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 have developed unique polyurethane formulations that allow us to make products with superior performance characteristics, including 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 the traditional rubber tire manufacturing processes, in part because our polyurethane compounds do not require the multiple processing steps, extreme heat, and high pressure that are necessary to cure rubber. Using our polyurethane technologies, we believe tires can be produced which 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. Our focus continues to be 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, distributors and dealers accounts for the majority of our revenue. We have the ability to produce a broad range of products for the light duty tire market. Our efforts in product development and marketing allow us to continue to build customer relationships and expand sales with original equipment manufacturers and tire distributors. We continue our focus on creating unique product solutions for customers with specific tire performance requirements. Our international sales continue to be negatively impacted by the strong US dollar exchange rate versus foreign currencies.
Polyurethane Elastomer Tires
– During the fourth quarter of fiscal year 2016 we relaunched the forklift tire product line with select customers. We expect shipments of forklift tires to restart in the third quarter of fiscal year 2017. We continue to develop new elastomer tire products for specific customer applications, such as scissor lift tires. We expect sales in this market segment to increase in the coming quarters as these new products are introduced and gain market acceptance.
Agricultural Tires
– Sales of agricultural tires continue to be negatively impacted by the dramatic downturn in farm commodity prices. Farm income levels continue to be depressed which has reduced the available money for investment in farm equipment. Recent projections have indicated that crop prices will continue to remain at historically low levels and farm income will continue to suffer in the coming months. Large agricultural equipment suppliers continue to expect 2017 to be a challenging year for farmer income and farm-related spending. Our focus has been to continue to invest in agricultural trade show attendance to increase awareness of our products in the farming community, so we are well positioned to take advantage of the eventual rebound in farm income. Given this backdrop, we are not anticipating dramatic agricultural sales gains for fiscal year 2017 compared to fiscal year 2016. We continue to pursue additional distribution relationships, both domestically and internationally, to increase our market penetration for our agricultural tires. We have found that the strength of the US Dollar versus other foreign currencies has negatively impacted our international business. We expect that exchange rate effects will continue to dampen our international sales efforts in the coming quarters. We have continued development of new seeder tire styles in response to specific customer requirements, and we expect this will help drive additional sales in this product line.
Due to the Company’s limited resources, tire projects which are contingent on additional significant development, such as composite and automotive tires, have been put on hold and will be revisited at a later date until such funds become 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 profitable quarterly results in the third and fourth quarters of fiscal 2016, as well as the second quarter in fiscal year 2017. We continue to look for ways to reduce manufacturing costs to improve gross margins in the face of these difficult economic conditions in our target markets. We have a solid backlog of orders for closed cell foam product to be delivered over the next 12 months, but we expect that the challenging economic environment, particularly in the agricultural market, will continue to provide strong headwinds and negatively impact our drive towards consistent and increasing profitability.
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 awareness. At that time Management again expressed the need for additional working capital in order to execute its plan in a timely manner. In the absence of additional capital, it was stated that any initiatives would need to be paid from internally generated cash flow. During the fourth quarter of fiscal 2016, the Company was successful in procuring a term loan to finance needed investments in manufacturing equipment, laboratory instruments, and website development. However, a lack of available capital prevented the Company from executing its other strategic marketing initiatives, which we believe has negatively impacted the Company’s market position and profitability. Without additional capital in fiscal year 2017, the implementation of the Company’s strategic plan will be delayed unless initiatives can be financed out of internally generated cash flow. Current projects underway include a redesign and update of our company website as well as investment in business software systems to improve productivity in the sales group.
A final consideration for the upcoming quarters is the effect that new trade legislation may have on our business. The new Administration campaigned on a platform of “leveling the playing field” with respect to pricing of imported goods and the implementation of new policies to promote American manufacturing. As Amerityre is the largest American manufacturer of flat free polyurethane tires, these policies, if implemented, may improve our competitive position against our competition, who produce their tires overseas and import them for sale in the USA. There may also be a renewed push to “buy American”, which also may put us in a better competitive position in the marketplace. These new policies, however, may also negatively impact our business and costs as the majority of our wheel rims are sourced from overseas due to an inability to find a viable domestic supplier. Some of the potential new policies being discussed includes tariffs on imported goods, which would raise the costs for our rims and consequently our wheel assemblies.
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 December 31, 2016, totaling $479,633 with accumulated amortization of $317,902 for a net book value of $161,731. Patent and trademark costs capitalized at December 31, 2015, totaled $479,633 with accumulated amortization of $290,588 for a net book value of $189,045.
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 December 31, 2016 and 2015, 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 December 31, 2016 and 2015, respectively.
Amortization expense for the years ended December 31, 2016 and 2015 was $13,648 and $13,666 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.
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 December 31, 2016 and 2015 reflect the impact of FASB ASC 718. Stock-based compensation expense recognized under FASB ASC 718 for the fiscal years ended December 31, 2016 and 2015 was $15,223 and $41,795, 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 December 31, 2016 and 2015 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 six months ended December 31, 2016 and 2015 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
December 31,
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For the Six Months Ended
December 31
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(in 000’s)
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Change
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(in 000’s)
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|
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Change
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2016
|
|
|
2015
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2016 vs. 2015
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2016
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2015
|
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2016 vs. 2015
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Net revenues
|
|
$
|
879
|
|
|
$
|
915
|
|
|
|
(3.8
|
%)
|
|
$
|
1,716
|
|
|
$
|
1,929
|
|
|
|
(11.0
|
%)
|
|
Cost of revenues
|
|
|
(612
|
)
|
|
|
(697
|
)
|
|
|
(12.2
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%)
|
|
|
(1,168
|
)
|
|
|
(1,464
|
)
|
|
|
(20.2
|
%)
|
|
Gross profit
|
|
|
267
|
|
|
|
218
|
|
|
|
22.5
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%
|
|
|
548
|
|
|
|
465
|
|
|
|
17.8
|
%
|
|
Research and development expenses
|
|
|
(56
|
)
|
|
|
(56
|
)
|
|
|
0.0
|
%
|
|
|
(109
|
)
|
|
|
(110
|
)
|
|
|
(0.9
|
%)
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|
Sales and marketing expense
|
|
|
(59
|
)
|
|
|
(69
|
)
|
|
|
(14.5
|
%)
|
|
|
(126
|
)
|
|
|
(166
|
)
|
|
|
(24.1
|
%)
|
|
General and administrative expense
|
|
|
(147
|
)
|
|
|
(270
|
)
|
|
|
(45.4
|
%)
|
|
|
(339
|
)
|
|
|
(495
|
)
|
|
|
(31.4
|
%)
|
|
Other income (expense)
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
100.0
|
%
|
|
|
(5
|
)
|
|
|
(1
|
)
|
|
|
400.0
|
%
|
|
Net income (loss)
|
|
|
3
|
|
|
|
(177
|
)
|
|
|
(101.7
|
%)
|
|
|
(31
|
)
|
|
|
(307
|
)
|
|
|
(89.9
|
%)
|
|
Preferred stock dividend
|
|
|
(25
|
)
|
|
|
(25
|
)
|
|
|
0.0
|
%
|
|
|
(50
|
)
|
|
|
(50
|
)
|
|
|
0.0
|
%
|
|
Net loss attributable to common shareholders
|
|
$
|
(22
|
)
|
|
$
|
(202
|
)
|
|
|
(89.1
|
%)
|
|
$
|
(81
|
)
|
|
$
|
(357
|
)
|
|
|
(77.2
|
%)
|
The primary driver for the weakness in the first half of fiscal year 2017 is much lower agricultural tire sales as well as reduced sales of certain closed cell foam products. We expect continued weakness in the agricultural business segment throughout the remainder of fiscal year 2017. We expect our overall closed cell foam sales to be consistent with levels seen during the first half of fiscal year 2017.
Three Months Ended December 31, 2016 Compared to December 31, 2015
Net Sales.
Net sales of $879,607 for the quarter ended December 31, 2016, represents a 3.8% decrease over net sales of $914,888 for the same period in 2015. These results were in line with our expectations. Our sales were driven primarily by closed cell foam tire sales. We continue to have a positive response to our marketing and pricing plans for our polyurethane foam tires. 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 December 31, 2016 was $612,336 or 69.6% of sales compared to $696,671 or 76.1% of sales for the same period in 2015. Cost of revenues were lower due to decreases in raw materials expenditures, continued diligence in producing tires efficiently, use of fully depreciated assets causing manufacturing depreciation expense to be lower, and lower manufacturing and shipping supplies 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 quarter ended December 31, 2016 was $267,271 compared to $218,217 for the same period in 2015. Gross profit for the quarter ended December 31, 2016 increased by $49,054 or 22.5% over the same period in 2015 due to the decrease in the cost of revenue outlined in the discussion above. The December 31, 2016 gross profit reflects a 30.4% gross margin for product sales compared to a gross margin on product sales of 23.9% in the quarter ending December 31, 2015.
Research & Development Expenses (R&D).
Research and development expenses for the quarter ended December 31, 2016 were $56,185 compared to $55,968 for the same period in 2015. We continue to focus our R&D efforts on product formulation optimization and new product development. The Company plans to continue 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 December 31, 2016 were $58,961 as compared to $68,595 for the same period in 2015. Sales and marketing expenses decreased $9,634 between periods primarily due to lower wages, paid commissions and travel costs, offset by increased trade show expenses as we attended two trade shows during this quarter.
General & Administrative Expenses
. General and administrative expenses for the quarter ended December 31, 2016 were $147,477 compared to $269,801 for the same period in 2015. This decrease of $122,324 between periods is driven by savings in wages (due to the timing of executive bonuses in 2015), stock based compensation, warranty expense and professional fees.
Other Expense.
Other expense for the quarter ended December 31, 2016 was $1,832 compared to $899 for the same period in 2015. 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 quarter ended December 31, 2016 of $2,816 represents a 101.7% improvement compared to the net loss for the quarter ended December 31, 2015 of $177,040. Cost savings, business structures and other improvements that the Company put into place in fiscal year 2016 are continuing to positively impact results with our first ever second quarter with net income.
Six Months Ended December 31, 2016 Compared to December 31, 2015
Net Sales.
Net sales of $1,715,760 for the six months ended December 31, 2016, represents an 11.0% decrease over net sales of $1,928,821 for the same period in 2015. These results were in line with our expectations as we anticipated that we would not have strong pivot tire sales for the period. Our sales were primarily closed cell foam tire sales. We continue to have a positive response to our marketing and pricing plans 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 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 six months ended December 31, 2016 was $1,167,788 or 68.1% of sales compared to $1,463,447 or 75.9% of sales for the same period in 2015. Cost of revenues were lower due to decreases in raw materials expenditures, better manufacturing efficiency, 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 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 six months ended December 31, 2016 was $547,972 compared to $465,374 for the same period in 2015. Gross profit for the six months ended December 31, 2016 increased by $82,598 or 15.0% over the same period in 2015 due to the decrease in cost of revenue outlined in the discussion above. The December 31, 2016 gross profit reflects a 31.9% gross margin for product sales compared to a gross margin on product sales of 21.4% in 2015.
Research & Development Expenses (R&D).
Research and development expenses for the six months ended December 31, 2016 were $109,044 compared to $109,567 for the same period in 2015. While research and development expenses are flat between the periods we continue to focus on product formulation research and product development.
Sales & Marketing Expenses.
Sales and marketing expenses for the six months ended December 31, 2016 were $126,191 as compared to $166,259 for the same period in 2015. Sales and marketing expenses decreased $40,068 between periods primarily due to the impact of the company’s new commission program, lower overall sales leading to lower commission payments, and lower travel costs, offset by increased trade show expenses as we attended three trade shows during this six month period.
General & Administrative Expenses
. General and administrative expenses for the six months ended December 31, 2016 were $339,783 compared to $494,640 for the same period in 2015. General and administrative expenses decreased $154,857 between periods primarily due to savings in wages (due to the timing of awarding executive bonuses in 2015), stock based compensation, warranty expense and professional fees.
Other Expense.
Other expense for the six months ended December 31, 2016 was $4,964 compared to $1,425 for the same period in 2015. Other expense consists solely of interest expense and increased in the period due to our new bank debt facilities.
Net Loss
. Net loss for the six months ended December 31, 2016 of $32,010 represents an 89.9% improvement from the net loss for the six months ended December 31, 2015 of $306,517.
Liquidity and Capital Resources
Our principal sources of liquidity consist 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. Management continues to evaluate financing options but is choosing to delay financing at terms that will subject the Company to high costs of debt and are reluctant to raise money through stock sales at what we believe are highly dilutive share prices. 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 December 31, 2016 we have not needed to activate this financing option due to increased 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.
Cash Flows
The following table sets forth our cash flows for the quarters ended December 31, 2016 and 2015.
|
|
|
Six Months ended Dec. 31,
|
|
|
|
|
(in 000’s)
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Net cash provided (used) by operating activities
|
|
$
|
51
|
|
|
$
|
(246
|
)
|
|
Net cash used in investing activities
|
|
|
(11
|
)
|
|
|
-
|
|
|
Net cash used by financing activities
|
|
|
(9
|
)
|
|
|
(53
|
)
|
|
Net increase (decrease) in cash during the period
|
|
$
|
31
|
|
|
$
|
(299
|
)
|
Net Cash Used by Operating Activities.
Our primary sources of operating cash for the six months ended December 31, 2015 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. Net cash provided by operating activities was $51,497 for the quarter ended December 31, 2016 compared to net cash used by operating activities of $246,244 for the same period in 2015.
Non-cash items include depreciation and amortization and stock based compensation. Our net loss was $ 32,010 for the six months ended December 31, 2016 compared to a net loss of $306,517 for the same period in 2015. The net loss for fiscal 2016 included non-cash expenses for depreciation and amortization of $52,782 and stock-based compensation (both stock issued and options) of $15,223. As of December 31, 2015, depreciation and amortization was $81,028 and stock-based compensation (both stock issued and options) totaled $41,795.
Net Cash Used by Investing Activities.
Net cash used by investing activities was $11,424 for the six months ended December 31, 2016 and $0 for the same period in 2015.
For the six months ended December 31, 2016 we purchased critical facility equipment of which $11,424 was paid in cash the remainder financed through bank financing.
Net Cash Used by Financing Activities
. Net cash used by financing activities was $8,574 for the six months ended December 31, 2016 and $53,185 for the same period in 2015.
The primary use of cash for the quarter ended December 31, 2016 was payment toward the capital lease of $2,965 and payment of notes payable of $5,609.
Contractual Obligations and Commitments
The following table summarizes our contractual cash obligations and other commercial commitments at December 31, 2016.
|
|
Payments due by period
|
|
|
|
Total
|
|
|
Less than
1 year
|
|
|
1 to 3 years
|
|
|
3 to 5 years
|
|
|
After
5 years
|
|
|
|
|
|
|
Facility lease (1)
|
$
|
482,400
|
|
|
$
|
136,800
|
|
|
$
|
345,600
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Capital lease (2)
|
|
11,678
|
|
|
|
6,922
|
|
|
|
4,756
|
|
|
|
-
|
|
|
|
-
|
|
|
Bank debt (3)
|
|
87,257
|
|
|
|
16,904
|
|
|
|
59,726
|
|
|
|
10,627
|
|
|
|
-
|
|
|
Total contractual cash obligations
|
$
|
581,335
|
|
|
$
|
160,626
|
|
|
$
|
410,082
|
|
|
$
|
10,627
|
|
|
$
|
-
|
|
|
(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.
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Cash Position, Outstanding Indebtedness and Future Capital Requirements
At February 6, 2017, our total cash balance was $266,143, none of which is restricted; accounts receivables was $439,782; and inventory, net of reserves for slow moving or obsolete inventory, and other current assets was $673,485. Our total indebtedness was $526,931 and includes $364,467 in accounts payable and accrued expenses, $17,531 in current portion of long-term debt, $11,154 in capital lease liability and $133,779 in long-term debt.
