UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
AMENDMENT NO. 1
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2005
[ ] 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
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AMERITYRE CORPORATION
(Exact name of small business issuer as specified in its charter)
NEVADA | 87-0535207 |
(State or other jurisdiction of | (I.R.S. Employer |
incorporation or organization) | Identification No.) |
1501 INDUSTRIAL ROAD, BOULDER CITY, NEVADA | 89005 |
(Address of principal executive offices) | (Zip Code) |
(702) 294-2689
(Issuer’s telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve (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 ninety (90) days Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Large accelerated filer [ ]
Accelerated filer [X]
Non-accelerated filer [ ]
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
The number of shares outstanding of Registrant's Common Stock as of November 1, 2005: 20,005,516
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission and, therefore, do not include all information and footnotes necessary for a complete presentation of our financial position, results of operations, cash flows, and stockholders' equity in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.
Our unaudited balance sheet at September 30, 2005 and our audited balance sheet at June 30, 2005; and the related unaudited statements of operations and cash flows for the three month periods ended September 30, 2005 and 2004, are attached hereto.
The Company has restated the financial statements contained in this report to give effect to the adoption of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment,” (“SFAS 123(R)”) for the fiscal quarter ended September 30, 2005. See notes 2 and 3 of the financial statements.
AMERITYRE CORPORATION
BALANCE SHEETS
ASSETS
September 30,2005 Restated | June 30, 2005 | |
(Unaudited) | ||
CURRENT ASSETS | ||
Cash and cash equivalents | $ 2,640,052 | $ 2,122,320 |
Accounts receivable – net | 128,278 | 168,838 |
Inventory | 615,111 | 646,798 |
Prepaid expenses | 94,714 | 62,489 |
Special project in progress | - | 752 |
Deferred stock offering expenses | 83,278 | 80,151 |
Deposit on equipment | 97,884 | - |
Total Current Assets | 3,659,317 | 3,081,348 |
PROPERTY AND EQUIPMENT | ||
Leasehold improvements | 120,767 | 120,767 |
Molds and models | 353,591 | 343,031 |
Equipment | 2,280,888 | 2,280,888 |
Furniture and fixtures | 73,652 | 70,678 |
Software | 189,337 | 184,901 |
Less - accumulated depreciation | (1,941,882) | (1,858,950) |
Total Property and Equipment | 1,076,353 | 1,141,315 |
OTHER ASSETS | ||
Patents and trademarks – net | 380,753 | 368,011 |
Deposits | 36,000 | 36,000 |
Total Other Assets | 416,753 | 404,011 |
TOTAL ASSETS | $ 5,152,423 | $ 4,626,674 |
The accompanying notes are an integral part of these financial statements.
AMERITYRE CORPORATION
BALANCE SHEETS (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, 2005 Restated | June 30, 2005 | |
(Unaudited) | ||
CURRENT LIABILITIES | ||
Accounts payable | $ 90,406 | $ 49,904 |
Accrued expenses | 126,660 | 27,424 |
Deferred revenue - special projects | - | 7,500 |
Total Current Liabilities | 217,066 | 84,828 |
Total Liabilities | 217,066 | 84,828 |
COMMITMENTS AND CONTINGENCIES | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock: 5,000,000 shares authorized of $0.001 par value, -0- shares issued and outstanding | - | - |
Common stock: 40,000,000 shares authorized of $0.001 par value, 20,005,516 and 19,505,216 shares issued and outstanding, respectively | 20,005 | 19,505 |
Additional paid-in capital | 43,740,440 | 41,986,176 |
Expenses prepaid with common stock | (150,000) | - |
Deferred stock offering costs | (1,000,000) | (1,000,000) |
Retained deficit | (37,675,088) | (36,463,835) |
| ||
Total Stockholders' Equity | 4,935,357 | 4,541,846 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 5,152,423 | $ 4,626,674 |
The accompanying notes are an integral part of these financial statements.
AMERITYRE CORPORATION
Statements of Operations
(Unaudited)
For the Three Months Ended September 30, | ||
2005 Restated | 2004 | |
NET SALES | $ 435,969 | $ 339,772 |
COST OF SALES | 354,343 | 246,787 |
GROSS PROFIT | 81,626 | 92,985 |
EXPENSES | ||
Advisory group expense | - | 6,134,000 |
Payroll and payroll taxes | 490,347 | 417,562 |
Depreciation and amortization | 89,256 | 92,346 |
Research & development | 236,382 | 298,367 |
Bad debt expense | - | 582 |
Selling, general and administrative | 495,250 | 320,175 |
Total Expenses | 1,311,235 | 7,263,032 |
LOSS FROM OPERATIONS | (1,229,609) | (7,170,047) |
OTHER INCOME | ||
Interest income | 17,304 | 7,927 |
Other income | 1,052 | 5,844 |
Total Other Income | 18,356 | 13,771 |
NET LOSS | $ (1,211,253) | $ (7,156,276) |
BASIC AND FULLY DILUTED LOSS PER SHARE | $ (0.06) | $ (0.38) |
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING | 19,715,806 | 18,662,788 |
The accompanying notes are an integral part of these financial statements.
AMERITYRE CORPORATION
Statements of Cash Flows
(Unaudited)
For the Three Months Ended September 30, | ||
2005 Restated | 2004 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (1,211,253) | $ (7,156,276) |
Adjustments to reconcile net loss to net cash (used) by operating activities: | ||
Depreciation and amortization | 89,256 | 92,346 |
Stock-based compensation expense related to employee options | 144,764 | - |
Amortization of expenses prepaid with common stock | 50,000 | 312,760 |
Options issued for advisory group service | - | 6,134,000 |
Changes in assets and liabilities: | ||
Decrease in accounts receivable | 40,560 | 9,154 |
(Increase) decrease in prepaid expenses | (32,225) | 53,461 |
(Increase) in other current assets | (100,260) | - |
(Increase) decrease in inventory | 31,687 | (61,863) |
Increase in accounts payable and accrued expenses | 132,239 | 19,300 |
Net Cash (Used) by Operating Activities | (855,232) | (597,118) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Cash paid for patents and trademarks | (19,067) | (33,597) |
Purchase of equipment | (17,969) | (25,815) |
Net Cash (Used) by Investing Activities | (37,036) | (59,412) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Common stock issued for cash | 1,410,000 | 812,000 |
Net Cash Provided by Financing Activities | 1,410,000 | 812,000 |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 517,732 | 155,470 |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 2,122,320 | 1,591,289 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ 2,640,052 | $ 1,746,759 |
The accompanying notes are an integral part of these financial statements.
AMERITYRE CORPORATION
Statements of Cash Flows (Continued)
(Unaudited)
For the Three Months Ended September 30, | ||
2005 Restated | 2004 | |
SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES | ||
CASH PAID FOR: | ||
Interest | $ - | $ - |
Income taxes | $ - | $ - |
NON-CASH OPERATING ACTIVITIES | ||
Stock-based compensation expense related to employee options | $ 144,764 | $ - |
NON-CASH FINANCING ACTIVITIES | ||
Common stock issued for prepaid compensation | $ 200,000 | $ 598,000 |
Options issued for advisory group service | $ - | $ 6,134,000 |
The accompanying notes are an integral part of these financial statements.
AMERITYRE CORPORATION
Notes to the Unaudited Financial Statements
September 30, 2005 (Restated) and June 30, 2005
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed financial statements have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in accordance with such rules and regulations. The information furnished in the interim condensed financial statements include normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements. Although we believe the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim condensed financial statements be read in conjunction with our most recent audited financial statements and notes thereto included in our June 30, 2005 Annual Report on Form 10-KSB. Operating results for the three months ended September 30, 2005 are not necessarily indicative of the results that may be expected for the current fiscal year ending June 30, 2006.
NOTE 2 – RESTATEMENT
Although the Company disclosed in its Form 10-KSB for the year ended June 30, 2005, that it was adopting Statement of Financial Accounting Standard No. 123 (revised 2004) “Share-Based Payment,” (“SFAS 123(R)”) for the first quarter of 2006, the Company incorrectly determined that SFAS was not applicable to its financial statement presentation until January 1, 2006, instead of July 1, 2005 (the first day of the Company’s fiscal year 2006). The Company has restated its financial statements to correctly reflect the adoption of SFAS 123(R) as of July 1, 2005. SFAS 123(R) requires the measurement and recognition of compensation expense for all stock based awards made to employees and directors based on estimated fair value.
During the period ended September 30, 2005, the Company issued options to acquire an aggregate of 625,000 shares of its common stock to certain employees in connection with their employment (the “Employment Options”). The Employment Options vest annually over a period of one to three years based on the employees continued employment by the Company. The exercise price for the Employment Options is $6.60 per share. The 625,000 options issued to the employees were issued at or above the market price of the Company’s common stock on the date of grant. However, the compensation cost for the issuance of the options has been determined based on fair market value at the grant dates consistent with the method of SFAS 123R. The effect of the restatement includes an increase of $144,764 in selling, general and administrative costs, thereby increasing net loss for the period to $1,211,253, or a loss of $0.06 per share, as indicated below:
AMERITYRE CORPORATION
Notes to the Unaudited Financial Statements
September 30, 2005 (Restated) and June 30, 2005
NOTE 2 – RESTATEMENT, Continued
STOCKHOLDERS' EQUITY | As Reported at September 30, 2005 | Restatement Adjustment | As Restated |
Preferred stock: 5,000,000 shares authorized of $0.001 par value, -0- shares issued and outstanding | - | - | |
Common stock: 40,000,000 shares authorized of $0.001 par value, 20,005,516 and 19,505,216 shares issued and outstanding, respectively | 20,005 | 20,005 | |
Additional paid-in capital | 43,595,676 | 144,764 | 43,740,440 |
Expenses prepaid with common stock | (150,000) | (150,000) | |
Deferred stock offering costs | (1,000,000) | (1,000,000) | |
Retained deficit | (37,530,324) | (144,764) | (37,675,088) |
Total Stockholders' Equity | 4,935,357 | 4,935,357 | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 5,152,423 | $ 5,152,423 | |
As Reported for the three month period ended September 30, 2005 | Restatement Adjustment | As Restated | |
Net Sales | $ 435,969 | $ - | $ 435,969 |
Cost of Sales | 354,343 | - | 354,343 |
Gross Profit | 81,626 | - | 81,626 |
Expenses | |||
Payroll & Payroll Taxes | 490,347 | - | 490,347 |
Depreciation & Amortization | 89,256 | - | 89,256 |
Research & Development | 236,382 | - | 236,382 |
Selling General & Administrative | 350,486 | 144,764 | 495,250 |
Total Expenses | 1,166,471 | 144,764 | 1,311,235 |
Loss From Operations | (1,084,845) | (144,764) | (1,229,609) |
Other Income | |||
Interest Income | 17,304 | - | 17,304 |
Other Income | 1,052 | - | 1,052 |
Total Other Income | 18,356 | - | 18,356 |
Net Loss | $ (1,066,489) | $ (144,764) | $ (1,211,253) |
Basic and Fully Diluted Loss Per Share | $ (0.05) | $ (0.01) | $ (0.06) |
Weighted Average Number of Shares Outstanding | 19,715,806 | - | 19,715,806 |
AMERITYRE CORPORATION
Notes to the Unaudited Financial Statements
September 30, 2005 (Restated) and June 30, 2005
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Stock Based-Compensation Expense
On July 1, 2005, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment,” (“SFAS 123(R)”) which requires the measurement and recognition of compensation expense for all share-based payments to employees and directors including employee stock options and stock purchases related to the Company’s employee stock option and award plans based on estimated fair values. SFAS 123(R) supersedes the Company’s previous accounting under Accounting Principles Board Option No. 25, “Accounting for Stock Issued to Employees” (“APB25”) for periods beginning in fiscal 2006. In March 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107 (“SAB 107”) relating to SFAS 123(R). The Company has applied the provisions of SAB 107 in its adoption of SFAS 123(R).
The Company adopted SFAS 123(R) using the modified prospective transition method, which requires the application of the accounting standard as of July 1, 2005, the first day of the Company’s fiscal year 2006. The Company’s financial statements as of and for the three month period ended September 30, 2005 reflect the impact of SFAS 123(R). In accordance with the modified prospective transition method, the Company’s financial statements for the prior year have not been restated to reflect, and do not include, the impact of SFAS 123(R). Stock-based compensation expense recognized under SFAS 123(R) for the three month period ended September 30, 2005 was $144,764 and related to employee stock options issued during the period. There was no stock-based compensation expense related to employee stock options and employee stock purchases recognized during the three month period ended September 30, 2004. See Note 5 for additional information.
SFAS 123(R) 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 the Company’s Statement of Operations. Prior to the adoption of SFAS 123(R), the Company accounted for stock-based awards to employees and directors using the intrinsic value method in accordance with APB 25 as allowed under Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”). Under the intrinsic value method, no stock-based compensation expense had been recognized in the Company’s Statement of Operations, because the exercise price of the Company’s stock options granted to employees and directors equaled the fair market value of the underlying stock at the date of grant.
Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. At June 30, 2005, the Company had no unvested share-based payment awards for which compensation expense should be recognized during the three month period ended September 30, 2005. Stock-based compensation expense recognized in the Company’s Statement of Operations for the three month period ended September 30, 2005 only includes compensation expense for share-based payment awards granted, but not yet vested after July 1, 2005, and is based on the grant date fair value estimated in accordance with SFAS 123(R). Stock-based compensation expense recognized in the Company’s Statement of Operation for the three month period ended September 30, 2005 assumes all awards will vest, therefore no reduction has been made for estimated forfeitures.
AMERITYRE CORPORATION
Notes to the Unaudited Financial Statements
September 30, 2005 (Restated) and June 30, 2005
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Basic and Fully Diluted 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.
Three Months Ended | ||
September 30, 2005 | September 30, 2004 | |
Loss (numerator) | $ (1,211,253) | $ (7,156,276) |
Shares (denominator) | 19,715,779 | 18,662,788 |
Per share amount | $ (0.06) | $ (0.38) |
The Company’s outstanding stock options have been excluded from the basic net loss per share calculation. The Company excluded 4,100,000 and 4,709,000 common stock equivalents for the periods ended September 30, 2005 and 2004, respectively, because they are antidilutive.
NOTE 4 - GOING CONCERN
Our financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. We have historically incurred significant losses which have resulted in a total accumulated deficit of $37,675,088 at September 30, 2005 which raises substantial doubt about our ability to continue as a going concern. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.
We have taken certain steps to maintain our operating and financial requirements in an effort to enable us to continue as a going concern until such time that revenues are sufficient to cover expenses, including: (1) evaluating (A) our cost of goods and equipment utilization and requirements of our manufacturing operations, and (B) our sales and marketing plan on a product sector basis; (2) incorporating revisions to our methods, processes and costs in order to achieve necessary manufacturing efficiencies (i.e., line automation, reduced material costs, reduced product waste, etc.); and (3) seeking reduced material and component costs from suppliers.
In addition, to expand revenue opportunities during the fiscal year we have commenced a program of (1) licensing manufacturing and distribution rights to certain of our polyurethane tire products to third-party manufacturers based on such factors as geographical locations and boundaries; (2) selling manufacturing equipment to third-party manufacturers to manufacture products utilizing our manufacturing equipment and processes; (3) selling our proprietary polyurethane chemical systems to third-party manufacturers that utilize our manufacturing equipment and processes; and (4) offering contract design and engineering services to the tire and auto industries.
To supplement our cash needs during the 2006 fiscal year we have (1) obtained approximately $1,500,000 in funding through the exercise of outstanding options; and (2) expect to issue common stock in lieu of cash as compensation for employment, development, and other professional services. We are currently evaluating funding strategies to help offset any cash shortfalls that may occur during or after the 2006 fiscal year. We anticipate that during the balance of the 2006 fiscal year we will need approximately $3,000,000 to implement our plan and to meet our working capital requirements. Our ability to continue as a going concern is dependent upon our ability to successfully accomplish the plan described above, and eventually attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.
AMERITYRE CORPORATION
Notes to the Unaudited Financial Statements
September 30, 2005 (Restated) and June 30, 2005
NOTE 5 - STOCK OPTIONS
General Option Information
During the period ended September 30, 2005, we issued options to acquire an aggregate of 625,000 shares of our common stock to certain employees in connection with their employment (the “Employment Options”). The Employment Options vest annually over a period of one to three years based on the employees continued employment by the Company. The exercise price for the Employment Options is $6.60 per share. The Company use the Black-Scholes model to value stock options. The Black-Scholes model requires the use of employee exercise behavior data and the use of a number of assumptions including volatility of the Company’s stock price, the weighted average risk-free interest rate, and the weighted average expected life of the options. As the Company does not pay dividends, the dividend rate variable in the Black-Scholes model is zero. We estimated the fair value of the stock above options at the grant based on the following assumptions:
For the period ended September 30, 2005 | |
Risk free interest rate | 4.13% |
Expected life | 3 years |
Expected volatility | 57.693% |
Dividend yield | 0.00% |
A summary of the status of the Company’s outstanding stock options as of September 30, 2005 and June 30, 2005 and changes during the periods then ended is presented below:
September 30, 2005 | June 30, 2005 | |||
Shares | Weighted Average Exercise Price | Shares | Weighted Average Exercise Price | |
Outstanding, beginning of period | 3,945,000 | $ 6.31 | 1,922,000 | $ 3.66 |
Granted | 625,000 | 6.60 | 3,185,000 | 6.97 |
Expired/Cancelled | - | - | (195,252) | (0.18) |
Exercised | (470,000) | (3.00) | (966,748) | (4.14) |
Outstanding end of period | 4,100,000 | $ 6.74 | 3,945,000 | $ 6.31 |
Exercisable | 475,000 | $ 5.26 | 945,000 | $ 4.14 |
AMERITYRE CORPORATION
Notes to the Unaudited Financial Statements
September 30, 2005 (Restated) and June 30, 2005
NOTE 5 - STOCK OPTIONS, Continued
The following table summarizes the range of outstanding and exercisable options as of September 30, 2005:
Options Outstanding | Options Exercisable | ||||
Range of Exercise Prices | Number Outstanding | Weighted Average Remaining Contractual Life (in Years) | Weighted Average Exercise Price per Share | Number Exercisable | Weighted Average Exercise Price per Share |
$ 3.80 | 30,000 | 1.00 | $0.05 | 30,000 | $0.33 |
4.00 | 200,000 | 1.69 | 0.33 | 200,000 | 2.21 |
6.40 | 185,000 | 3.34 | 0.30 | 185,000 | 2.05 |
6.60 | 625,000 | 6.71 | 1.03 | - | - |
6.70 | 60,000 | 0.25 | 0.10 | 60,000 | 0.66 |
7.00 | 3,000,000 | 3.96 | 4.93 | - | - |
4,100,000 | 4.16 | $6.74 | 475,000 | $5.26 | |
As of September 30, 2005, unrecognized stock based compensation related to stock options was approximately $1,592,400. This cost is expected to be expensed over a weighted average period of 2.6 years.
NOTE 6 - STOCK ISSUANCES
Effective July 1, 2005, our Board of Directors authorized the issuance of 30,300 shares of restricted common stock to Richard A. Steinke, the Company’s President and Chief Executive Officer as part of his employment compensation for the period beginning July 1, 2005 and ending June 30, 2006. The value of the shares was $200,000, based on the closing price of $6.60 per share.
During the three months ended September 30, 2005 we also issued 470,000 shares of our common stock for cash totaling $1,410,000, in connection with the exercise of 470,000 outstanding stock options at $3.00 per share.
NOTE 7 - INVENTORY
Inventory is stated at the lower of cost (computed on a first-in, first-out basis) or market. The inventory consists of chemicals, finished goods produced in the Company’s plant and products purchased for resale.
September 30, 2005 | June 30, 2005 | |
(Unaudited) | ||
Raw Materials | $ 160,546 | $ 122,834 |
Work in Progress | - | - |
Finished Goods | 454,565 | 523,964 |
Total Inventory | $ 615,111 | $ 646,798 |
AMERITYRE CORPORATION
Notes to the Unaudited Financial Statements
September 30, 2005 (Restated) and June 30, 2005
NOTE 8 - SUBSEQUENT EVENTS
1. Employment of Chief Operating Officer
Effective October 16, 2005, the Company hired Gary N. Benninger as our Chief Operating Officer. Dr. Benninger’s employment contract with the Company is for an initial term of one year beginning October 16, 2005, at an annual salary of $250,000, renewable by mutual agreement. The contract also includes provisions for the payment of a bonus share award of 10,000 shares of the Company’s common stock vesting January 15, 2006, and a grant of options for the purchase of 150,000 shares of the Company’s common stock, subject to annual vesting provisions (50,000 options on June 30th 2006-2008). The bonus share award and the options are being issued under the terms of the Company’s 2005 Stock Option and Award Plan. Both the bonus share award and the vesting of the options are subject to continuing employment with the Company.
2. Settlement of Legal Proceeding
Effective October 20, 2005, we entered into a settlement and release agreement with the defendant in case number A505333, 8th Judicial District Court for the State of Nevada, Amerityre Corporation vs. Prototype Engineering, Inc., an Ohio corporation (“Prototype”), and Frederick F. Vannan, Jr. (“Vannan ”). The Company paid $100,000 to Prototype and agreed that the settlement resolved the lawsuit. The settlement is in no way an admission of fault, guilt, liability, or wrongdoing on the part of either party, and any possible fault, guilt, liability, or wrongdoing by either party was expressly denied. Each of the parties agreed, on its own behalf and on behalf of its officers, directors, agents and employees not to disparage or demean the business, the reputation, the good faith, character, ability or products of the other party. The Company recognized the settlement expense during the three month period ended September 30, 2005, which is included in the selling, general and administrative expenses for that period.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Statements
You should read the following discussion and analysis in conjunction with the Financial Statements and related Notes contained elsewhere in this Form 10-Q ("Report"). The information in this Report is not a complete description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this Report and in our other reports filed with the SEC, including our Annual Report on Form 10-KSB for the year ended June 30, 2005.
The section entitled "Risk Factors" set forth in our Annual Report on Form 10-KSB for the year ended June 30, 2005 and similar types of discussions in other SEC filings, discuss some of the important risks that may affect our business, results of operations and financial condition. Some of those risks are as follows:
*Our cash and cash equivalent reserves may not be adequate to cover our costs of operations.
*Our business depends on the protection of our intellectual property and may suffer if we are unable to adequately protect our intellectual property.
*Proposed new products for highway use must meet safety standards prior to marketing which could delay anticipated revenues and increase expenses.
*Anticipated fund-raising activities include possible equity placements that will dilute current shareholders.
*Our stock price can be extremely volatile.
You should carefully consider those risks, in addition to the other information in this Report and in our other filings with the SEC, before deciding to invest in our Company or to maintain or decrease your investment.
This Report may contain “forward-looking” statements within the meaning of Section 17A of the Securities Exchange Act of 1933, as amended, and Section 21E of the Securities Exchange Act, as amended. Examples of forward-looking statements include, but are not limited to: (a) projections of our revenues, capital expenditures, growth, prospects, dividends, capital structure and other financial matters; (b) statements of our plans and objectives; (c) statements of our future economic performance; (d) statements of assumptions underlying other statements and statements about us and our business relating to the future; and (e) any statements using the words "believes," "budget," "target," "goal," “anticipate," “expect," "plan," "outlook," "objective," “may," “project," “intend," "estimate," or similar expressions. These statement are only predictions. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict.
The Company has restated the financial statements contained in this report to give effect to the adoption of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment,” (“SFAS 123(R)”) for the fiscal quarter ended September 30, 2005. See notes 2 and 3 of the financial statements for additional information. Management’s discussion and analysis of financial condition and results of operations below reflects the restatement.
General
We were incorporated as a Nevada corporation on January 30, 1995 under the name American Tire Corporation and changed our name to Amerityre Corporation in December 1999. We own certain proprietary and nonproprietary technology to manufacture tires from polyurethane foam and polyurethane elastomer.
Polyurethane Foam Tire Technology
We currently produce “Flatfree[TM]” polyurethane foam tires for bicycles, wheelchairs, lawn and garden products, and outdoor power equipment products (the “Products”).
Polyurethane Elastomer Passenger Car Tire Technology
Since August 2001, we have been engaged in the development of polyurethane elastomer tires for highway and agricultural use based on our proprietary technology and various methods and processes relating to the manufacturing of those tires from liquid elastomers. The polyurethane elastomer material is identified by us as Elastothane[TM]. Elastothane [TM] and the technology to produce tires using Elastothane[TM] are significant to us because we believe that combined they result in a tire that can be produced quickly and less expensively than traditional rubber pneumatic tires, while meeting or exceeding the performance of those tires.
We have produced a limited number of prototype polyurethane car tires and conducted independent laboratory testing to demonstrate that these tires comply with existing federal safety standards for new-pneumatic tires, FMVSS 109, and the proposed revisions to those standards, FMVSS 139, which takes effect in July 2007. Compliance with FMVSS 109 and subsequent FMVSS 139, is necessary to commercially market pneumatic car tires within the United States. FMVSS 139, retains many of the test components of FMVSS 109, with the following major changes:
(1) Endurance and Low Inflation Pressure Test. Test remains 34 hours, but extends the final load step from 22 hours to 24 hours. Load percentages have been reduced from 90/100/110% to 85/90/100%. In addition, at the end of the 34 hours of endurance testing, the tire will be run under-inflated (20psi) at 120 km/h (75 mph) for 90 minutes;
(2) Speed test. Test remains a total of 90 minutes with a 2 hour warm-up; however, speeds for each 30 minute segment have been increased from 75/80/85 mph to 140/150/160 km/h [87/93/99 mph], respectively; and
(3) Aging effects performance test. Implementation of the aging effects performance test has been deferred until the NHTSA has completed additional research and issues a new proposal.
In addition to inventing passenger car tires made from polyurethane elastomer, we have invented the manufacturing equipment necessary to produce the polyurethane car tires in limited quantities. We have filed several applications for method and process patents with respect to various aspects of this technology. We have completed fabrication of prototype manufacturing equipment to mold the polyurethane elastomer tires and we are fabricating certain additional pieces of manufacturing equipment that are necessary to assemble the reinforcement materials (i.e., beads, belts and plies) utilized in connection with manufacturing the tire. This work is continuing and we expect to make improvements to the method, process and equipment as needed.
Non-pneumatic Temporary/Spare Tire Technology
We also are developing a temporary/spare tire out of polyurethane elastomer. Our initial project, a ‘zero’ pressure non-pneumatic temporary/spare tire, was developed for prospective use as a temporary/spare tire for passenger vehicles. These tires do not contain air and do not require inflation. In April 2005, we announced that prototype non-pneumatic temporary/spare tire had passed FMVSS 129 testing. FMVSS 129, is the applicable safety standard for new, non-pneumatic tires that must be met before the tires can be offered commercially. We believe that this is a major breakthrough in tire technology because, to the best of our knowledge, no other company has developed a non-pneumatic tire that has successfully met FMVSS 129 standard.
We have initiated discussions with automobile manufacturers about making these tires available to their customers as an original equipment temporary/spare tire. In addition, we are continue testing prototype designs of the non-pneumatic temporary/spare tire for other vehicles/applications.
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 accounting principles generally accepted in the United States. 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 are believed to be reasonable under the circumstances. The results of which for the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
We believe the following to be 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 are 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 is recognized when the sales amount is determined, shipment of goods to the customer has occurred and collection is reasonably assured. Product is shipped FOB origination.
Patents and Trademarks
Patent and trademark costs have been capitalized at June 30, 2005 totaling $407,642. 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 being amortized. Amortization will begin once the patents have been issued. Amortization expense for the years ended June 30, 2005 and June 30, 2004 was $30,847 and $1,309, respectively. The Company evaluates the recoverability of intangibles and reviews the amortization period on a continual basis utilizing the guidance of SFAS 142, "Goodwill and Other Intangible Assets." We test our patents and trademarks for impairment at least annually and whenever events or changes in circumstances indicated that the carrying value may not be recoverable. We consider the following indicators, among others, when determining whether or not our patents are impaired: 1) any changes in the market relating to the patents that would decrease the life of the asset; 2) any adverse change in the extent or manner in which the patents are being used; 3) any significant adverse change in legal factors relating to the use of the patents; 4) current-period operating or cash flow loss combined with our history of operating or cash flow losses; 5) future cash flow values based on the expectation of commercialization through licensing; and 6) 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 inventory consists of chemicals, finished goods produced in the Company’s plant and products purchased for resale.
Equity Securities
Equity securities issued for services rendered have been accounted for at the fair market value of the securities on the date of authorization.
Stock Options
On July 1, 2005, we adopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment,” (“SFAS 123(R)”) which requires the measurement and recognition of compensation expense for all share-based payments to employees and directors including employee stock options and stock purchases related to the Company’s employee stock option and award plans based on estimated fair values. SFAS 123(R) supersedes our previous accounting under Accounting Principles Board Option No. 25, “Accounting for Stock Issued to Employees” (“APB25”) for periods beginning in fiscal 2006. In March 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107 (“SAB 107”) relating to SFAS 123(R). We have applied the provisions of SAB 107 in its adoption of SFAS 123(R).
We adopted SFAS 123(R) using the modified prospective transition method, which requires the application of the accounting standard as of July 1, 2005, the first day of our fiscal year 2006. Our financial statements as of and for the three month period ended September 30, 2005 reflect the impact of SFAS 123(R). In accordance with the modified prospective transition method, our financial statements for the prior year have not been restated to reflect, and do not include, the impact of SFAS 123(R). Stock-based compensation expense recognized under SFAS 123(R) for the three month period ended September 30, 2005 was $144,764 and related to employee stock options issued during the period. There was no stock-based compensation expense related to employee stock options and employee stock purchases recognized during the three month period ended September 30, 2004. See Note 5 to the financial statements for additional information.
SFAS 123(R) 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 the Company’s Statement of Operations. Prior to the adoption of SFAS 123(R), we accounted for stock-based awards to employees and directors using the intrinsic value method in accordance with APB 25 as allowed under Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”). Under the intrinsic value method, no stock-based compensation expense had been recognized in the Company’s Statement of Operations, because the exercise price of our stock options granted to employees and directors equaled the fair market value of the underlying stock at the date of grant.
Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. At June 30, 2005, we had no unvested share-based payment awards for which compensation expense should be recognized during the three month period ended September 30, 2005. Stock-based compensation expense recognized in our Statement of Operations for the three month period ended September 30, 2005 only includes compensation expense for share-based payment awards granted, but not yet vested after July 1, 2005, and is based on the grant date fair value estimated in accordance with SFAS 123(R). Stock-based compensation expense recognized in our Statement of Operation for the three month period ended September 30, 2005 assumes all awards will vest, therefore no reduction has been made for estimated forfeitures.
Valuation of Options and Warrants
The valuation of options and warrants granted to unrelated parties for services are measured as of the earlier of (1) the date at which a commitment for performance by the counterparty to earn the equity instrument is reached, or (2) the date the counterparty’s performance is complete. Pursuant to the requirements of EITF 96-18, the options and warrants will continue to be revalued in situations where they are granted prior to the completion of the performance.
Three Month Period Ended September 30, 2005 compared to the Three Month Period Ended September 30, 2004
Net Sales
For the three month period ended September 30, 2005 we had net sales of $435,969, an 28% increase over net sales of $339,772, for the same period last year. This increase was due primarily to further expansion of our Products sales among retail chain customers.
Cost of Sales
Our cost of sales consists primarily of expense related to the cost of raw material, components, and production of our Products. It includes salaries, benefits expenses, maintenance, facilities and other operating costs association with the production our Products. Our cost of sales for the three month period ended September 30, 2005 was $354,343, or 81% of sales as compared to $246,787, or 73% of sales for the same period last year, resulting in a gross margin of $81,626, or 19% as compared to a gross margin of $92,985 or 27% for the respective periods. The reduction in our gross margin for the period as compared to the prior year period is a result of a increase in our cost of sales attributed to the revaluation of our standard costs (after taking into account increases in chemical and wheel component costs ). To offset the increases in manufacturing costs, we are evaluating the need to adjust the selling prices for our Products in an attempt to improve our gross margin.
Selling, General and Administrative
For three month period ended September 30, 2005, total operating expenses were $1,311,235, consisting of payroll and payroll taxes of $490,347, depreciation and amortization of $89,256, research and development costs of $236,382, and selling, general and administrative expenses of $495,250.
For the three month period ended September 30, 2004, total operating expenses were $7,263,032, consisting of payroll and payroll taxes of $417,562, depreciation and amortization of $92,346, research and testing $298,367, bad debt expense of $582, selling, general and administrative expenses of $320,175, and an expense of $6,134,000 for advisory group services associated with the grant of options to acquire an aggregate of 3,000,000 shares of our common stock to third-party consultants during the period. The value of the options was calculated using the Black-Scholes option pricing model. Our selling, general and administrative expenses for the three month period ended September 30, 2004 do not include $1,000,000 in deferred stock issuance costs. This amount has been recorded as a reduction in stockholders' equity due to its association with a proposed offering of our securities.
Our corporate expenses for the period ending September 30, 2005 remained relatively constant with our corporate expenses for the prior year period, excluding the effect of the one-time $6,134,000 expense for advisory group services associated with the grant of options for the 2004 period as detailed above.
Interest Expense. We had no interest expense during the three month periods ended September 30, 2005 and 2004, respectively.
Other Income. For the three month period ended September 30, 2005, we had other income of $18,356 earned on account receivables and temporary investments of cash not immediately needed in ordinary daily business. For the three month period ended September 30, 2004, we had other income of $13,771 earned on account receivables and temporary investments of cash not immediately needed in ordinary daily business.
We experienced a net loss of $ 1,211,253 for the three month period ended September 30, 2005, compared to a net loss of $7,156,276 for the same period in 2004. The basic loss per share for the current period was $0.06 compared to a basic loss per share of $0.38 for prior year period, based on the weighted average number of shares outstanding of 19,715,806 and 18,662,788 for the respective periods.
Net loss for the three month period ended September 30, 2005, included $100,000 expense associated with the settlement of outstanding litigation and stock-based compensation expense under SFAS 123(R) of $144,764 related to employee stock options granted during the period. There was no stock-based compensation expense related to employee stock options under SFAS 123(R) during the three month period ended September 30, 2004 because we did not adopt the recognition provisions of SFAS 123 with respect to employee stock options granted during that period.
With the adoption of SFAS 123(R), we will continue to use the Black-Scholes option-pricing model (“Black-Scholes model”), which was previously used by us in the pro forma information required under SFAS 123. For additional information see note 5 of our financial statements. Our determination of fair value of share-based payment awards on the date of grant using an option pricing model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behavior. Option-pricing models were developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable. Because our employee stock options have certain characteristics that are significantly different from traded options, and because changes in the subjective assumptions can materially affected the estimated value, in management’s opinion, the existing valuation models may not provide an accurate measure of fair value of the employee stock options. Although fair value of employee stock options is determined in accordance with SFAS 123(R) and SAB 107 using an option-pricing model, the value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction.
Liquidity and Capital Resources
During the three month periods ended September 30, 2005 and 2004, we financed our operations through collecting accounts receivable and issuing common stock for cash paid in connection with the exercise of outstanding stock options and prepayment of certain salaries.
At September 30, 2005, we had current assets of $3,659,317 and current liabilities of $217,066, for a working capital surplus of $3,442,251, an increase of $445,731 over the working capital surplus of $2,996,520 we had at September 30, 2004. We had cash and cash equivalents of $2,640,052 and net accounts receivable of $128,278 at September 30, 2005 compared to cash and cash equivalents of $2,122,320 and net accounts receivable of $168,838 at September 30, 2004. Our increase in cash and equivalents at September 30, 2005, is attributable to the exercise of $1,410,000 of outstanding options during the period.
Net cash used by our operating activities for the three month period ended September 2005 was $855,232, compared to $597,118 for the same period in 2004 .. The increase in cash used by operating activities for the three month period ended September 30, 2005 can be attributed to a deposit on the purchase of new production equipment and the prepayment of operating expenses, including health insurance and property taxes. Our operations for the three month period ended September 30, 2005 were funded primarily by cash and cash equivalents, accounts receivables, and the issuance of common stock for services and salaries. Our operations for the three month period ended September 30, 2004 were funded primarily the same way.
At September 30, 2005, we had net property and equipment of $1,076,353, after deduction of accumulated depreciation of $1,941,882. At September 30, 2004, we had net property and equipment of $1,141,315, after deduction of accumulated depreciation of $1,858,950. At September 30, 2005, our property and equipment consisted mainly of leasehold improvements, $120,767; molds and models, $353,591; equipment, $2,280,888; furniture and fixtures, $73,652; and software, $189,337, compared to leasehold improvements, $120,767; molds and models, $343,031; equipment, $2,280,888; furniture and fixtures, $70,678; and software, $184,901, at September 30, 2004.
Our financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. We have historically incurred significant losses which have resulted in a total retained deficit of $37,675,088 at September 30, 2005 which raises substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.
We have taken certain steps to maintain our operating and financial requirements in an effort to enable us to continue as a going concern until such time that revenues are sufficient to cover expenses, including: (1) evaluating (A) our cost of goods and equipment utilization and requirements of our manufacturing operations, and (B) our sales and marketing plan on a product sector basis; (2) continued revisions to our methods, processes and costs in order to achieve necessary manufacturing efficiencies (i.e., line automation, reduced material costs, reduced product waste, etc.); and (3) seeking reduced material and component costs from suppliers.
In addition, to expand revenue opportunities during the fiscal year we have commenced a program of (1) licensing manufacturing and distribution rights to certain of our polyurethane tire products to third-party manufacturers based on such factors as geographical locations and boundaries; (2) selling manufacturing equipment to third-party manufacturers to manufacture products utilizing our manufacturing equipment and processes; (3) selling our proprietary polyurethane chemical systems to third-party manufacturers that utilize our manufacturing equipment and processes; and (4) offering contract design and engineering services to the tire and auto industries.
To supplement our cash needs during 2006 fiscal year we have (1) obtained approximately $1,500,000 in funding through the exercise of outstanding options; and (2) expect to issue common stock in lieu of cash as compensation for employment, development, and other professional services. We are currently evaluating funding strategies to help offset any cash shortfalls that may occur during and after the 2006 fiscal year. We anticipate that during the balance of the 2006 fiscal year we will need approximately $3,000,000 to implement our plan and to meet our working capital requirements.
Our ability to continue as a going concern is dependent upon our ability to successfully accomplish the plan described above, and eventually attain profitable operations.
Impact of Inflation
We do not anticipate that inflation will have a material impact on our current operations.
Seasonality
Because the significant portion of our current customers reside in the United States, we anticipate that sales of certain of our lawn and garden Products to those customers located in Northern portion of the United States could be reduced as a result of fall and winter climate and weather conditions.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to changes in prevailing market interest rates affecting the return on its investments but does not consider this interest rate market risk exposure to be material to its financial condition or results of operations. The Company invests primarily in United States Treasury instruments with short-term (less than one year) maturities. The carrying amount of these investments approximates fair value due to the short-term maturities. Under its current policies, the Company does not use derivative financial instruments, derivative commodity instruments or other financial instruments to manage its exposure to changes in interest rates or commodity prices.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. As a result of the restatement outlined below, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were not effective as of the end of the period covered by this report.
Although the Company disclosed in its Form 10-KSB for the year ended June 30, 2005, that it was adopting Statement of Financial Accounting Standard No. 123 (revised 2004) “Share-Based Payment,” (“SFAS 123(R)”) for the first quarter of 2006, the Company incorrectly determined that SFAS 123(R) was not applicable to its financial statement presentation until January 1, 2006, instead of July 1, 2005 (the first day of the Company’s fiscal year 2006). The Company was made aware of the error in April 2006 through a review by the Securities and Exchange Commission of its registration statement on Form S-1, filed in March 2006 (file no. 333-132305). SFAS 123(R) requires the measurement and recognition of compensation expense for all stock based awards made to employees and directors based on estimated fair value. Accordingly, the Company is filing this amended Form 10-Q to correct the accounting treatment for options issued during the quarter ended September 30, 2005.
The Company has adopted changes to its internal controls and procedures in order to prevent future misstatements of a similar nature. These changes have materially affected, or are reasonably likely to affect, the Company’s internal control over financial reporting. Specifically, the Company has now adopted a formal procedure to insure that new accounting standards are reviewed and applied correctly. Under this procedure, the CFO will monitor the release of new accounting standards. Once the CFO becomes aware of a new accounting standard, he will present the new standard to the Executive Vice-president and the Chairman of the Audit Committee and schedule a meeting with them to discuss the application of the new standard to the Company. Thereafter, once a determination concerning the application of a new standard has been made, the Company will present its determination to its auditor for review and comment.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Effective October 20, 2005, we entered into a settlement and release agreement with the defendants in case number A505333, 8th Judicial District Court for the State of Nevada, Amerityre Corporation vs. Prototype Engineering, Inc., an Ohio corporation (“Prototype”), and Frederick F. Vannan, Jr. (“Vannan”). The Company paid $100,000 to Prototype and agreed that the settlement resolved the lawsuit. The settlement is in no way an admission of fault, guilt, liability, or wrongdoing on the part of either party, and any possible fault, guilt, liability, or wrongdoing by either party was expressly denied. Each of the parties agreed, on its own behalf and on behalf of its officers, directors, agents and employees not to disparage or demean the business, the reputation, the good faith, character, ability or products of the other party. The Company recognized the settlement expense during the three month period ended September 30, 2005, which is included in the selling, general and administrative expenses for that period.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Effective July 1, 2005, our Board of Directors authorized the issuance of 30,300 shares of restricted common stock to Richard A. Steinke, the Company’s President and Chief Executive Officer as part of his employment compensation for the period beginning July 1, 2005 and ending June 30, 2006. The value of the shares was $200,000, based on the closing price of $6.60 per share.
All of our securities issued in the foregoing transactions were issued in reliance on the exemption from registration and prospectus delivery requirements of the Act set forth in Section 3(b) and/or Section 4(2) of the Securities Act and the regulations promulgated thereunder.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
Notice of Annual Meeting
Our annual meeting of the shareholders (the “Annual Meeting”) will be held in the Sunset Room at the Sunset Station Hotel and Casino, 1301 West Sunset Road, Henderson, Nevada 89014, on Thursday, December 1, 2005, at 10:00 am, Pacific Time, to:
1. Elect seven directors to serve until the expiration of their respective terms and until their respective successors are elected and qualified;
2. Ratify the selection of HJ & Associates, LLC as our independent auditor for our fiscal year ending June 30, 2006;
3. Ratify the 2005 Stock Option and Award Plan;
4. Transact such other business as may properly come before the Annual Meeting or any adjournment thereof.
The foregoing matters are described in more detail in our Proxy Statement that was filed with the SEC on October 24, 2005, and mailed to shareholders on or about that date.
ITEM 6. EXHIBITS
Exhibit 31.01 - CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002.
Exhibit 31.02 - CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002.
Exhibit 32.01 - CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002.
Exhibit 32.02 - CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
AMERITYRE CORPORATION | |
Dated: April 24, 2006 | /S/RICHARD A. STEINKE |
Richard A. Steinke | |
President and Chief Executive Officer | |
Dated: April 24, 2006 | /S/ANDERS A. SUAREZ |
Anders A. Suarez | |
Chief Financial Officer and Principal Accounting Officer |