AMERI METRO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
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CASH FLOWS FROM OPERATING ACTIVITIES
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Adjustments to reconcile net loss to net cash used in operating activities:
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Issuance of stock for services
Issuance of stock for termination fees
Cancellation of stock issued for services
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Change in operating assets and liabilities:
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Cash flows used in operating activities
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CASH FLOWS FROM FINANCING ACTIVITIES
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Proceeds from related party loans
Repayment of related party loans
Due to related parties
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Cash flows provided by financing activities
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
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CASH AND CASH EQUIVALENTS, END OF PERIOD
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SUPPLEMENTAL CASH FLOW INFORMATION:
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Income taxes paid
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SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:
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Issuable common stock Class B
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The accompanying notes are an integral part of these unaudited financial statements.
AMERI METRO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2016
NOTE 1 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 Companys activities are subject to significant risks and uncertainties including failure to secure additional funding to properly execute the companys business plan.
Basis of Presentation
The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (SEC), and should be read in conjunction with the audited financial statements and notes thereto contained in the Companys financial statements filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for the 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. Notes to the consolidated financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year 2015 as reported in Form 10-K, have been omitted.
NOTE 2 GOING CONCERN
These 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 January 31, 2016, the Company has a working capital deficiency of $12,972,156 and has accumulated losses of $18,505,819 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.
Managements 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 Companys 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 DUE TO RELATED PARTIES
At January 31, 2016, the Company is indebted to three directors of the Company for $1,050 (July 31, 2015 - $250) 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 January 31, 2016, $645,297 (July 31, 2015 - $528,552) is due to the majority shareholder, of which $508,531 is unsecured, non-interest bearing and due on demand, $11,829 is past due with an interest rate of 3%, $30,337 is due December 31, 2016 with interest at 3%, and $94,600 is due on October 26, 2016 with an interest rate of 2%. At January 31, 2016, accrued interest on these loans is $1,292 (July 31, 2015 - $506).
NOTE 5 LOAN PAYABLE
On January 30, 2014, the Company entered into a short-term loan with a non-related party. The Company was loaned $6,000 from an investment company, the repayment terms are 3% interest with a maturity date of January 31, 2015. The Company has repaid $2,597 as of January 31, 2016. At January 31, 2016, accrued interest on these loans is $229 (July 31, 2015 - $206). At January 31, 2016, this loan is past due.
NOTE 6 CAPITAL STOCK
On November 3, 2014, the Company effected a 4:1 forward stock split of its issued and outstanding shares of common stock. As a condition of the split, all shareholders who wanted to participate were required to send $100 to the Transfer Agent to pay for the expense related to reissuance of shares due to split. The cutoff date for the return of the notification and payment to the transfer agent was December 31, 2014. If the shareholder did not return the confirmation and payment, they would not be eligible to receive the additional shares.
As of the date of this filing 99.71% of the shareholders participated and therefore the statements are retroactively adjusted to reflect a 3.99:1 forward split. Due to 3.99:1 forward split the shares increased to 938,192,724, the shares issuable to effect a 4:1 split is 2,736,000. As a result, all share amounts have been retroactively adjusted for all periods presented for a 3.99:1 forward split.
On August 3, 2015, the Company reclassified 4,800,000 shares of Class A common stock to Class C common stock and reclassified 48,000,000 shares of Class B common stock to Class D common stock.
On August 3, 2015, the Company issued 20,000 post-split shares of Class B common stock as termination fee for an agreement in which the Company did not fully perform. The fair value of these shares is $5 and is recorded as termination fee.
On August 3, 2015, the Company reinstated 20,000 shares of Class B common stock that were rescinded in error in the fiscal year ended July 31, 2015.
On August 31, 2015, the Company issued 1,000,000 post-split shares of Class B common stock to a director of the Company pursuant to directorship agreement entered on August 4, 2015. The fair value of these shares is $250 and is recorded as directors fees.
On September 10, 2015, the Company issued 2,000,000 post-split shares of Class B common stock to two directors of the Company pursuant to two directorship agreements entered on August 4, 2015. The fair value of these shares is $500 and is recorded as directors fees.
On November 11, 2015, the Company rescinded 60,000,000 post-split shares of Class B common stock that had previously been issued by the former CFO to himself without appropriate Board of Directors approval.
On November 11, 2015, the Company rescinded 880,952 post-split shares of Class B common stock that had previously been issued for services as the consultant did not fully perform on the original contract.
NOTE 7 COMMITMENTS AND CONTINGENCIES
The Company has entered into an employment agreement with the Chief Executive Officer 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.
The Company has signed an employment agreement for the Head of Mergers and Acquisitions and Business Development, and as non-board member President, Mr. Shah Mathias (Company Founder), 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 Companys common stock as follows: when the Company issue shares for the Initial Public Offering, the Company Founder is to be issued 10% of the said shares; and if shares are issued at such time to any other party the Company Founder is to be issued an equal amount of shares.
NOTE 7 COMMITMENTS AND CONTINGENCIES (CONTINUED)
Employee Agreements (continued)
The Company entered into an employment agreement with the former Chief Financial Officer (the CFO) with an effective date of December 3, 2014. The term of the employment agreement was 3 years, with an annual base salary of $350,000. The former CFO also issue himself, without approval of the Company's Board of Directors 60,000,000 post-split shares of Class B common stock as a signing bonus. On December 30, 2014, the former CFO caused the Company to issue him 60,000,000 post-split shares of Class B common stock. On November 11, 2015, the former CFO resigned and the Company rescinded the 60,000,000 post-split shares of Class B common stock that had been issued. The former CFO has notified the Company that he disputes the rescission.
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 post-split shares of Class B common stock as a signing bonus. On December 30, 2014, the Company issued 1,000,000 post-split 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 post-split shares of Class B common stock. On July 24, 2015, the Company issued 1,000,000 post-split shares of Class B common stock to the director.
The Company entered into an employment agreement with the Chief Financial Officer (the CFO) with an effective date of August 4, 2015. The term of the employment agreement is 3 years, with an annual base salary of $350,000.
The Company entered into an employment agreement with the Chief Operating Officer (the COO) with an effective date of August 4, 2015. The term of the employment agreement is 3 years, with an annual base salary of $375,000.
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 salary of $500,000.
The Company entered into three directorship agreements with three directors of the Company with an effective date of August 1, 2015. The initial term of the directorship agreements is one year, with an annual base salary of $150,000. Each of the three directors is also entitled to 1,000,000 post-split shares of Class B common stock. On August 31, 2015 and September 10, 2015, the Company issued 1,000,000 post-split shares and 2,000,000 post-split shares of Class B common stock to the three directors, respectively.
On January 31, 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 commences 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 in cash or stock, or as to any early termination fees. As of January 31, 2016, no stock has been issued in payment of rent.
In connection with the stock split, some shareholders did not respond or pay the transfer agent fee by the deadline. As a result, these shareholders were not issued the additional shares. At some point, the Company may be required to issue an additional 2,736,000 of Class B common stock in connection with this stock split.
NOTE 8 SUBSEQUENT EVENTS
On March 8, 2016, options for 2,000,000 common shares were granted to four management team members (8,000,000 in total). The exercise price of each option shall be determined by the Board of Directors of the Company. For each individual 800,000 options vested on the date granted and 200,000 options vest annually for six years.
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
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 Managements Discussions and Analysis of Financial Condition and Results of Operation are to financial statements of the Company.
The Company is focused on development of transportation facilities, including but not limited to high-speed rail for passenger and freight transportation and related and ancillary transportation businesses, inland ports, sea ports, airports, and toll roads . The Company intends to secure manufacturing and technologies together with ancillary land development projects, sale of goods and services to government, civilian and commercial end users.
The Company anticipates that it will, directly or through subsidiaries, develop plans, and then coordinate and supervise the financing, construction and development of such transportation projects by bringing together the resources, plans, financing, approvals and technology needed to implement such transportation systems.
The Company has not yet commenced its revenue producing operations; however, it has been meeting with and making presentations to parties associated with projects it intends to develop, including parties in the United States related to a sea port and a rail project. The Company believes that the need, demand and usage of alternative transportation such as high speed rail, ports and toll roads are increasingly important as the United States adopts policies to attempt to reduce its dependency on fossil fuels and to improve its infrastructure and transportation systems. The Company intends to develop and prepare the designs and concepts for feasible and profitable regional transportation and infrastructure related projects utilizing existing and new infrastructure. The Company will prepare the complete project package including appraisals and estimates and will obtain contracts for the development of the facilities and infrastructure and purchase of the equipment. The Company will present the complete project, working as project supervisor and coordinator, to municipalities and regional government agencies.
Funding for individual projects of the Company will occur from bond offerings organized through various nonprofit entities and organizations sponsored or affiliated with municipal and government agencies as well as from issuances of stock and debt-financing. Certain of these nonprofit entities or organizations may themselves be affiliated with, or related to, the Company and assist, or work in conjunction with, the Company in securing contracts and funds to develop projects.
On December 1, 2010, the Company formed its whollyowned subsidiary, Global Transportation & Infrastructure, Inc. (GTI). in the state of Delaware with an authorized capital of 100,000,000 shares of common stock with a par value of $.0001 and 20,000,000 shares of preferred stock with a par value of $.0001. GTI was formed to provide development and construction services for the Alabama highway project including securing financing for the design, planning, engineering and related costs for its construction and to engage in the construction of highspeed rail for passenger and freight transportation and related transportation projects for the Company.
Through its subsidiary, GTI, the Company is also attempting to be involved in the development of a new toll road in the southeast United States. The Company acquired from Penndel Land Company (a company solely owned by the President of the Ameri Metro) the contract rights to a construction agreement with the Alabama Toll Facilities, Inc. ("ATFI", a non-profit company designated by the State of Alabama to act as the project developer for such a toll road an on which the President of Ameri Metro served as one of its four directors). As such the Company has the development rights for such toll road. The Company will need to secure the financing for the design, planning, engineering and related costs for the construction of the toll road. If the Company is able to secure such financing, ATFI will effect a bond offering to purchase the land on which the toll road is to be located.
The high-speed rail plan developed by the Company utilizes existing rail rights-of-way to connect several metropolitan areas and states serving expanding populations. The major elements of the plan include:
· Use of existing rail rightsofway to connect rural, small urban and major metropolitan areas;
Operation of a "hub-and-spoke" passenger rail system providing service to and through one or more major hubs to locations throughout the United States;
Introduction of modern rail equipment operating at speeds up to 250 mph;
Provision of multimodal connections to improve system access;
Improvement in reliability and ontime performance;
Development or expansion of a feeder bus system linking outlying areas to railroad stations;
Acquiring new train equipment including train sets and spares;
Track improvement, including replacement and upgrades, additional sidings, signal and communications systems, and gradecrossing improvements;
Construction or improvement of railroad grade crossings and passenger stations.
The following discussion outlines the steps as the Company anticipates that will occur in regard to the adoption and implementation of a high-speed rail system by a regional or local municipality. To date, the Company has not developed any rail systems.
The Company plans that it will prepare the feasibility study and locate contractors and manufacturers to complete and work and provide cost estimates. Because highspeed rail travel is already inplace in much of Europe and Asia, the Company anticipates working with European companies to furnish the highspeed equipment, such as locomotives and passenger cars.
The Company will put proposed contracts together with the supporting feasibility study, appraisals, cost/benefit analysis, TEMS study, transportation history and other data to create a complete regional project proposal. The Company will then present such project proposals to the municipalities (state or local) as a complete and finished project. The local or regional municipality will then independently analyze and discuss the Company's proposal. If accepted, the Company anticipates that, upon approval, the local municipality will effectuate a bond offering for the funding of the high-speed rail project. The Company anticipates that the projects will be financed by bonds or indentures offered by sponsored or affiliated non-profit organizations of the applicable local or municipal government or agency. Such non-profit entities may also be affiliates or companies related to the Company.
The Company has met with a large multi-state group in the eastern United States and its project plans were favorably received. Political pressure is increasing to find alternate transportation systems as the price of gas and environmental risk of drilling and using petroleum products rises. Highway maintenance is increasingly expensive as the price of materials and labor increases. Highway congestion is an increasing urban problem. The Company presented a project as a total package thereby providing the municipalities with the complete overview and relieving it of the time and costs involved in studying the proposal, seeking pricing information and projecting results. In addition, the Company believes that it may be able to effect economies of scale by purchasing new and renovating existing equipment and facilities on an integrated regional basis rather than in fractured individual areas or small municipalities. The project also creates many jobs in the areas that the facilities are located in.
Once a proposed high-speed rail project is accepted and a financing bond issue is effected by the municipality, the Company will act as the project manager and oversee the entire project including not only the development of the project but its continued operations as well. The Company will also serve as the main central point for coordination of and between the municipalities, contractors, and operators of the project and, once established, the rail system.
Hi Speed Rail Facilities, Inc.
In 2010, the Company entered into an agreement with HSRF (one of the Company's related nonprofit companies) for the purpose of construction of projects consisting of the financing, construction and operation of high speed rail and related projects across the United States. HSRF is designed to focus on the building of train tracks and stations. Pursuant to the agreement between the Company and HSRF, the Company will act as the agent and representative of HSRF to perform all required tasks and actions to develop and construct such projects. The Company anticipates that having this agreement in place and by having HSRF already organized will expedite the process of commencing a project once the Company designs and develops and secures or raises funds to commence a project.
Hi Speed Rail Facilities Provider, Inc.
In 2010, the Company entered into a written agreement with HSRFP (one of the Company's related nonprofit companies) for the purpose of construction of projects consisting of the financing, construction and operation of various high speed rail and related projects across the United States. Pursuant to such agreement between the Company and HSRFP, the Company was appointed as the agent and representative of HSRFP to perform all required tasks and actions to develop and construct such projects. HSRFP was organized to provide a vehicle to issue bonds and help secure infrastructure projects for the Company focusing on facilities ancillary to the high speed rail such as rail yards rail, rail assembly plants maintenance facilities. The Company anticipates that having this agreement in place and by having HSRF already organized will expedite the process of commencing a project once the Company secures or raises funds to commence a project.
Master Trust Indenture Agreement
On December 1, 2010, HSRF entered into a Master Trust Indenture agreement providing that HSRF serve as trustee for a bond offering of $15,000,000,000 of HSRF Revenue Bonds Series 2010. In April 2012 this Indenture was amended to reflect a Master Indenture of $20,000,000,000. The Company will act as developer for the project financed by the Hi Speed Indenture. The Master Trust Indenture provides the basic terms and conditions of any bond issuance such as use of an escrow agent, rights of bond holders, sale of bonds, etc..
ING Investment Management
Each of the nonprofits has entered into an investment management agreement with ING Investment Management to manage any funds raised in bond offerings and to provide its investment advisory services. This non-binding agreement would only take effect upon the raising of revenues bonds. ING Investment Management would serve to invest, reinvest and supervise the management of any such funds while such funds were held in an investment account and until use for the intended purposes.
Alabama Toll Road
The Company is working to develop a project to build a toll road in the State of Alabama, but still needs funding for this project. Ameri Metro 2010 was developing this project at the time of the merger. The planned toll road is designated as a 352 mile 4-lane road designed to be built from Orange Beach, Alabama to the Tennessee state line with the intent of connecting various rural sections of Alabama to Tennessee and more urban areas. The toll road that would connect various rural sections of Alabama to Tennessee and with its more urban areas..
As its first step, Alabama Toll Facilities, Inc. (ATFI) was created and obtained status as a nonprofit corporation pursuant to Section 501(c)(3) of the Internal Revenue Code. As a nonprofit corporation, ATFI is allowed to make bond offerings in order to finance the cost of acquisition and construction and equipping of the toll road project. Mr. Shah Mathias (the founder of the Company) was one of the directors of ATFI and has subsequently resigned his position.
In 2007, the toll road project was presented to the Alabama legislature which on June 7, 2007, adopted Act no. 2007-506 entitled "Expressing Support for the Alabama Toll Road Project". This Act stated that it recognized the need to utilize other financial resources to meet the needs of that highways and other infrastructure items such as that offered by ATFI. The Act urged approval of the bonds offered by ATFI as special revenue bonds with the project eventually vesting to the state upon retirement of the bonds. The Act further supports designating ATFI as the exclusive entity for creation and development of the toll road project.
As a second step, on September 23, 2009, Penndel Land Company (Penndel), a company wholly owned by Shah Mathias entered into an agreement with ATFI by which Penndel was appointed as the agent and representative of ATFI to perform all required tasks and actions to develop and construct the toll road.
Thirdly, on December 1, 2010, the Company formed a wholly-owned subsidiary, Global Transportation & Infrastructure, Inc. ("GTI") in the state of Delaware to provide development and construction services for the Alabama highway project and to include securing financing for the design, planning, engineering and related costs of construction.
In December 2010, Penndel assigned its agreements with ATFI to GTI. As such the Company, through its subsidiary, GTI, has the development rights for such toll road. Under the terms of the agreement, GTI will provide development and construction services. GTI will also act as an agent and representative to take actions necessary to secure the first and future phases of the financing applicable to the design, planning, engineering and related soft and hard costs of the construction of a toll road in the state of Alabama and related activities.
Alabama Indenture Agreement
On December 1, 2010, ATFI entered into a Master Trust Indenture agreement with as HSRF Trustee, which has agreed to serve as the trustee for the bond offering of up to $7,000,000,000 of ATFI Revenue Bonds once it determines to effect such an offering if ever. The Alabama Indenture indicates that the developer for the project will be GTI. In April 2012 the Alabama Indenture was amended to reflect a Master Indenture of $20,000,000,000. The Master Agreement provides the basic terms and conditions of any bond issuance such as use of an escrow agent, rights of bond holders, sale of bonds, etc. At the time that any bonds are to be issued, the Company will engage an asset manager and trustee for the indenture.
The Company also plans to develop projects as opportunities are presented related or ancillary to the transportation or transportation-related fields. The Company entered into a contract for the acquisition of the patents, rights, titles, and business of Damar Corporation LLC, the inventor, developer and manufacturer of Damar TruckDeck. (See www.damartruckdeck.com). The Damar Corporation was incorporated in 2007 to develop, manufacture and market the truck deck component invented and developed by its owner. The Damar Corporation has filed a patent application covering its truck deck system. The Damar TruckDeck is a flexible truck deck storage and organization system that with an integrated frame allowing the cargo deck to be used as a hauling surface. The system has many configurations to fit a wide variety of uses (hunting, construction, moving, hauling, etc.) in various truck deck sizes. The Damar TruckDeck primarily consists of lockable repositionable storage units.
The Company cannot effect this agreement until its raises the funds necessary to the acquisition of such assets as listed in the agreement.
In October 2014, HSR Technology, Inc. as the equitable owner of four tax parcels located within West Manchester Township, York, PA filed a request for landowner curative amendment with the local township, with the intent of constructing facilities on the properties for the fabrication, assembly and welding of steel, aluminum and stainless steel assemblies with no foundry or casting operations. The use will include the fabrication and assembly of composite rebar, composite rail, bed liners and rail car assemblies received pre-prepared. The rail access is critical to the procurement of the land, as the products manufactured on site will be directly related to the company purpose of creating global economic development and promoting trade by bringing people together through innovative ideas and advanced technology. HSR Technology, Inc. proposes the initial construction of a transfer and storage building with a rail siding into the building. Manufacturing and assembly buildings would be added in stages, eventually employing up to 2,800 workers.
Port Trajan Project
The Port Trajan 5 project is a transportation project located in the Antrim Township, Greencastle, Pennsylvania on the Interstate 81 corridor and the railroad "Crescent Corridor", a 2,500 mile network of rail and terminals. Norfolk Southern is operating a rail-truck facility in this corridor and the State of Pennsylvania has provided funding toward the development of additional facilities along this corridor. The Company envisions the development of the land next to such corridor, which it has termed the Port Trajan Project. The Company anticipates that it will construct a distribution center consisting of a terminal and a rail line between the main rail track to the highway for the transition of shipping containers from the rail line to waiting trucks. The distribution center will provide the facility for repackaging the shipments into containers or other shipments destined for final destination by truck.
The Company anticipates that such project will be completed in phases the first of which is the purchase of an initial 345 acres at $350,000 per acre. The purchase price will include all on-site horizontal improvements. Off-site improvements will be acquired at an additional $20,000,000. The land is currently owned by a related company and the Company has entered into a letter of intent for its purchase.
On January 9, 2013, the Company signed a letter of intent with a related party to purchase land for a potential future project. The Company was unable to meet the deposit requirements of this contract, and so in November 2013 the deposit requirements were amended to require a cash deposit of $1,000 to hold the purchase option open for the Company until institutional funding is acquired. Future plans are to issue in excess of 10,000,000 shares of common stock to aid in funding the land purchase. As of January 31, 2016 the $1,000 has been deposited on this contract.
On January 13, 2013 the Company entered into a Letter of Intent with a related party. The purpose being that the Company is contracting services for the build out of the Port Trajan 5 Terminals.
On February 19, 2014, the Company entered into a Master Agreement for Production Services with Platinum Media whereby Platinum Media will provide the Company with all of its media development needs for a 5 year term. The agreement states that the fees charged to the Company will be no less than $12,000,000 per year. As at January 31, 2016, the Company has not been charged by Platinum Media.
The Company believes that the United States suffers from an overburdened transportation infrastructure and that a fundamental overhaul of the national transportation structure is needed. The Company anticipates that it will be able to assist in this fundamental overhaul by providing both the hands-on expertise and investment resources to establish an intermodal grid comprised of transportation and support services extending to urban and outlying areas alike. The Company will largely focus on projects related to high speed rail, but will also concentrate its efforts on other transportation projects that improve transportation infrastructure.
The Company believes that there is a compelling need to revitalize Americas transportation infrastructure. As all levels of government are facing increasing economic crisis, the Company anticipates that such revitalization will be the result of public-private partnerships and alliances to create the basis for developing such an infrastructure. Organizations, such as the Company, are accordingly poised to play a significant role in the redevelopment and improvement of the nations transportation infrastructure.
The Company believes that the transportation infrastructure crisis facing America is two-fold. In the first instance, the existing infrastructure lacks modernity and has rendered the same incapable of meeting the nations transportation needs. In the second instance, the funding to address this problem is currently beyond the reach of the federal, state, regional, and municipal governments.
The 2009 David R. Goode National Transportation Policy Conference held at the Miller Center of Public Affairs at the University of Virginia, outlined the compelling need to revitalize Americas transportation infrastructure and recommended that Public private partnerships need to emerge from the laboratory of pilot programs to play a much larger role as a core element of Americas transport investment strategy. Organizations, such as the Company, are accordingly poised to play a significant role in the redevelopment and improvement of the nations transportation infrastructure. The same transportation conference also noted that, Lacking a coherent vision for our transportation future and chronically short of resources, we defer new investments, fail to plan, and allow existing systems to fall into disrepair. This shortsightedness and under investmentat the planning level and on our nations roads, rails, airports and waterwayscosts the country dearly. It compromises our productivity and ability to compete internationally; transportation users pay for the systems inefficiencies in lost time, money and safety. Rural areas are cut off from economic opportunities and even urbanites suffer from inadequate public transportation options. Meanwhile, transportation-related pollution exacts a heavy toll on our environment and public health.
Furthermore, the conference report was equally insistent on the need for private sector funding. In Recommendation 8: Connecting the Dots, the co-chairs wrote: Resolving the controversy over private equity contributions to the transport system is essential to meet the nations pressing transportation challenges, as is recognizing the appropriate role of public-private partnerships (PPPs) in taking on those challenges. They added, PPPs need to emerge from the laboratory of pilot programs to play a much larger role as a core element of Americas transport investment strategy.
To resolve this crisis will require a massive infusion of capital. The National Surface Transportation Infrastructure Financing Commission, in its 2009 report Paying Our Way estimates the total shortfall between what is required and what is available, at all levels of government, just for maintaining the current system range from $134 billion to $194 billion per year for the period 2008 to 2035. If the goal is to improve existing transportation systems, the shortfall is even larger: $189$262 billion per year over the same time period.
The main problem is that the funds to either maintain or improve existing transportation systems are simply not available from traditional sources. Taxpayers at all levels of government are loath to support any tax increases for infrastructure projects. New transportation systems are frequently discussed at all levels of government but the public funding for implementing such plans is usually non-existent.
The Company believes it is facing solid growth for next 20 years or more. According to McKinsey Global Institute- The McKinsey Infrastructure Practice Report- January 2013; confirms that 57 to 67 trillion dollars of investment is need for infrastructure from 2013 to 2030. Due to robust infrastructure market and a tremendous back log of infrastructure projects on hand, along with anticipated projects identified by the Companys infrastructure projects consultants; TEMS, Inc. Management believes that market conditions warrants that the company reconsider its capital structure and in September 2014 it has amended its Certificate of Incorporation increase its authorized shares. Market conditions were further supported by The Boeing Current Market Outlook 2012-2013 report which shows an 80 % growth over next 20 year for cargo fleet.
Entry of the Company into the Market
The Company anticipates that it can offer a comprehensive, innovative approach to resolving the nations transportation crisis. And it proposes doing so without the necessity of the government increasing taxes at any level, or in any manner. In short, the Company suggests replacing pubic financing with private funding.
The primary competitive barrier most companies face in attempting to impact the nations infrastructure crisis is that they approach the overall problem in disparate segments. For example, one provider proposes building railroad cars, while another proposes laying tracks. A third is interested in depots, while a fourth focuses on accommodations. None bring a comprehensive plan for full-funding to the mix. On the other hand, the Company takes an intermodal approach to providing seamless service with a scale of economy. The high-speed rail plan will utilize existing rail rights-of-way to connect several metropolitan areas and states serving expanding populations.
The Company also foresees pursuing joint ventures with other industries related to the transportation industry. For example, it is currently finalizing an arrangement with a major manufacturer of certain materials used in the construction of highways and other transportation systems. The discussions contemplate a two-fold transaction by which the Company would initially buy the manufacturing plant and then subsequently purchase the remaining non-cash assets of the company.
The Company may or may not face significant competition from other companies that may be developing high speed rail passenger and high speed freight transportation systems. As this industry is not well developed in the United States to date, such competition that may exist is primarily in the development and planning stages. 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, traditionally significant competition generally exists in the industry, from government agencies and entities. Due to the federal budgetary constraints, henceforth any completion would be from private or public entities. On the heels of the Department of Transportations 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 awards 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 January 2016, very little of this has come to fruition.
The Company received its Notice of Effectiveness from the SEC on November 27, 2013 and has applied for the Form 2-11.
Long-Range Ideas and Related Companies
The Founder of the Company, Shah Mathias, has organized and established two nonprofit corporations and is a facilitator of a third non profit (ATFI) for the purpose of facilitating the development of the transportation systems. The nonprofit statutes provide a vehicle to issue bonds and to help secure infrastructure projects. The nonprofits have the discretion to turn over the infrastructure projects to a state or governing body having jurisdiction after the indebtedness has been paid. The nonprofits that Mr. Mathias has created are:
1)Alabama Toll Facilities, Inc. (ATFI)
2)Hi Speed Rail Facilities, Inc. (HSRF)
3)Hi Speed Rail Facilities Provider, Inc. (HSRFP)
In addition to the nonprofit companies discussed earlier, Shah Mathias, the former CEO of the Company, has developed long-range ideas and plans to develop currently undeveloped areas through which a planned Alabama toll road will traverse. These plans include the development of an airport, sea shipping port and a high speed rail line. Mr. Mathias has established a series of corporations which, although not subsidiaries of the Company, are related companies as they are all under common control of Mr. Mathias. Mr. Mathias has established these companies to basically serve as subcontractors for the operations of the planned transportation systems.
None of these companies has any operations or any revenues to date. Mr. Mathias (as president of each of these companies) has executed contracts between several of these companies and the Company. In each of these companies, Shah Mathias is the president and chief executive officer. No other officers or directors exist in any of these related companies. The Company owns 25% of each of the companies with the remaining ownership held directly or indirectly by Mr. Mathias.
1) HSR Freight line, Inc. Designed to handle all services for use of track time and trains for freight and freight forwarding services.
2) HSR Passenger Services, Inc. Designed to handle rail ticketing booking, reservations, and food services.
3) HSR Technologies, Inc. Designed to handle all building of suites and manufacturing of trains and rail tracks and provide fiber optics, telecommunications, and related technologies services.
4) HSR Logistics, Inc. Designed to handle all purchasing functions.
5) KSJM International Airport, Inc. Designed to eventually create an airport facility in inland Alabama
6) Port Of Ostia, Inc. Designed to handle all air cargo if and when an airport facility is created.
7) Port of De Claudius, Inc. Designed to handle sea container and port operations.
8) AMERI Cement, Inc. Designed to handle cement needs for building Alabama toll road.
9) Lord Chauffeurs LTD: Designed to operate all passenger ground transportation.
10) Atlantic Energy & Utility Products, Inc. Designed to provide utility and maintenance service to above entities.
11) Penn Insurance Services LLC. Designed to provide insurance service to above entities.
12) Cape Horn Abstracting, Co. Designed to land title examination services.
13) Eastern Development & Design, Inc. Designed to provide all civil engineering and architectural service.
14) Slater & West, Inc. Designed to handle contract administration services and work force H R matters.
15) Malibu Homes, Inc. Designed to establish residential home building services.
16) Platinum Media, Inc. Designed to provide all media related services
Mr. Mathias has created two nonprofits and is the facilitator of a third (ATFI) for use in issuing bonds to fund the proposed projects. Two of these nonprofits are specifically for use for financing high speed rail transportation systems, the third is specifically for use with the Alabama Toll Facility, discussed below.
The nonprofit statutes allow nonprofit corporations to issue bonds and the Company envisions that its related nonprofits will issue bonds to fund the projects and once the indebtedness is paid the project infrastructure can be turned over to a state or governing body having jurisdiction. The nonprofits created are:
Hi Speed Rail Facilities, Inc. (HSRF)
Hi Speed Rail Facilities Provider, Inc. (HSRFP)
Alabama Toll Facilities, Inc. (ATFI)
The board of directors of HSRF and HSRFP consist of the following individuals: Shah Mathias (founder of the Company) Kirk Wilson, James Kingsborough, and Otto Banks. The board of directors of ATFI consists of Jack Garison and Jack Hopper. Shah Mathias earlier served on the ATFI board of directors but resigned from that position.
The Company envisions a stock offering to secure financing in the near future. In addition, the above three entities envision utilizing different bond offerings for different aspects of a project development. The above three entities anticipate an IBO for the acquisition of the land, some of which may already have existing rail beds or other of which may need to be constructed and engineered. It anticipates offering a bond offering for the acquisition of equipment or for the purchase of raw materials. These entities envision that each bond offering will be relatively specific in nature but all such bond offerings will be regulated by a master indenture agreement designed to provide the terms and structure, interest rates, and other basic information for any bond offering. These entities further envision that after some period, it will offer a revenue bond that will consolidate the earlier bond offerings into one, upon the completion of the construction. These entities have engaged Morgan Stanley as the broker of record for the bond indentures.
The HSRF Trustee has entered into the following agreements:
An INVESTMENT MANAGEMENT AGREEMENT on January 2, 2013 between ING Investment Management Co. LLC, and HSRF Trustee, as Trustee to Master Trustee Indenture Relating to $20,000,000,000 Revenue Bonds Series 2012 for Alabama Toll Facilities, Inc. (as filed with SEC on January 18, 2013, 8k filing Ex. 10.11).
An INVESTMENT MANAGEMENT AGREEMENT on January 2, 2013 between ING Investment Management Co. LLC, (IIM), a Delaware limited liability company, and HSRF Trustee, as Trustee to Master Trustee Indenture Relating to $20,000,000,000 Revenue Bonds Series 2012 for High Speed Rail Facilities Provider, Inc. (as filed with SEC on January 18, 2013, 8k filing Ex. 10.12).
Upon floating a bond offering by the nonprofit entity or otherwise, the Company will act as the project manager and oversee the entire project including, not only the development, but also the continued operations of the high-speed rail project. The Company envisions it will also serve as the main central point for coordination of and between the municipalities, contractors, and operators of the project and, once established, the rail system.
This Quarterly Report on Form 10-Q and the documents incorporated by reference, include forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they prove incorrect or never materialize, could cause our results to differ materially and adversely from those expressed or implied by such forward-looking statements. Examples of forward-looking statements include, but are not limited to any statements, predictions and expectations regarding our earnings, revenues, sales and operations, operating expenses, anticipated cash needs, capital requirements and capital expenditures, needs for additional financing, use of working capital, plans for future products, services and distribution channels, anticipated growth strategies, planned capital raises, ability to attract distributors and customers, sources of net revenue, anticipated trends and challenges in our business and the markets in which we operate, the impact of economic and industry conditions on our customers and our business, customer demand, our competitive position, the outcome of any litigation against us, critical accounting policies and the impact of recent accounting pronouncements. Additional forward-looking statements include, but are not limited to, statements pertaining to other financial items, plans, strategies or objectives of management for future operations, our financial condition or prospects, and any other statement that is not historical fact. Forward-looking statements are often identified by the use of words such as may, might, intend, should, could, can, would, continue, expect, believe, anticipate, estimate, predict, potential, plan, seek and similar expressions and variations or the negativities of these terms or other comparable terminology.
These forward-looking statements are based on the expectations, estimates, projections, beliefs and assumptions of our management based on information currently available to management, all of which is subject to change. Such forward-looking statements are subject to risks, uncertainties and other factors that are difficult to predict and could cause actual results to differ materially from those stated or implied by our forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified under Risk Factors in this Form 10-Q and incorporated by reference herein. We undertake no obligation to revise or update publicly any forward-looking statements to reflect events or circumstances after the date of such statements for any reason except as otherwise required by law.
The information contained in this Form 10-Q is not a complete description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this Quarterly Report, our Annual Report on Form 10-K for the year ended July 31, 2015 and in our other reports filed with the Securities and Exchange Commission (the SEC).
Results of Operations
Comparison of the Three and Six Months Ended January 31, 2016 and 2015.
The Company has no source of continuing revenues and received no revenues for the three and six months ending January 31, 2016 and 2015.
For the six months ended January 31, 2016 and 2015, the Company had total operating expenses of $4,446,504 and $2,567,410, respectively and net loss of $4,447,318 and $2,567,648, respectively. The increase in operating expenses and net loss resulted from the accrual of director and officer compensation of $2,279,167 and the accrual of professional fees of $803,268 during the six months ended January 31, 2016 as compared to $1,665,308 and $25,800 during the six months ended January 31, 2015.
For the three months ended January 31, 2016 and 2015, the Company had total operating expenses of $1,775,247 and $1,332,863, respectively and net losses of $1,775,910 and $1,332,982, respectively. The increase in operating expenses and net loss resulted primarily from increases accrued expenses related to director and officer compensation, due to the August 2015 additions to our management team.
Liquidity and Capital Resources
Our cash, current assets, total assets, current liabilities and total liabilities as of January 31, 2016 and July 31, 2015 were as follows:
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January 31, 2016
July 31, 2015
Total current assets
Total current liabilities
We had $16,365 in cash and cash equivalents as of January 31, 2016. Our cash used in operations for the six months ended January 31, 2016 was $100,652. We had a net loss for the six months ended January 31, 2016 of $4,447,318. We had an accumulated deficit of $18,505,819 at January 31, 2016. 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
For the six months ended January 31, 2016, our net cash used in operating activities was $100,652, which consisted of our net loss of $4,447,318, offset primarily by increases in accrued expenses of $3,409,791 and accounts payable of $951,180. For the six months ended January 31, 2015, our net cash used in operating activities was $30,983 which consisted of our net loss of $2,567,648, offset primarily by an increase in accrued expenses of $2,506,826.
For the six months ended January 31, 2016, our net cash provided by financing activities was $117,017, which primarily consisted of net proceeds from the related party loans. For the six months ended January 31, 2015 our net cash provided by financing activities was $28,792, which consisted of proceeds from related party loans.
Related Party Transactions
At January 31, 2016, the Company is indebted to three directors of the Company for $1,050 (July 31, 2015 - $250) for expenditures incurred on behalf of the Company. The amount is unsecured, non-interest bearing and due on demand.
As of January 31, 2016, $614,487 (July 31, 2015 - $528,552) is due to the majority shareholder, of which $508,058 is unsecured, non-interest bearing and due on demand, $11,829 is past due with an interest rate of 3%, and $94,600 is due on October 26, 2016 with an interest rate of 2%. At January 31, 2016, accrued interest on these loans is $626 (July 31, 2015 - $506).
The Company has negative working capital, has incurred losses since inception, and has not yet received significant revenues from sales of products or services. These factors raise substantial doubt about the Companys 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.
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. Managements 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. The Company has recently had meetings with certain groups and municipalities regarding proposed transportation infrastructure projects, and it has also met with potential investors for these projects; in addition, it is in the process of finalizing and filing a stock registration statement so stock can be issued to raise funding for these projects.
Critical Accounting Policies
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires making estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
The Company believes that the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its financial statements:
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The Company accounts for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, Compensation Stock Compensation which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. The fair value of the equity instrument is charged directly to compensation expense and credited to additional paid-in capital over the period during which services are rendered.
The Company follows ASC Topic 505-50, formerly EITF 96-18, Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling Goods and Services, for stock options and warrants issued to consultants and other non-employees. In accordance with ASC Topic 505-50, these stock options and warrants issued as compensation for services provided to the Company are accounted for based upon the fair value of the services provided or the estimated fair market value of the option or warrant, whichever can be more clearly determined. The fair value of the equity instrument is charged directly to compensation expense and additional paid-in capital over the period during which services are rendered.
Recent Accounting Pronouncements
For the six month period ended January 31, 2016, there were no accounting standards or interpretations issued that are expected to have a material impact on our financial position, operations or cash flows.
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 with very limited participation from our Chief Financial Officer (due to him being a recent hire within the quarter), 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 of January 31, 2016, 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 Commissions 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 of January 31, 2016, 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 six month period ended January 31, 2016, 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.
Shah Mathias, former CEO of the Company, is appealing a 2005 charge of serving liquor to a minor. Mr. Mathias has asserted that he was out of town on the alleged date and the victim has admitted that she was attempting to reap some financial gain. The case is pending a trial date. In subsequent proceedings it was determined by the superior court, actions taken against Mr. Mathias were illegal.
There are currently no other pending, threatened or actual legal proceedings in which the Company or any other directors are a party.
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.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
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.
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Articles of Incorporation (filed with the Form 10 November 9, 2011)
Amended by-laws (filed as part of the Form 8-K/A filed January 18, 2013)
Opinion of Counsel on legality of securities being registered (filed with the Registration Statement
on Form S-1 filed June 13, 2013)
Master Indenture Agreement of Alabama Toll Facilities, Inc. (filed with the Form 8-K August 27, 2012)
Master Indenture Agreement of Hi Speed Rail Facilities, Inc. (filed with the Form 8-K August 27, 2012)
Master Indenture Agreement of Hi Speed Rail Facilities Provider, Inc. (filed with the Form 8-K August 27, 2012)
June 12, 2012 Agreement and Plan of Reorganization (filed as part of the Form 8-K/A filed January 18, 2013)
TEMS engagement (filed as part of the Form 8-K/A filed January 18, 2013)
Alabama Indenture Agreement (filed as part of the Form 8-K/A filed January 18, 2013)
High Speed Rail Indenture Agreement (filed as part of the Form 8-K/A filed January 18, 2013)
Damar Agreement (filed as part of the Form 8-K/A filed January 18, 2013)
Alabama Legislative Act 506 (filed as part of the Form 8-K/A filed January 18, 2013)
Form of subscription agreement for sale of the shares (filed with the Registration Statement on Form S-1 filed
June 13, 2013)
Letter of Intent for Port Trajan property (filed with the Registration Statement on Form S-1 filed June 13, 2013)
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION OF PRINCIPAL ACCOUNTING AND FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
* Filed herewith
** To be filed
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.
March 21, 2016
/s/ Debra Mathias
Title: Chief Executive Officer
(Principal executive officer)