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 have developed unique polyurethane formulations that
allow us to make products with superior performance characteristics in the areas
of abrasion resistance, energy efficiency and load-bearing capabilities, when
compared to conventional rubber tires. We also believe that our manufacturing
processes are more energy efficient than the traditional, rubber tire,
manufacturing processes, in part because our polyurethane compounds do not
require the multiple processing steps, extreme heat, and high pressure that are
necessary to cure rubber. We believe tires produced with our proprietary
polyurethane formulations last longer, are less susceptible to failure and are
friendlier to the environment when compared to competitor offerings.



We concentrate on three segments of the flat free tire market:  light duty
polyurethane foam tires, polyurethane elastomer industrial tires and
agricultural tires. Our focus continues to be applications and markets where our
advantages in product technology, tire performance, and customer service give us
an opportunity to obtain premium pricing. Our most recent activities in these
areas are set forth below:



Light Duty Polyurethane Foam Tires - The sale of polyurethane foam tires to
original equipment manufacturers, distributors and dealers accounts for the
majority of our revenue. We produce a broad range of products for the light duty
tire market. Our product development and marketing efforts are focused on
building customer relationships and expanding sales with original equipment
manufacturers and tire distributors. Our competitive advantage is creating
unique product solutions for customers who have challenging tire performance
requirements that cannot be met by competitor offerings.



Due to the effect of COVID-19, we experienced lower than expected demand for our
polyurethane foam tires in the 4th quarter of fiscal year 2020. However, sales
have rebounded from a heavily depressed level in May 2020, and current sales
levels are comparable to sales levels experienced pre-COVID. Sales for the
fiscal first quarter 2021 were 7.4% higher than the sales level in fiscal first
quarter 2020. Some of these sales are likely "catch up" sales related to the
reopening of our customers from the COVID shutdown, but we are seeing similar
strong sales trends that we saw last year during the pre-COVID period



Polyurethane Elastomer Industrial Tires - Overall sales volumes of our forklift
tires remain small, less than 0.1% of our total sales revenue. Price sensitive
consumers continue to favor imported solid rubber press-on forklift tires rather
than our products. Due to other project priorities, we do not plan to devote
significant resources towards promoting this product line.



The Company continues to see greater interest in its light-density elastomer
formulation for use in tire applications where customers need higher abrasion
resistance and load bearing capability. Elastothane TM 500 formulation provides
better performance in these areas compared to our closed cell foam formulation.
Lawn and garden tires continue to drive increased sales of this formulation We
continue to believe this new formulation represents a significant upside
opportunity for our product portfolio.



Agricultural Tires - Agricultural tires sales continue again to be negatively
impacted by poor farm income levels. However, we have seen some recent strength
in farm commodity prices which may improve the financial position of farmers and
allow them to restart spending on equipment upgrades. However, we are not
convinced yet that the prospect for improved agricultural commodity pricing will
continue. We continue to approach OEMs and large distributors about promoting
and utilizing our tires for certain applications, but their belief that farmers
will not pay extra for a premium product has limited our success to date. The
introduction of our ElastothaneTM 500 formulation has enabled us to offer a
better product alternative for abrasive applications.



We believe investment in R&D for new and improved products is important to the
continued growth and success of our overall business, and we will selectively
invest in promising opportunities that can be supported within our current
financial model. We have several product evaluation programs ongoing which have
the potential to develop into significant future business. We expect our current
R&D investments to continue to prove to be a prudent investment of our capital
resources.



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As described above, our product line covers diverse market segments which are
unrelated in terms of customer base, product distribution, market demands and
competition. Our external sales team is comprised of independent manufacturer
representatives, whose experience is complementary to our product portfolio. The
Company's continued emphasis on proper product pricing and new marketing
campaigns continue to drive more profitable sales.  Our website educates the
marketplace about our products as well as generates some online sales.

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  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 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 are in addition to revenue, inventory and stock
valuation with accounting policies disclosed in our financial statements. The
following 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.

Valuation of Intangible Assets and Goodwill





Patent and trademark costs have been capitalized at September 30, 2020, totaling
$487,633 with accumulated amortization of $399,154 for a net book value of
$88,479. Patent and trademark costs capitalized at September 30, 2019, the prior
year, totaled $487,633 with accumulated amortization of $381,456 for a net book
value of $106,177.



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 September 30, 2020
and 2019, respectively, there were no pending patents. Annually, pending or
expired patents are inventoried and analyzed, which resulted in the recognition
of a loss on abandonment, expiration or retirement of patents and trademarks of
$-0- for each of the periods ended September 30, 2020 and 2019, respectively.



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Amortization expense for the years ended September 30, 2020 and 2019 was $4,425
and $4,425 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.




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:

• Revenues, net of returns and trade discounts, which consists of product

sales and services and 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 quarters ended September 30, 2020 and 2019 with respect to
certain key financial measures. The comparisons illustrated in the table are
discussed in greater detail below.




                                               Three Month Period Ended September 30,      Percent Change
                                                             (in 000's)
                                                   2020                    2019            2020 vs. 2019
Net revenues                                   $       1,051         $            979                  7.4 %
Cost of revenues                                        (708 )                   (690 )                2.5 %
Gross profit                                             343                      289                 18.7 %
Research and development expenses                        (20 )                    (26 )              (23.1 )%
Sales and marketing expense                              (60 )                    (43 )               39.5 %
General and administrative expense                      (210 )                   (193 )                8.8 %
Loss on asset disposal                                    (3 )                      -                100.0 %
Other income                                               4                        2                100.0 %
Net income                                                54                       29                 86.2 %
Preferred stock dividend                                   -                      (25 )             (100.0 )%
Net income (loss) attributable to common
shareholders                                   $          54         $              4              1,250.0 %




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Quarter Ended September 30, 2020 Compared to September 30, 2019





Net Revenues. Net revenues of $1,051,286 for the quarter ended September 30,
2020, represents an 7.4% increase over net revenues of $979,297 for the same
period in 2019. These results exceeded our expectations. We did not expect sales
to rebound quickly from the depressed sales levels seen in the previous quarter
ending June 30th, 2020, due to the COVID-19 pandemic. We expect our polyurethane
foam products to continue to constitute the majority of our sales during the
remainder of the fiscal year.



Cost of Revenues. Cost of revenues for the quarter ended September 30, 2020 was
$707,566 or 67.3% of sales compared to $690,599 or 70.5% of sales for the same
period in 2019. This increase in Gross Margin was due to a favorable product mix
compared to the year ago period. We have started to see indications that raw
material costs, particularly chemical feedstocks, will increase in price due to
a tightening of supply in the marketplace. We also expect tariffs to remain in
place for the foreseeable future, regardless of the results of the US national
elections in November 2020. These scenarios will likely keep pressure on our
Gross Margins for the rest of the fiscal year.



Gross Profit. Gross profit for the quarter ended September 30, 2020 was $343,720
compared to $288,698 for the same period in 2019, an increase of $55,022 or
18.7% ,over the same period in 2019.  The September 30, 2020 gross profit
reflects a 32.7% gross margin for product sales compared to a gross margin on
product sales of 29.5% in 2019.



Research & Development Expenses (R&D). Research and development expenses for the
quarter ended September 30, 2020 were $20,471 compared to $26,016 for the same
period in 2019. We continue to invest in product formulation and new product
development where appropriate to support our business plan.



Sales & Marketing Expenses. Sales and marketing expenses for the quarter ended
September 30, 2020 were $59,800 as compared to $43,471 for the same period in
2019. The difference between periods reflects higher commission expenses paid
during the recent period due to higher sales volumes.



General & Administrative Expenses. General and administrative expenses for the
quarter ended September 30, 2020 were $210,486 compared to $193,430 for the same
period in 2019, driven by higher compensation costs. We continue to control
costs and find more efficient ways to conduct our business activities.



Other Income, net. Other income for the quarter ended September 30, 2020 was
$820 compared to other income of $3,122 for the same period in 2019. The primary
driver in this variance is loss on asset disposal of $2,853.

Net Income. Net income for the quarter ended September 30, 2020 of $53,783 compared to a net income of $28,903 for the same period in 2019, an increase in net income of $24,880.

Liquidity and Capital Resources





Cash Flows



The following table sets forth our cash flows for the quarters ended September
30, 2020 and 2019.



                                                        Periods ended Sept. 30,
                                                              (in 000's)
                                                       2020                2019
Net cash used by operating activities               $       (48 )       $       (79 )
Net cash used by investing activities                         -                 (13 )
Net cash used by financing activities                         -                  (2 )
Net increase (decrease) in cash during the period   $       (48 )       $       (94 )




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Net Cash (Used)/Provided by Operating Activities. Our primary sources of
operating cash during the quarter ended September 30, 2020 came from collections
from customers on balances from June 30, 2020 and sales for the quarter. Our
primary use of operating cash was an increase in prepaid and other current
assets, specifically related to renewal of insurance policies (a normal
reoccurrence in our first quarter of fiscal year 2021), increase in inventory
levels in preparation for shipment of a large order in early October and a
larger accounts payable balance at September 30, 2020 versus June 30, 2020 (a
timing variance due to when the quarter ended). Net cash used by operating
activities was $47,493 for the quarter ended September 30, 2020 compared to net
cash provided by operating activities of $78,859 for the same period in 2019.



Non-cash items include depreciation and amortization and stock based
compensation. Our net income was $53,783 for the quarter ended September 30,
2020 compared to a net income of $28,903 for the same period in 2019. The net
income for the quarter ended September 30, 2020 included non-cash expenses for
depreciation and amortization of $55,062, stock-based compensation of $12,323
and a loss on asset disposal of $2,853. As of September 30, 2019, depreciation
and amortization was $25,194 and stock-based compensation totaled $10,119.



Net Cash Used by Investing Activities. Net cased used by investing activities
was $-0- for the quarter ended September 30, 2020; as of September 30, 2019 we
used $12,641 as we purchased new computers and rebuilt production equipment.



Net Cash Used by Financing Activities. Net cash used by financing activities was
$263 for the quarter ended September 30, 2020 and $2,842 for the same period in
2019. The use of cash for the quarter ended September 30, 2020 was payment of
notes payable.



Our principal sources of liquidity consist of cash and payments received from
our customers. In February 2020, the Company secured a $50,000 line of credit
with a local community bank. As of September 30, 2020, the line had not been
used. In April 2020, the Company secured a Small Business Administration
Paycheck Protection Program loan for $149,570, which has a term of 2 years at 1%
interest. The first payment is expected to be due on or about November 15, 2020.
In October 2020, the Company's bank that brokered this loan has recommended full
forgiveness be provided by the Small Business Administration.



Historically, management has been reluctant to pursue financing at terms that
subject the Company to the high costs of debt, or raise money through the sale
of equity at prices we believe do not reflect the true value of the Company.



As part of its effort to maintain adequate working capital levels, Amerityre has
not declared dividends on its preferred stock since June 2016. These unpaid
dividends have accrued in the amount of $25,000 per quarter since that time. The
preferred stock automatically converted on May 13, 2020 into 20,000,000 shares
of common stock.



We continue to have access to 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 of March
31, 2020, we have not needed to activate this financing option due to increased
focus on enforcement of established collection policies and proactive
communication with customers.

Cash Position, Outstanding Indebtedness and Future Capital Requirements





At November 6, 2020, our total cash balance was $526,702, none of which is
restricted; accounts receivables was $384,045; and inventory, net of reserves
for slow moving or obsolete inventory, and other current assets was $610,244.
Our total indebtedness, specifically which management reviews for cash
management, was $1,223,386 and includes $476,962 in accounts payable and accrued
expenses, $92,844 in current portion of long-term debt, $120,329 in long-term
debt and $533,250 in total operating lease liability.



We continue to take actions to improve our liquidity and access to capital
resources. Management continues to maintain that an equity financing in the
current market environment would be too dilutive and not in the best interests
of our shareholders. We have been successful in securing a line of credit with
our bank, and additional financing was secured in April 2020 from the U.S.
government Paycheck Protection Program, a Small Business Administration loan
program initiated to combat the negative effects of COVID-19 on U.S. small
businesses. These new sources of liquidity have been key tools to provide the
Company with the tools to overcome negative effects of the coronavirus on our
business.



We are focused on the sale and distribution of profitable product
lines. Management continues to look for further financing facilities at
affordable terms that will allow the Company to maintain sufficient working
capital to capitalize on new sales growth opportunities. We are limiting our
capital expenditures to that required to maintain current manufacturing
capability or support key business initiatives identified in our strategic sales
plan.



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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 period ended September 30, 2020, 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. We expect to limit
manufacturing and sales operation investments until the negative effects of the
COVID-19 pandemic can be fully quantified and addressed. Although we have seen a
significant increase in business activity in the recent quarter, we are not
assured that a resurgence of the COVID-19 virus will not cause another
significant decrease in demand from our customers If there is a new shutdown of
the economy , we may lack sufficient working capital to meet our needs for the
next 12 months.

The Company has, on occasion, instituted initiatives to incentivize sales of slower-moving inventory through promotional pricing. These programs will continue to be selectively utilized in the upcoming quarters to monetize inventory, promote individual product lines, and improve our cash flow.

As of November 9, 2020, the Company has approximately 25,707,000 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 raise new funds.

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.

Cautionary Note Regarding Forward Looking Statements





This report contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, including statements regarding
economic conditions in general and in the agricultural market, in particular,
our sales prospects in light of new products, increased sales and resulting
profits, and liquidity. All statements other than statements of historical facts
contained in this report, including statements regarding our future financial
position, liquidity, business strategy and plans and objectives of management
for future operations, are forward-looking statements. The words "believe,"
"may," "estimate," "continue," "anticipate," "intend," "should," "plan,"
"could," "target," "potential," "is likely," "will," "expect" and similar
expressions, as they relate to us, are intended to identify forward-looking
statements. We have based these forward-looking statements largely on our
current expectations and projections about future events and financial trends
that we believe may affect our financial condition, results of operations,
business strategy and financial needs.



These forward-looking statements are subject to a number of risks, uncertainties
and assumptions, including those described in our Annual Report on Form 10-K for
the year ended June 30, 2020. New risk factors emerge from time-to-time and it
is not possible for us to predict all such risk factors, nor can we assess the
impact of all such risk factors on our business or the extent to which any risk
factor, or combination of risk factors, may cause actual results to differ
materially from those contained in any forward-looking statements. Except as
otherwise required by applicable laws, we undertake no obligation to publicly
update or revise any forward-looking statements described in this report,
whether as a result of new information, future events, changed circumstances or
any other reason after the date this report is filed.







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