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EX-31.1 - EX-31.1 - AMERITYRE CORPex31-1.htm
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EX-31.2 - EX-31.2 - AMERITYRE CORPex31-2.htm
EX-32.2 - EX-32.2 - AMERITYRE CORPex32-2.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 

 
Form 10-K
 

 
(Mark One)
 
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2015
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                       to                     
 
Commission file number   000-50053
 
GRAPHIC
AMERITYRE CORPORATION
(Exact name of registrant as specified in its charter)

Nevada
(State or other jurisdiction of
incorporation or organization)
87-0535207
(I.R.S. Employer
Identification No.)
 
1501 Industrial Road
Boulder City, Nevada 89005
(702) 293-1930
 (Address of principal executive office and telephone number)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class
Name of each exchange on which registered
N/A
N/A

Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock
 
 
 
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES o  NO x
 
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. YES o  NO x

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x  NO o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x   NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o          Accelerated filer ¨          Non-accelerated filer ¨          Smaller reporting company x
 
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES o  NO x  

On August 10, 2015, there were 41,650,287 shares of common stock of the Registrant outstanding.

As of December 31, 2014, the Registrant’s most recent second quarter, there were 38,025,526 shares of common stock of the Registrant held by non-affiliates outstanding with a market value $1,901,276 (based upon the closing price of $0.05 per share of common stock as quoted on the NASD: OTCBB).

Documents Incorporated by Reference
 
Portions of the Registrant's definitive proxy statement, which will be issued in connection with the 2015 Annual Meeting of Shareholders of Amerityre Corporation, are incorporated by reference into Part III of this Annual Report on Form 10-K.
 
 
AMERITYRE CORPORATION
2015 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
 
 
Page
PART I
 
ITEM 1.
 5
ITEM 1A.
8
ITEM 1B.
12
ITEM 2.
12
ITEM 3.
12
ITEM 4.
12
PART II
 
ITEM 5.
13
ITEM 6.
13
ITEM 7.
13
ITEM 7A.
20
ITEM 8.
20
ITEM 9.
20
ITEM 9A.
20
ITEM 9B.
20
PART III
   21
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 
ITEM 11.
EXECUTIVE COMPENSATION
 
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
 
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
 
PART IV
 
ITEM 15.
23
 
 
 
AMERITYRE CORPORATION
2015 ANNUAL REPORT ON FORM 10-K

This report contains "forward-looking statements" within the meaning of the federal securities laws. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions and other information that is not historical information. In some cases, forward-looking statements can be identified by terminology such as "believes," "expects," "may," "will," "should," "anticipates," or "intends" or the negative of such terms or other comparable terminology, or by discussions of strategy. We may also make additional forward-looking statements from time to time. All such subsequent forward-looking statements, whether written or oral, by us or on our behalf, are also expressly qualified by these cautionary statements.

All forward-looking statements, including without limitation, management's examination of historical operating trends, are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them, but, there can be no assurance that management's expectations, beliefs and projections will result or be achieved. All forward-looking statements apply only as of the date made. We undertake no obligation to publicly update or revise forward-looking statements which may be made to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events.

There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in or contemplated by this report. Any forward-looking statements should be considered in light of the risks set forth in "Part I. Item 1A. Risk Factors" and elsewhere in this report.

This report may include information with respect to market share, industry conditions and forecasts that we obtained from internal industry research, publicly available information (including industry publications and surveys), and surveys and market research provided by consultants. The publicly available information and the reports, forecasts and other research provided by consultants generally state that the information contained therein has been obtained from sources believed to be reliable, but there can be no assurance as to the accuracy and completeness of such information. We have not independently verified any of the data from third-party sources, nor have we ascertained the underlying economic assumptions relied upon therein. Similarly, our internal research and forecasts are based upon our management's understanding of industry conditions, and such information has not been verified by any independent sources.

For convenience in this report, the terms “Amerityre,” “Company,” “our,” “us” or “we” may be used to refer to Amerityre Corporation.
 
 
 
PART I

ITEM 1.  BUSINESS

Overview
 
Amerityre incorporated as a Nevada corporation on January 30, 1995 under the name American Tire Corporation and changed its name to Amerityre Corporation in December 1999.
 
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, in comparison to conventional rubber tires.  We also believe that our manufacturing processes are more energy efficient than the traditional rubber tires 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.  
 
Products

Our polyurethane material technology is based on two proprietary formulations; closed-cell polyurethane foam, which is a lightweight material with high load-bearing capabilities for low duty cycle applications; and Elastothane®, a high performance polyurethane elastomer with high load-bearing capabilities for high duty applications.  We are concentrating on three segments of the tire market: closed-cell polyurethane foam tires, polyurethane elastomer forklift tires and agricultural tires.
 
Closed-Cell Polyurethane Foam Tires
 
We currently manufacture several lines of closed-cell polyurethane foam tires for bicycles, hand trucks, lawn and garden, wheelbarrow, personnel carriers, and medical mobility products.  Our closed-cell polyurethane foam products are often referred to as flat-free because they have no inner tube, do not require inflation and will not go flat even if punctured.  Our closed-cell polyurethane foam tires are mounted on the wheel rim in much the same way as a pneumatic tire.  Our closed-cell polyurethane foam products are virtually maintenance free, provide extended tire life, and offer superior energy efficiency compared to rubber based tires.  Closed cell foam tires and components accounted for 74.7% of fiscal 2015 revenues.

Polyurethane Elastomer Forklift Tires
 
We have developed solid polyurethane forklift tires made of Elastothane®.  We currently produce and sell over 20 sizes for Class 1, 4 and 5 forklifts.  We believe our tires are superior to rubber tires as they are non-marking, more energy efficient, carry greater load weight, operate in lower temperature environments and have longer service lives.  Forklift tires accounted for 1.0% of fiscal 2015 revenues.
 
Agricultural Tires
 
Amerityre has developed three products for the agricultural tire market, one used in irrigation and two used in planting/harvesting.  These products have successfully field tested and we developed strategies to increase the distribution of these products into the market.  Agricultural tires accounted for 23.3% of fiscal 2015 revenues.

Raw Materials and Supplies

The two principal chemical raw materials required to manufacture our products are known generically as polyols and isocyanates.  We purchase our chemical raw materials from multiple suppliers.  In addition, we purchase various quantities of additional chemical additives that are mixed with the polyols and isocyanates.  These additional chemicals are also available from multiple suppliers.  Critical raw materials are generally sourced from at least two vendors to assure adequate supply and price competition.

In addition to the chemical raw materials, we purchase steel and plastic wheel components for use in tire and wheel assemblies.  We purchase these components from multiple domestic and overseas suppliers.  
 
 
Operations/Manufacturing
 
Our closed-cell polyurethane foam products are primarily manufactured utilizing multiple stationed carousel centrifugal molding presses.  We produce closed-cell foam products using these presses by pouring a proprietary polyurethane formula into a mold, which then spreads out in the mold through centrifugal force.  The molding process occurs by reacting monomeric diphenylmethanediisocyanate (MDI) with polyol and other chemicals.  The chemical reaction causes a cross linking of the chemicals, which thereafter become solid.  The manufacturing process for a closed-cell polyurethane foam product takes less than two minutes.  The closed-cell polyurethane foam product can then be removed from the mold and the process is repeated.
 
All of our products are inspected prior to shipment to ensure quality.  Any closed-cell foam products considered by our quality control personnel to be defective are disposed of through traditional refuse disposal services.  

Information Systems
 
We use commercial computer aided design (CAD) and finite element analysis (FEA) software in connection with engineering and designing our products.  This software allows us to integrate our proprietary manufacturing and production data with our design technology, enabling our engineering department to leverage our previous manufacturing and test results to predict the performance characteristics of new product designs and product improvements.  For general business purposes, we use commercially available software for financial, distribution, manufacturing, customer relationships and payroll management.
 
Sales, Marketing and Distribution
 
Amerityre utilizes independent manufacturer representatives with tire industry experience to promote and sell our products. These representatives sell all of our products in a designated sales territory. These independent sales professionals complement our in-house sales department in Boulder City.     

We currently distribute directly from our manufacturing facility in Boulder City, Nevada and contracted warehouse in Akron, Ohio.  
 
Internationally, we have several distribution partners established in Canada and Europe. We continue to seek additional international sales and marketing partners to expand the worldwide sales and distribution of our products.

Customers
 
We have three customers who accounted for 27% of our sales for the year ended June 30, 2015 and two customers who accounted for 21% of our sales for the year ended June 30, 2014.    In general, our customers are comprised of OEMs of lawn and garden products, and outdoor power equipment, regional distributors, retail cooperatives and chains that sell lawn and garden products, bicycle tires and hand truck tires to the aftermarket.
 
Competition
 
There are several companies that produce not-for-highway-use or light-use tires from polyurethane foam such as Greentyre, who manufactures in the UK; Carefree Tire and Marathon Tire, who manufactures in China; Marathon Tire who manufactures in China, and; Custom Engineered Wheels and Krypton Industries who manufacture in India.  We believe our closed-cell polyurethane foam tires differ from the polyurethane foam tires offered by the aforementioned competitors because our products contain millions of closed-cell versus open-cell air bubbles.  By closing the cells, our products have higher load bearing characteristics than tire products with open-cell polyurethane foam, while effectively producing a ride quality comparable to a pneumatic tire.
 
In addition to manufacturers of polyurethane foam tires, we compete directly with companies that manufacture and market traditional not-for-highway-use, low-duty pneumatic, semi-pneumatic, and solid tires made from rubber.  The not-for-highway use tire industry has historically been highly competitive and several of our competitors have financial resources that substantially exceed ours. In addition, many of our competitors are very large companies, such as Kenda, Taiwan; Maxxis International, Taiwan; Cheng Shin, China; and Carlisle Tire, USA.  These competitors have established brand name recognition, distribution networks for their products, and have strong consumer loyalty to their products.

As we enter the agricultural tire market, we have found the market leader is Titan Tire USA, a global manufacture of agriculture pneumatic tire and wheel assemblies.  In addition, Rhino Gator, BB Metal Works, and Mach II are North American competitors offering various types of flat free tire solutions. 
 
 
Intellectual Property Rights
 
We seek to obtain patent protection for, or to maintain as trade secrets, those inventions that we consider important to the development of our business.  We rely on a combination of patent, trademark, copyright and trade secret laws in the United States and other jurisdictions as well as confidentiality procedures and contractual provisions to protect our proprietary technology and branding.  We control access to our proprietary technology and enter into confidentiality agreements with our employees and other third parties.  We own twelve issued U.S. patents and have additional pending U.S. and foreign patent applications.  We use various trademarks in association with marketing our products, including the names Amerityre®, Elastothane®, Arcus®, Atmospheric®, Logo®, Kik® and Kryon®.
 
Trade Secrets
 
Our polyurethane material technology is based on two key proprietary formulations, a closed-cell polyurethane foam, which is a lightweight material with high load-bearing capabilities for low duty cycle applications, and a polyurethane elastomer, which is a high performing material with high load-bearing capabilities for high duty applications. Our technology has been maintained as Trade Secret by combination of limited and controlled access to our facility along with a use of non-disclosure agreements with persons as have been afforded access thereto and, to the best of our knowledge and belief, we have maintained the technology as trade secrets as required to provide for the protection of our polyurethane material technology under U.S. trade secret laws.
 
Patents
 
Set forth in the schedule below are patents that have been issued or for which a patent application is pending with respect to our technology.
 
Description of Patent
 
U.S. Patent
App/Serial No.
 
Issued Date or
Date Filed
 
Brief Description/Purpose
Improved Method and Apparatus for Making Tires and the Like
 
6,165,397
 
12/26/2000
 
Applies to pouring the material at the inside diameter (where the tire starts) during the manufacturing process.
Run-Flat Tire with Elastomeric Inner Support
 
6,679,306
 
1/20/2004
 
Applies to a polyurethane insert within a tire to create a “run-flat” system.
Method and Apparatus for Vacuum Forming a Wheel from a Urethane Material
 
 
7,377,596
 
 
5/27/2008
 
 
Applies to the method we employ to coat a light gauge steel or aluminum wheel by evacuating air from the mold while moving material through the mold utilizing a vacuum process to eliminate pockets of air within the matrix of the material. The resulting product becomes a “Composite” wheel.
Elastomeric Tire with Arch Shaped Shoulders
 
6,971,426
 
12/06/2005
 
Applies the design of the Arcus® run-flat tire (the first polyurethane elastomer tire to run with or without air).
Method for Manufacturing a Tire with Belts, Plies and Beads Using a Pre-cured Elastomer and Cold Rolling Method
 
6,974,519
 
 
12/13/2005
 
 
Applies to how we put the plies, beads and belts on a mandrel or bladder to be placed inside a mold for manufacturing a tire.
 
Improved Vacuum Forming Apparatus for Vacuum Forming a Tire, Wheel or Other Item from an Elastomeric Material
 
7,527,489
 
 
5/5/2009
 
 
Applies to an improvement in the vacuum forming equipment used to manufacture a tire and other items.
 
Method for Vacuum Forming an Elastomeric Tire
 
8,114,330
 
2/14/2012
 
Applies to polyurethane tires and methods we employ to evacuate air from mold while moving material through the mold.
Run Flat Tire Insert System
 
7,398,809
 
7/15/2008
 
Applies to how to utilize an insert on a wheel within a corresponding pneumatic tire.
Method and Apparatus for Vacuum Forming an Elastomeric Tire
 
 
7,399,172
 
 
7/15/2008
 
 
Applies to polyurethane tires and the method we employ to evacuate air from the mold while moving material through the mold utilizing a vacuum process to eliminate air pockets within the matrix of the material.
System for Retreading a Transport Tire with Polyurethane Tread
 
8,206,141
 
6/26/2012
 
Applies to apparatus we used to retread transport tires with polyurethane tread.
Method for Retreading a Heavy Duty Tire with a Polyurethane Tread
 
8,603,377
 
12/10/2013
 
Applies to the method we employ for applying a polyurethane tread to a rubber tire casing.
Pivot  Wheel Segment
 
D710,913
 
8/12/2014
 
Applies to irrigation wheels used in special soil conditions.
 
 
Trademarks
 
Set forth in the schedule below are the United States trademarks that have been registered.
 
Trademarks
 
Registration/Serial #
 
Issued
Amerityre®
  2,401,989  
8/14/2001
Elastothane®
  3,139,489  
9/5/2006
Elastothane®
  3,497,302  
9/2/2008
Arcus®
  2,908,077  
4/24/2004
Atmospheric®
  3,089,313  
5/9/2006
Logo®
  4,404,548  
9/17/2013
Kik®
  3,608,633  
4/21/2009
Kryon®
  4,009,423  
9/9/2011

We also own certain trademark applications and/or trademark registrations relating to the Arcus® trademark in several foreign jurisdictions.
 
Employees
 
As of August 10, 2015, we had 18 full-time employees and 1 part-time employee, including 5 salaried and 14 hourly employees.  We may hire temporary labor for manufacturing needs as required.  We believe that we will be able to hire a sufficient quantity of qualified laborers in the local area to meet our employment needs.  Our manufacturing process does not require special skills, other than orientation to our production techniques and specific equipment.  None of our employees is represented by a labor union or a collective bargaining agreement.  We consider our relations with our employees to be good.

Research and Development
 
Our current research and development activities are focused primarily on product improvement (i.e., forklift tires and agriculture tires) and cost efficient manufacturing processes.  We continue to develop “low cost” polyurethane foam formulations to increase the Company’s competitive position in certain markets.  Due to the Company’s limited resources, tire projects which are contingent on additional development, such as composite and automotive tires, have been put on hold and will be revisited at a later date.  Research and development expenses of an external testing nature were $23,058 and $3,806, for fiscal 2015 and 2014, respectively.  All research and development expenses of the Company including internal and external expenses were $200,753 and $166,890, for fiscal 2015 and 2014, respectively.
 
ITEM 1A. RISK FACTORS
 
Historically, we have lost money from operations and we have made no provision for any contingency, unexpected expenses or increases in costs that may arise.
 
Since inception, we have been able to cover our operating losses from the sale of our securities.  We do not know if these sources of funds will be available to cover future operating losses. If we are unable to obtain adequate sources of funds to operate our business we may not be able to continue as a going concern.

Our business operations and plans could be adversely affected in the event we need additional financing and are unable to obtain such funding.  To the extent that our business strategy requires expanding our operations, such expansion could be costly to implement and may cause us to experience significant continuing losses.  It is possible that our available short-term assets and anticipated revenues may not be sufficient to meet our operating expenses, business expansion plans, and capital expenditures for the next twelve months.  Insufficient funds may prevent us from implementing our business strategy or may require us to delay, scale back or eliminate certain opportunities for the commercialization of our technology and products.  If we cannot generate adequate sales of our products, or increase our revenues through licensing of our technology or other means, we may be forced to cease operations.
 
In order to succeed as a company, we must continue to manufacture quality products and sell adequate quantities of products at prices sufficient to generate profits.  We may not accomplish these objectives.   A number of factors may affect future sales of our products even if we are successful in increasing our revenue base.  These factors include whether competitors produce alternative or superior products and whether the cost of implementing our products is competitive in the marketplace.
 
In addition, we are attempting to increase revenues through licensing our technology and manufacturing rights, and selling polyurethane chemical systems to customers that produce their own products.  If these proposals are not viable in the marketplace, we may not generate significant revenues from these efforts.
 
 
The “slow growth” in the U.S. economy could have an adverse impact on our business, operating results or financial position.
 
The U.S. economy has experienced “slow growth” since the last U.S. recession and general downturn in the global economy. A continuation or worsening of these conditions, including credit and capital markets disruptions, could have an adverse impact on our business, operating results or financial position in a number of ways. We may experience declines in revenues and cash flows as a result of reduced orders, payment delays or other factors caused by the economic problems of our customers and prospective customers. We may experience supply chain delays, disruptions or other problems associated with financial constraints faced by our suppliers and customers. We may incur increased costs or experience difficulty with our ability to borrow in the future or otherwise with financing our operating, investing or financing activities. Any of these potential problems could hinder our efforts to increase our sales and might, if severe and extensive enough, cause our sales to decline, jeopardizing our ability to operate.
 
We may experience delays in resolving unexpected technical issues experienced in completing development of new technology that will increase development costs and postpone anticipated sales and revenues.
 
As we develop and improve our products, we frequently must solve chemical, manufacturing and/or equipment-related issues.  Some of these issues are ones that we cannot anticipate because the products we are developing are new. If we must revise existing manufacturing processes or order specialized equipment to address a particular issue, we may not meet our projected timetable for bringing products to market.  Such delays may interfere with existing manufacturing schedules, negatively affect revenues and increase our cost of operations.
 
We have entered new market segments where we have limited experience, and we may be unable to successfully manage planned growth.
 
We have limited experience in the commercial manufacturing and marketing arena, within the new market segments we have entered.  We do not have marketing and product development resources at our disposal compared to our competitors in the tire industry.  In order to become profitable through the commercialization of our technology and products, our products must be cost-effective, economical to produce, and have the ability to be distributed on a commercial scale.  Furthermore, if our technologies and products do not achieve, or if they are unable to maintain, market acceptance or regulatory approval, we may not be profitable.
 
Our success depends, in part, on our ability to license, market and distribute, and commercialize our technologies and products effectively.  We have limited manufacturing, marketing and distribution capabilities.   We may not properly ascertain or assess any and all risks inherent in the industry.  We may not be successful in entering into new licensing or marketing arrangements.  If we are unable to meet the challenges posed by our planned licensing, manufacturing, distribution and sales growth, our business may fail.
 
We are subject to governmental regulations, including environmental and health and safety regulations.
 
Our business operations are subject to a variety of national, state and local laws and regulations, many of which deal with the environment and health and safety issues. We believe we are in material compliance with applicable environmental and worker health and safety requirements. However, material future expenditures may be necessary if compliance standards change or material unknown conditions that require remediation are discovered. If we fail to comply with present and future environmental and worker health and safety laws and regulations, we could be subject to future liabilities or interruptions in our operations, which could have a material adverse effect on our business.
 
The markets in which we sell our products are highly competitive.
 
The markets for our products are highly competitive on a global basis, with a number of companies having significantly greater resources and market share than us.  Many of our competitors maintain a significantly higher level of brand recognition than we do.  Their access to greater resources enables them to adapt more quickly to changes in the markets we have targeted.  Our competitors are able to devote greater resources to the development and sale of new products.  Most of the products we have developed have not obtained broad market acceptance and rely on our emerging technology.  To improve our competitive position, we will need to make significant ongoing investments in manufacturing, customer service and support, marketing, sales, research and development and intellectual property protection.  We do not know if we will have sufficient resources to continue to make such investments or if we will maintain or improve our competitive position within the markets we serve.
 
 
We attempt to protect the critical elements of our proprietary technology as trade secrets.  Because of our reliance on trade secrets, we are unable to prevent third parties from independently developing technologies that are similar or superior to our technology or from successfully reverse engineering or otherwise replicating our technology.
 
In certain cases, where the disclosure of information required to obtain a patent would divulge critical proprietary data, we may choose not to patent elements of our proprietary technology and processes which we have developed or may develop in the future and instead rely on trade secret laws to protect certain elements of our proprietary technology and processes.  For example, we rely on trade secrets to protect our key polyurethane formulations.  These formulations are critical elements of and central to our proprietary technology.  Our trade secrets could be compromised by third parties, or intentionally or accidentally by our employees.  It is also possible that others will independently develop technologies that are similar or superior to our technology.  Third parties may also legally reverse engineer our products.  Independent development, reverse engineering, or other legal copying of those elements of our proprietary technology that we attempt to protect as trade secrets could enable third parties to benefit from our technologies without compensating us.  The protection of proprietary technology through claims of trade secret status has been the subject of increasing claims and litigation by various companies both in order to protect proprietary rights as well as for competitive reasons, even when proprietary claims are unsubstantiated.  The prosecution of litigation to protect our trade secrets or the defense of such claims is costly and unpredictable given the uncertainty and rapid development of the principles of law pertaining to this area.  We may also be subject to claims by other parties with regard to the use of technology information and data that may be deemed proprietary to others.  The independent development of technologies that are similar or superior to our technology or the reverse engineering of our products by third parties would have a material adverse effect on our business and results of operations.  In addition, the loss of our ability to use any of our trade secrets or other proprietary technology would have a material adverse effect on our business and results of operations.  Because trade secrets do not ensure exclusivity and pose such issues with respect to enforcement, third parties may decline to partner with us or may pay lesser compensation for use of our technology which is protected only by trade secrets.
 
Our business depends on the protection of our patents and other intellectual property and may suffer if we are unable to adequately protect such intellectual property.
 
Our success and ability to compete are substantially dependent upon our intellectual property.  We rely on patent, trademark and copyright laws, trade secret protection and confidentiality or license agreements with our employees, customers, strategic partners and others to protect our intellectual property rights.  However, the steps we take to protect our intellectual property rights may be inadequate.  There are events that are outside of our control that pose a threat to our intellectual property rights as well as to our products and services.  For example, effective intellectual property protection may not be available in every country in which we license our technology or our products are distributed.  Also, the efforts we have taken to protect our proprietary rights may not be sufficient or effective.  Any impairment of our intellectual property rights could harm our business and our ability to compete.  Also, protecting our intellectual property rights is costly and time consuming.  Any increase in the unauthorized use of our intellectual property could make it more expensive to do business and harm our operating results.  In addition, other parties may independently develop similar or competing technologies designed around any patents that may be issued to us.
 
We have been granted a number of U.S. patents relating to certain aspects of our manufacturing technology and use of polyurethane to make tires and we may seek further patents on future innovations.  Our ability to either manufacture products or license our technology is substantially dependent on the validity and enforcement of these patents and patents pending.  We cannot guarantee that our patents will not be invalidated, circumvented or challenged, that patents will be issued for our patents pending, that the rights granted under the patents will provide us competitive advantages or that our current and future patent applications will be granted.
 
Third parties may invalidate our patents.
 
Third parties may seek to challenge, invalidate, circumvent or render unenforceable any patents or proprietary rights owned by or licensed to us based on, among other things:
 
 
·  
subsequently discovered prior art or engineering designs;

 
·  
lack of entitlement to the priority of an earlier, related application; or

 
·  
failure to comply with the written description, best mode, enablement or other applicable requirements.
 
 
United States patent law requires that a patent must disclose the “best mode” of creating and using the invention covered by a patent.  If the inventor of a patent knows of a better way, or “best mode,” to create the invention and fails to disclose it, that failure could result in the loss of patent rights.  Our decision to protect certain elements of our proprietary technologies as trade secrets and to not disclose such technologies in patent applications, may serve as a basis for third parties to challenge and ultimately invalidate certain of our related patents based on a failure to disclose the best mode of creating and using the invention claimed in the applicable patent.  If a third party is successful in challenging the validity of our patents, our inability to enforce our intellectual property rights could seriously harm our business.
 
We may be liable for infringing the intellectual property rights of others.
 
Our products and technologies may be the subject of claims of intellectual property infringement in the future.  Our technologies may not be able to withstand any third-party claims or rights against their use.  Any intellectual property claims, with or without merit, could be time-consuming, expensive to litigate or settle, could divert resources and attention and could require us to obtain a license to use the intellectual property of third parties.  We may be unable to obtain licenses from these third parties on favorable terms, if at all.  Even if a license is available, we may have to pay substantial royalties to obtain it.  If we cannot defend such claims or obtain necessary licenses on reasonable terms, we may be precluded from offering most or all of our products or services and our business and results of operations will be adversely affected.
 
Because our proposed tire products are derived from new technology, our product liability insurance costs will likely increase and we may be exposed to product liability risks that could adversely affect profitability.
 
Even if tests indicate that our tires meet performance standards, or if we decide to revive our highway hire product program and these tires are approved for use, these products may subject us to significant product liability claims because the technology is new and there is little history of on-road use.  Moreover, because our products are and will be used in applications where their failure could result in substantial injury or death, we could also be subject to product liability claims.  Introduction of such new products and increased use of our existing products will most likely increase our product liability premiums and defense of potential claims could increase insurance costs even further, which could substantially increase our expenses.  Any insurance we obtain may not be sufficient to cover the losses incurred through such lawsuits.
 
Significant increases in the price of chemical raw materials, steel and other raw materials used in our products could increase our production costs and decrease our profit margins or make our products less competitive in the marketplace due to price increases.
 
The materials used to produce our products are susceptible to price fluctuations due to supply and demand trends, the economic climate and other unforeseen trends.  With respect to both polyols and isocyanates, worldwide demand is increasing and may exceed current capacity. If we are successful in implementing our business strategy, the quantities of chemical raw materials required by us or by others that utilize our technology may increase significantly. Shortages, if any, may result in chemical price increases. We have experienced increases in the cost of wheel components due to the increased cost of steel, but no supply delays or shortages.  However, we anticipate that we may experience an increase in steel wheel components at such time as the Chinese government cancels any export rebates it may be currently providing Chinese wheel manufacturers.  Our raw materials pricing could increase further in the future.  Because we are introducing products that will compete, in part, on the basis of price, we may be unable to pass cost increases on to our customers.  If we are unable to pass on raw material cost increases to our customers, our future results of operations and cash flow will be materially adversely affected.
 
Our ability to execute our business plan would be harmed if we are unable to retain or attract key personnel.
 
Our polyurethane technology has been developed by a small team and only a limited number of the members of our management team maintain the technical knowledge to produce our products.  Our future success depends, to a significant extent, upon our ability to retain and attract the services of these and other key personnel.  The loss of the services of one or more members of our management team could hinder our ability to effectively manage our business and implement our growth strategies.  Finding suitable replacements could be difficult, and competition for such personnel of similar experience is intense.  We do not carry key person insurance on any of our officers.
 
 
Shareholders and potential investors may experience some difficulty trading our stock since it is only quoted on the National Association of Securities Dealers (NASD) Over the Counter Bulletin Board.

 Our common stock is quoted on NASD OTC Bulletin Board.  As a result, secondary trading of our shares may be subject to certain state imposed restrictions and the ability of individual stockholders to trade their shares in a particular state may be subject to various rules and regulations of that state. A number of states require that an issuer's securities be registered in their state or appropriately exempted from registration before the securities are permitted to trade in that state. Further, our shares may be subject to the provisions of Section 15(g) and Rule 15g-9 of the Exchange Act, commonly referred to as the "penny stock" rule. Broker-dealers who sell penny stocks to persons other than established customers and accredited investors (generally persons with assets in excess of $1,000,000, excluding the value of a principal residence, or annual income exceeding $200,000 by an individual, or $300,000 together with his or her spouse), are subject to additional sales practice requirements.

For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of such securities and must have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the first transaction, of a risk disclosure document relating to the penny stock market. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, and current quotations for the securities. Finally, monthly statements must be sent to clients disclosing recent price information for the penny stocks held in the account and information on the limited market in penny stocks. Consequently, these rules may restrict the ability of broker-dealers to trade and/or maintain a market in our common stock and may affect the ability of stockholders to sell their shares.

ITEM 1B. UNRESOLVED STAFF COMMENTS
 
As of June 30, 2015, we did not have any unresolved comments with the staff of the Securities and Exchange Commission.
 
ITEM 2. PROPERTIES
 
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 square feet, inclusive of approximately 5,500 square feet of office space, situated on approximately 4.15 acres.   The extended lease commenced on July 1, 2015 for the base rent as follows:

 
·  
July 1, 2015 to June 30, 2016: $11,300
 
·  
July 1, 2016 to June 30, 2017: $11,400
 
·  
July 1, 2017 to June 30, 2018: $11,500
 
·  
July 1, 2018 to June 30, 2019: $11,500
 
·  
July 1, 2019 to June 30, 2020: $11,500

All other terms and conditions of the building lease remain in effect.
 
ITEM 3. LEGAL PROCEEDINGS
 
As of June 30, 2015, we were not involved in any legal proceedings.
 
ITEM 4. MINE SAFETY DISCLOSURES

Not applicable. 
 
 
PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 
Our common stock is quoted on the FINRA Over the Counter (“OCT”) Bulletin Board. The following table sets forth for the periods indicated the high and low sale prices of our common stock.  Prices represent inter-dealer quotations without adjustment for retail markups, markdowns or commissions and may not represent actual transactions.

Fiscal year ended June 30,
 
High
   
Low
 
             
2015
           
Fourth Quarter
 
$
0.05
   
$
0.02
 
Third Quarter
 
$
0.08
   
$
0.02
 
Second Quarter
 
$
0.08
   
$
0.03
 
First Quarter
 
$
0.09
   
$
0.03
 
 
2014
           
Fourth Quarter
 
$
0.10
   
$
0.05
 
Third Quarter
 
$
0.10
   
$
0.05
 
Second Quarter
 
$
0.12
   
$
0.05
 
First Quarter
 
$
0.16
   
$
0.08
 
 
The closing price of our common stock on the NASD OTC Bulletin Board on August 10, 2015 was $0.04 per share.  As of August 10, 2015, there were approximately 495 holders of record of our common stock and 41,650,287 shares of common stock outstanding based on information provided by our transfer agent, Interwest Transfer Company, 1981 E. Murray-Holladay Road, Holladay, Utah 84117.

Dividends

We have not paid any dividends on our common stock since our inception and do not anticipate paying any dividends in the foreseeable future.  Any future determination to pay dividends will be at the discretion of our Board of Directors and will be dependent upon then-existing conditions, including our financial condition, results of operations, contractual restrictions, capital requirements, business prospects and other factors our Board of Directors deems relevant.
 
ITEM 6. SELECTED FINANCIAL DATA
 
We are a “Smaller Reporting Company” as defined under §229.10(f)(1) of Regulation S-K and are not required to provide the information required by this Item.
 
ITEM 7. 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.  Factors that could cause or contribute to such differences include, but are not limited to, those discussed in "Part I. Item 1A. Risk Factors" as well as those discussed elsewhere in this report.  The historical results set forth in this discussion and analyses are not necessarily indicative of trends with respect to any actual or projected future financial performance.  This discussion and analysis should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this report.

Overview

Amerityre engages in the research and development, manufacturing and sale of 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 tires 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.  
 
 
Over the past year changes in government regulations have made it difficult to source some raw materials in a cost effective manner. Amerityre has worked with its supplier base to successfully identify suitable replacements for these materials. This effort will continue during FY 2016. As always, Amerityre is committed to being in compliance with all government regulations while ensuring the quality of our products.
  
We are concentrating on three segments of the tire market: closed-cell polyurethane foam tires, polyurethane elastomer forklift tires and agricultural tires. 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. During 2014, we introduced a new low cost formulation positioned to compete within the commodity segment of this market, and we continue to develop new products for this market segment.   Marketing efforts continue to build customer relationships with original equipment manufacturers and further develop distribution networks to expand business and product sales.
 
Polyurethane Elastomer Forklift Tires – During 2014 the forklift product line was reintroduced into the marketplace.  Sales have been below expectations and during FY 2015 a project has been ongoing to source suitable formulation components to replace those that are unavailable, as mentioned above. This new formulation is expected to be completed and introduced to the market during the second half of FY 2016, at which time a new marketing campaign will be launched for this product. 

Agricultural Tires – The pivot tire product continues to demonstrate revenue growth. With market acceptance and growing revenues for this new product, we focused on developing product improvement for the pivot tire including advances in manufacturing.  We continue to work to establish distribution relationships to increase our market penetration in this segment.  Our market knowledge continues to grow as evidenced by several new product designs we have implemented during the period and a new design patent we hold.  This patent will protect the Company’s interest going forward and we anticipate we can bolster future revenues by providing application-specific solutions for customers.

Due to the Company’s limited resources, tire projects which are contingent on additional development, such as composite and automotive tires, have been put on hold and will be revisited at a later date.

As described above, the market segments we are focused on are diverse markets which are unrelated in terms of customer base, product, distribution, market demands and competition. Our sales team is comprised of three 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 has driven more profitable sales for Amerityre.  These initiatives started to be evident in our third quarter 2015 results. During the fourth quarter 2015 Amerityre achieved net income for the quarter for the first time in Company history, supporting our goal to establish “Profitability as a Mindset”.  

Factors Affecting Results of Operations
 
Our operating expenses consisted primarily of the following:
 
 
·  
Cost of sales, which consists primarily of raw materials, components and production of our products, including applied labor costs and benefits expenses, maintenance, facilities and other operating costs associated with the production of our products;

 
·  
Selling, general and administrative expenses, which consist primarily of salaries, commissions and related benefits paid to our employees and related selling and administrative costs including professional fees;

 
·  
Research and development expenses, which consist primarily of contractor and direct labor conducting research and development, equipment and materials used in new product development and product improvement using our technologies;

 
·  
Consulting expenses, which consist primarily of amounts paid to third-parties for outside services;

 
·  
Depreciation and amortization expenses which result from the depreciation of our property and equipment, including amortization of our intangible assets; and

 
·  
Stock based compensation expense related to stock and stock option awards issued to employees and consultants for services performed for the Company.
 
 
Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with United States generally accepted accounting principles.  The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses.  On an ongoing basis, we evaluate our estimates, including those related to uncollectible receivables, inventory valuation, deferred compensation and contingencies.  We base our estimates on historical performance and on various other assumptions that we believe to be reasonable under the circumstances.  These estimates allow us to make judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

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 June 30, 2015, totaling $479,633 with accumulated amortization of $276,923 for a net book value of $202,710. Patent and trademark costs capitalized at June 30, 2014, totaled $590,192 with accumulated amortization of $303,245 for a net book value of $286,947.

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. Included in the total patent and trademark costs are $-0- and $6,207 of patent and trademark costs pending at June 30, 2015 and 2014, respectively, that were not being amortized.  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 $56,283 and $168,743 for the years ended June 30, 2015 and 2014, respectively.

Amortization expense for the years ended June 30, 2015 and 2014 was $31,954 and $49,315 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:

 
·  
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.

Inventory
 
Inventory is stated at the lower of cost (computed on a first-in, first-out basis) or market. 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 June 30, 2015 and 2014 reflect the impact of FASB ASC 718. Stock-based compensation expense recognized under FASB ASC 718 for the fiscal years ended June 30, 2015 and 2014 was $23,706 and $111,973, respectively, related to employee stock options.

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, 2015 and 2014 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:
 
 
·  
Net sales, which consist of product sales;
 
 
·  
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;
 
 
·  
Gross profit, which is an indicator of both competitive pricing pressures and the cost of goods sold of our products and the mix of product and license fees, if any;
 
 
·  
Growth in our customer base, which is an indicator of the success of our sales efforts; and
 
 
·  
Distribution of sales across our products offered.
 
The following summary table presents a comparison of our results of operations for the fiscal years ended June 30, 2015 and 2014 with respect to certain key financial measures.  The comparisons illustrated in the table are discussed in greater detail below.
 
         
Percent
   
Fiscal Year Ended June 30,
   
Change
   
(in 000’s)
     
   
2015
   
2014
   
2015 vs. 2014
Net revenues
 
$
4,794
   
$
4,316
     
11.1
 %
Cost of revenues
   
(3,515
)
   
(3,557
   
(1.2
)%
Gross profit
   
1,279
     
759
     
68.5
 %
Research  and development expenses
   
(201
   
(167
   
20.4
 %
Sales and marketing expense
   
(557
   
(471
   
18.3
 %
General and administrative expense (1)
   
(819
   
(1,020
   
(19.7
)%
Gain on extinguishment of long term payable
   
63
     
-
     
100.0
 %
Loss on sales of assets
   
(63
   
(251
)
   
(74.9
)%
Other expense
   
(1
   
(120
)
   
(99.2
)%
Net loss
   
(299
   
(1,270
)
   
(76.5
)%
Preferred stock dividend
   
(100
   
(25
   
300.0
 %
Net loss attributable to common shareholders
 
$
(399
 
$
(1,295
   
(69.2
)%

(1)  Includes stock-based compensation expense of $23,706 and $111,973 for the fiscal years ended June 30, 2015 and 2014, respectively.
 
 
 Year Ended June 30, 2015 Compared to the Year Ended June 30, 2014
 
Net revenues.   Net revenues of $4,793,737 for the year ended June 30, 2015, represents a $477,676 or 11.1% increase over net revenues of $4,316,061 the year ended June 30, 2014. Sales between periods increased largely due to increases in the agricultural product line offset by a large long term customer not placing its customary order in the third quarter.  This client is restructuring its product line and we anticipate future sales to the client in our next fiscal year.

Cost of revenues.  Cost of revenues for the year ended June 30, 2015 was $3,514,608 or 73.3% of revenues compared to $3,556,579 or 82.4% of revenues for the year ended June 30, 2014. Cost of revenues decreased due to decreases in raw materials and overhead offset by higher direct labor when compared to the prior year. 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 year ended June 30, 2015 of $1,279,129 represents a 68.5% increase over gross profit of $759,482 for the year ended June 30, 2014. The fiscal 2015 gross profit reflects a 26.7% gross margin for product sales compared to a gross margin on product sales of 17.6% for fiscal 2014.
 
Research and development expenses.  Research and development expenses for the year ended June 30, 2015 were $200,753, a 20.4% increase in the research and development expenses for the year ended June 30, 2014 of $166,890.  The $33,863 increase between periods is primarily due to increased expenditures on product formulation research and product testing.  All other expenses were generally consistent.

Sales and marketing expenses.  Sales and marketing expense of $556,843 for the year ended June 30, 2015 represents an 18.3% increase over the same expenses of $470,575 for the year ended June 30, 2014. Sales and marketing expenses increased $86,268 between periods primarily due higher commissions to sales representatives, higher trade show expense and higher print advertising expense for our products. All other expenses were generally consistent.

General and administrative expenses. General and administrative expenses of $819,899 for the year ended June 30, 2015 represent a 19.7% decrease over the same expense of $1,020,814 for the year ended June 30, 2014.  General and administrative expenses decreased $200,915 or 19.7% between periods primarily due to savings in salaries and wages, lower stock based compensation, lower depreciation, lower bank fees, lower director and officer travel and lower bad debt expense offset by increases in consulting and accounting expenses.  All other expenses were generally consistent.

Other Income/ (Expense).  Other expense for the year ended June 30, 2015 was $995 compared to $370,866 for the year ended June 30, 2014. Other expense decreased $369,871 between periods due to our ability to pay off all unsecured notes and short-term borrowings in 2014, resulting in no cost of debt in the current period.  Additionally, in the current period we were able to write off a long term payable under the Nevada Statute of Limitations which offset the current year loss on asset disposals.

Net loss.  The net loss for the year ended June 30, 2015 of $299,361 represents a 76.5% improvement from the net loss for the year ended June 30, 2014 of $1,269,663.  However, net loss to common shareholders of $399,361 represents a 69.3% decrease when compared to the same period in 2014 due to the preferred share dividend.

The following summary table presents a comparison of our results of operations for the three months ended June 30, 2015 and 2014 with respect to certain key financial measures.  The following analysis is provided so that a reader of this management discussion and analysis can see the known trends discussed in other areas of this Item 7 and enable the reader to compare quarterly data provided in the Company’s interim financial reporting throughout fiscal year 2015:
 
         
Percent
   
Three Mos. Ended June 30,
   
Change
   
(in 000’s)
     
   
2015
   
2014
   
2015 vs. 2014
Net revenues
 
$
1,222
   
$
849
     
43.9
 %
Cost of revenues
   
(826
)
   
(717
)
   
15.2
 %
Gross profit
   
396
     
132
     
200.0
 %
Research  and development expenses
   
(45
)
   
(41
)
   
9.8
 %
Sales and marketing expense
   
(130
)
   
(119
)
   
9.2
 %
General and administrative expense (1)
   
(182
)
   
(360
)
   
(49.2
)%
Gain on extinguishment of long term payable
   
63
     
-
     
100.0
 %
Loss on sales of assets
   
(63
)
   
(249
)
   
(74.7
)%
Other income
   
-
     
4
     
(100.0
)%
Net income (loss)
   
39
     
(633
)
   
(106.2
)%
Preferred stock dividend
   
(25
   
(25
)
   
0.0
 %
Net income (loss) attributable to common shareholders
 
$
14
   
$
(658
)
   
(102.2
)%

(1)  Includes stock-based compensation expense of $5,068 and $56,207 for the three months ended June 30, 2015 and 2014, respectively.
 
 
Additionally, although our sales no longer show strong seasonality trends, the first quarter of each of our fiscal years has traditionally been our weakest quarter and we do not anticipate this trend to change in 2016.  The primary driver for this weakness is lower pivot tire sales during crop growing season.

Liquidity and Capital Resources
 
Our principal sources of liquidity consist of cash and payments received from our customers.  We do not have any significant 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.   Management continues to evaluate financing options but are 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.

As we have historically not succeeded in establishing favorable short term financing, 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 June 30, 2015 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 adjusting credit limits to allow for increased sales volume.
 
Cash Flows
 
The following table sets forth our cash flows for the fiscal years ended June 30, 2015 and 2014.
 
   
Years ended June 30,
 
   
(in 000’s)
 
   
2015
   
2014
 
Net cash used in operating activities
 
$
(143
)
 
$
(781
)
Net cash used in investing activities
   
(52
)
   
(46
)
Net cash (used in)/provided by financing activities
   
(78
)
   
1,447
 
Net (decrease) increase in cash and cash equivalents during period
 
$
(273
)
 
$
620
 
 
Net Cash Used By Operating Activities. Our primary sources of operating cash during fiscal 2015 came from the sale of inventory, offset by an increased accounts receivable and prepaid balances, and payment on vendor accounts at June 30, 2015.  Net cash used by operating activities was $143,210 for the year ended June 30, 2015 compared to $780,617 for the same period in 2014.
 
Non-cash items include depreciation and amortization, stock based compensation, write off of deferred financing costs, accretion of debt discount, gain on extinguishment of a long term payable and a loss on disposal of assets.  Our net loss was $299,361 for the year ended June 30, 2015 compared to a net loss of $1,269,663 for the same period in 2014.  The net loss for fiscal 2015 included non-cash expenses for stock-based compensation (both stock issued and options) of $28,853 and loss on disposal of assets of $62,731 offset by gain on extinguishment of a long term payable of $62,500.  In fiscal 2014, stock-based compensation (both stock issued and options) totaled $180,973, accretion of debt discount was $40,970, loss on disposal of assets was $250,845 and the write off of deferred financing costs was $40,000.
 
Net Cash Used In Investing Activities.  Net cash used by investing activities was $52,065 for the year ended June 30, 2015 and $46,448 for the same period in 2014.  The primary use of cash from investing activities for the year ended June 30, 2015 relate to the acquisition of property and equipment of $55,840, plus additional patent costs of $4,000, offset by proceeds from the sale of assets of $7,775.

Net Cash Provided by Financing Activities.  During the fiscal year ended June 30, 2015, the primary use of cash for financing activities was the dividend related to our 2013 Series Convertible Preferred Stock issuance.  The Company’s primary source of cash from financing activities as of June 30, 2014 were the net proceeds from sale of 2013 Series Convertible Preferred Stock of $1,980,478 plus $355,182 from unsecured note payables offset by the use of cash for the redemption of convertible secured notes of $100,000 and payment of notes payable of $767,257.
 
 
Contractual Obligations and Commitments
 
The following table summarizes our contractual cash obligations and other commercial commitments at June 30, 2015.
 
   
Payments due by period
 
   
Total
   
Less than
1 year
   
1 to 3 years
   
3 to 5 years
   
After
5 years
 
       
Facility lease (1)
 
$
686,400
   
$
135,600
   
$
274,800
   
$
276,000
   
$
-
 
                                         
Total contractual cash obligations
 
$
686,400
   
$
135,600
   
$
274,800
   
$
276,000
   
$
-
 
 
(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.

Cash Position, Outstanding Indebtedness, and Future Capital Requirements

At August 10, 2015, our total cash balance was $260,946 none of which is restricted; accounts receivables, net of reserves for bad debt, was $359,409; and inventory, net of reserves for slow moving or obsolete inventory, and other current assets was $856,282. Our total indebtedness was $329,704 and includes $182,839 in accounts payable, $60,170 in accrued expenses, $13,518 in current portion of long-term debt, $19,337 in capital lease liability and $53,840 in long-term debt.

Over the past year, we have been working on various proposals to secure short-term loans as well as long-term bank financing and equity based investments. The Company currently does not have an existing credit facility. 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 are intent on focusing on the sale and distribution of profitable product lines. Although, management continues to look for further financing facilities at affordable terms that will allow the Company to maintain sufficient raw material and finished goods inventory to capitalize on sales growth opportunities, no additional capital expenditures are anticipated over the next twelve months unless they support sales development and product improvement.  We continue to work to reduce our overall costs wherever possible.

To help address our cash resources, which at times may be limited, we are in discussions with various third parties about potential opportunities to license our technology which we believe will bring in additional cash flows without diluting our common stock or requiring the addition of debt. We are in discussions with banks and other lenders regarding establishing a line of credit for short term cash needs, however at this time we have not succeeded in establishing such a line of credit.  Lastly, we have 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.

At the Annual Stockholder’s Meeting held on December 4, 2014, management presented a plan focusing on “Profitability as a Mindset”.  To that end, management continues to sharpen our sales model and continues to add sales resources. The result of the Company’s emphasis on proper product pricing and new marketing campaigns has driven more profitable sales for Amerityre, which started to be evident in our third quarter 2015 results and became realized in our fourth quarter results.  Fourth quarter 2015 resulted in net income for the quarter for the first time in Company history.  Overall these changes are supporting our goal in establishing “Profitability as a Mindset” and management and the Company’s Board of Directors are committed to this trend. 

As of August 10, 2015 the Company has approximately 7,064,000 shares authorized and available for issuance. Although we are reluctant to raise money through stock sales at what we believe are dilutive share prices, these authorized but unissued and unreserved shares of our common stock can be utilized if necessary to fund the expansion of our manufacturing operations or to obtain additional working capital.
 
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 year ended June 30, 2015, 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.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a “Smaller Reporting Company” as defined under §229.10(f)(1) of Regulation S-K and are not required to provide the information required by this Item.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our financial statements required by this item are included on the pages immediately following the Index to Financial Statements appearing on page F-1.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There have been no changes in our independent accountants, HJ & Associates, LLC, or disagreements with them on matters of accounting or financial disclosure.

ITEM 9A. CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive and Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive and Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, our management, including our Chief Executive and Financial Officer, concluded that the design and operation of these disclosure controls and procedures were effective at the reasonable assurance level. There has been no change in our internal controls over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
 
 
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
 
The Company’s management is responsible for the preparation and integrity of our published financial statements. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and, accordingly, include amounts based on judgments and estimates made by our management. The Company’s management also prepared the other information included in the annual report and is responsible for its accuracy and consistency with the financial statements.

The Company’s management is responsible for establishing and maintaining a system of internal control over financial reporting, which is intended to provide reasonable assurance to our management and the Board of Directors regarding the reliability of our financial statements. The system includes but is not limited to:
 
 
·  
a documented organizational structure and division of responsibility;

 
·  
established policies and procedures, including a code of conduct to foster a strong ethical climate which is communicated throughout the company;

 
·  
regular reviews of our financial statements by qualified individuals; and

 
·  
the careful selection, training and development of our people.
 
There are inherent limitations in the effectiveness of any system of internal control, including the possibility of human error and the circumvention or overriding of controls. Also, the effectiveness of an internal control system may change over time. We have implemented a system of internal control that was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles.
 
The Company’s management has assessed our internal control system in relation to criteria for effective internal control over financial reporting described in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Based on its assessment, the Company’s management has concluded that, as of June 30, 2015, the Company’s system of internal controls over financial reporting was effective to provide reasonable assurance based on those criteria.  The Company used the 1992 version of the COSO framework, primarily in relation to the control activities section of the framework, while addressing our assessment over internal controls and we will be modifying this in light of the 2015 framework in fiscal year 2016.
 
This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the company to provide only management's report in this annual report.

ITEM 9B. OTHER INFORMATION

None.
 
 
PART III
 
The information called for by Part III of Form 10-K (Item 10—Directors, Executive Officers and Corporate Governance of the Registrant, Item 11—Executive Compensation, Item 12—Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, Item 13—Certain Relationships and Related Transactions, and Director Independence, and Item 14—Principal Accounting Fees and Services) is incorporated by reference from our Proxy Statement related to our 2015 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission not later than October 28, 2015 (120 days after the end of the fiscal year covered by this Annual Report on Form 10-K).
 
 
 
 
 
 
 
PART IV
 
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)           Documents filed with this report.

1.           Financial Statements:
See Index to Financial Statements on page F-1

2.           Financial Statement Schedules:
Financial statement schedules are omitted because they are not required or are not applicable or the required information is shown in the financial statements or notes thereto.

3.           Exhibits:
The exhibits to this report are listed on the Exhibit Index below.
 
(b)           Description of exhibits
 
Exhibit
   
Number
 
Description
3.1
 
Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.01 to our registration statement on Form 8-A12G (File No. 000-50053)).
3.2
 
Certificate of Amendment to the Articles of Incorporation of the Company (incorporated by reference to Exhibit 3(i) in our Form 10Q for the quarter ended December 31, 2014 (File No. 000-50053)).
3.3
 
Bylaws of the Company (incorporated by reference to our Form 8K dated September 25, 2014 (File No. 000-50053).
10.1
 
31.1
 
31.2    Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.1
 
32.2    Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
101 INS
 
XBRL Instance Document
     
101 SCH
 
XBRL Taxonomy Extension Schema Document
     
101 CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
     
101 DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
     
101 LAB
 
XBRL Taxonomy Extension Label Linkbase Document
     
101 PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document
 
 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated:  August 31, 2015
 
AMERITYRE CORPORATION
     
By:
     
/s/ Michael F. Sullivan
 
/s/ Lynda R. Keeton-Cardno
 
Michael F. Sullivan
Chief Executive Officer
(Principal Executive Officer)
 
Lynda R. Keeton-Cardno
Chief Financial Officer
(Principal Financial and Accounting Officer)
 
 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on the 31st day of August 2015.
 
/s/ Timothy L. Ryan
 
/s/ John J. Goldberg
 
Timothy L. Ryan
Chairman of the Board
 
 
John J. Goldberg
Director
 
       
/s/ Glenn D. Bougie
 
/s/ Gary M. Tucker
 
Glenn D. Bougie
Director
 
Gary M. Tucker
Director
 
 

/s/ Michael F. Sullivan
 
/s/ Terry Gilland
 
Michael F. Sullivan
Director
 
Terry Gilland
Director
 
 
 
AMERITYRE CORPORATION

INDEX TO FINANCIAL STATEMENTS
 
 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors
Amerityre Corporation
Boulder City, Nevada
 
We have audited the accompanying balance sheets of Amerityre Corporation as of June 30, 2015 and 2014, and the related statements of operations, stockholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Amerityre Corporation as of June 30, 2015 and 2014, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
 
/s/ HJ & Associates, LLC
Salt Lake City, Utah
August 31, 2015 
 
 
 
 
AMERITYRE CORPORATION
Balance Sheets
 
   
June 30, 2015
   
June 30, 2014
 
ASSETS
           
             
CURRENT ASSETS
           
  Cash
 
$
455,717
   
$
728,585
 
  Accounts receivable - net
   
314,054
     
384,160
 
  Accounts receivable - related party - net
   
6,312
     
17,089
 
  Current Inventory - net
   
661,129
     
770,991
 
  Prepaid and other current assets
   
27,860
     
39,631
 
     Total Current Assets
   
1,465,072
     
1,940,456
 
                 
PROPERTY AND EQUIPMENT
               
  Leasehold improvements
   
153,543
     
162,683
 
  Molds and models
   
572,894
     
824,979
 
  Equipment
   
2,937,922
     
2,966,649
 
  Furniture and fixtures
   
74,921
     
105,622
 
  Construction in progress
   
-
     
975
 
  Software
   
305,924
     
311,632
 
  Less – accumulated depreciation
   
(3,735,744
)
   
(3,915,542
)
     Total Property and Equipment
   
309,460
     
456,998
 
                 
OTHER ASSETS
               
  Patents and trademarks – net
   
202,710
     
286,947
 
  Non-current inventory
   
186,560
     
-
 
  Deposits
   
11,000
     
11,000
 
     Total Other Assets
   
400,270
     
297,947
 
TOTAL ASSETS
 
$
2,174,802
   
$
2,695,401
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
           
             
CURRENT LIABILITIES
           
  Accounts payable and accrued expenses
 
$
438,680
   
$
617,678
 
  Current portion of long-term debt
   
13,608
     
16,013
 
     Total Current Liabilities
   
452,288
     
633,691
 
                 
  Long-term debt
   
53,840
     
53,840
 
TOTAL LIABILITIES
   
506,128
     
687,531
 
                 
COMMITMENTS AND CONTINGENCIES  
               
                 
STOCKHOLDERS’ EQUITY
               
  Preferred stock: 5,000,000 shares authorized of $0.001 par value, 2,000,000 and 2,000,000 shares issued and outstanding, respectively
   
2,000
     
2,000
 
  Common stock: 75,000,000 shares authorized of $0.001 par value, 41,570,287 and 41,441,620 shares issued and outstanding, respectively
   
41,570
     
41,441
 
  Additional paid-in capital
   
62,515,856
     
62,455,820
 
  Accumulated deficit
   
(60,890,752
)
   
(60,491,391
)
     Total Stockholders’ Equity
   
1,668,674
     
2,007,870
 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
$
2,174,802
   
$
2,695,401
 
 
The accompanying notes are an integral part of these financial statements. 
 
 
AMERITYRE CORPORATION
Statements of Operations
 
   
For the Years Ended June 30,
 
   
2015
   
2014
 
             
NET SALES
 
$
4,793,737
   
$
4,316,061
 
                 
COST OF REVENUES
   
3,514,608
     
      3,556,579
 
                 
GROSS PROFIT
   
1,279,129
     
759,482
 
                 
EXPENSES
               
 Research and development
   
200,753
     
166,890
 
 Sales and marketing
   
556,843
     
470,575
 
 General and administrative
   
819,899
     
1,020,814
 
                 
   Total Expenses
   
1,577,495
     
1,658,279
 
                 
LOSS FROM OPERATIONS
   
(298,366
)
   
(898,797
)
                 
OTHER INCOME/(EXPENSE)
               
  Interest expense
   
-
     
(92,979
)
  Write-off of deferred financing costs
   
-
     
(40,000
)
  Gain on extinguishment of long term payable
   
62,500
        -
 
  Loss on disposal of assets
   
(62,731
)
   
(250,845
)
  Other (loss) income
   
(764
)
   
12,958
 
                 
   Total Other Expense
   
(995
)
   
(370,866
)
                 
NET LOSS
   
(299,361
)
   
(1,269,663
)
                 
  Preferred Stock Dividend
   
(100,000
)
   
(25,000
)
                 
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS
 
$
(399,361
)
 
$
(1,294,663
)
                 
BASIC AND DILUTED LOSS PER SHARE
 
$
(0.01
)
 
$
(0.03
)
                 
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
   
41,494,497
     
40,012,990
 
 
The accompanying notes are an integral part of these financial statements.
 
 
AMERITYRE CORPORATION
Statements of Stockholders’ Equity
 
   
Preferred Stock
   
Common Stock
   
Additional Paid in
   
Accumulated
 
   
Shares
   
Amount
   
Shares
   
Amount
   
Capital
   
Deficit
 
Balance, June 30, 2013
   
-
   
$
-
     
39,741,620
   
$
39,741
   
$
60,213,599
   
$
(59,196,728
)
Common stock issued for cash at $0.07 per share
   
-
     
-
     
50,000
     
50
     
3,450
     
-
 
2013 Series Convertible preferred stock issued at $1 per share, net of offering costs
   
2,000,000
     
2,000
     
-
     
-
     
1,978,478
     
-
 
Common stock issued for services at $0.08 per share
   
-
     
-
     
500,000
     
500
     
39,500
     
-
 
Common stock issued to directors for services at $0.06 per share
   
-
     
-
     
1,150,000
     
1,150
     
67,850
     
-
 
Preferred stock dividends
   
-
     
-
     
-
     
-
     
-
     
(25,000
)
Stock option based compensation expense for board and employee service
   
-
     
-
     
-
     
-
     
111,973
     
-
 
Warrant expense
   
-
     
-
     
-
     
-
     
40,970
     
-
 
Net loss for the year ended June 30, 2014
   
-
     
-
     
-
     
-
     
-
     
(1,269,663
)
Balance, June 30, 2014
   
2,000,000
     
2,000
     
41,441,620
     
41,441
     
62,455,820
     
(60,491,391
)
Preferred stock dividends
   
-
     
-
     
-
     
-
     
-
     
(100,000
)
2013 Series Convertible preferred stock offering costs
   
-
     
-
     
-
     
-
     
(188
)
   
-
 
Common stock issued for services at $0.04 per share
   
-
     
-
     
128,667
     
129
     
5,018
     
-
 
Reversal of deferred financing fees
   
-
     
-
     
-
     
-
     
31,500
     
-
 
Stock option based compensation expense for employee service
   
-
     
-
     
-
     
-
     
23,706
     
-
 
Net loss for the year ended June 30, 2015
   
-
     
-
     
-
     
-
     
-
     
(299,361
)
Balance, June 30, 2015
   
2,000,000
   
$
2,000
     
41,570,287
   
$
41,570
   
$
62,515,856
   
$
(60,890,752
)

The accompanying notes are an integral part of these financial statements. 
 
 
AMERITYRE CORPORATION
Statements of Cash Flows
 
   
For the Years Ended June 30,
 
   
2015
   
2014
 
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net Loss
 
$
(299,361
)  
$
(1,269,663
)
Adjustments to reconcile net loss to net cash used by operating activities:
               
Depreciation and amortization expense
   
221,109
     
224,150
 
Change in allowance for bad debt expense (recovery)
   
(7,777
)    
7,317
 
Stock based compensation related to director and employee stock options
   
23,706
     
111,973
 
Stock paid for services
   
5,147
     
69,000
 
Accretion of discount on convertible note
   
-
     
40,970
 
Write off of deferred financing costs
   
-
     
40,000
 
Gain on extinguishment of long term payable
   
(62,500
)
   
-
 
Loss on disposal of assets
   
62,731
     
250,845
 
Changes in operating assets and liabilities:
               
Accounts receivable
   
88,660
     
(43,651
)
Prepaid and other current assets
   
11,771
     
75,139
 
Inventory and change in inventory reserve
   
(76,696
)
   
(216,424
)
Accounts payable and accrued expenses
   
(85,000
)
   
(95,273
)
       Net Cash Used by Operating Activities
   
(118,210
)
   
(805,617
)
CASH FLOWS FROM INVESTING ACTIVITIES
               
   Purchase of property and equipment
   
(55,840
)
   
(46,448
)
   Cash paid for patents and trademarks
   
(4,000
)
   
-
 
   Proceeds from the sale of assets
   
7,775
     
-
 
       Net Cash Used by Investing Activities
   
(52,065
)
   
(46,448
)
CASH FLOWS FROM FINANCING ACTIVITIES
               
   Proceeds from the issuance of unsecured note payables
   
-
     
355,182
 
   Redemption of convertible note payables
   
-
     
(100,000
)
   Payments on notes payable
   
(2,405
)
   
(767,257
)
   Proceeds from sale of common stock
   
-
     
3,500
 
   Proceeds from sale of preferred stock, net of offering costs
   
(188
)
   
1,980,478
 
   Preferred stock dividends
   
(100,000
)
   
-
 
       Net Cash Used by Financing Activities
   
(102,593
)
   
1,471,903
 
NET (DECREASE) INCREASE IN CASH
   
(272,868
)
   
619,838
 
CASH AT BEGINNING OF YEAR
   
728,585
     
108,747
 
CASH AT END OF YEAR
 
$
455,717
   
$
728,585
 
 
NON-CASH FINANCING ACTIVITIES
               
                 
   Interest paid
 
$
4,363
   
$
60,391
 
   Income taxes paid
 
$
-
   
$
-
 

SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES
           
             
Write off of accounts receivable previously allowed for
 
$
7,296
   
$
-
 
Property and equipment reclassifications within property and equipment category
  to correct properly classification of assets
 
$
-
   
$
31,857
 
Removal of fully depreciated fixed assets
 
$
368,953
   
$
10,000
 
Expired or retired patents
 
$
58,276
   
$
-
 
Reversal of deferred financing fees
 
$
31,500
   
$
-
 
Accrual of preferred share dividends
 
$
-
   
$
25,000
 

The accompanying notes are an integral part of these financial statements.
 
 
AMERITYRE CORPORATION
Notes to the Financial Statements
June 30, 2015 and 2014

NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Amerityre Corporation (the “Company”) incorporated as a Nevada corporation on January 30, 1995 under the name American Tire Corporation and changed its name to Amerityre Corporation in December 1999.  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 manufacturing 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.

Reclassifications

Certain reclassifications, which have no effect on net loss, have been made in the prior period financial statements, specifically the recognition of the preferred share dividend as a non-cash transaction at June 30, 2014.

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.

Concentrations of Risk

The Company maintains several accounts with financial institutions.  Currently, the accounts are insured by the Federal Deposit Insurance Corporation up to $250,000.

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 three customers who accounted for 27% of our sales for the year ended June 30, 2015 and two customers who accounted for 21% of our sales for the year ended June 30, 2014.

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, 2015 and 2014, 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, 2015 and 2014, the reserve for uncollectible accounts was $289 and $15,362, respectively.

  
AMERITYRE CORPORATION
Notes to the Financial Statements
June 30, 2015 and 2014

Inventory

Inventory is stated at the lower of cost (computed on a first-in, first-out basis) or market.  The inventory consists primarily of chemicals, finished goods produced in our plant and products purchased for resale.
 
   
2015
   
2014
 
Raw materials
 
$
302,910
   
$
358,725
 
Finished goods
   
655,714
     
525,722
 
Inventory reserve
   
(110,935
)
   
(113,456
)
Inventory – net (current and long term)
 
$
847,689
   
$
770,991
 

Our inventory reserve reflects items that were deemed to be defective or obsolete based on an analysis of all inventories on hand.

In fiscal year 2015, 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.  This change in methodology did not materially affect the total components of our inventory classification as presented above.

Property and Equipment

Property and equipment are stated at cost. 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. Depreciation 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, 2015 and 2014 was $189,155 and $205,289, respectively.

Patents and Trademarks

Patent and trademark costs have been capitalized at June 30, 2015, totaling $479,633 with accumulated amortization of $276,923 for a net book value of $202,710. Patent and trademark costs capitalized at June 30, 2014, totaled $590,192 with accumulated amortization of $303,245 for a net book value of $286,947.

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. Included in the total patent and trademark costs are $-0- and $6,207 of patent and trademark costs pending at June 30, 2015 and 2014, respectively, that were not being amortized.  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 $56,283 and $168,743 for the years ended June 30, 2015 and 2014, respectively.

 
AMERITYRE CORPORATION
Notes to the Financial Statements
June 30, 2015 and 2014

Amortization expense for the years ended June 30, 2015 and 2014 was $31,954 and $49,315 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, 2015 is as follows:
 
2015
 
$
27,331
 
2016
 
$
27,297
 
2017
 
$
22,304
 
2018
 
$
20,962
 
2019
 
$
16,653
 

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, 2015 and 2014 reflect the impact of FASB ASC 718. Stock-based compensation expense recognized under FASB ASC 718 for the fiscal years ended June 30, 2015 and 2014 was $23,706 and $111,973, respectively, related to employee stock options.

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, 2015 and 2014 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.

The Company’s outstanding stock options, warrants, and shares issuable upon conversion of outstanding convertible notes have been excluded from the diluted net loss per share calculation. The Company excluded a total of 2,770,000 and 2,254,000 common stock equivalents for the years ended June 30, 2015 and 2014, respectively because they are anti-dilutive.
 
 
AMERITYRE CORPORATION
Notes to the Financial Statements
June 30, 2015 and 2014
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, 2015 and 2014:

   
2015
   
2014
 
Deferred tax assets:
               
  NOL carryover
 
$
17,035,800
   
$
16,930,200
 
  Section 1231 loss carryover
   
24,900
     
  900
 
  Allowance for doubtful accounts
   
100
     
6,000
 
  Related party accruals
   
-
     
24,400
 
  Inventory reserve
   
38,800
     
44,200
 
  R & D carryover
   
221,600
     
195,400
 
  Accrued vacation
   
(7,600
   
  5,900
 
Deferred tax liabilities:
               
  Depreciation
   
(11,400
   
  (44,300
)
Valuation allowance
   
(17,302,200
   
  (17,162,700
)
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, 2015 and 2014 due to the following:
 
   
2015
   
2014
 
Book loss
 
$
(104,800
)
 
$
(495,200
Depreciation
   
39,400
     
  54,300
 
Meals & entertainment
   
2,800
     
  3,300
 
Nondeductible expenses
   
17,100
     
 102,200
 
Accrued vacation
   
(2,200
)
   
  1,300
 
Inventory reserve
   
(900
)
   
  20,000
 
Receivable reserve
   
(5,300
)
   
  2,900
 
Related party accruals
   
     (21,900
   
-
 
Loss on asset disposal
   
10,400
     
  71,000
 
                 
Valuation allowance
   
65,400
     
  240,200
 
   
$
-
   
$
-
 
 
At June 30, 2015, the Company had net operating loss carry-forwards of approximately $42,948,000 that may be offset against future taxable income from the year 2016 through 2035. No tax benefit has been reported in the June 30, 2015 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

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, 2015 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 2011.
 
 
AMERITYRE CORPORATION
Notes to the Financial Statements
June 30, 2015 and 2014

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.

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

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. License fee revenue is recognized as earned, and no revenue is recognized until the inception of the license term.

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.

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. In the past the Company estimated its warranty reserve based on historical experience with warranty claims and returns for defective items.  Because the Company has experienced limited items through the warranty process, in fiscal year 2015 the Company changed to actual, instead of estimated, warranty recognition.  This change in accounting principle did not have a material impact on the Company’s financial statements and as of June 30, 2015 and 2014, the Company had no estimated warranty reserves accrued.
 
Advertising

The Company follows the policy of charging the costs of advertising to expense as incurred.  Advertising expense for the years ended June 30, 2015 and 2014 was $28,606 and $5,128, 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.

Related Party Transactions
 
Amerityre’s Chairman of the Board, Timothy L. Ryan, is also the principal owner of Rhino Rubber LLC, a manufacturing and distribution company for solid industrial tires and wheels.  During fiscal 2015 and fiscal 2014, Rhino Rubber LLC purchased a total of $9,633 and $9,668, respectively, in tire products from Amerityre.  As of June 30, 2015 and 2014, the accounts receivable balances for Rhino Rubber LLC were $6,312 and $17,089, respectively.  The terms and conditions of those related-party sales transactions were the same as those afforded to any of Amerityre’s customers.
 
 
AMERITYRE CORPORATION
Notes to the Financial Statements
June 30, 2015 and 2014
 
We currently distribute directly from our manufacturing facility in Boulder City, Nevada and from Rhino Rubber in Akron, Ohio.  Costs for these services were limited to freight, shipping and labor for mounting services.  The Company pays $600 a month to Rhino Rubber.

Recent Accounting Pronouncements

Adopted

In August 2014, the FASB issued ASU 2014-15 Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The new standard provides guidance around management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company has elected to early adopt the provisions of ASU 2014-10 for these financial statements.

Issued

In January 2015, the FASB issued ASU 2015-01, “Income Statement – Extraordinary and Unusual Items (Subtopic 225-20),” which eliminates the concept of extraordinary items. The new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2015. The new guidance is to be applied prospectively but may also be applied retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. We expect to adopt the provisions of this new guidance on July 1, 2016. We do not expect the adoption of the new provisions to have a material impact on our financial condition or results of operations.

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

In years prior to 2014, the Company engaged in a variety of debt via notes payable and short term borrowings, all of which had been fully paid off as of June 30, 2014, except the following.

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, 2015, $13,608 and $53,840 (2014 $16,013 and $53,840) were recorded for the current and long-term portion, respectively, of the related liability.
 
NOTE 3 – COMMITMENTS AND CONTINGENCIES

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.
 
   
Payments due by period
 
   
Total
   
Less than
1 year
   
1 to 3 years
   
3 to 5 years
   
After
5 years
 
       
Facility lease
 
$
686,400
   
$
135,600
   
$
274,800
   
$
276,000
   
$
-
 
                                         
Total contractual cash obligations
 
$
686,400
   
$
135,600
   
$
274,800
   
$
276,000
   
$
-
 
 
Rent expense for the years ended June 30, 2015 and 2014 was $132,000 and $132,000, respectively.
 
 
AMERITYRE CORPORATION
Notes to the Financial Statements
June 30, 2015 and 2014
 
NOTE 4 – STOCK TRANSACTIONS

During the years ended June 30, 2015 and 2014, the Company had the following stock transactions:

In December 2013, we executed a Commitment Letter with a private lender commencing negotiations for a $1,000,000 line of credit. Under the terms of the Commitment Letter, the board of directors authorized the issuance of 500,000 shares of common stock to the lender as commitment fees. The total value of the shares issued was $40,000 based on the market closing price on the authorization date of $0.08 per share.

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 to the Company’s common stock at a ratio of ten shares of common stock for each share of the 2013 Series Shares (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.  Lastly, the 2013 Series Shares contain a quarterly cash dividend rate of 1.25% of the original issuance price of $1.00 per share.

The 2013 Series Shares were offered and sold in reliance on the exemption from registration under Securities and Exchange Commission Rule 506, Regulation D.  As of the close of the private placement on April 8, 2014, the Company had received cash deposits and issued a stock certificate for the purchase of all 2,000,000 of the 2013 Series Shares.  As of June 30, 2014, proceeds from the private placement of the 2013 Series Shares were $1,980,478, net of issuance costs of $19,522.  The Company also recognized an additional $188 in issuance costs as of June 30, 2015.  No underwriter participated in the placement and no commissions were paid.

During the second quarter of fiscal year 2015, we granted a consultant 128,667 common shares valued at $0.04 per share ($5,147) for work performed related to sales of our products in the three month period ending December 31, 2014.  These shares were issued in January 2015.

Lastly, in a prior period we had accrued deferred financing costs related to a private placement stock campaign.  Upon further investigation the accrual was in error and reversed in the second quarter of fiscal 2015, resulting in an increase to additional paid in capital of $31,500.

NOTE 5 – STOCK OPTIONS AND WARRANTS

General Option Information

On July 6, 2011, the Board of Directors cancelled the “2004 Non-Employee Directors’ Stock Incentive Plan” and approved the "Directors’ 2011 Stock Option and Award Plan”.   Under the 2011 Plan, a total of 3,300,000 shares are authorized for issuance.  

The Company also maintained the 2005 Stock Option and Award Plan, which was previously approved by shareholders, for the purpose of granting option awards to its employees and consultants.   This plan had a 10 year life and expired July 2015.

On August 10, 2015, the Board of Directors cancelled the “Directors’ 2011 Stock Option and Award Plan” as all options under this plan had been granted and adopted the “2015 Omnibus Stock Option and Award Plan” which contains provisions for up to 3,000,000 stock options to be granted to employees, consultants and directors.

Prior Issuances of options

In July 2011, each non-executive director is eligible to receive (therefore granted), based on their length of service, options to purchase a total of 300,000 shares at that day’s closing price, $0.17.  Any options issued will vest over a three year service period as follows: 100,000 on June 30, 2012, 100,000 on June 30, 2013 and 100,000 on June 30, 2014.  These options expire two years after vesting.  The Director who serves as Audit Chair during the fiscal year received an additional 50,000 options per year under the same terms.  In June 2014, 1,450,000 options, representing 650,000 share options from the 2012 service period, 400,000 share options from the 2013 service period and 400,000 from the 2014 service period were extended for 5 years.  In accordance with the Stock Compensation topic of the FASB ASC, the Company analyzed the transaction and determined that there was incremental compensation cost which is included in the Company’s total stock based compensation expense.
 
 
AMERITYRE CORPORATION
Notes to the Financial Statements
June 30, 2015 and 2014

Also in July 2011, Board Chairman, who acted in the CEO capacity until April 1, 2015, Timothy L. Ryan was granted 200,000 options per year under the 2005 Stock Option and Award Plan with the same terms as above.

During the fiscal year ended June 30, 2013, the Company granted a total of 300,000 options to a director for his services on the Board of Directors.  Those options were all cancelled during the year ended June 30, 2013, upon the director’s resignation from the Board.  The Company also recognized $73,721 in expense related to the continued vesting of options that were granted during prior years.  During the fiscal year ended June 30, 2014 the Company granted a total of 150,000 options to directors for service on the Board of Directors.
 
Option issuances and vesting during the period ending June 30, 2015

No options were granted to Board members for Board service for the year ended June 30, 2015.

During the year ended June 30, 2015, 100,000 options were granted to a consultant pursuant to a consulting agreement.  Additionally 140,000 options related to this transaction vested (20,000 options monthly May – November 2014 at $0.10).  Year to date expense related to these options is $12,022 as of June 30, 2015.

On December 1, 2014, 480,000 options were granted to the Company’s Chief Executive Officer (then our Chief Operating Officer) as part of his employment offer.  The options have a strike price of $0.10, vest December 1, 2015 and expire December 1, 2020.  Year to date expense related to these options is $10,844 as of June 30, 2015.

On January 21, 2015, 50,000 options were granted to the Company’s Chief Financial Officer as part of her employment offer.  The options have a strike price of $0.10, vest ratably January 21, 2015 to December 1, 2015 and expire December 1, 2020.  Year to date expense related to these options is $840 as of June 30, 2015.

We estimated the fair value of the stock options at the grant date based on the following weighted average assumptions:
 
Risk-free interest rate
    1.190 1.345
%
Expected life
    3.8 4.5
years
Expected volatility
    147.43 152.40
%
Dividend yield
    0.00
%
 
A summary of the status of our outstanding stock options as of June 30, 2015 and June 30, 2014 and changes during the periods then ended is presented below: 
 
   
June 30, 2015
   
June 30, 2014
 
   
Shares
   
Weighted
Average
Exercise Price
   
Shares
   
Weighted
Average
Exercise Price
 
Outstanding beginning of period
   
1,754,000
   
$
0.17
     
1,904,000
   
$
0.23
 
Granted
   
670,000
   
$
0.10
     
150,000
   
$
0.08
 
Expired/Cancelled
   
(154,000
)
 
$
0.29
     
(300,000
)
 
$
0.50
 
Exercised
   
-
   
$
-
     
-
   
$
-
 
Outstanding end of period
   
2,270,000
   
$
0.14
     
1,754,000
   
$
0.17
 
                                 
Exercisable
   
1,752,500
   
$
0.16
     
1,604,000
   
$
0.18
 

The following table summarizes the range of outstanding and exercisable options as of June 30, 2015:

     
Outstanding
   
Exercisable
 
 
Range of
Exercise Prices
   
 
Number Outstanding at
June 30, 2015
   
Weighted
Average
Remaining
Contractual Life
   
 
Weighted
Average
Exercise Price
   
 
Number
Exercisable at
June 30, 2015
   
Weighted
Average Remaining
Contractual Life
 
$
0.08
     
150,000
     
6.42
   
$
0.08
     
150,000
     
6.42
 
$
0.10
     
670,000
     
4.47
   
$
0.10
     
152,500
     
4.47
 
$
0.17
     
650,000
     
4.42
   
$
0.17
     
650,000
     
4.42
 
$
0.17
     
400,000
     
5.42
   
$
0.17
     
400,000
     
5.42
 
$
0.17
     
400,000