UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended October 31, 2018April 30, 2020
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number: 000-54546
AMERI METRO, INC.
(Exact name of registrant as specified in its charter)
Delaware |
| 45-1877342 |
(State or other jurisdiction of incorporation or organization) |
| (IRS Employer Identification No.) |
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2575 Eastern Blvd. Suite 211 York, Pennsylvania |
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17402 |
(Address of principal executive offices) |
| (Zip Code) |
Registrant’s telephone number, including area code: (717) 434-0668
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 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 90 days.
[ ] Yes [X] No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
[ ] Yes [X] No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] | Accelerated filer [ ] |
Non-accelerated filer [ X ] | Smaller reporting company [ X ] |
Emerging growth company [ ] | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
[ ] Yes [X] No
Indicate the number of shares outstanding of each of the registrant’s classes of preferred stock and common stock as of the latest practicable date.
Class | Outstanding at |
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Preferred Stock, par value $0.00001 | 1,800,000 shares |
Class A Common Stock, par value $0.000001 | 1,600,000 shares |
Class B Common Stock, par value $0.000001 |
|
Class C Common Stock, par value $0.000001 |
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Class D Common Stock, par value $0.000001 | 48,000,000 shares |
AMERI METRO, INC.
TABLE OF CONTENTS
October 31, 2018April 30, 2020
INDEX
| Page | |
PART I – FINANCIAL INFORMATION |
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Item 1. | Condensed Consolidated Financial Statements (unaudited) |
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| Condensed Consolidated Balance Sheets as of | F-1 |
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| Condensed Consolidated Statements of Operations for the |
F-2 |
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| Condensed Consolidated Statements of Stockholders’ Deficit for the |
F-3 |
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| Condensed Consolidated Statements of Cash Flows for the |
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| Notes to Condensed Consolidated Financial Statements (unaudited) |
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 4 |
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Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 6 |
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Item 4. | Controls and Procedures |
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PART II – OTHER INFORMATION | ||
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Item 1. | Legal Proceedings | 7 |
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Item 1A. | Risk Factors | 7 |
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Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 7 |
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Item 3. | Defaults Upon Senior Securities | 7 |
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Item 4. | Mine Safety Disclosures | 7 |
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Item 5. | Other Information | 7 |
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Item 6. | Exhibits |
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Signatures |
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AMERI METRO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| October 31, | July 31, |
ASSETS | (Unaudited) |
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Current assets |
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Cash and cash equivalents | $ 1,686 | $ 306 |
Prepaid expenses and deposits | 27,297 | 2,940 |
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Total Current Assets | 28,983 | 3,246 |
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Office equipment, net | 1,062 | 1,194 |
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Total Assets | $ 30,045 | $ 4,440 |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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Liabilities |
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Current liabilities |
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Accounts payable and accrued expenses | $ 1,315,441 | $ 1,285,448 |
Accounts payable and accrued expenses – related party | 1,290,169 | 1,282,361 |
Accrued compensation expenses – related parties | 33,921,935 | 31,720,348 |
Loans payable – related parties | 1,050 | 979,795 |
Stock payable | 13,281 | 13,281 |
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Total Current Liabilities | 36,541,876 | 35,281,233 |
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Loans payable – related parties | 1,102,856 | – |
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Total Liabilities | 37,644,732 | 35,281,233 |
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Commitments and contingencies (Note 7) |
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Stockholders’ Deficit |
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Preferred stock, par value $.000001, 200,000,000 shares authorized, | 2 | 2 |
Common stock class A, par value $.000001, 7,000,000 shares authorized, 1,600,000 shares issued and outstanding | 2 | 2 |
Common stock class B, par value $.000001, 4,000,000,000 shares authorized, 1,005,300,659 shares issued and outstanding (990,890,659 shares – July 31, 2018) | 1,005 | 991 |
Common stock class C, par value $.000001, 4,000,000,000 shares authorized, 48,000,000 shares issued and outstanding | 48 | 48 |
Common stock class D, par value $.000001, 4,000,000,000 shares authorized, 48,000,000 shares outstanding | 48 | 48 |
Additional paid in capital | 1,538,744,061 | 5,593,909 |
Stock subscriptions receivable | (1,533,197,000) | (47,000) |
Accumulated deficit | (43,162,853) | (40,824,793) |
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Total Stockholders’ Deficit | (37,614,687) | (35,276,793) |
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Total Liabilities and Stockholders’ Deficit | $ 30,045 | $ 4,440 |
April 30, | July 31, | |
ASSETS | (Unaudited) | |
Current assets | ||
Cash | $1,842 | $315 |
Prepaid expenses and deposits | 20,130 | 6,357 |
Total Current Assets | 21,972 | 6,672 |
Office equipment, net | 414 | 724 |
Total Assets | $22,386 | $7,396 |
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||
Liabilities | ||
Current liabilities | ||
Accounts payable and accrued expenses | $1,846,187 | $1,578,226 |
Accounts payable and accrued expenses – related parties | 1,251,644 | 1,316,400 |
Accrued compensation expenses – related parties | 47,622,143 | 40,605,372 |
Stock payable | 13,281 | 13,281 |
Loans payable – related parties | 173,333 | – |
Total Current Liabilities | 50,906,588 | 43,513,279 |
Loans payable – related parties | – | 1,157,924 |
Total Liabilities | 50,906,588 | 44,671,203 |
Stockholders’ Deficit | ||
Preferred stock, par value $0.000001, 200,000,000 shares authorized, | 2 | 2 |
Common stock class A, par value $0.000001, 7,000,000 shares authorized, 1,600,000 shares issued and outstanding | 2 | 2 |
Common stock class B, par value $0.000001, 10,000,000,000 shares authorized, 2,926,768,899 (July 31, 2019 – 1,062,522,134) shares issued and outstanding | 2,926 | 1,063 |
Common stock class C original and Series I to XL, par value $0.000001, 8,000,000,000 shares authorized, 66,000,000 (July 31, 2019 – 48,000,000) shares issued and outstanding | 66 | 48 |
Common stock class D original and Series I to XL, par value $0.000001, 8,000,000,000 shares authorized, 48,000,000 shares outstanding | 48 | 48 |
Common stock dividend distributable | 198,759 | – |
Additional paid in capital | 230,263,561,370 | 1,589,157,814 |
Stock subscriptions receivable | (230,257,597,000) | (1,583,597,000) |
Accumulated deficit | (57,050,375) | (50,225,784) |
Total Stockholders’ Deficit | (50,884,202) | (44,663,807) |
Total Liabilities and Stockholders’ Deficit | $22,386 | $7,396 |
TheSee accompanying notes are an integral part of these unauditedto condensed consolidated financial statements.
F-1
AMERI METRO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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| Three months ended October 31, 2018 | Three months ended October 31, 2017 | Three months ended April 30, 2020 | Three months ended April 30, 2019 | Nine months ended April 30, 2020 | Nine months ended April 30, 2019 |
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OPERATING EXPENSES |
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General & administrative |
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| $ 2,322,227 | $ 3,281,207 | $ 2,642,773 | $ 2,340,449 | $ 7,667,633 | $ 6,998,245 |
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TOTAL OPERATING EXPENSES |
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| 2,322,227 | 3,281,207 | 2,642,773 | 2,340,449 | 7,667,633 | 6,998,245 |
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LOSS FROM OPERATIONS |
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| (2,322,227) | (3,281,207) | (2,642,773) | (2,340,449) | (7,667,633) | (6,998,245) |
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OTHER INCOME (EXPENSE) |
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Interest expense |
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| (15,833) | (11,509) | (8,574) | (16,229) | (42,647) | (48,441) |
Gain on settlement of debt | – | – | 1,354,610 | – | ||||
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TOTAL OTHER INCOME (EXPENSE) |
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| (15,833) | (11,509) | (8,574) | (16,229) | 1,311,963 | (48,441) |
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NET LOSS |
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| $ (2,338,060) | $ (3,292,716) | $ (2,651,347) | $ (2,356,678) | $ (6,355,670) | $ (7,046,686) |
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LOSS PER SHARE (BASIC AND DILUTED) |
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| $ (0.00) | $ (0.00) | $ (0.00) | $ (0.00) | $ (0.01) | |
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WEIGHTED AVERAGE COMMONSHARES OUTSTANDING (BASIC AND DILUTED) |
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| 1,091,466,637 | 1,088,490,659 | 2,194,529,151 | 1,104,990,659 | 1,502,792,760 | 1,100,373,077 |
TheSee accompanying notes are an integral part of these unauditedto condensed consolidated financial statements.
F-2
CONDENSED CONSOLIDATED STATEMENTSSTATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREENINE MONTHS ENDED OCTOBER 31, 2018 AND 2017APRIL 30, 2020
(Unaudited)
| Preferred Stock | Common Stock | Common Stock | Common Stock | Common Stock | Additional Paid-in | Stock Subscription | Accumulated |
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| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Receivable | Deficit | Total |
Balance, August 1, 2018 | 1,800,000 | $ 2 | 1,600,000 | $ 2 | 990,890,659 | $ 991 | 48,000,000 | $ 48 | 48,000,000 | $ 48 | $ 5,593,909 | $ (47,000) | $ (40,824,793) | $ (35,276,793) |
Shares issued for option exercise | – | – | – | – | 14,410,000 | 14 | – | – | – | – | 1,533,149,986 | (1,533,150,000) | – | – |
Stock-based compensation | – | – | – | – | – | – | – | – | – | – | 166 | – | – | 166 |
Net loss | – | – | – | – | – | – | – | – | – | – | – | – | (2,338,060) | (2,338,060) |
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| – | – | – | – |
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Balance, October 31, 2018 | 1,800,000 | $ 2 | 1,600,000 | $ 2 | 1,005,300,659 | $ 1,005 | 48,000,000 | $ 48 | 48,000,000 | $ 48 | $ 1,538,744,061 | $ (1,533,197,000) | $ (43,162,853) | $ (37,614,687) |
| Preferred Stock | Common Stock Class A | Common Stock Class B | Common Stock Class C | Common Stock Class D | Common Stock Dividend | Additional Paid in | Stock Subscription | Accumulated |
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| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Distributable | Capital | Receivable | Deficit | Total |
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Balance, August 1, 2019 | 1,800,000 | $ 2 | 1,600,000 | $ 2 | 1,062,522,134 | $ 1,063 | 48,000,000 | $ 48 | 48,000,000 | $ 48 | $ – | $ 1,589,157,814 | $ (1,583,597,000) | $ (50,225,784) | $ (44,663,807) |
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Stock-based compensation | – | – | – | – | – | – | – | – | – | – | – | 98 | – | – | 98 |
Net Loss | – | – | – | – | – | – | – | – | – | – | – | – | – | (2,504,875) | (2,504,875) |
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Balance, October 31, 2019 | 1,800,000 | $ 2 | 1,600,000 | $ 2 | 1,062,522,134 | $ 1,063 | 48,000,000 | $ 48 | 48,000,000 | $ 48 | $ – | $ 1,589,157,912 | $ (1,583,597,000) | $ (52,730,659) | $ (47,168,584) |
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Stock-based compensation | – | – | – | – | – | – | – | – | – | – | – | 126 | – | – | 126 |
Shares issued for option exercise | – | – | – | – | 2,400,000 | 2 | – | – | – | – | – | 1,375,999,998 | (1,376,000,000) | – | – |
Shares issued for amended opportunity licensing agreement | – | – | – | – | 3,475,248 | 3 | – | – | – | – | – | 866 | – | – | 869 |
Stock options issued for debt settlement | – | – | – | – | – | – | – | – | – | – | – | 13,300 | – | – | 13,300 |
Stock dividend | – | – | – | – | – | – | 14,769,480 | 15 | – | – | – | 3,677 | – | (3,692) | – |
Declaration of stock dividend | – | – | – | – | – | – | – | – | – | – | 465,229 | – | – | (465,229) | – |
Net loss | – | – | – | – | – | – | – | – | – | – | – | – | – | (1,199,448) | (1,199,448) |
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Balance, January 31, 2020 | 1,800,000 | $ 2 | 1,600,000 | $ 2 | 1,068,397,382 | $ 1,068 | 62,769,480 | $ 63 | 48,000,000 | $ 48 | $ 465,229 | $ 2,965,175,879 | $ (2,959,597,000) | $ (54,399,028) | $ (48,353,737) |
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Stock-based compensation | – | – | – | – | – | – | – | – | – | – | – | 74 | – | – | 74 |
Shares issued for services | – | – | – | – | 480,000,000 | 480 | – | – | – | – | – | 119,520 | – | – | 120,000 |
Shares issued for option exercise | – | – | – | – | 301,200,000 | 301 | – | – | – | – | – | 227,297,999,699 | (227,298,000,000) | – | – |
Shares issued for investment in related entity | – | – | – | – | – | – | 3,230,520 | 3 | – | – | – | 805 | – | – | 808 |
Shares re-issued for deposit | – | – | – | – | 11,292,240 | 11 | – | – | – | – | – | (11) | – | – | – |
Stock dividend | – | – | – | – | 1,065,879,277 | 1,066 | – | – | – | – | (266,470) | 265,404 | – | – | – |
Net loss | – | – | – | – | – | – | – | – | – | – | – | – | – | (2,651,347) | (2,651,347) |
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Balance, April 30, 2020 | 1,800,000 | $ 2 | 1,600,000 | $ 2 | 2,926,768,899 | $ 2,926 | 66,000,000 | $ 66 | 48,000,000 | $ 48 | $ 198,759 | $ 230,263,561,370 | $ (230,257,597,000) | $ (57,050,375) | $ (50,884,202) |
| Preferred Stock | Common Stock | Common Stock | Common Stock | Common Stock | Additional Paid-in | Stock Subscription | Accumulated |
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| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Receivable | Deficit | Total |
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Balance, August 1, 2017 | 1,800,000 | $ 2 | 1,600,000 | $ 2 | 990,890,659 | $ 991 | 48,000,000 | $ 48 | 48,000,000 | $ 48 | $ 5,593,594 | $ (47,000) | $ (29,977,275) | $ (24,429,590) |
Stock-based compensation | – | – | – | – | – | – | – | – | – | – | 106 | – | – | 106 |
Net loss | – | – | – | – | – | – | – | – | – | – | – | – | (3,292,716) | (3,292,716) |
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| – | – | – | – |
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Balance, October 31, 2017 | 1,800,000 | $ 2 | 1,600,000 | $ 2 | 990,890,659 | $ 991 | 48,000,000 | $ 48 | 48,000,000 | $ 48 | $ 5,593,700 | $ (47,000) | $ (33,269,991) | $ (27,722,200) |
TheSee accompanying notes are an integral part of these unauditedto condensed consolidated financial statements.
F-3AMERI METRO, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE NINE MONTHS ENDED APRIL 30, 2019
(Unaudited)
| Preferred Stock | Common Stock Class A | Common Stock Class B | Common Stock Class C | Common Stock Class D | Additional Paid in | Stock Subscription | Accumulated |
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| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Receivable | Deficit | Total |
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Balance, August 1, 2018 | 1,800,000 | $ 2 | 1,600,000 | $ 2 | 990,890,659 | $ 991 | 48,000,000 | $ 48 | 48,000,000 | $ 48 | $ 5,593,909 | $ (47,000) | $ (40,824,793) | $ (35,276,793) |
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Shares issued for option exercise | – | – | – | – | 14,410,000 | 14 | – | – | – | – | 1,533,149,986 | (1,533,150,000) | – | – |
Stock-based compensation | – | – | – | – | – | – | – | – | – | – | 166 | – | – | 166 |
Net loss | – | – | – | – | – | – | – | – | – | – | – | – | (2,338,060) | (2,338,060) |
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Balance, October 31, 2018 | 1,800,000 | $ 2 | 1,600,000 | $ 2 | 1,005,300,659 | $ 1,005 | 48,000,000 | $ 48 | 48,000,000 | $ 48 | $ 1,538,744,061 | $ (1,533,197,000) | $ (43,162,853) | $ (37,614,687) |
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Shares issued for services | – | – | – | – | 2,050,000 | 2 | – | – | – | – | 56 | – | – | 58 |
Stock-based compensation | – | – | – | – | – | – | – | – | – | – | 62 | – | – | 62 |
Net loss | – | – | – | – | – | – | – | – | – | – | – | – | (2,351,948) | (2,351,948) |
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Balance, January 31, 2019 | 1,800,000 | $ 2 | 1,600,000 | $ 2 | 1,007,350,659 | $ 1,007 | 48,000,000 | $ 48 | 48,000,000 | $ 48 | $ 1,538,744,179 | $ (1,533,197,000) | $ (45,514,801) | $ (39,966,515) |
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Stock-based compensation | – | – | – | – | – | – | – | – | – | – | 105 | – | – | 105 |
Net loss | – | – | – | – | – | – | – | – | – | – | – | – | (2,356,678) | (2,356,678) |
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Balance, April 30, 2019 | 1,800,000 | $ 2 | 1,600,000 | $ 2 | 1,007,350,659 | $ 1,007 | 48,000,000 | $ 48 | 48,000,000 | $ 48 | $ 1,538,744,284 | $ (1,533,197,000) | $ (47,871,479) | $ (42,323,088) |
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See accompanying notes to condensed consolidated financial statements.
AMERI METRO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Three months ended October 31, 2018 | Three months ended October 31, 2017 |
CASH FLOWS FROM OPERATING ACTIVITIES |
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Net loss | $ (2,338,060) | $ (3,292,716) |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation expense | 132 | 132 |
Stock-based compensation | 166 | 106 |
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Change in operating assets and liabilities: |
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Prepaid expense and deposits | (24,357) | – |
Accounts payable and accrued expenses | 29,993 | 707,051 |
Accounts payable and accrued expenses – related parties | 7,808 | 315,736 |
Accrued compensation expenses – related parties | 2,201,587 | 2,240,415 |
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Cash flows used in operating activities | (122,731) | (29,276) |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Proceeds from related party loans | 124,111 | 29,552 |
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Cash flows provided by financing activities | 124,111 | 29,552 |
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NET INCREASE IN CASH AND CASH EQUIVALENTS | 1,380 | 276 |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 306 | – |
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CASH AND CASH EQUIVALENTS, END OF PERIOD | $ 1,686 | $ 276 |
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SUPPLEMENTAL CASH FLOW INFORMATION: |
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Interest paid | $ – | $ – |
Income taxes paid | $ – | $ – |
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| Nine Months ended April 30, 2020 | Nine Months ended April 30, 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES |
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Net loss | $ (6,355,670) | $ (7,046,686) |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation expense | 310 | 366 |
Stock-based compensation | 120,298 | 391 |
Impairment of investment in related companies | 1,677 | – |
Gain on settlement of debt | (1,354,610) | – |
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Change in operating assets and liabilities: |
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Prepaid expense and deposits | (13,773) | (10,417) |
Accounts payable and accrued expenses | 267,961 | 222,061 |
Accounts payable and accrued expenses – related parties | 15,505 | 24,365 |
Accrued compensation expenses – related parties | 7,016,771 | 6,657,212 |
Due to related parties | 18,915 | – |
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Cash flows used in operating activities | (282,616) | (152,708) |
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CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
Proceeds from related party loans | 305,573 | 153,163 |
Repayment of related party loans | (21,430) | – |
|
|
|
Cash flows provided by financing activities | 284,143 | 153,163 |
|
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS | 1,527 | 455 |
CASH, BEGINNING OF PERIOD | 315 | 306 |
|
|
|
CASH, END OF PERIOD | $ 1,842 | $ 761 |
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION: |
|
|
Interest paid | $ – | $ – |
Income taxes paid | $ – | $ – |
|
|
|
TheSee accompanying notes are an integral part of these unauditedto condensed consolidated financial statements.
F-4
AMERI METRO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2018April 30, 2020
(Unaudited)
NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Ameri Metro, Inc. (“Ameri Metro” and the “Company”) was formed to engage primarily in high-speed rail for passenger and freight transportation and related transportation projects. The Company initially intends to develop a Midwest high-speed rail system for passengers and freight. Currently the Company is engaged in raising capital and entering into relationships in furtherance of its planned activities.
The Company’s activities are subject to significant risks and uncertainties including failure to secure additional funding to properly execute the company’s business plan.
In December 2019, an outbreak of a new strain of coronavirus (“COVID-19”) began in Wuhan, Hubei Province, China. In March 2020, the World Health Organization declared COVID-19 a pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. The extent of the impact of the COVID-19 pandemic on our ability to secure funding and to execute our business plans in the expected time frame, will depend on future developments, including the duration and spread of the pandemic, all of which are uncertain and cannot be predicted. The management team is closely following the progression of COVID-19 and its potential impact on the Company. Since the Company is not currently trading and has not begun full-scale operations, there is minimal impact on the Company’s current financial condition. The Company sees an opportunity for additional U.S. projects given the Administration’s interest in advancing a $2 Trillion infrastructure package. Although the Company expects a significant reduction in GDP globally, the Company anticipates a return to growth later in the fiscal year 2020. Management will continue to monitor the situation and take appropriate actions when the Company is capitalized.
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements of the CompanyCompany. have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, the instructions to Form 10-Q and Article 8 of Regulation S-X, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s financial statements filed with the Securities and Exchange Commission (“SEC”) on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for the unaudited interim condensed consolidated financial statements to be not misleading have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. The unaudited interim condensed consolidated statements do not include all of the information and notes required by U.S. GAAP for complete financial statements. Notes to the consolidated financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year 20182019 as reported in Form 10K,10-K, have been omitted.
Principles of Consolidation
The consolidated financial statements present the financial position, results of operations and cash flows for Ameri Metro and its wholly-owned subsidiary, Global Transportation & Infrastructure, Inc. (“GTI”). Intercompany transactions and balances have been eliminated in consolidation.
Participating Profits InterestInvestment in Related Companies
As at October 31, 2018,April 30, 2020, the Company has a 25% participating profitsownership interest in sixteen related entities.entities and 2% ownership interest in a related entity. The remaining 75% participating profitsownership interest (and 100% voting control) is owned by the Company’s majority shareholder. These entities have had no operations, no assets orother than the 33,931,475 shares of Class B common stock and 3,230,520 shares of Class C common stock of the Company, and no liabilities, and as of October 31, 2018,April 30, 2020.
Participating Profits Interest
As at April 30, 2020, the Company has a 10% participating profits interest in a project. The remaining 90% participating profits interest (and 100% voting control) is owned by the Company’s majority shareholder. As of April 30, 2020, the project has not commenced and the Company’s participating profits interest in these companies was $0.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the year. Management bases its estimates on historical experience and on other assumptions considered to be reasonable under the circumstances. However, actual results may differ from the estimates.
Basic loss per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. Due to loss for the period ended October 31, 2018April 30, 2020 and 2017,2019, the outstanding options are anti-dilutive. As a result, the computations of net loss per common shares is the same for both basic and fully diluted common stock. Potentially dilutive securities, which include 12,500,00010,890,000 and 22,000,00013,700,000 stock options as at October 31, 2018,April 30, 2020, and 2017,2019, have been excluded from the computation of diluted net loss per share because the effect of their inclusion would have been antidilutive.
F-5
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which, among other things, requires lessees to recognize most leases on their balance sheets related to the rights and obligations created by those leases. The new standard also requires new disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The amendments in this update should be applied under a modified retrospective approach. The new standard is effective for annual reporting periods beginning after December 15, 2018. Early adoption is permitted. Management does not plan to early adopt this guidance. The Company’s only lease as at August 1, 2019 is a month-to-month rent agreement for office space. The month-to-month rent agreement is considered a lease with a term of 12 months or less. As the leaseleases standard does not require lessees to apply the guidance to arrangements with a lease term of 12 months or less, the Company expectsadoption of the new standard to havehad no material impact on itsthe Company’s consolidated financial statements.
In June 2018, the FASB issued ASU 2018-07, which simplifies the accounting for nonemployee share-based payment transactions. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The standard became effective for the Company in the first quarter of fiscal year 2020. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
The Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 2 – GOING CONCERN
These unaudited condensed consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated any revenues since inception and is unlikely to generate earnings in the immediate or foreseeable future. As at October 31, 2018,April 30, 2020, the Company has a working capital deficiency of $36,512,893$50,884,616 and has accumulated losses of $43,162,853$57,050,375 since inception. The ability of Ameri Metro to continue as a going concern is dependent on the Company generating cash from the sale of its common stock and/or obtaining debt financing and attaining future profitable operations.
Management’s plans include selling its equity securities and obtaining debt financing to fund its capital requirement and on-going operations; however, there can be no assurance the Company will be successful in these efforts. These factors create substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.
NOTE 3 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES – RELATED PARTIES
As of October 31, 2018, $33,921,935April 30, 2020, $47,622,143 (July 31, 20182019 - $31,720,348)$40,605,372) is accrued in relation to various employment agreements, directorship agreements and audit committee agreements as described in Note 8.
On January 14, 2020, the Company issued 300,000,000 options to Penndel Land Company, a company owned by Company Founder, for $1,368,217 of loans and accrued interest owed to the Company’s Founder as at December 31, 2019. The fair value of the 300,000,000 options was $13,300 on the grant date and the Company recognized a gain of $1,354,610 on settlement of debt. On February 14, 2020, the Company issued 300,000,000 shares of Class B common stock upon the exercise of stock options.
At October 31, 2018,April 30, 2020, the Company is indebted to the majority shareholder for $1,290,169$1,250,594 (July 31, 20182019 - $1,282,361)$1,315,350) for accrued interest of $41,163$474 on related party loans, and $1,249,006 of consulting fees owed.
NOTE 4 – LOANS PAYABLE – RELATED PARTIES
Asowed and $1,114 of October 31, 2018, $1,102,856 (July 31, 2018 - $978,745) is due toexpenses paid on behalf of the majority shareholder and due onCompany.
At April 30, 2021, with an interest rate of 3% per annum. At October2020 and July 31, 2018, accrued interest on these loans is $41,470 (July 31, 2018 - $33,662), which is included in accounts payable and accrued expenses – related parties.
At October 31, 2018,2019, the Company is indebted to three directors of the Company for an aggregate of $1,050 (July 31, 2018 - $1,050) for expenditures incurred on behalf of the Company. The amount is unsecured, non-interest bearing and due on demand.
NOTE 4 – LOANS PAYABLE – RELATED PARTIES
As of April 30, 2020, $173,333 (July 31, 2019 - $1,157,924) is due to the majority shareholder as he paid expenses on behalf of the Company. The amount is unsecured, bears interest at 3% per annum and is due on April 30, 2021. At April 30, 2020, accrued interest on the loan is $474 (July 31, 2019 - $66,651), which is included in accounts payable and accrued expenses – related parties.
NOTE 5 – STOCK PAYABLE
Effective October 2, 2014, the Company entered into an employment agreement with Mr. Shah Mathias (the Company’s founder and a majority shareholder) for the Head of Mergers and Acquisitions and Business Development, and as non-board member President (See Note 7)9). According to the agreement, the Company agreed to issue stock options of 1.2% of all authorized stock capitalization to Mr. Shah Mathias at the time of appointment. In addition, the Company agreed to issue shares of common stock equal to 10% of any shares issued under a public offering pursuant to a Form S-1 registration statement; and if shares are issued at such time to any other party Mr. Shah Mathias is to be issued an equal amount of shares. As of October 31, 2018,April 30, 2020, the Company has not completed its public offering pursuant to a Form S-1 registration statement. On April 3, 2015, the Company amended the employment agreement to eliminate the requirement to issue stock options of 1.2% of all authorized stock capitalization and, instead, agreed to issue Mr. Shah Mathias a total of 1.2% of Class A and Class B shares of common stock, and 1% of Class C and D shares of common stock at the time of the amendment. As of OctoberJuly 31, 2018, the Company has issued 48,000,000 shares of Class D common stock and 43,200,000 shares of Class C common stock pursuant to the employment agreement, and recorded $13,281 of stock payable for unissued stock consisting of 84,000 unissued Class A common stock, 4,800,000 unissued Class B common stock, and 48,000,000 unissued Class D Stock.
F-6
NOTE 6 – CAPITAL STOCK
On August 20,November 5, 2018, the Company reserved 100,000,000issued 2,000,000 shares of Class B shares of common stock in the namewith a fair value of $500 to two officers and directors of the Ameri Metro, Inc. 2015 Equity Incentive Plan.Company for services pursuant to directorship agreements dated August 30, 2018. The shares are being administered by HSRF Statutory Trust on behalf of the Company. Upon exercise of stock options granted pursuant towere issued from the 2015 Equity Incentive Plan HSRF Statutory Trust will issuereserved shares. The shares vest 285,714 per year for seven years. During the relevant employee, director or consultantnine months ended April 30, 2020, the Company recorded $107 (2019 - $93) for the vested portion of the shares, from trust.leaving $258 of unvested compensation expense to be recognized in future periods.
On August 20, 2018,December 15, 2019, the Company reserved 100,000,000 Class Bissued a stock dividend of 14,769,480 shares of Class C common stock in the name of the Ameri Metro, Inc. 2018 Equity Incentive Plan. The shares are being administered by HSRF Statutory Trust on behalf of the Company. Upon exercise of stock options granted pursuant to the 2018 Equity Incentive Plan, HSRF Statutory Trust will issue the relevant employee, director or consultant shares from trust.
On September 18, 2018, the Company reserved 150,000,000 Class B shares of common stock in the name of the Ameri Metro, Inc. Trust reserved shares.
On January 7, 2020, the Company increased the number of authorized shares of its Class B common stock to 10,000,000,000 shares.
On January 7, 2020, the Company created 40 series of Class C common stock for the purpose of any future purchases of commodities, supplies, equipment and other tangible items for current and futureequity participation in forty infrastructure projects. The Company increased the number of authorized shares of its Class C common stock to 8,000,000,000 shares, of which 7,500,000,000 shares are being administered byallocated evenly to the HSRF Statutory Trust on behalf of40 series.
On January 7, 2020, the Company and will be issued outcreated 40 series of trust when the Company deems it appropriate to issue Class B shares ofD common stock for these purchases.the purpose of equity participation in forty infrastructure projects. The Company increased the number of authorized shares of its Class D common stock to 8,000,000,000 shares, of which 7,500,000,000 shares are allocated evenly to the 40 series.
On October 1, 2018, the Company reserved 18,000,000 each of Class C and Class D shares of common stock in the name of the Ameri Metro, Inc. Trust. The shares are being administered by HSRF Statutory Trust and reserved on behalf of the shareholders for future dividend disbursement. On October 23, 2018, Shah Mathias transferred 200,000,000 of his personal Class B Ameri Metro shares to the HSRF Statutory Trust. The transfer would permit the possible future purchase of equipment and services from designated vendors and suppliers. The transferred shares remain in Mr. Mathias’ control.
On October 12, 2018,January 13, 2020, the Company issued 3,600,0003,475,248 shares with a fair value of $869 from the 2015 Incentive Plan to acquire 25% ownership interest in a related entity.
On January 15, 2020, the Company issued 400,000 shares of Class B common stock to 32 officers and directors of the Company pursuant to the exercise of stock options granted on March 3, 2015 with an amended exercise price of $42 per share.$565. The shares were issued from the 2015 Equity Incentive Plan reserved shares. At October 31, 2018,April 30, 2020, the $151,200,000$226,000,000 proceeds receivable upon the exercise of the options had yet to be received and was recorded as stock subscriptions receivable.
On October 12, 2018,January 15, 2020, the Company issued 7,200,0001,400,000 shares of Class B common stock to 67 officers and directors of the Company pursuant to the exercise of stock options granted on November 1, 2016 with an amended exercise price of $42 per share.$565. The shares were issued from the 2015 Equity Incentive Plan reserved shares. At October 31, 2018,April 30, 2020, the $302,400,000$791,000,000 proceeds receivable upon the exercise of the options had yet to be received and was recorded as stock subscriptions receivable.
On October 12, 2018,January 15, 2020, the Company issued 2,000,000400,000 shares of Class B common stock to a consultant2 officers and directors of the Company pursuant to subscription agreement enteredthe exercise of stock options granted on February 7, 2018.August 30, 2018 with an amended exercise price of $565. The shares were issued from the 2015 Equity Incentive Plan reserved shares. At October 31, 2018,April 30, 2020, the $503,750,000 of proceeds receivable for the sale of the shares had yet to be received and was recorded as stock subscriptions receivable.
On October 12, 2018, the Company issued 10,000 shares of Class B common stock to a consultant of the Company pursuant to the exercise of stock options granted on October 11, 2018 with an exercise price of $460 per share. The shares were issued from the 2015 Equity Incentive Plan reserved shares. At October 31, 2018, the $4,600,000$226,000,000 proceeds receivable upon the exercise of the options had yet to be received and was recorded as stock subscriptions receivable.
October 12, 2018,On January 18, 2020, the Company issued 1,600,000200,000 shares of Class B common stock to two officers and directorsa director of the Company pursuant to the exercise of stock options granted on August 30, 2018January 18, 2020 with an exercise price of $357 per share.$665. The shares were issued from the 2015 Equity
Incentive Plan reserved shares. At October 31, 2018,April 30, 2020, the $571,199,998$133,000,000 proceeds receivable upon the exercise of the options had yet to be received and was recorded as stock subscriptions receivable.
On January 31, 2020, the Company declared a 100% stock dividend to all shareholders of Class B common stock at par and recorded a dividend payable of $465,229 for 1,860,916,765 shares to be issued. On March 30, 2020, the Company issued 1,065,879,277 shares for the stock dividend.
On February 14, 2020, the Company issued 300,000,000 shares of Class B common stock to the Founder of the Company upon the exercise of stock options granted on January 14, 2020 with exercise prices ranging from $665 to $851. At April 30, 2020, the $226,500,000,000 proceeds receivable upon the exercise of the options had yet to be received and was recorded as stock subscriptions receivable.
On February 18, 2020, the Company issued 480,000,000 shares of Class B common stock with a fair value of $120,000 to the Company Founder pursuant to the amendment to his employment agreement dated January 5, 2020.
On February 18, 2020, the Company issued 3,230,520 shares of Class C common stock with a fair value of $808 to acquire 2% of Susquehanna Mortgage Bankers Corp. (formerly Global Infrastructure SP Bankers).
On March 11, 2020, the Company reinstated 11,292,240 shares of Class B common stock rescinded during the year ended July 31, 2013. The 11,292,240 shares of Class B common stock were originally issued to a related party as a deposit on a future development.
On March 23, 2020, the Company issued 1,200,000 shares of Class B common stock to a director of the Company pursuant to the exercise of stock options granted on January 18, 2020 with an exercise price of $665. The shares were issued from the 2015 Equity Incentive Plan reserved shares. At April 30, 2020, the $798,000,000 proceeds receivable upon the exercise of the options had yet to be received and was recorded as stock subscriptions receivable.
As part of its 100% stock dividend, on March 30, 2020 the Company issued shares to the Ameri Metro, Inc. 2015 Equity Incentive Plan; to the Ameri Metro, Inc. 2018 Equity Incentive Plan; to the Ameri Metro, Inc. Trust; to the Ameri Metro North American Pension Plan; and to the Ameri Metro Universal Pension Plan. The shares are being administered by HSRF Statutory Trust.
NOTE 7 – STOCK OPTIONS
On March 8, 2016, the Company granted 8,000,000 stock options to 4 officers and directors of the Company, exercisable at $42 per share and expire on March 8, 2026. The 8,000,000 options vest according to the following schedule: 3,200,000 options vest immediately and 800,000 vest annually for the next 6 years. The weighted average grant date fair value of stock options granted was $0.00009 per share. On June 12, 2019, the Company amended the vesting terms through a Directors’ Resolution so that the remaining 2,400,000 unvested options will vest on November 1 instead of March 8 of each subsequent year. On January 5, 2020, the Company amended the vesting terms of the remaining 2,400,000 options and the vesting date was changed to August 30 of each subsequent year. The Company also modified the exercise price of 1,600,000 options to $565 per share. The exercise price of the other 2,800,000 outstanding option was not changed. The modification did not result in any incremental compensation cost and therefore the stock-based compensation for the unvested portion of the modified options will be recognized based on the original fair value. On October 12, 2018, 3,600,000 options were exercised at $42 per share. On January 15, 2020, 400,000 options were exercised at $565 per share. During the threenine months ended October 31, 2018,April 30, 2020 and 2019, the Company recorded stock-based compensation of $18 (2018 - $26)$17 and $49, respectively, on the consolidated statement of operations as director fees.
F-7
operations.
On November 1, 2016, the Company granted 14,000,000 stock options to 7 officers and directors of the Company, exercisable at $42 per share and expire on November 1, 2026. The 14,000,000 options vest according to the following schedule: 5,600,000 options vest immediately and 1,400,000 vest annually for the next 6 years. On June 12, 2019, the Company amended the vesting terms through a Directors’ Resolution so that 1,400,000 options originally vesting on November 1, 2018 are to be vested on October 12, 2018. On October 12, 2018, 7,200,000 shares were issued upon the exercise of the stock options. The weighted average grant date fair value of stock options granted was $0.00009 per share. On January 5, 2020, the Company amended the vesting terms of the remaining options and the vesting date was changed to August 30 of each subsequent year. Furthermore, the exercise price was amended to $565 per share for all options vesting on or after August 30, 2019. The weighted average grant datemodification did not result in any incremental compensation cost and therefore the stock-based compensation for the unvested portion of the modified options will be recognized based on the original fair value of stockvalue. On January 15, 2020, 1,400,000 options granted was $0.00009were exercised at $565 per share. During the threenine months ended October 31, 2018,April 30, 2020 and 2019, the Company recorded stock-based compensation of $47 (2018 - $80)$81 and $109, respectively, on the consolidated statement of operations as director fees.operations.
On February 7, 2018, the Company granted 2,000,000 stock options to a consultant of the Company, exercisable at various prices per share and expire on May 1, 2022. The exercise prices are as follows: 250,000 options at $60 per share, 350,000 options at $225 per share, 300,000 options at $250 per share, 300,000 options at $275 per share, 300,000 options at $300 per share, 500,000 options at $325 per share. On June 12, 2019, the Company amended the vesting terms so that all 2,000,000 options vested by October 12, 2018. On
October 12, 2018, 2,000,000 shares that vested pursuant to the amendment were issued. The weighted average grant date fair value of stock options granted was $0.000005 per share. During the threenine months ended October 31, 2018,April 30, 2020 and 2019, the Company recorded stock-based compensation of $nil and $4 on the consolidated statement of operations as consulting fees.operations.
On August 30, 2018, the Company granted 4,000,000 stock options to two officers and directors of the Company, exercisable at $357 per share and expire on August 30, 2028. The 4,000,000 options vest according to the following schedule: 1,600,000 options vest immediately, and 800,000400,000 vest annually for the next 6 years. The weighted average grant date fair value of stock options granted was $0.000008 per share. On January 5, 2020, the exercise price was amended to $565 per share for all options vesting on or after August 30, 2019. The modification did not result in any incremental compensation cost and therefore the stock-based compensation for the unvested portion of the modified options will be recognized based on the original fair value. On January 15, 2020, 400,000 options were exercised at $565 per share. During the threenine months ended October 31, 2018,April 30, 2020 and 2019, the Company recorded stock-based compensation of $96$26 and $123 on the consolidated statement of operations as director fees.operations.
On August 30, 2018, the Company granted 100,000 stock options to a consultant of the Company, exercisable at $460$515 per share and expire on August 30, 2028. The 100,000 options vest according to the following schedule: 40,000 options vest immediately, and 10,000 vest annually for the next 6 years. On October 11, 2018, the Company issued 10,000 shares upon the exercise of stock option. The weighted average grant date fair value of stock options granted was $0.000009 per share. On January 5, 2020, the exercise price was amended to $565 per share for all options vesting on or after August 30, 2019. The weighted averagemodification did not result in any incremental compensation cost and therefore the stock-based compensation for the unvested portion of the modified options will be recognized based on the original fair value. During the nine months ended April 30, 2020 and 2019, the Company recorded stock-based compensation of $nil and $1 on the consolidated statement of operations.
On June 12, 2019, the Company amended Equity Incentive Plans, Subscription Agreements and Equity Agreements so that options issued after June 12, 2019 would have a strike price equal to the market price at that grant date.
On January 14, 2020, the Company issued 300,000,000 options to Penndel Land Company, a company owned by Company Founder, for $1,368,217 of loans and accrued interest owed to the Company’s Founder as at December 31, 2019. These options are exercisable at various prices per share and expire on January 14, 2030. The exercise prices are as follows: 50,000,000 options at $665 per share, 50,000,000 options at $698 per share, 50,000,000 options at $735 per share, 50,000,000 options at $771 per share, 50,000,000 options at $810 per share, 50,000,000 options at $851 per share. The fair value of the 300,000,000 options was $13,300 on the grant date On February 14, 2020, the Company issued 300,000,000 shares of Class B common stock upon the exercise of stock options.
On January 18, 2020, the Company granted 2,000,000 stock options to a director of the Company, exercisable at $665 per share and expire on January 18, 2030. The 2,000,000 options vest according to the following schedule: 1,400,000 options vest immediately, 200,000 options vest on August 30, 2020, 200,000 options vest on August 30, 2021, and 200,000 options vest on August 30, 2022. The exercise price of the 600,000 options vesting on August 30, 2020, 2021 and 2022 are subject to re-set. The grant date fair value of stock options granted was $0.000009$0.000046 per share. On January 18, 2020, 200,000 shares were issued upon the exercise of stock options. On March 23, 2020, 1,200,000 shares were issued upon the exercise of stock options. During the threenine months ended October 31, 2018,April 30, 2020, the Company recorded stock-based compensation of $1$72 on the consolidated statement of operations as consulting fees.operations.
A summary of the Company’s stock option activity is as follows:follow:
| Number of Options | Weighted Average Exercise Price $ | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value $ |
|
|
|
|
|
Outstanding, July 31, 2018 | 22,000,000 | 42.00 | 8.02 | – |
|
|
|
|
|
Granted | 4,100,000 | 359.51 |
| – |
Exercised | (14,410,000) | 106.39 |
| – |
|
|
|
|
|
Outstanding, October 31, 2018 | 13,690,000 | 99.99 | 8.13 | – |
| Number of Options | Weighted Average Exercise Price $ | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value $ |
|
|
|
|
|
Outstanding, July 31, 2019 | 12,490,000 | 105.56 | – | – |
|
|
|
|
|
Granted | 302,000,000 | 754.40 |
|
|
Exercised | (303,600,000) | 753.21 |
|
|
|
|
|
|
|
Outstanding, April 30, 2020 | 10,890,000 | 435.75 | 6.80 | – |
Exercisable, April 30, 2020 | 1,640,000 | 52.84 | 5.92 | – |
The fair value of each option granted was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:
| Three Months Ended October 31, 2018 | Three Months Ended October 31, 2017 | Nine Months Ended April 30, 2020 | Nine Months Ended April 30, 2019 |
|
|
|
|
|
Expected dividend yield | 0% | 0% | 0% | 0% |
Expected volatility | 150% | 150% | 150% | 150% |
Expected life (in years) | 10 | 10 | 10 | 10 |
Risk-free interest rate | 1.83% | 1.83% | 1.82% | 1.83% |
|
|
| ||
At October 31, 2018,April 30, 2020, there was $507$485 of unrecognized compensation costs related to non-vested stock-based compensation arrangements granted under the Plan. There was $nil intrinsic value associated with the outstanding stock options at October 31, 2018.April 30, 2020.
F-8
NOTE 8 – COMMITMENTS AND CONTINGENCIES
Related and Non-related Party Agreements
On SeptemberJune 25, 2019, the Company amended the Opportunity License Agreements it entered with 16 related entities. The amendment clarifies ownership, voting rights, and distribution of profits for the Company and the Company founder. The amendment also provides that the Company will purchase non-controlling interest of each of the sixteen entities and the Portus de Jewel project. On June 29, 2019, the Company issued 33,931,475 shares of Class B common stock from the 2015 Incentive Plan which equal to 25% of the Founder’s shares in 15 of the 16 entities and 20,000,000 shares of Class B common stock from the 2015 Incentive Plan which equal to 10% of the Founder’s shares in the Portus de Jewel project. On January 13, 2020, the Company issued 3,475,248 shares of Class B common stock from the 2015 Incentive Plan which equal to 25% of the Founder’s shares in 1 of the 16 entities. During the year ended July 31, 2019, the Company recorded an impairment of $8,483 and opportunity license fees of $5,000 which are included in general and administrative expense. During the nine months ended April 30, 2018,2020, the Company recorded an impairment of $869 which is included in general and administrative expense.
On December 27, 2012, the Company entered into a memorandum of understanding (“MOU”) with Jewel’s Real Estate 1086 Master LLLP, a company owned by the Founder of the Company, to acquire certain development rights of the Portus De-Jewel Mexico project. The Company agreed to issue 11,292,240 shares of Class B common stock as deposit towards the purchase 100%price. The full purchase price for this project will be determined at a future date. During the year ended July 31, 2013 the Company issued 11,292,240 shares of Air Cyprus Aviation Limited (ACA) in exchangecommon stock as the deposit for £9,500,000.the project. At July 31, 2013 the value of the deposit was determined to be not recoverable and exceeds its fair value. An amendment toimpairment loss of $1,142 was recorded. The 11,292,240 shares were rescinded during the MOU was signed to causeyear ended July 31, 2014. On March 11, 2020, the MOU to become binding which is subject to government regulatory approval.Company reinstated the 11,292,240 shares of Class B common stock.
Employee Agreements
The Company has entered into an employment agreement with the Chief Executive Officer (“CEO”) Debra Mathias with an effective date of April 21, 2014. The term of the employment agreements is 3 years, with an annual base salary of $1,200,000. On April 21, 2017, the agreement was extended to April 21, 2021.
The Company has signed an employment agreement with Mr. Shah Mathias (Company Founder) for the Head of Mergers and Acquisitions and Business Development, and as non-board member President, with an effective date of October 2, 2014. The term of the employment agreement is 20 years, with an annual base salary of $1,200,000 and ten percent (10%) of any revenue producing contract entered into by the Company while the Company Founder is in office, while holding any position under any title, and five percent (5%) of any such revenue producing contract afterward, for the benefit of the Company Founder or his estate, for a period of twenty (20) years. The Company Founder is also eligible to earn an annual bonus award of up to 100% of the annual base salary. In addition, the Company Founder is entitled to receive shares of the Company’s common stock (See Note 4)5). Effective September 1, 2019, the Company Founder’s annual base salary is increased to $1,500,000. On January 5, 2020, the Company amended the employment agreement. Pursuant to the amendment, the Company Founder shall be entitled to receive shares of the Company’s Class B common stock equal to 12% of the authorized number of shares or 480,000,000 shares. At no other time in the future will the Founder receive any additional shares of any class, other than additional shares resulting from future stock splits or granted by the Board of Directors.
The Company has entered into an employment agreement with the Chief Engineer with an effective date of December 3, 2014. The term of the employment agreement is 3 years, with an annual base salary of $175,000. The Chief Engineer is also entitled to 1,000,000 shares of Class “B” common stock as a signing bonus. On December 30, 2014, the Company issued 1,000,000 shares of Class “B” common stock to the Chief Engineer.
The Company has entered into a directorship agreement with a Director of the Company with an effective date of June 30, 2015. The initial term of the directorship agreement is one year, with an annual base salary of $150,000. The director is also entitled to 1,000,000 shares of Class B common stock. On July 24, 2015, the Company issued 1,000,000 shares of Class B common stock to the director. On March 17, 2016, the term of the agreement was extended to July 31, 2021.
The Company entered into an employment agreement with the Chief General Counsel with an effective date of August 4, 2015. The term of the employment agreement is 3 years, with an annual base of $500,000. On March 17, 2016, the term of the agreement was extended to July 31, 2021.
The Company entered into thirteen directorship agreements with thirteen Directors of the Company. The initial term of the directorship agreements is one year, with an annual base salary of $150,000. Each of the thirteen directors is also entitled to 1,000,000 shares of Class B common stock. On March 17, 2016, the term of the agreements was extended to July 31, 2021.
On October 19, 2016, the Company appointed three individuals as Directors of the Company and the Audit Committee. On August 30, 2018, two new individuals were appointed to replaceEffective November 1, 2016, the two original individuals as Directors of the Company and the Audit Committee. The annual compensation for each of the individuals is $120,000.
The Company has entered into an employment agreement with the President of the Company with an effective date of November 1, 2016. The term of the employment agreement is 3 years, with an annual base salary of $650,000.
The Company has entered into an employment agreement with the Chief Risk Officer of the Company with an effective date of November 1, 2016. The term of the employment agreement is 3 years, with an annual base salary of $500,000.
The Company has entered into an employment agreement with the Vice CEO of the Company with an effective date of November 1, 2016. The term of the employment agreement is 3 years, with an annual base salary of $750,000.
The Company has entered into an employment agreement with the Treasurer of the Company with an effective date of November 1, 2016. The term of the employment agreement is 3 years, with an annual base salary of $600,000.
The Company has entered into an employment agreement with the Non-Executive General Manager of the Company with an effective date of November 1, 2016. The term of the employment agreement is 3 years, with an annual base salary of $160,000.
The Company has entered into an employment agreement with the Chief Operations Officer of the Company with an effective date of August 30, 2018. The term of the employment agreement is three years, with an annual base salary of $425,000.
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Effective September 1, 2019, the Chief Operations Officer’s annual base salary is increased to $500,000.
The Company has entered into an employment agreement with the Chief Financial Officer of the Company with an effective date of August 30, 2018. The term of the employment agreement is three years, with an annual base salary of $375,000. Effective September 1, 2019, the Chief Financial Officer’s annual base salary is increased to $500,000.
As of October 31, 2018,April 30, 2020, and July 31, 2018,2019, total accrued compensation expenses to related parties related to the above employment agreements were $33,921,935$47,622,143 and $31,720,348,$40,605,372, respectively. At April 30, 2020, and July 31, 2019, the Company has accrued payroll taxes of $1,355,248 and $1,154,197, respectively, related to the accrued compensation expenses.
Operating Lease
On April 30, 2014, the Company terminated its existing office space lease, and entered into a new month-to-month rent agreement for office space. The new agreement which commenced on November 1, 2015, calls for monthly rent payments of $1,440. The terminated lease agreement has not been resolved as to payment of existing amounts due or as to any early termination fees. According to the lease agreement, the Company’s unpaid rental balance shall bear interest until paid at a rate equal to the prime rate of interest charged by the M&T Bank, plus 2 percent. Late payment charge is $25 per day beginning with the first day following the due date. As of OctoberApril 30, 2020, and July 31, 2018,2019, the Company recorded unpaid rent expense of $27,753(July 31, 2018 - $27,753),and $27,753, respectively, and accrued interest and late fee of $143,451 (July 31, 2018 - $136,780).$183,327 and $163,389, respectively.
Legal Proceedings
On September 14, 2017, the Company received a letter from Zimmerman & Associates, on behalf of J. Harold Hatchett, III and Ronald Silberstein, claiming breach of contract, wrongful termination, and wrongful violations of the Business Corporations Act, and knowingly inaccurate SEC Reporting against the Company and the board of directors. The Company plans to work amicably to come to a settlement. As of April 30, 2020, the Company has accrued $1,263,870 and $1,295,120 in salaries for J. Harold Hatchett III and Ronald Silberstein, respectively.
The Company received a lawsuit on June 13, 2017 by Estate of Robert A. Berry Esq. (decedent, Oct 22, 2015), plaintiff (the “Plaintiff Estate”). The Plaintiff Estate asserted a claim for $50,000 and 11,000 common class “B” shares of the Company relating to shares and
accrued stipend beginning 2015. The Company, in 2015, had previously booked the liability of $50,000 without interest accruing and issued the 11,000 shares of common class “B” stock of the Company to decedent Robert A. Berry Esq. Company anticipates paying the $50,000 when the Company raises capital.
Memorandum of Understanding
On September 30, 2018, the Company entered into a memorandum of understanding (“MOU”) to purchase 100% of Air Cyprus Aviation Limited (ACA) in exchange for £9,500,000. An amendment to the MOU was signed to cause the MOU to become binding which is subject to government regulatory approval.
NOTE 9 – INCOME TAXES
The Company has filed its federal and state tax returns for the yearsyear ended July 31, 20182019 and 2017.2018. The Net operating losses (“NOLs”) for these years will not be available to reduce future taxable income until the returns are filed. Assuming these returns are filed, asAs of October 31, 2018,April 30, 2020, the Company had approximately $7.9$7.8 million of federal and state net operating losses that may be available to offset future taxable income. The net operating loss carryforwards will begin to expire in 2030 unless utilized.
The tax years 20172019 and 2018 remain open to examination by the major taxing jurisdictions to which the Company is subject.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the 2017 Tax Cuts and Jobs Act ("2017 Tax Reform"). The 2017 Tax Reform significantly revised the future ongoing U.S. corporate income tax by, among other things, lowering U.S. corporate income tax rates and implementing a territorial tax system. The Company has reasonably estimated the effects of the 2017 Tax Reform and recorded provisional amounts in the consolidated financial statements. This amount is primarily comprised of the re-measurement of federal net deferred tax assets resulting from the permanent reduction in the U.S. statutory corporate tax rate to 21%, from 34%. A rate of 21% is utilized for the period. The Company will continue to monitor additional guidance issued by the U.S. Treasury Department, the IRS, and other standard-setting bodies, so we may make adjustments to the provisional amounts (if any). However, management's opinion is that future adjustments due to the 2017 Tax Reform should not have a material impact on the Company's provision for income taxes. The Company has a full allowance against the deferred tax asset and as a result there was no impact to income tax expense for the periods ended October 31, 2018.April 30, 2020.
NOTE 10 – SUBSEQUENT EVENTS
On November 5, 2018, the Company issued 2,000,000 shares of Class B common stock to two officers and directors of the Company for services pursuant to directorship agreements dated August 30, 2018. On June 12, 2019, the Company amended Equity Incentive Plans, Subscription Agreements and Equity Agreements so that options issued after June 12, 2019 would have a strike price equal to the market price at that grant date.
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On January 10, 2019 the Company issued 25,000 Class B common shares from the 2015 Equity Incentive Plan reserved shares and 25,000 Class B common shares from the 2018 Equity Incentive Plan reserved shares for services rendered.
On January 10, 2019 the Company issued 40,000 Class B common shares from the 2015 Equity Incentive Plan reserved shares to a Director for shares he should have received during a prior 4:1 stock split.
On January 10, 2019 the Company issued 10,000,000 Class B common shares from the 2015 Equity Incentive Plan reserved shares to the Ameri Metro North American Pension/HSRF Statutory Trust for future employee benefit programs.
On January 10, 2019 the Company issued 10,000,000 Class B common shares from the 2015 Equity Incentive Plan reserved shares to the Ameri Metro Universal Pension/HSRF Statutory Trust for future employee benefit programs.
On January 10, 2019 the Company issued 10,000,000 Class B common shares from the 2018 Equity Incentive Plan reserved shares to the Ameri Metro North American Pension/HSRF Statutory Trust for future employee benefit programs.
On January 10, 2019 the Company issued 10,000,000 Class B common shares from the 2018 Equity Incentive Plan reserved shares to the Ameri Metro Universal Pension/HSRF Statutory Trust for future employee benefit programs.
On January 10, 2019 the Company issued 10,000,000 Class B common shares from the Ameri Metro Inc. Trust reserved shares to the Ameri Metro North American Pension/HSRF Statutory Trust for future employee benefit programs.
On January 10, 2019 the Company issued 10,000,000 Class B common shares from the Ameri Metro Inc. Trust reserved shares to the Ameri Metro Universal Pension/HSRF Statutory Trust for future employee benefit programs.
On June 17, 2019 the Company issued 1,200,000 Class B common shares from the 2015 Equity Incentive Plan reserved shares to a Director per November 1, 2016 Equity Agreement.
On June 20, 2019, the Company issued an additional 200,000,000 Class B shares of common stock in the name of Ameri Metro, Inc. 2015 Equity Incentive Plan. The shares are being administered by HSRF Statutory Trust on behalf of the Company. Upon exercise of stock options granted pursuant to the 2015 Equity Incentive Plan, HSRF Statutory Trust will issue the relevant employee, director or consultant shares from trust.
On June 29, 2019 the Company issued a total of 53,931,475 Class B common shares from the 2015 Equity Incentive Plan reserved shares held by HSRF Statutory Trust to (1) the sixteen related entities discussed in Note 1 to obtain a 25% ownership interest with no voting rights in each of the sixteen related entities and (2) to a project in order to obtain a 10% participating profits interest in the project. The Company’s majority shareholder obtains the remaining 90% participating profits interest in that project.
On January 5, 2020, the Company amended the employment agreement the Company entered with the Company Founder. Pursuant to the amendment, the annual base salary is increased to $1,500,000 commencing September 1, 2019 and the Company Founder shall be entitled to receive shares of the Company’s Class B common stock equal to 12% of the authorized number of shares or 480,000,000 shares. At no other time in the future will the Founder receive any additional shares of any class, other than additional shares resulting from future stock splits or granted by the Board of Directors.
On January 5, 2020, the Company extended the term of the directorship agreements the Company entered with the CFO and COO till July 31, 2021.
On January 5, 2020, the Company amended the terms of the outstanding options as follows: i) to change the vesting date for all options vesting on November 1 to August 30, and ii) to modify the exercise price for all options vesting on or after August 30, 2019 to $565 per share.
On January 6, 2020, the Company registered HSRF Statutory Trust as the trustee for Ameri Metro Inc. Trust, Ameri Metro North America Pension Plan, Ameri Metro Universal Pension Plan, Ameri Metro Inc. 2018 Equity Incentive Plan and Ameri Metro 2015 Equity Incentive Plan. The related entity Slater and West Inc. along with the Ameri Metro Inc. Compensation Committee will act as oversight board of each entity. The Company has no jurisdiction or authority over the entities.
On January 7, 2020, the Company increased the voting rights of its Class A common stock to 40,000:1.
On January 7, 2020, the Company increased the number of authorized shares of its Class B common stock to 10,000,000,000 shares.
On January 7, 2020, the Company created 40 series of Class C common stock for the purpose of equity participation in forty infrastructure projects. The Company increased the number of authorized shares of its Class C common stock to 8,000,000,000 shares, of which 7,500,000,000 shares are allocated evenly to the 40 series.
On January 7, 2020, the Company created 40 series of Class D common stock for the purpose of equity participation in forty infrastructure projects. The Company increased the number of authorized shares of its Class D common stock to 8,000,000,000 shares, of which 7,500,000,000 shares are allocated evenly to the 40 series.
On January 7, 2020, the Company reserved 37,500,000 shares in each series of Class C common stock in the name of the Ameri Metro, Inc. Trust. The shares are being administered by HSRF Statutory Trust and reserved on behalf of the shareholders for future acquisition, joint venture, and other project related expenses. The related entity Slater and West Inc. along with the Ameri Metro Inc. Compensation Committee will act as oversight board of Ameri Metro, Inc. Trust. The Company has no jurisdiction or authority over Ameri Metro Inc. Trust.
On January 7, 2020, the Company reserved 37,500,000 shares in each series of Class D common stock in the name of the Ameri Metro, Inc. Trust. The shares are being administered by HSRF Statutory Trust and reserved on behalf of the shareholders for future acquisition, joint venture, and other project related expenses. The related entity Slater and West Inc. along with the Ameri Metro Inc. Compensation Committee will act as oversight board of Ameri Metro, Inc. Trust. The Company has no jurisdiction or authority over Ameri Metro Inc. Trust.
On January 7, 2020, the Company reserved another 200,000,000 shares of Class B common stock in the name of the Ameri Metro, Inc. Trust. The shares are being administered by HSRF Statutory Trust on behalf of the Company. The related entity Slater and West Inc. along with the Ameri Metro Inc. Compensation Committee will act as oversight board of Ameri Metro, Inc. Trust. The Company has no jurisdiction or authority over Ameri Metro Inc. Trust.
On January 7, 2020, the Company issued a stock dividend of 14,273,490 shares of Class C common stock from the Ameri Metro, Inc. Trust reserved shares.
On January 14, 2020, the Company issued 300,000,000 options to Penndel Land Company, a company owned by Company Founder, for approximately $1,370,000 of loans and accrued interest owed to the Company’s Founder as at December 31, 2019. These options are exercisable at various prices per share and expire on January 14, 2030. The exercise prices are as follows: 50,000,000 options at $665 per share, 50,000,000 options at $698 per share, 50,000,000 options at $735 per share, 50,000,000 options at $771 per share, 50,000,000 options at $810 per share, 50,000,000 options at $851 per share.
On January 18, 2020, the Company granted 2,000,000 stock options to a director of the Company, exercisable at $665 per share and expire on January 18, 2030. The 2,000,000 options vest according to the following schedule: 1,400,000 options vest immediately, 200,000 options vest on August 30, 2020, 200,000 options vest on August 30, 2021, and 200,000 options vest on August 30, 2022. The exercise price of the 600,000 options vesting on August 30, 2020, 2021 and 2022 are subject to re-set.
On January 31, 2020, the Company approved a 100% stock dividend to all shareholders of Class B common stock at par.
On February 18, 2020, the Company issued 3,561,1803,230,520 shares of Class C common stock to acquire 2% of Susquehanna Mortgage Bankers Corp. (formerlyGlobal Infrastructure Bank.SP Bankers). On April 28, 2020, by consent of the Company’s Board of directors, the Company agree to issue 23,000,000 shares of Original Class C common stock to acquire an additional 23% in Susquehanna Mortgage Bankers Corp. The intent is to become a licensed Commercial & Residential lender, an entity supervised by the State banking commission. Once licensed, it will then apply for a Fintech mortgage lender with the U.S. Office of Currency Control to become a licensed lender under the U.S. Federal Reserve system. No shares have been issued as of the date of this filing.
On March 19,April 28, 2020, by consent of the Company’s Board of directors, the Company issued 1,200,000agreed to issue 23,000,000 shares of the Original Class BC common stock uponto acquire 25% ownership interest in Ann Charles International Airport. The Company is the exercisedeveloper of stock options.
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this project. No shares have been issued as of the date of this filing.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s discussion and analysis of results of operations and financial condition (“MD&A”) is a supplement to the accompanying unaudited consolidated financial statements and provides additional information on the Company’s businesses, current developments, financial condition, cash flows and results of operations. The following discussion should be read in conjunction with our unaudited consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”) and with our Annual Report on Form 10-K for the fiscal year ended July 31, 2018.2019.
Forward-Looking Statements
Except for the historical information contained herein, this Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements involve risks and uncertainties, including, among other things, statements concerning: our business strategy; liquidity and capital expenditures; future sources of revenues and anticipated costs and expenses; and trends in industry activity generally. Such forward-looking statements include, among others, those statements including the words such as "may," "will," "should," "expect," "plan," "could," "anticipate," "intend," "believe," "estimate," "predict," "potential," "goal," or similar language or by discussions of our outlook, plans, goals, strategy or intentions.
Our actual results may differ significantly from those projected in the forward-looking statements. These statements are only predictions and involve known and unknown risks, and uncertainties, that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, we cannot guarantee future results, levels of activity, performance or achievements.
The forward-looking statements we make in this Quarterly Report are based on management’s current views and assumptions regarding future events and speak only as of the date of this report. We assume no obligation to update any of these forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting these forward-looking statements, except as required by applicable law, including the securities laws of the United States and the rules and regulations of the Securities and Exchange Commission.
BUSINESS
The Business
Since its incorporation, the Company has developed its business plan, appointed officers and directors, engaged initial project consultants and entered into negotiations and contracts for related and ancillary business. The Company is in the process of developing proposals for high-speed rail service.
The Company was incorporated in the State of Delaware and merged with Ameri Metro 2010 on June 12, 2012. References to the financial condition and performance of the Company below in this section “Management’s Discussions and Analysis of Financial Condition and Results of Operation” are to financial statements of the Company.
The Company, and its wholly owned subsidiary Global Transportation and Infrastructure, Inc., plan to use Private Public Partnerships (“PPP”) for funding of infrastructure projects and transportation projects. The Company is a conduit to provide general contracting services for infrastructure projects and transportation projects. As a conduit we identify infrastructure projects for both private and public end users. The Company will bring together private and public entities, the end users, including the affiliate entities to organize the revenue bond offering, which will be the private debt vehicle to build the infrastructure project for the end user. The Companies ultimate role is providing general contracting services and construction management services for the private and public entities.
Competition
The Company may face significant competition from other companies that may be developing competing transportation systems. The Company will, however, face competition in the allocation of monetary resources from governmental agencies, at the local, regional, state and federal levels. The Company believes that government agencies will strongly endorse its proposed plan for high-speed regional rail systems, but believes that, given the economic environment, there may be few or no funds available for such development.
Nevertheless, as an example, traditionally significant competition generally exists in the industry, from government agencies and entities. Due to the federal budgetary constraints, henceforth any completion would come from private or public entities. On the heels of the Department of Transportation’s recent request for high-speed rail proposals, its Federal Railroad Administration received 132 applications from 32 states totaling $8.8 billion. That was more than three times the $2.4 billion available. During the first round of awardsofawards in the fall of 2009, applicants submitted more than $55 billion in project proposals. That was nearly six times the initial $8 billion
available from the American Recovery and Reinvestment Act. Unfortunately, due to federal budgetary setbacks, as of early 2017, very little of this has come to fruition.
Trading Market
While there currently is no market for the shares, the Company has obtained the trading symbol “ARMT” from FINRA.
Employees
In addition to the Chief Executive Officer, the Company has been accruing salaries for employees and twenty six other persons who are working on behalf of the Company to assist in the development of its initial high-speed rail project. None of the twenty six people currently receive salaries or other compensation. The Company has also issued stock to individuals, for their consulting and professional services. At the time the Company launches its planned IPO, the Company will pay the accrued salaries to the employees.
Subsidiaries
The Company has one subsidiary, Global Transportation & Infrastructure Inc. (“GTI”) incorporated in the state of Delaware. GTI is a wholly owned subsidiary of the Company. The Company owns 25% of each of the companies listed in the section “Related Companies”.
Reports to Security Holders
The Company is a reporting company pursuant to the Securities Exchange Act of 1934 and files with the Securities and Exchange Commission quarterly, annual, periodic and other reports. The Company intends to deliver a copy of its annual report to its security holders, and will voluntarily send a copy of the annual report, including audited financial statements, to any registered shareholder who requests. The Company’s documents filed with the Securities and Exchange Commission may be inspected at the Commission’s principal office in Washington, D.C. Copies of all or any part of the registration statement may be obtained from the Public Reference Section of the Securities and Exchange Commission, 100 F Street N.E., Washington, D.C. 20549. Call the Commission at 1-800-SEC-0330 for further information on the operation of the public reference rooms. The Securities and Exchange Commission also maintains a web site at http://www.sec.gov that contains reports, proxy statements and information regarding registrants that file electronically with the Commission. All of the Company’s filings may be located under the CIK number 0001534155.
Results of Operations
In December 2019, an outbreak of a new strain of coronavirus (“COVID-19”) began in Wuhan, Hubei Province, China. In March 2020, the World Health Organization declared COVID-19 a pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. The extent of the impact of the COVID-19 pandemic on our ability to execute our business plans in the expected time frame and to secure funding, will depend on future developments, including the duration and spread of the pandemic, all of which are uncertain and cannot be predicted. The management team is closely following the progression of COVID-19 and its potential impact on the Company. Since the Company is not currently trading and has not begun full-scale operations, there is minimal impact on the Company’s current financial condition. The Company sees an opportunity for additional U.S. projects given the Administration’s interest in advancing a $2 Trillion infrastructure package. Although the Company expects a significant reduction in GDP globally, the Company anticipates a return to growth later in the fiscal year 2020. Management will continue to monitor the situation and take appropriate actions when the Company is capitalized.
Comparison of the Nine Months Ended April 30, 2020 and 2019.
The Company has no source of continuing revenues and received no revenues for the nine months ending April 30, 2020 and 2019. For the nine months ended April 30, 2020 and 2019, the Company had total operating expenses of $7,667,633 and $6,998,245, respectively and net losses of $6,355,670 and $7,046,686, respectively. The increase in operating expenses resulted primarily from increases of $147,876 in professional fees, $24,968 in director fees, $488,706 in officer payroll and $53,427 in transfer agent and filing fees and offset by decrease of $34,192 in personnel expenses, $5,522 in telephone expense, and $7,060 in travel expenses. During the nine months ended April 30, 2020, the Company recognized a gain of $1,354,610 upon settlement of debt which resulted in a decrease in net loss.
Comparison of the Three Months Ended October 31, 2018April 30, 2020 and 2017.2019.
The Company has no source of continuing revenues and received no revenues for the three months ending October 31, 2018April 30, 2020 and 2017.2019. For the three months ended October 31, 2018April 30, 2020 and 2017,2019, the Company had total operating expenses of $2,322,227$2,642,773 and $3,281,207,$2,340,449, respectively and net losses of $2,338,060$2,651,347 and $3,292,716,$2,356,678, respectively. The decreaseincrease in operating expenses and net loss resulted primarily from decreasesincreases of $24,011 in professional fees, $244,992 in officer payroll and $28,067 in transfer agent and filing fees and offset by an increasedecrease of $7,655 in personnel expenses, travel expense and filing fees.interest expense.
Liquidity and Capital Resources
Our cash, current assets, total assets, current liabilities and total liabilities as of October 31, 2018April 30, 2020 and July 31, 20182019 were as follows:
| October 31, 2018 | July 31, 2018 | April 30, 2020 | July 31, 2019 |
Cash | $ 1,686 | $ 306 | $ 1,842 | $ 315 |
Total current assets | 28,983 | 3,246 | 21,972 | 6,672 |
Total assets | 30,045 | 4,440 | 22,386 | 7,396 |
Total current liabilities | 36,541,876 | 35,281,233 | 50,906,588 | 43,513,279 |
Total liabilities | 37,644,732 | 35,281,233 | 50,906,588 | 44,671,203 |
Cash Requirements
We had $1,686$1,842 in cash and cash equivalents as of October 31, 2018.April 30, 2020. Our cash used in operations for the threenine months ended October 31, 2018April 30, 2020 was $122,731.$282,616. We had a net loss for the threenine months ended October 31, 2018April 30, 2020 of $2,338,060.$6,355,670. We had an accumulated deficit of $43,162,853$57,050,375 at October 31, 2018.April 30, 2020. Our cash on hand is not sufficient to cover our monthly expenses and we continue to seek financing in the form of debt or stock sales to finance our operations. There can be no assurance the Company will be successful in these efforts.
Sources and Uses of Cash
Operations
For the threenine months ended October 31, 2018,April 30, 2020, our net cash used in operating activities was $122,731,$282,616, which consisted primarily of our net loss of $2,338,060,$6,355,670 and a gain of $1,354,610 upon settlement of debt, offset primarily by increases in accrued compensation expensesexpense of $2,201,587.$7,016,771. For the threenine months ended October 31, 2017,April 30, 2019, our net cash used in operating activities was $29,276,$152,708, which consisted primarily of our net loss of $3,167,815,$7,046,686, offset primarily by increases in accrued compensation expenses of $2,240,415.$6,657,212.
Financing
For the threenine months ended October 31, 2018,April 30, 2020, our net cash provided by financing activities was $124,111,$284,143, which consisted of proceeds of $305,573 from related party loans.loans and repayment of $21,430 to related party. For the threenine months ended October 31, 2017April 30, 2019, our net cash provided by financing activities was $29,552,$153,163, which consisted of proceeds from related party loans.
Going Concern
Management’s plans include selling its equity securities and obtaining debt financing to fund its capital requirement and on-going operations; however, there can be no assurance the Company will be successful in these efforts. These factors create substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.
Critical Accounting Policies
Our critical accounting policies have not changed from the information reported on our Annual Report on Form 10-K for the year ended July 31, 2018.2019.
Recent Accounting Pronouncements
See Note 1 to the accompanying financial statements for recent accounting pronouncements we have not yet adopted.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a smaller reporting company, we are not required to provide the information required by this Item.
Item 4. Controls and Procedures.
We conducted an evaluation, with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as ofOctober 31, 2018April 30, 2020, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commission’s rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as ofOctober 31, 2018April 30, 2020, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses identified and described in our Annual Report on Internal Control Over Financial Reporting filed in our Annual Report on Form 10-K. However, management is focused on putting in place effective controls.
Changes in Internal Control over Financial Reporting
No change in our system of internal control over financial reporting occurred during the period covered by this report, the threesix month period ended October 31, 2018,April 30, 2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On September 14, 2017, the Company received a letter from Zimmerman & Associates, on behalf of J. Harold Hatchett, III and Ronald Silberstein, claiming breach of contract, wrongful termination, and wrongful violations of the Business Corporations Act, and knowingly inaccurate SEC Reporting against the Company and the board of directors. The Company plans to work amicably to come to a settlement. As of October 31, 2017, the Company has accrued $1,263,870 and $1,295,120 in salaries for J. Harold Hatchett III and Ronald Silberstein, respectively.
The Company received lawsuit on June 13, 2017 by Estate of Robert A. Berry Esq. (decedent, Oct 22, 2015), plaintiff (the “Plaintiff Estate”). The Plaintiff Estate asserted a claim for $50,000 and 11,000 common class “B” shares of the Company relating to shares and accrued stipend beginning 2015. The Company, in 2015, had previously booked the liability of $50,000 without interest accruing and issued the 11,000 shares of common class “B” stock of the Company to decedent Robert A. Berry Esq. Company anticipates paying the $50,000 when the Company raises capital.
Item 1A. Risk Factors.
As a smaller reporting company, we are not required to provide the information required by this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits.
See the Exhibit Index following the signature page to this Quarterly Report on Form 10-Q for a list of exhibits filed or furnished with this report, which Exhibit Index is incorporated herein by reference.
Exhibit Index
3.1Articles of Incorporation (filed with the Form 10 November 9, 2011)
3.2Amended by-laws (filed as part of the Form 8-K/A filed January 18, 2013)
3.3Cert. of Amendment Cert. of Incorporation of Ameri Metro
5.1Opinion of Counsel on legality of securities being registered
10.2Master Indenture Agreement of Hi Speed Rail Facilities, Inc. (filed with the Form 8-K January 18, 2013)
10.4TEMS engagement (filed as part of the Form 8-K/A filed January 18, 2013)
10.5Alabama Indenture Agreement (filed as part of the Form 8-K/A filed January 18, 2013)
10.6High Speed Rail Indenture Agreement (filed as part of the Form 8-K/A filed January 18, 2013)
10.7Damar Agreement (filed as part of the Form 8-K/A filed January 18, 2013)
10.8Agreement For Construction (filed as part of the Form 10-K/A filed November 6, 2019)
10.9Assignment Agreement For Construction (filed as part of the Form 10-K/A filed November 6, 2019)
10.10Payment Agreement to Penndel Land Co (filed as part of the Form 10-K/A filed November 6, 2019)
10.12HSR Tech LOI Tech Use Agreement (filed as part of the Form 10-K/A filed November 6, 2019)
10.16Consulting Agreement HSRFP Inc. (filed as part of the Form 10-K/A filed November 6, 2019)
10.17Consulting Agreement HSRF Inc. (filed as part of the Form 10-K/A filed November 6, 2019)
10.18Company Founder Emp. Agreement(filed as part of the Form 10-K/A filed November 6, 2019)
10.19Directorship Agreement (filed as part of the Form 10-K/A filed November 6, 2019)
10.21Port De Ostia Inc. Agreement GTI (filed as part of the Form 10-K/A filed November 6, 2019)
10.22C-Bar Marshall Rebar Agreement (filed as part of the Form 10-K/A filed November 6, 2019)
10.23Ameri Metro & Jewell LOI (filed as part of the Form 10-K/A filed November 6, 2019)
10.24Master Consulting Agreement (filed as part of the Form 10-K/A filed November 6, 2019)
10.25Master Trustee Agreement (filed as part of the Form 10-K/A filed November 6, 2019)
10.31TEMS consent form letter (filed as part of the Form 10-K/A filed November 6, 2019)
23.2Consent of Counsel (included in Exhibit 5.1)
31.1CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002*
31.2CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002*
99.4Alabama Legislative Act 506 (filed as part of the Form 8-K/A filed January 18, 2013)
99.7Florida Alabama TPO Bond Indenture (filed as part of the Form 10-K/A filed November 6, 2019)
99.8Alabama Toll Road Bond Indenture (filed as part of the Form 10-K/A filed November 6, 2019)
99.15Portus De Jewel Mexico Bond Indenture (filed as part of the Form 10-K/A filed November 6, 2019)
99.18HSR Freight Line Inc. Bond Indenture (filed as part of the Form 10-K/A filed November 6, 2019)
99.20HSR Technologies Inc. Bond Indenture (filed as part of the Form 10-K/A filed November 6, 2019)
99.21Malibu Homes Inc. Bond Indenture (filed as part of the Form 10-K/A filed November 6, 2019)
99.22Platinum Media Inc. Bond Indenture (filed as part of the Form 10-Q filed December 30, 2019)
____________________
* Filed herewith
** To be filed
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: April 1,May 26, 2020By:/s/ Robert Choiniere
Robert Choiniere
Chief Financial Officer
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