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ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended
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Jun. 30, 2022
Accounting Policies [Abstract] |
Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block] | NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Amerityre Corporation (the “Company”) incorporated as a Nevada corporation on January 30, 1995. The Company was organized to take advantage of existing proprietary and non-proprietary technology available for the manufacturing of specialty tires. The Company engages in the manufacturing, marketing, distribution and sales of “flat free” specialty tires and tire-wheel assemblies and currently is manufacturing these tires at its facility located in Boulder City, Nevada. The Company’s financial statements are prepared using the accrual method of accounting. The Company has elected a June 30 year-end. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management routinely makes judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results could differ from those estimates. Concentrations of Risk The Company places its cash accounts with high credit quality financial institutions and generally limits the amount of credit exposure to the amount in excess of the FDIC insurance coverage limit of $250,000 for interest bearing accounts. As of June 30, 2022, and 2021, the Company has a series of accounts at one bank that collectively exceed this amount at each year end. The Company has not experienced losses in such accounts and believes it is not exposed to any significant credit risk to cash. Credit losses, if any, have been provided for in the financial statements and are based on management’s expectations. The Company’s accounts receivables are subject to potential concentrations of credit risk. The Company does not believe that it is subject to any unusual risks or significant risks in the normal course of its business. We have one customer who accounted for 27% of our sales for the year ended June 30, 2022. This same customer accounted for 28% of our sales for the year ended June 30, 2021. While the Company conducts most of its business in the United States, revenue related to foreign sales was $2,128,282 and $1,656,937 as of June 30, 2022, and 2021. Foreign sales for the year ended June 30, 2022 was 33% of total sales; for the year ended June 302, 2021 this was 34% of total net revenues. 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, 2022, and 2021, respectively, we had no cash equivalents. Accounts 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, 2022, and 2021, the reserve for uncollectible accounts was $0, respectively. Inventory Inventory is stated at the lower of cost (computed on a first-in, first-out basis) or net realizable value. The inventory consists primarily of chemicals, finished goods produced in our plant and products purchased for resale. Inventory levels increased during fiscal year 2022 due to the higher prices paid for raw materials versus prices paid in fiscal year 2021, and the decision of the Company to strategically purchase of additional chemical raw materials when they became available. For some materials this required us to hold higher inventory levels than would be held in previous years.
|  | June 30, |
|  | 2022 |  |  | 2021 |
Raw materials |  | $ | 769,277 |  |  | $ | 416,709 |
Finished goods |  |  | 403,517 |  |  |  | 525,565 |
Inventory reserve |  |  | (132,307 | ) |  |  | (119,652 | )
Inventory – net (current and long term) |  | $ | 1,040,487 |  |  | $ | 822,622 |
Our inventory reserve reflects items that were deemed to be defective or obsolete based on an analysis of all inventories on hand. In fiscal years 2022 and 2021, the Company critically reviewed all slow-moving inventory to determine if defective or obsolete. If not defective or obsolete, but slow moving, we presented these items as non-current inventory, although all inventory is ready and available for sale at any moment. For those items that are spare maintenance materials or parts kept on hand as backup components of major production lines, or “store inventories”, the Company capitalizes the amount if above our capitalization policy for property and equipment. Right to Use Assets – Leases We account for all Company leases following a multi-step analysis process which includes:
| ● | Analysis of all agreements to determine if a lease exists, inclusive of this analysis is the length of the agreement and amount of the resulting liability. Based on this we have determined the following:
| ● | Assets with a length less than 1 year are not considered lease arrangements as allowed by ASC 842 and,
| ● | Assets with a value of less than our capitalization policy of $2,500 are not considered a lease.
Items that do not qualify as lease arrangements are treated similar to service agreements and expensed as incurred. Once an item qualifies for lease accounting, we analyze the item for operating or finance lease treatment with the major difference that finance leases include interest as a term note would. In the case that a finance lease does not have a stated interest rate, we will impute the interest. Both operating and finance leases result in a right to use asset and related lease liability on our balance sheet. Items that enhance a lease asset, such as leasehold improvements, are capitalized with the related right to use asset. Amortization of that improvement is based on all known facts inclusive of the lease term. Property and Equipment Property and equipment are stated at cost, generally with a cost of $2,500 or greater. Expenditures for small tools, ordinary maintenance and repairs are charged to operations as incurred. Major additions and improvements are capitalized. When we retire or dispose of assets, the costs and accumulated depreciation or amortization are removed from the respective accounts and we recognize any related gain or loss. Major replacements that substantially extend the useful life of an asset are capitalized and depreciated. Assets which qualify for capital lease treatment and follow our property and equipment capitalization policy are also capitalized. Depreciation and amortization, collectively depreciation expense, is computed using the straight-line method over estimated useful lives as follows:
Leasehold improvements | 5 years, or over lease term
Equipment | 5 to 10 years
Furniture and fixtures | 7 years
Software | 2 years
Depreciation expense for the years ended June 30, 2022, and 2021 was $46,525 and $47,969, respectively. Patents and Trademarks Patent and trademark costs have been capitalized on June 30, 2022, totaling $487,633 with accumulated amortization of $429,419 for a net book value of $58,214. Patent and trademark costs capitalized on June 30, 2021, totaled $487,633 with accumulated amortization of $411,656 for a net book value of $75,977. The patents which have been granted are being amortized over a period of 20 years. Patents which are pending or are being developed are not amortized. Amortization begins once the patents have been issued. As of June 30, 2022, and 2021, respectively, there were no pending patents. Annually, pending, or expired patents are inventoried and analyzed, which resulted in the recognition of a loss on abandonment, expiration or retirement of patents and trademarks of $-0- for the years ended June 30, 2022, and 2021, respectively. Amortization expense for the years ended June 30, 2022, and 2021 was $17,763 and $16,927 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, 2022, is as follows:
2023 |  | $ | 12,738 |
2024 |  | $ | 16,337 |
2025 |  | $ | 7,464 |
2026 |  | $ | 5,270 |
2027 |  | $ | 4,974 |
Thereafter |  | $ | 11,431 |
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, 2022, and 2021 reflect the impact of FASB ASC 718. Stock-based compensation expense recognized under FASB ASC 718 for the fiscal years ended June 30, 2022, and 2021 was $116,123 and $88,806, respectively, related to employee stock options and employee stock grants. FASB ASC 718 requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in our Statement of Operations. Stock-based compensation expense recognized in our Statements of Operations for fiscal years ended June 30, 2022, and 2021 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 income per share is computed using the weighted-average number of common shares outstanding during the period. All options expired as of December 31, 2021. Our outstanding stock options have been excluded from the basic and fully diluted net loss per share calculation for the period ending June 30, 2021 were 1,030,000 common stock equivalents, because they are anti-dilutive. Income Taxes FASB ASC 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based on the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. As a result of the implementation of FASB ASC 740, the Company performed a review of its material tax positions in accordance with recognition and measurement standards established by FASB ASC 740. Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Net deferred tax assets consist of the following components as of June 30, 2022, and 2021:
|  | 2022 |  |  | 2021 |
Deferred tax assets: |  |  |  |  |  |  |  |
Net operating loss (“NOL”) carryover |  | $ | 7,804,200 |  |  | $ | 8,334,200 |
Section 1231 loss carryover |  |  | 3,900 |  |  |  | 4,000 |
Inventory reserve |  |  | 27,800 |  |  |  | 25,100 |
R & D carryover |  |  | 216,300 |  |  |  | 209,800 |
Related party accruals |  |  | 9,800 |  |  |  | 8,000 |
Deferred revenue |  |  | 22,700 |  |  |  | 5,400 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Depreciation |  |  | (56,500 | ) |  |  | (19,700 | )
Valuation allowance |  |  | (8,028,200 | ) |  |  | (8,566,800 | )
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, 2022, and 2021 due to the following:
|  | 2022 |  |  | 2021 |
Book income (loss) tax effected |  | $ | 90,700 |  |  | $ | 54,300 |
Depreciation |  |  | (34,300 | ) |  |  | (5,900 | )
Nondeductible expenses |  |  | 24,400 |  |  |  | 18,600 |
Inventory reserve |  |  | 2,700 |  |  |  | 6,900 |
Deferred revenue |  |  | 17,300 |  |  |  | 2,900 |
R&D Section 6765 Addback |  |  | 1,400 |  |  |  | 600 |
Related party accruals |  |  | 1,800 |  |  |  | 3,700 |
Loss on asset impairment |  |  | 100 |  |  |  | 300 |
Valuation allowance |  |  | (104,100 | ) |  |  | (81,400 | )
|  | $ | - |  |  | $ | - |
On June 30, 2022, the Company had net operating loss carry-forwards of approximately $37,163,000 that may be offset against future taxable income. Effective with tax years beginning June 30, 2019, future net operating losses may be offset against future taxable income, subject to annual limitations. No tax benefit has been reported in the June 30, 2022 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount. NOL’s arising in tax years beginning in 2017 or earlier are subject to a 20-year limit. Because Amerityre’s NOL’s were generated from fiscal year end June 30, 2002 to fiscal year end June 30, 2016, there will be some NOL’s expiring each year through fiscal year 2036. The following table shows the amounts that would expire per year it not utilized:
2023 |  |  | 2,568,876 |
2024 |  |  | 4,921,923 |
2025 |  |  | 9,912,014 |
2026 |  |  | 4,478,509 |
2027 |  |  | 3,954,682 |
2028 |  |  | 3,434,035 |
2029 |  |  | 2,893,639 |
2030 |  |  | 1,161,192 |
2031 |  |  | 1,027,013 |
2032 |  |  | 780,467 |
2033 |  |  | 1,035,050 |
2034 |  |  | 651,035 |
2035 |  |  | 237,572 |
2036 |  |  | 107,053 |
NOL’s arising in tax years beginning in 2022 or later will be subject to 80% of taxable income limitations. NOL carryforwards arising in year beginning in 2021 or earlier are not subject to these limitations. Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry-forwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry-forwards may be limited as to use in future years. The Company’s policy is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. As of June 30, 2022, the Company had no accrued interest or penalties related to uncertain tax positions. The Company files income tax returns in the U.S. federal jurisdiction. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2015. Fair Value Accounting As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. The three levels of the fair value hierarchy are described below:
Level 1 | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 | Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;
Level 3 | Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
Revenue Recognition The majority of our revenue is derived from short-term sales contracts. We account for revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers”, which we adopted on July 1, 2017, using the modified retrospective method. This change in revenue principle was applied to all contracts effective on the adoption date above. Revenue for our products is recognized at the time in which our performance obligation is satisfied which we have defined as “control” of the product by the customer. “Control” is defined as a customer having “rights/obligations of physical control over the product or has the rights and intention to control the product.” Based on the terms of our contracts, a customer’s “control” is based on analysis of the following; (i) when a customer arranges their own shipping, and once the product has left our dock, Amerityre recognizes revenue for the product. In effect by arranging their own shipping the customer is “taking control” of the product when it leaves our warehouse; or (ii) when a customer does not arrange their own shipping, we cannot recognize revenue until it is delivered, and the customer takes “control” of the product. Due to a very robust process to determine when control, as described above, occurs, there is limited judgement applied in the above process. In cases where we enter into sales arrangements with customers for non-standard products, such as custom formulation materials, revenue items are recognized as separate and distinct contracts with revenue recognition occurring upon acceptance by the customer. These types of transactions have been historically rare and non-routine in nature. We had no revenue from these types of transactions in either fiscal year 2022 or 2021. This establishes a “deferred revenue” event until such time as delivery of the product has been completed and we have proof from the shipper of the delivery (and change in control). We invoice the customer at shipping, starting the accounts receivable process. Our Company collection policies on products does not change (this includes any prepayment and credit establishment processes). Nor do our refund and return policies change where credit is provided on account for the next purchase as no refunds are given. Deferred revenue was $108,313, inclusive of $9,376 of shipping and handling revenue (see below), as of June 30, 2022. Deferred revenue was $25,892, inclusive of $3,252 of shipping and handling revenue, as of June 30, 2021. Shipping and Handling Shipping and Handling Fees require that freight costs charged to customers be classified as revenues. Freight expenses are included in costs of sales and are recognized as incurred. However, due to our adoption of ASC 606 as discussed above, we defer the revenues of shipping and handling until the related product revenue is also recognized. The result of this accounting is a deferral of $9,376 as of June 30, 2022, and $3,252 as of June 30, 2021. Product Warranties The Company’s standard sales terms include a limited warranty on workmanship and materials to the original purchaser if items sold are used in the service for which they are intended. Specifically, the Company warrants wheels, bearings, and bushings for one year from the date of purchase. Due to historical warranty results, we recognize warranty expense based on actual warranty recognition as historical rates for accrual are inconsistent and infrequent. As of June 30, 2022 and 2021 accrued warranty expense was $0 and $7,800, respectively. Advertising The Company follows the policy of charging the costs of advertising to expense as incurred. Advertising expense for the years ended June 30, 2022, and 2021 was $2,116 and $2,177, respectively. Sales Tax In accordance with FASB ASC 605-45, formerly EITF Issue No. 06-3, How Taxes Collected from Customers and Remitted to Government Authorities Should Be Presented in the Income Statement, the Company accounts for sales taxes and value added taxes imposed on its good and services on a net basis in the Statement of Operations. Recent Accounting Pronouncements Financial Accounting Standards Board, Accounting Standards Updates which are not effective until after June 30, 2020, are not expected to have a significant effect on the Company’s consolidated financial position or results of operations.

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- Definition The entire disclosure for the organization, consolidation and basis of presentation of financial statements disclosure, and significant accounting policies of the reporting entity. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -URI https://asc.fasb.org/topic&trid=2122149 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -URI https://asc.fasb.org/topic&trid=2197479 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI https://asc.fasb.org/topic&trid=2122369 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -URI https://asc.fasb.org/topic&trid=2134479 + Details
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