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 "Risk Factors"
in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020, 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
solid polyurethane foam tires. We have developed unique polyurethane
formulations that allow us to make products with superior performance
characteristics, compared to conventional rubber tires, in the areas of abrasion
resistance, energy efficiency and load-bearing capabilities. 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 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 focus our business on 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, including bicycle tires, hand truck tires, mobility tires, and
lawn/garden tires. 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.



Despite the effects of COVID-19 on the overall business climate, we experienced
higher than expected demand for our polyurethane foam tires in the recent
quarter. Sales for the fiscal second quarter 2021 were 9.9% higher than the
sales level in fiscal second 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 the same 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. We have not devoted significant resources towards promoting
this product line. Our industrial tire product line, which includes our golf car
tires, our 480 x 12 tires, and our 570 x 12 tires, continues to see strong
growth. We offer the 480 x 12 and 570 x 12 tires in both polyurethane foam and
light density elastomer formulations. We expect these tires to continue to grow
in popularity in the coming quarters.



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 tire applications 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 to be negatively impacted
by low farm income levels. However, the recent increase in farm commodity prices
may result in more disposal income for farmers in 2021. We continue to approach
OEMs and large distributors about promoting and utilizing our tires for certain
applications, but progress with these potential customers has been limited 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 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. The Company's continued emphasis on proper product pricing
continues to drive more profitable sales. Our website educates the marketplace
about our products as well as offers an outlet for 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 costs 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 and stock option
           awards issued to employees and consultants for services

performed for
           the Company.




Critical Accounting Policies



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



We believe the following accounting policies are our critical accounting
policies because they are important to the portrayal of our financial condition
and results of operations and they require critical management judgments and
estimates about matters that may be uncertain. If actual results or events
differ materially from those contemplated by us in making these estimates, our
reported financial condition and results of operations for future periods could
be materially affected.


Valuation of Intangible Assets and Goodwill





Patent and trademark costs have been capitalized at December 31, 2020, totaling
$487,633 with accumulated amortization of $403,396 for a net book value of
$84,237. Patent and trademark costs capitalized at December 31, 2019, totaled
$487,633 with accumulated amortization of $385,880 for a net book value of
$101,753.



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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 December 31, 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 three and six month periods ended December 31, 2020 and
2019, respectively.



Amortization expense for the periods ended December 31, 2020 and 2019 was $8,667
and $8,849 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 December 31, 2020 and 2019 with respect to certain
key financial measures. The comparisons illustrated in the table are discussed
in greater detail below.



                                For the Three Months Ended                                 For the Six Months Ended
                                       December 31,                                              December 31,
                                        (in 000's)                     Change                     (in 000's)                    Change
                                 2020                2019           2020 vs. 2019           2020               2019          2020 vs. 2019
Net revenues                 $       1,205       $       1,067                12.9 %    $      2,256       $      2,047                10.2 %
Cost of revenues                      (904 )              (768 )              17.6 %          (1,611 )           (1,460 )              10.3 %
Gross profit                           301                 299                 0.3 %             645                587                 9.9 %
Research & Development                 (31 )               (36 )             (13.9 %)            (51 )              (62 )             (17.7 %)
Sales and Marketing                    (51 )               (51 )               0.0 %            (111 )              (95 )              16.8 %
General and Administrative            (186 )              (174 )               6.9 %           (396) )             (366 )               8.2 %
Other income (expense)                 143                   -               100.0 %             144                  3               4,700 %
Net income                             176                  38               363.2 %             231                 67               244.8 %
Preferred stock dividend                 -                 (25 )            (100.0 %)              -                (50 )            (100.0 %)
Net income                   $         176       $          13             1,253.8 %    $        231       $         17             1,258.8 %






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Quarter Ended December 31, 2020 Compared to December 31, 2019





Net Revenues. Net revenues of $1,204,990 for the quarter ended December 31,
2020, represents a 12.9% increase over net revenues of $1,067,440 for the same
period in 2019. These results exceeded our expectations. The improved results
were mainly driven by higher than expected polyurethane foam tire sales from
current customers benefitting from business reopening from the COVID-19
shutdown. We expect our polyurethane foam products to continue to account for
the majority of our sales during the upcoming fiscal year.



Cost of Revenues. Cost of revenues for the quarter ended December 31, 2020 was
$903,543 or 75.0% of sales compared to $768,758 or 72.0% of sales for the same
period in 2019. We experienced higher raw material costs, particularly chemical
feedstocks, during the recent quarter. Our chemical suppliers have informed us
that there will likely be significant price increases in the coming months for
our raw materials due to operating issues at the supplier manufacturing
facilities and increased difficulties in receipt of imported material. Despite
the changes in the government due to the election, we also expect tariffs to
remain in place for the foreseeable future. We expect these headwinds to
continue to pressure our Gross Margins for the rest of the fiscal year, at a
minimum. We are looking at ways to mitigate these adverse factors, including the
adjustment of product pricing to our customers.



Gross Profit. Gross profit for the quarter ended December 31, 2020 was $301,447
compared to $298,682 for the same period in 2019. This increase of $2,765 or
9.9% over the same period in 2019, was primarily driven by the greater sales of
higher margin products. The December 31, 2020 gross profit reflects a 25.0%
gross margin for product sales compared to a gross margin on product sales of
28.0% in 2019.



Research & Development Expenses (R&D). Research and development expenses for the
quarter ended December 31, 2020 were $30,507 compared to $35,897 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 December 31, 2020 were $51,102, virtually identical to the $51,309 spent on Sales and Marketing expenses for the same period in 2019.





General & Administrative Expenses. General and administrative expenses for the
quarter ended December 31, 2020 were $186,014 compared to $172,936 for the same
period in 2019, driven by higher compensation costs partially offset by lower
legal and depreciation costs.



Other Income (Expense), net. Other income, net, for the quarter ended December
31, 2020 was $143,028 compared to an expense position of $145 for the same
period in 2019. The primary driver of this variance was the forgiveness of our
loan from the Small Business Administration Paycheck Protection Program.



Net Income. Net income for the quarter ended December 31, 2020 was $176,852,
compared to net income of $38,395 for the same period in 2019, resulting in a
positive increase in net income of $138,457. or a 363.2% increase in net income
versus the same period in 2019.



Six Months Ended December 31, 2020 Compared to December 31, 2019





Net Revenues. Net revenues of $2,256,276 for the six-month period ended December
31, 2020, represents a 10.2% increase over net sales of $2,046,737 for the same
period in 2019. These results were above our expectations and driven by
increased demand for polyurethane foam tires from current customers. With the
expected continuation of the reopening of businesses closed due to COVID -19, as
well as an increasing stronger overall economy, we expect sales for the rest of
the fiscal year to be strong.



Cost of Revenues.  Cost of revenues for the six-month period ended December 31,
2020 was $1,611,109 or 71.4% of sales compared to $1,459,357 or 71.3% of sales
for the same period in 2019. This result was achieved despite the previously
noted increases in raw material costs. We were able to mitigate some of these
costs through the sale of higher margin products compared to the previous period
in 2019.


Gross Profit. Gross profit for the six-month period ended December 31, 2020 was $645,167 compared to $587,380 for the same period in 2019, an increase of $57,787 or 9.9% over the same period in 2019. The December 31, 2020 gross profit reflects a 28.6% gross margin for product sales compared to a gross margin on product sales of 28.7% in 2019.





Research & Development Expenses (R&D). Research and development expenses for the
six-month period ended December 31, 2020 were $50,978 compared to $61,913 for
the same period in 2019. The lower expenses in the fiscal year 2020 period are
driven by lower tire testing expenses compared to the year earlier period.



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Sales & Marketing Expenses. Sales and marketing expenses for the six-month
period ended December 31, 2020 were $110,902 compared to $94,780 for the same
period in 2019. The difference between periods relates to higher sales
commissions paid, offset by lower trade show expenses, when compared to the same
six-month period in 2019.



General & Administrative Expenses. General and administrative expenses for the
six-month period ended December 31, 2020 were $396,500 compared to $366,366 for
the same period in 2019. The difference between periods is due to higher
compensation costs partially offset by lower legal expenses and depreciation
costs.


Other Income, net. Other income for the quarter ended December 31, 2020 was $143,848 compared to $2,977 for the same period in 2019. The primary driver of this variance is the forgiveness of our loan from the Small Business Administration Paycheck Protection Program.

Net Income. Net income for the six-month period ended December 31, 2020 of $230,635 compared to a net income of $67,298 for the same period in 2019, an increase in net income of $163,337, or 244.8%.

Liquidity and Capital Resources





Cash Flows



The following table sets forth a summary of our cash flows for the periods
below.



                                             Six Months ended Dec. 31,
                                                     (in 000's)
                                            2020                  2019

Net cash used in operating activities $ (29 ) $ (162 ) Net cash used in investing activities

            (11 )                  (30 )
Net cash used in financing activities              -                    (25 )

Net decrease in cash during the period $ (40 ) $ (217 )

Net Cash Used by Operating Activities. In 2020, the Company decided to use a
portion of its available cash to make a lump sum payment for annual insurance
premiums rather than finance these expenditures over the course of the year. As
a result, our prepaid assets increased in the period. During the fiscal 2021
second quarter we also saw a rise in finished product inventories in advance of
our Christmas holiday shutdown, in order to be prepared for customer product
shipments in early January. Net cash used in operating activities was $29,042
for the period ended December 31, 2020 compared to net cash provided by
operating activities of $161,525 for the same period in 2019.



Non-cash items include depreciation and amortization, stock-based compensation,
the forgiveness of our loan from the Small Business Administration Paycheck
Protection Program, proceeds of which were received in fiscal year 2020, and
asset impairment. Amortization includes the amortization of our right to use
asset, our facility rent. Our net income was $230,635 for the six-month period
ended December 31, 2020 compared to net income of $67,298 for the same six-month
period in 2019. The net income for the six-month period ended December 31, 2020
included non-cash expenses for depreciation and amortization of $108,161,
stock-based compensation of $23,810, debt forgiveness of $149,570, and loss on
impairment of assets $20,078. As of December 31, 2019, depreciation and
amortization was $120,762 and stock-based compensation totaled $19,654.



Net Cash Used by Investing Activities. Net cash used by investing activities was
$10,785 for the six-month period ended December 31, 2020 and $30,318 for the
same period in 2019. In fiscal year 2021, we invested in leasehold improvements
by replacing our plant office HVAC units.



Net Cash Used by Financing Activities. Net cash used by financing activities was
$315 for the six-month period December 31, 2020 and $25,121 for the same period
in 2019. In fiscal year 2021 this was payment towards notes payable related to
our forklift tires.



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 December 31, 2020, the line had not been
used.



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.



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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 December
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 February 8, 2021, our total cash balance was $673,535, none of which is
restricted; accounts receivables were $429,709; and inventory, net of reserves
for slow moving or obsolete inventory, and other current assets was $605,814.
Our total indebtedness, specifically which management reviews for cash
management, was $1,057,996 and includes $497,645 in accounts payable and accrued
expenses, $2,000 in current portion of long-term debt, $61,551 in long-term debt
and $496,800 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.



In assessing our liquidity, management reviews and analyzes our current cash,
accounts receivable, accounts payable, capital expenditure commitments, cash
requirements and other obligations. In connection with the preparation of our
financial statements for the period ended December 31, 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, and because we do not qualify at present for additional
Paycheck Protection Program funding, 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 February 8, 2021, the Company has approximately 27,547,000 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.



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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,
the impact of the COVID-19 pandemic and the reopening of the economy and
anticipated increase in product sales resulting therefrom, the possibility and
expected effect of future shutdowns in connection with COVID-19, operational
actions taken by us to reduce expenditures as the economy continues to recover,
expected sales levels for the remainder of the fiscal year ending June 30, 2021,
our ability to increase our authorized capital and pursue future financings,
increased demand for our products and resulting sales and profits, continued
strength of our current polyurethane foam tire market segment, the prudence of
our research and development investments 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 fiscal year ended June 30, 2020. In addition, there is a risk that the
economic repercussions from COVID-19 may be more severe than we currently
expect, particularly with the new strains emerging and the uncertainty if
existing vaccinations will be effective against the new strains. 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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