|
$
|
276,000
|
|
|
$
|
2,063,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
(38,436
|
)
|
|
$
|
-
|
|
|
$
|
(38,436
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted income per share
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
$
|
(0.00
|
)
|
Property and Equipment
Property and equipment are stated at cost, generally with a cost of $2,500 or greater. Expenditures for small tools, ordinary maintenance and repairs are charged to operations as incurred. Major additions and improvements are capitalized. When we retire or dispose of assets, the costs and accumulated depreciation or amortization are removed from the respective accounts and we recognize any related gain or loss. Major replacements that substantially extend the useful life of an asset are capitalized and depreciated. Assets which qualify for capital lease treatment and follow our property and equipment capitalization policy are also capitalized. Depreciation and amortization, collectively depreciation expense, is computed using the straight-line method over estimated useful lives as follows:
Leasehold improvements
|
5 years, or over lease term
|
Equipment
|
5 to 10 years
|
Furniture and fixtures
|
7 years
|
Software
|
2 years
|
Depreciation expense for the years ended June 30, 2019 and 2018 was $59,995 and $63,692, respectively.
Patents and Trademarks
Patent and trademark costs have been capitalized at June 30, 2019, totaling $487,633 with accumulated amortization of $377,032 for a net book value of $110,601. Patent and trademark costs capitalized at June 30, 2018, totaled $487,633 with accumulated amortization of $355,028 for a net book value of $132,605.
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 June 30, 2019 and 2018, 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 the years ended June 30, 2019 and 2018, respectively.
AMERITYRE CORPORATION
Notes to the Financial Statements
June 30, 2019 and 2018
Amortization expense for the years ended June 30, 2019 and 2018 was $22,004 and $23,347 respectively. The Company evaluates the recoverability of intangibles and reviews the amortization period on a continual basis utilizing the guidance of the 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:
|
●
|
any changes in the market relating to the patents that would decrease the life of the asset;
|
|
●
|
any adverse change in the extent or manner in which the patents are being used;
|
|
●
|
any significant adverse change in legal factors relating to the use of the patents;
|
|
●
|
current period operating or cash flow loss combined with our history of operating or cash flow losses;
|
|
●
|
future cash flow values based on the expectation of commercialization through licensing; and
|
|
●
|
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.
|
The estimated amortization expense, based on current intangible balances, for the next five fiscal years beginning July 1, 2019 is as follows:
2020
|
|
$
|
17,696
|
|
2021
|
|
$
|
16,927
|
|
2022
|
|
$
|
17,763
|
|
2023
|
|
$
|
13,896
|
|
2024
|
|
$
|
16,337
|
|
Thereafter
|
|
$
|
27,982
|
|
Financial and Derivative Instruments
The Company periodically enters into financial instruments. Upon entry, each instrument is reviewed for debt or equity treatment. In the event that the debt or equity treatment is not readily apparent, FASB ASC 480-10-S99 is consulted for temporary treatment. Once an event takes place that removes the temporary element the Company appropriately reclassifies the instrument to debt or equity.
The Company periodically assesses its financial and equity instruments to determine if they require derivative accounting. Instruments which may potentially require derivative accounting are conversion features of debt, equity, and common stock equivalents in excess of available authorized common shares, and contracts with variable share settlements. In the event of derivative treatment, we mark the instrument to market.
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 fiscal years ended June 30, 2019 and 2018 reflect the impact of FASB ASC 718. Stock-based compensation expense recognized under FASB ASC 718 for the fiscal years ended June 30, 2019 and 2018 was $38,015 and $28,792, 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 June 30, 2019 and 2018 assume all awards will vest; therefore no reduction has been made for estimated forfeitures.
Basic and Fully Diluted Net Loss per Share
Basic and Fully Diluted net loss per share is computed using the weighted-average number of common shares outstanding during the period.
AMERITYRE CORPORATION
Notes to the Financial Statements
June 30, 2019 and 2018
The Company’s outstanding stock options, warrants, stock grants not yet earned and shares issuable upon conversion of outstanding convertible notes, if any, have been excluded from the diluted net loss per share calculation. The Company excluded a total of 3,970,000 and 3,730,000 common stock equivalents for the years ended June 30, 2019 and 2018, respectively because they are anti-dilutive.
Income Taxes
FASB ASC 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based on the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. As a result of the implementation of FASB ASC 740, the Company performed a review of its material tax positions in accordance with recognition and measurement standards established by FASB ASC 740.
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Net deferred tax assets consist of the following components as of June 30, 2019 and 2018:
|
|
2019
|
|
|
2018
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss (“NOL”) carryover
|
|
$
|
8,946,000
|
|
|
$
|
9,180,100
|
|
Section 1231 loss carryover
|
|
|
19,000
|
|
|
|
32,200
|
|
Inventory reserve
|
|
|
12,900
|
|
|
|
12,800
|
|
R & D carryover
|
|
|
207,100
|
|
|
|
207,100
|
|
Related party accruals
|
|
|
7,400
|
|
|
|
-
|
|
Deferred revenue
|
|
|
4,100
|
|
|
|
4,400
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
(9,400
|
)
|
|
|
(8,600
|
)
|
Statutory rate change adjustment
|
|
|
-
|
|
|
|
(6,147,000
|
)
|
Decrease of valuation allowance due to rate change
|
|
|
-
|
|
|
|
6,147,000
|
|
Valuation allowance
|
|
|
(9,187,100
|
)
|
|
|
(9,428,000
|
)
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income from continuing operations for the years ended June 30, 2019 and 2018 due to the following:
|
|
2019
|
|
|
2018
|
|
Book income (loss) tax effected
|
|
$
|
8,600
|
|
|
$
|
(10,800
|
)
|
Depreciation
|
|
|
6,800
|
|
|
|
8,300
|
|
Nondeductible expenses
|
|
|
8,000
|
|
|
|
10,900
|
|
Inventory reserve
|
|
|
100
|
|
|
|
2,100
|
|
Deferred revenue
|
|
|
(300
|
)
|
|
|
5,800
|
|
R&D Section 6765 Addback
|
|
|
-
|
|
|
|
100
|
|
Related party accruals
|
|
|
7,400
|
|
|
|
-
|
|
Valuation allowance
|
|
|
(30,600
|
)
|
|
|
(16,400
|
)
|
|
|
$
|
-
|
|
|
$
|
-
|
|
AMERITYRE CORPORATION
Notes to the Financial Statements
June 30, 2019 and 2018
At June 30, 2019, the Company had net operating loss carry-forwards of approximately $42,565,000 that may be offset against future taxable income. Effective with tax years beginning June 30, 2018, future net operating losses may be offset against future taxable income, subject to annual limitations. No tax benefit has been reported in the June 30, 2019 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.
NOL’s arising in tax years beginning in 2018 or earlier are subject to a 20 year limit. Because Amerityre’s NOL’s were generated from fiscal year end June 30, 2000 to fiscal year end June 30, 2016, there will be some NOL’s expiring each year through fiscal year 2036. The following table shows the amounts that would expire per year it not utilized:
2020
|
|
|
257,282
|
|
2021
|
|
|
2,655,947
|
|
2022
|
|
|
2,523,700
|
|
2023
|
|
|
2,568,876
|
|
2024
|
|
|
4,921,923
|
|
2025
|
|
|
9,912,014
|
|
2026
|
|
|
4,478,509
|
|
2027
|
|
|
3,954,682
|
|
2028
|
|
|
3,434,035
|
|
2029
|
|
|
2,893,639
|
|
2030
|
|
|
1,161,192
|
|
2031
|
|
|
1,027,013
|
|
2032
|
|
|
780,467
|
|
2033
|
|
|
1,035,050
|
|
2034
|
|
|
651,035
|
|
2035
|
|
|
237,572
|
|
2036
|
|
|
107,053
|
|
NOL’s arising in tax years beginning in 2018 or later will be subject to 80% of taxable income limitations. NOL carryforwards arising in year beginning in 2018 or earlier are not subject to these limitations.
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry-forwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry-forwards may be limited as to use in future years.
The Company’s policy is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. As of June 30, 2019 the Company had no accrued interest or penalties related to uncertain tax positions.
The Company files income tax returns in the U.S. federal jurisdiction. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2015.
Fair Value Accounting
As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
AMERITYRE CORPORATION
Notes to the Financial Statements
June 30, 2019 and 2018
The three levels of the fair value hierarchy are described below:
Level 1
|
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
|
Level 2
|
Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;
|
Level 3
|
Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
|
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. This change in revenue principle was applied to all contracts effective on the adoption date above.
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 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. Due to a very robust process to determine when control, as described above, occurs, there is limited judgement applied in the above process. In cases where we enter into sales arrangements with customers for non-standard products, such as custom formulation materials, revenue items are recognized as separate and distinct contracts with revenue recognition occurring upon acceptance by the customer. These types of transactions have been historically rare and non-routine in nature. We had no revenue from these types of transactions in either fiscal year 2019 or 2018.
This establishes a “deferred revenue” event until such time as delivery of the product has been completed and we have proof from the shipper of the delivery (and change in control).
We invoice the customer at shipping, starting the accounts receivable process. Our Company collection policies on products does not change (this includes any prepayment and credit establishment processes). Nor do our refund and return policies change where credit is provided on account for the next purchase as no refunds are given.
Deferred revenue was $19,408, inclusive of $1,993 of shipping and handling revenue (see below), as of June 30, 2019. Deferred revenue was $20,712, inclusive of $2,552 of shipping and handling revenue, as of June 30, 2018.
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, due to our adoption of ASC 606 as discussed above, we defer the revenues of shipping and handling until the related product revenue is also recognized.
The result of this accounting is a deferral of $1,993 as of June 30, 2019 and $2,552 as of June 30, 2018.
Product Warranties
The Company’s standard sales terms include a limited warranty on workmanship and materials to the original purchaser if items sold are used in the service for which they are intended. Specifically the Company warrants wheels, bearings, and bushings for one year from the date of purchase. Due to historical warranty results, we recognize warranty expense based on actual warranty recognition.
AMERITYRE CORPORATION
Notes to the Financial Statements
June 30, 2019 and 2018
Advertising
The Company follows the policy of charging the costs of advertising to expense as incurred. Advertising expense for the years ended June 30, 2019 and 2018 was $3,090 and $2,492, respectively.
Sales Tax
In accordance with FASB ASC 605-45, formerly EITF Issue No. 06-3, How Taxes Collected from Customers and Remitted to Government Authorities Should Be Presented in the Income Statement, the Company accounts for sales taxes and value added taxes imposed on its good and services on a net basis in the Statement of Operations.
Recent Accounting Pronouncements
Recently Adopted and Recently Issued Accounting Guidance
Adopted
In February 2016, the FASB issued ASU No. 2016-02, “Leases”, (“ASU 2016-02”) which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 will become effective for public companies during interim and annual reporting periods beginning after December 15, 2018 with early adoption permitted. The Company adopted this new accounting pronouncement for the interim period beginning January 1, 2019. This adoption did not result in a material change to our earnings.
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's present or future financial position, results of operations or cash flows.
NOTE 2 – 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 June 30, 2019, $2,000 and $62,089 (2018, $2,000 and $62,468) were recorded for the current and long-term portion, respectively, of the related liability.
In June 2016, the Company executed a term note with U.S. Bank to finance critical manufacturing equipment and operating enhancements. Manufacturing equipment of approximately $29,000 was placed into service in July 2016. The majority of the remaining operating enhancements were placed in service in fiscal year 2017. Total amount financed was $55,068, at 5.59% interest, with payments of $1,059 due for 60 months starting July 2016.
In July 2016, the Company executed a term note with U.S. Bank to finance critical plant facility equipment which was placed into service in July 2016. The total amount financed was $37,666 at 5.59% interest, with payments of $720 due for 60 months starting October 2016. In the 4th quarter of fiscal year 2019 we were able to pay off this term bank financing without any pre-payment penalty.
|
|
Payments due by period
|
|
|
|
Total
|
|
|
Less than
1 year
|
|
|
1 to 3 years
|
|
|
3 to 5 years
|
|
|
After
5 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank debt
|
|
$
|
26,477
|
|
|
$
|
12,709
|
|
|
$
|
13,768
|
|
|
$
|
-
|
|
|
$
|
-
|
|
AMERITYRE CORPORATION
Notes to the Financial Statements
June 30, 2019 and 2018
NOTE 3 – RIGHT TO USE LEASE ASSETS
Based on our lease accounting policy, we have identified the following operating leases. As of June 30, 2019, we have no financing leases:
|
|
For the Years Ended June 30,
|
|
|
|
2019
|
|
|
2018
|
|
Facility lease
|
|
$
|
735,000
|
|
|
$
|
-
|
|
Leasehold improvements related to our facility
|
|
|
280,376
|
|
|
|
201,074
|
|
Accumulated amortization – leasehold improvements
|
|
|
(170,120
|
)
|
|
|
(161,320
|
)
|
Right to use leased assets, operating, net
|
|
$
|
845,256
|
|
|
$
|
39,754
|
|
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 $735,000 payable at amounts ranging from $11,750 to $12,600 a month until June 30, 2024.
NOTE 4 – STOCK TRANSACTIONS
During the years ended June 30, 2019 and 2018, the Company had the following stock transactions:
On December 13, 2013, the Board of Directors approved a resolution designating 2,000,000 shares of preferred stock, $0.001 par value, as 2013 Series Convertible Preferred Stock (the “2013 Series Shares”). On December 18, 2013, the Company filed a Certificate of Designation with the Nevada Secretary of State for the 2013 Series Convertible Preferred Stock, which was approved by the Nevada Secretary of State on December 19, 2013. The 2013 Series Shares have voting rights only on any matters directly affecting the rights and privileges of the 2013 Series Shares. The 2013 Series Shares have a liquidation preference amounting to a return of the initial par value per share only, with no further participation in any distributions to other shareholders. Any issued 2013 Series Shares will convert into 20 million shares of the Company’s common stock (1) at any time at the election of the holder; or (2) automatically on the date that is six years after the date of original issuance of the shares or April 2020. Lastly, the 2013 Series Shares contain a quarterly cash dividend rate of 1.25% of the original issuance price of $1.00 per share or $100,000 per year as of June 30, 2019 and 2018, respectively. In 2016, management notified our preferred shareholder that we are suspending future payments of their preferred cash dividend payments, so the Company can increase its working capital levels. Accrued preferred shareholder dividends were $325,000 as of June 30, 2019 and $225,000 as of June 30, 2018.
On January 21, 2017, 60,000 shares were granted to the Company’s Chief Financial Officer as part of her employment renewal. The shares are valued as of January 20, 2017 ($0.04) and vest ratably through December 2017. All of these shares have been issued: 30,000 in fiscal year 2018, 30,000 in fiscal year 2017.
On January 31, 2017, 225,000 shares were granted to the Company’s Board of Director’s as Board compensation for the term ending November 2017. Each non-executive Board member receives 50,000 shares, with the Audit Committee Chair receiving 75,000 shares. The shares vest ratably January – December 2017, valued at a fixed rate of $0.0155, the closing stock price on January 31, 2017. All of these shares have been issued: 112,500 shares issued fiscal year 2018 and 112,500 shares issued fiscal 2017.
Under a new 2017 Employment Agreement, the Company’s Chief Executive Officer, received a stock award of 2.4 million shares of the Company’s common stock vesting ratably over 23 months (February 2017 – December 2018). As of June 30, 2019, all of these shares had vested: 1,356,521 shares issued in fiscal year 2019, and 521,739 shares issued in each fiscal year 2018 and fiscal year 2017.
On November 30, 2017, 265,000 shares were granted to the Company’s Board of Directors as Board compensation for the term ending November 2018. Each non-executive Board member received 60,000 shares, with the Audit Committee Chair receiving 85,000 shares. The shares vested ratably December 2017 – November 2018, valued at $0.02 the closing stock price on November 30, 2017. As of June 30, 2019, all shares of stock have vested and were issued in fiscal year 2019.
AMERITYRE CORPORATION
Notes to the Financial Statements
June 30, 2019 and 2018
On January 21, 2018, 60,000 shares were granted to the Company’s Chief Financial Officer as part of her employment renewal. The shares are valued at $0.02, the closing stock price as of January 21, 2018, and vested ratably through December 2018. In addition to the stock, her base compensation was adjusted to $36,000 per annum. All of these shares have been issued in fiscal year 2019.
On May 24, 2018 the Board of Director’s approved a partial payment of Chief Executive Officer’s 2017 bonus in stock. This partial payment of $10,000 resulted in the issuance of 500,000 shares of stock.
On July 20, 2018, in association with the Company’s year-end close and results, the Compensation Committee of the Board approved a discretionary bonus to the Company’s Chief Executive Officer of which half was paid in stock. This resulted in 375,000 share of stock being issued in fiscal year 2019.
On September 26, 2018, the Company replaced and extended the Chief Executive Officer’s Employment Agreement. The Agreement extended his term of employment to December 31, 2019. Inclusive in this new Agreement is a stock award of 1.98 million shares of the Company’s common stock vesting ratably over 12 months (January 2019 – December 2019), valued at a fixed rate of $0.0163, the closing stock price on September 28, 2018. As of June 30, 2019, 990,000 of these shares had vested and were issued.
As of November 28, 2018, 350,000 shares were granted to the Company’s Board of Director’s as Board compensation for the term ending November 2019. Each non-executive Board member receives 75,000 shares, with the Audit Committee Chair receiving 125,000 shares. The shares vest ratably December 2018 – November 2019, valued at $0.02 the closing stock price on November 28, 2018. As of June 30, 2019, 175,000 shares of stock had vested and were issued.
On January 2, 2019, 60,000 shares were granted to the Company’s Chief Financial Officer as part of her employment renewal. The shares are valued at $0.02, the closing stock price as of January 2, 2019 and vest ratably through December 2019. As of June 30, 2019, 30,000 shares of stock vested and issued.
NOTE 5 – STOCK OPTIONS
General Option Information
On April 25, 2017, the Board of Directors cancelled the “2015 Omnibus Stock Option and Award Plan” as all options and stock awards under this plan had been granted and adopted the “2017 Omnibus Stock Option and Award Plan” which contains provisions for up to 3,000,000 stock options and stock awards to be granted to employees, consultants and directors.
Option issuances and vesting during the period ended June 30, 2019
On January 1, 2018, 480,000 options were granted to the Company’s Chief Executive Officer as part of his employment offer. The options have a strike price of $0.10, vested ratably through December 31, 2018 and expire December 31, 2021. Expense related to these options is $3,868 as of June 30, 2019. These options were inadvertently excluded from the option table in the Company’s Form 10-K filed on September 14, 2018. The financial consequence of this was deemed both qualitatively and quantitatively immaterial by management and all of the related expense has been recognized in fiscal year 2019.
Expense related to the above options is $3,868 as of June 30, 2019.
We estimated the fair value of the stock options above at the grant date based on the following weighted average assumptions:
Risk-free interest rate
|
|
|
2.010
|
%
|
Expected life
|
|
|
3.0
|
years
|
Expected volatility
|
|
|
114.38
|
%
|
Dividend yield
|
|
|
0.00
|
%
|
AMERITYRE CORPORATION
Notes to the Financial Statements
June 30, 2019 and 2018
A summary of the status of our outstanding stock options as of June 30, 2019 and June 30, 2018 and changes during the periods then ended is presented below:
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
Weight Average
|
|
|
Intrinsic
|
|
|
|
|
|
|
Weight Average
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Value
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Value
|
|
Outstanding beginning of period
|
|
|
3,730,000
|
|
|
$
|
0.13
|
|
|
|
|
|
|
|
4,280,000
|
|
|
$
|
0.12
|
|
|
|
|
|
Granted
|
|
|
480,000
|
|
|
$
|
0.10
|
|
|
|
|
|
|
|
-
|
|
|
$
|
0.00
|
|
|
|
|
|
Expired/Cancelled
|
|
|
(240,000
|
)
|
|
$
|
0.10
|
|
|
|
|
|
|
|
(550,000
|
)
|
|
$
|
0.10
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
-
|
|
|
$
|
0.00
|
|
|
|
|
|
Outstanding end of period
|
|
|
3,970,000
|
|
|
$
|
0.12
|
|
|
$
|
-
|
|
|
|
3,730,000
|
|
|
$
|
0.13
|
|
|
$
|
-
|
|
Exercisable
|
|
|
3,970,000
|
|
|
$
|
0.12
|
|
|
$
|
-
|
|
|
|
3,730,000
|
|
|
$
|
0.13
|
|
|
$
|
-
|
|
The following table summarizes the range of outstanding and exercisable options as of June 30, 2019:
|
|
|
|
Outstanding
|
|
|
Exercisable
|
|
Range of
Exercise Prices
|
|
|
Number Outstanding
at
June 30, 2019
|
|
|
Weighted
Average
Remaining
Contractual Life
|
|
|
Weighted
Average
Exercise Price
|
|
|
Number
Exercisable at
June 30, 2019
|
|
|
Weighted
Average Remaining
Contractual Life
|
|
$
|
0.08
|
|
|
|
150,000
|
|
|
|
2.42
|
|
|
$
|
0.08
|
|
|
|
150,000
|
|
|
|
2.42
|
|
$
|
0.10
|
|
|
|
2,370,000
|
|
|
|
1.45
|
|
|
$
|
0.10
|
|
|
|
2,370,000
|
|
|
|
1.45
|
|
$
|
0.17
|
|
|
|
1,450,000
|
|
|
|
1.25
|
|
|
$
|
0.17
|
|
|
|
1,450,000
|
|
|
|
1.25
|
|
|
|
|
|
|
3,970,000
|
|
|
|
|
|
|
|
|
|
|
|
3,970,000
|
|
|
|
|
|
NOTE 6: SUBSEQUENT EVENTS
The Company has evaluated all activity through September 13, 2019 (the date the Financial Statements were available to be issued) and concluded that no subsequent events have occurred that would require recognition in the Financial Statements or disclosure in the Notes to the Financial Statements.
No
No
Yes
Yes
false
--06-30
FY
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