Ameri Metro, Inc. (formerly Yellowwood) - Quarter Report: 2018 January (Form 10-Q)

Participating Profits Interest

As at January 31, 2018, the Company has a 25% participating profits interest in sixteen related entities. The remaining 75% participating profits interest (and 100% voting control) is owned by the Company’s majority shareholder. These entities have had no operations, assets, or liabilities, and as of January 31, 2018, the Company’s participating profits interest in these companies was $0.

Use of Estimates

The preparation of 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 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 January 31, 2018 and 2017, 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 22,000,000 stock options as at January 31, 2018, and 2017, have been excluded from the computation of diluted net loss per share because the effect of their inclusion would have been antidilutive.

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Reclassifications

Certain amounts in the prior-period financial statements have been reclassified for comparative purposes to conform with the presentation in the current period statements. These reclassifications had no effect on the reported results of operations.

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 January 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 leases standard does not require lessees to apply the guidance to arrangements with a lease term of 12 months or less, the Company expects the new standard to have no material impact on its consolidated financial statements.  

The Company has implemented all new accounting pronouncements that are in effect and that may impact its 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 January 31, 2018, the Company has a working capital deficiency of $30,215,436 and has accumulated losses of $35,761,845 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 – LOANS PAYABLE – RELATED PARTIES

As of January 31, 2018 and July 31, 2017, $939,354 and $894,184, respectively, is due to the majority shareholder and his companies as he paid expenses on behalf of the Company, of which $515,199 and $512,889, respectively is unsecured, non-interest bearing and due on demand, $416,555 (July 31, 2017 - $373,695) is due on October 31, 2018, with an interest rate of 3.50% per annum, and $7,600
(July 31, 2017 - $7,600) is due on demand with an interest rate of 2% per annum. At January 31, 2018 and July 31, 2017, accrued interest on these loans is $25,901 and $18,742, respectively, which is included in accrued expenses – related parties. Effective August 1, 2018 the loans were consolidated with the repayment term extended to April 30, 2021 at an interest rate of 3% per annum.

At January 31, 2018, and July 31, 2017, the Company is indebted to three directors of the Company for an aggregate of $1,050 for expenditures incurred on behalf of the Company. The amount is unsecured, non-interest bearing and due on demand.

NOTE 4 – STOCK PAYABLE

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NOTE 5 – CAPITAL STOCK

There were no common stock transactions during the six months ended January 31, 2018.

NOTE 6 – STOCK OPTIONS

On March 8, 2016, the Company adopted a stock option plan named 2015 Equity Incentive Plan, the purpose of which is to help the Company secure and retain the services of employees, directors and consultants, provide incentives to exert maximum efforts for the success of the Company and any affiliate and provide a means by which the eligible recipients may benefit from increases in value of the common stock.  

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. During the six months ended January 31, 2018, and 2017, the Company recorded stock-based compensation of $53 and $91, respectively, on the unaudited condensed consolidated statement of 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.  The weighted average grant date fair value of stock options granted was $0.00009 per share. During the six months ended January 31, 2018, and 2017, the Company recorded stock-based compensation of $128 and $nil, respectively, on the unaudited condensed consolidated statement of operations.

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:

At January 31, 2018, there was $582 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 January 31, 2018.

NOTE 7 – COMMITMENTS AND CONTINGENCIES

Related and Non-related Party Agreements

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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 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 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.   Effective November 1, 2016, 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.

As of January 31, 2018, and July 31, 2017, total accrued compensation expenses to related parties related to the above employment agreements were $27,547,222 and $23,220,245, respectively. At January 31, 2018, the Company has accrued payroll taxes of $775,493 related to the accrued compensation expenses.

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Legal Proceedings

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.

NOTE 8 – INCOME TAXES

At January 31, 2018 and July 31, 2017, the Company’s deferred tax assets consisted of principally net operating loss carry forwards. The material reconciling items between the tax benefit computed at the statutory rate and the actual benefit recognized in the financial statements consisted of accrued expenses and the change in the valuation allowance during the applicable period. The Company has recorded a 100% valuation allowance as management is uncertain that the Company will realize the deferred tax assets.

The Company has not filed its federal and state tax returns for the years ended July 31, 2018 and 2017. 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, as of January 31, 2018, the Company had approximately $7.49 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 2017 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 blended rate of 26.4% 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 January 31, 2018.  

NOTE 9 – SUBSEQUENT EVENTS

On August 20, 2018, the Company reserved 100,000,000 Class B shares of common stock in the name of the 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 August 20, 2018, the Company reserved 100,000,000 Class B shares of 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.

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.

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.

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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, for the purpose of any future purchases of commodities, supplies, equipment and other tangible items for current and future projects.  The shares are being administered by the HSRF Statutory Trust on behalf of the Company and will be issued out of trust when the Company deems it appropriate to issue Class B shares of common stock for these purchases.

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.

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 August 30, 2018, the Company granted a total of 4,000,000 stock options to two officers and directors of the Company, exercisable at $357 per share and expire on August 30, 2024. The 4,000,000 options vest according to the following schedule: 1,600,000 options vest immediately, and 400,000 vest annually for the next 6 years. The shares were issued from Equity Incentive Plan reserved shares.

On October 12, 2018, the Company issued 7,200,000 shares of Class B common stock to 6 officers and directors of the Company pursuant to the exercise of stock options granted on November 1, 2016. The shares were issued from Equity Incentive Plan reserved shares.

On October 12, 2018, the Company issued 2,000,000 shares of Class B common stock to a consultant of the Company pursuant to subscription agreement entered on February 7, 2018. The shares were issued from Equity Incentive Plan reserved shares.

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. In addition, the Company amended the exercise price of certain stock options granted a consultant from $460 per share, with a maximum sell price of $560, to $515 per share, with a maximum sell price of $715 per share.

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.

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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 3 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.

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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 condensed 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 condensed 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, 2017.

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

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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 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

Comparison of the Three Months Ended January 31, 2018 and 2017.

The Company has no source of continuing revenues and received no revenues for the three months ended January 31, 2018 and 2017.   For the three months ended January 31, 2018 and 2017, the Company had total operating expenses of $2,480,152 and $2,416,798, respectively and net losses of $2,491,854 and $2,421,988, respectively. The decrease in operating expenses and net loss resulted primarily from decreases in officer payroll.

Comparison of the Six Months Ended January 31, 2018 and 2017.

The Company has no source of continuing revenues and received no revenues for the six months ending January 31, 2018 and 2017.   For the six months ended January 31, 2018 and 2017, the Company had total operating expenses of $5,761,359 and $4,110,085, respectively and net losses of $5,784,570 and $4,120,043, respectively. The increase in operating expenses and net loss resulted primarily from increases in officer payroll, director’s fees and audit committee fees.

Liquidity and Capital Resources

Our cash, current assets, total assets, current liabilities and total liabilities as of January 31, 2018 and July 31, 2017 were as follows:

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Cash Requirements

We had $395 in cash as of January 31, 2018.  Our cash used in operations for the six months ended January 31, 2018 was $44,775. We had a net loss for the six months ended January 31, 2018 of $5,784,570. We had an accumulated deficit of $35,761,845 at January 31, 2018. 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

Financing

For the six months ended January 31, 2018, our net cash provided by financing activities was $45,170, which consisted of proceeds from related party loans. For the six months ended January 31, 2017 our net cash provided by financing activities was $83,469, which consisted of proceeds from related party loans.

Going Concern

These 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 January 31, 2018, the Company has a working capital deficiency of $30,215,436 and has accumulated losses of $35,761,845 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.

Critical Accounting Policies

Recent Accounting Pronouncements

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.

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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 of January 31, 2018, 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 of January 31, 2018, 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 quarter ended January 31, 2018, 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.

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.

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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