NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Dec. 31, 2012

Significant Accounting Policies [Text Block]

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash, accounts payable, and notes payable.  The carrying amount of cash and accounts payable approximates their fair value because of the short-term nature of these items.  The carrying amount of the notes payable approximates fair value as the individual borrowings bear interest at rates that approximate market interest rates for similar debt instruments.

Stock Based-Compensation Expense

We account for stock-based compensation under the provisions of Accounting Standards Codification 718, Compensation – Stock Compensation (ASC 718).  Our financial statements as of and for the three and six months ended December 31, 2012 and 2011 reflect the impact of ASC 718.  Stock-based compensation expense related to director and employee options recognized under ASC 718 for the six months ended December 31, 2012 and 2011 was $43,755 and $44,777, respectively.

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 the three and six months ended, 2012 and 2011 assumes all awards will vest therefore no reduction has been made for estimated forfeitures.  We have awarded some options with a performance requirement and no amounts will be recorded until the requirement is met.

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.

	For the Six Months Ended December 31,
	2012				2011
Loss (numerator)		$	(622,532	)		$	(424,446	)
Shares (denominator)			34,796,185				32,760,475
Per share amount		$	(.02	)		$	(.01	)

Our outstanding stock options, convertible preferred stock, convertible secured promissory notes and stock warrants, all of which are common stock equivalents, have been excluded from the basic and fully diluted net loss per share calculation.  We excluded 7,691,573 and 3,983,286 common stock equivalents for the six months ended December 31, 2012 and 2011, respectively, because they are anti-dilutive.

Income Tax

We file federal income tax returns in the U.S. and state income tax returns in those state jurisdictions where we are required to file.  With few exceptions, we are no longer subject to U.S. federal, state or and local income tax examinations by tax authorities for years before 2008.  We have adopted the provisions of Accounting Standards Codification 740, Income Taxes (ASC 740).

There are no tax positions included in the balance at December 31, 2012 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.  Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

Our policy is to recognize accrued interest related to unrecognized tax benefits in interest expense and penalties in operating expenses.

Certain prior year balances have been reclassified to conform to the current year presentation.

Related Party Transactions

Amerityre’s Chairman of the Board and Chief Executive Officer, Timothy L. Ryan, is also the principal owner of Rhino Rubber LLC, a manufacturing and distribution company for solid industrial tires and wheels.  During the six months ended December 31, 2012 and 2011, Rhino Rubber LLC purchased a total of $4,164 and $17,103, respectively, in tire products from Ameritye.  As of December 31, 2012 and 2011, the accounts receivable balances for Rhino Rubber LLC were $27,807 and $26,424, respectively.  The terms and conditions of those related-party sales transactions were the same as those afforded to any of Amerityre’s customers.

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.  Forklift Tire of Florida is a distributor primarily of Amerityre’s forklift product line.  During the six months ended December 31, 2012 and 2011, Forklift Tire of Florida purchased a total $0 and $12,211, respectively, in tire products from Amerityre.  As of December 31, 2012 and 2011, the accounts receivable balances for Forklift Tire of Florida were $2,324 and $11,863, respectively.  The terms and conditions of those related-party sales transactions were the same as those afforded to any of Amerityre’s customers.  In accordance with the Commission Agreement, 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 December 31, 2012, $21,192 and $53,840 were recorded for the current and long-term portion, respectively, of the related liability. Since his passing, Mr. Kines is no longer considered a related party. As a result, the related receivables are not reflected as related party receivables on the balance sheet at December 31, 2012.