Ameri Metro, Inc. (formerly Yellowwood) - Quarter Report: 2020 January (Form 10-Q)

As at January 31, 2020, 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, 2020, 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.

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Income (Loss) Per Share

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, 2020 and 2019, the outstanding options are anti-dilutive. As a result, the computations of net loss per common shares is the same for both basic and fully diluted common stock. Potentially dilutive securities, which include 312,090,000 and 13,700,000 stock options as at January 31, 2020, and 2019, have been excluded from the computation of diluted net loss per share because the effect of their inclusion would have been antidilutive.

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.  The Company’s only lease as at August 1, 2019 is a month-to-month rent agreement for office space.  The month-to-month rent agreement is considered a lease with a term of 12 months or less.  As the leases standard does not require lessees to apply the guidance to arrangements with a lease term of 12 months or less, the adoption of the new standard has no material impact on its consolidated financial statements.  

In June 2018, the FASB issued ASU 2018-07, which simplifies the accounting for nonemployee share-based payment transactions. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The standard became effective for the Company in the first quarter of fiscal year 2020. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

The Company has implemented all new accounting pronouncements that are in effect and that may impact its 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, 2020, the Company has a working capital deficiency of $48,337,766 and has accumulated losses of $54,399,028 since inception. The ability of Ameri Metro to continue as a going concern is dependent on the Company generating cash from the sale of its common stock and/or obtaining debt financing and attaining future profitable operations.

Management’s plans include selling its equity securities and obtaining debt financing to fund its capital requirement and on-going operations; however, there can be no assurance the Company will be successful in these efforts. These factors create substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.

NOTE 3 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES – RELATED PARTIES

As of January 31, 2020, $45,269,331 (July 31, 2019 - $40,605,372) is accrued in relation to various employment agreements, directorship agreements and audit committee agreements as described in Note 8.   

On January 14, 2020, the Company issued 300,000,000 options to Penndel Land Company, a company owned by Company Founder, for $1,368,217 of loans and accrued interest owed to the Company’s Founder as at December 31, 2019.  The fair value of the 300,000,000 options was $13,300 on the grant date and the Company recognized a gain of $1,354,610 on settlement of debt.  

At January 31, 2020, the Company is indebted to the majority shareholder for $1,250,134 (July 31, 2019 - $1,315,350) for accrued interest of $14 on related party loans, $1,249,006 of consulting fees owed and $1,114 of expenses paid on behalf of the Company.

At January 31, 2020 and July 31, 2019, 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 – LOANS PAYABLE – RELATED PARTIES

As of January 31, 2020, $15,375 (July 31, 2019 - $1,157,924) is due to the majority shareholder as he paid expenses on behalf of the Company.  The amount is unsecured, bears interest at 3% per annum and is due on April 30, 2021.  At January 31, 2020, accrued interest on the loan is $14 (July 31, 2019 - $66,651), which is included in accounts payable and accrued expenses – related parties.

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NOTE 5 – STOCK PAYABLE

Effective October 2, 2014, the Company entered into an employment agreement with Mr. Shah Mathias (the Company’s founder and a majority shareholder) for the Head of Mergers and Acquisitions and Business Development, and as non-board member President (See Note 9). According to the agreement, the Company agreed to issue stock options of 1.2% of all authorized stock capitalization to Mr. Shah Mathias at the time of appointment. In addition, the Company agreed to issue shares of common stock equal to 10% of any shares issued under a public offering pursuant to a Form S-1 registration statement; and if shares are issued at such time to any other party Mr. Shah Mathias is to be issued an equal amount of shares. As of January 31, 2020, the Company has not completed its public offering pursuant to a Form S-1 registration statement. On April 3, 2015, the Company amended the employment agreement to eliminate the requirement to issue stock options of 1.2% of all authorized stock capitalization and, instead, agreed to issue Mr. Shah Mathias a total of 1.2% of Class A and Class B shares of common stock, and 1% of Class C and D shares of common stock at the time of the amendment. As of July 31, 2018, the Company has issued 48,000,000 shares of Class D common stock and 43,200,000 shares of Class C common stock pursuant to the employment agreement, and recorded $13,281 of stock payable for unissued stock consisting of 84,000 unissued Class A common stock, 4,800,000 unissued Class B common stock, and 48,000,000 unissued Class D Stock.

NOTE 6 – CAPITAL STOCK

On November 5, 2018, the Company issued 2,000,000 shares of Class B common stock with a fair value of $500 to two officers and directors of the Company for services pursuant to directorship agreements dated August 30, 2018.  The shares were issued from the 2015 Equity Incentive Plan reserved shares.  The shares vest 285,714 per year for seven years. During the six months ended January 31, 2020, the Company recorded $75 (2019 - $46) for the vested portion of the shares, leaving $315 of unvested compensation expense to be recognized in future periods.

On December 15, 2019, the Company issued a stock dividend of 14,769,480 shares of Class C common stock from the Ameri Metro, Inc. Trust reserved shares.

On January 7, 2020, the Company increased the number of authorized shares of its Class B common stock to 10,000,000,000 shares.

On January 7, 2020, the Company created 40 series of Class C common stock for the purpose of equity participation in forty infrastructure projects.  The Company increased the number of authorized shares of its Class C common stock to 8,000,000,000 shares, of which 7,500,000,000 shares are allocated evenly to the 40 series.

On January 7, 2020, the Company created 40 series of Class D common stock for the purpose of equity participation in forty infrastructure projects.  The Company increased the number of authorized shares of its Class D common stock to 8,000,000,000 shares, of which 7,500,000,000 shares are allocated evenly to the 40 series.

On January 13, 2020, the Company issued 3,475,248 shares with a fair value of $869 from the 2015 Incentive Plan to acquire 25% ownership interest in a related entity.  

On January 15, 2020, the Company issued 400,000 shares of Class B common stock to 2 officers and directors of the Company pursuant to the exercise of stock options granted on March 3, 2015 with an amended exercise price of $565.  The shares were issued from the 2015 Equity Incentive Plan reserved shares.  At January 31, 2020, the $226,000,000 proceeds receivable upon the exercise of the options had yet to be received and was recorded as stock subscriptions receivable.

On January 15, 2020, the Company issued 1,400,000 shares of Class B common stock to 7 officers and directors of the Company pursuant to the exercise of stock options granted on November 1, 2016 with an amended exercise price of $565.  The shares were issued from the 2015 Equity Incentive Plan reserved shares.  At January 31, 2020, the $791,000,000 proceeds receivable upon the exercise of the options had yet to be received and was recorded as stock subscriptions receivable.

On January 15, 2020, the Company issued 400,000 shares of Class B common stock to 2 officers and directors of the Company pursuant to the exercise of stock options granted on August 30, 2018 with an amended exercise price of $565.  The shares were issued from the 2015 Equity Incentive Plan reserved shares.  At January 31, 2020, the $226,000,000 proceeds receivable upon the exercise of the options had yet to be received and was recorded as stock subscriptions receivable.

On January 18, 2020, the Company issued 200,000 shares of Class B common stock to a director of the Company pursuant to the exercise of stock options granted on January 18, 2020 with an exercise price of $665.  The shares were issued from the 2015 Equity Incentive Plan reserved shares.  At January 31, 2020, the $133,000,000 proceeds receivable upon the exercise of the options had yet to be received and was recorded as stock subscriptions receivable.

On January 31, 2020, the Company declared a 100% stock dividend to all shareholders of Class B common stock at par and recorded a dividend payable of $465,229 for 1,860,916,765 shares to be issued.

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NOTE 7 – 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. On June 12, 2019, the Company amended the vesting terms through a Directors’ Resolution so that the remaining 2,400,000 unvested options will vest on November 1 instead of March 8 of each subsequent year. On January 5, 2020, the Company amended the vesting terms of the remaining 2,400,000 options and the vesting date was changed to August 30 of each subsequent year.  The Company also modified the exercise price of 1,600,000 options to $565 per share.  The exercise price of the other 2,800,000 outstanding option was not changed.  The modification did not result in any incremental compensation cost and therefore the stock-based compensation for the unvested portion of the modified options will be recognized based on the original fair value.  On October 12, 2018, 3,600,000 options were exercised at $42 per share.  On January 15, 2020, 400,000 options were exercised at $565 per share.  During the six months ended January 31, 2020 and 2019, the Company recorded stock-based compensation of $7 and $35, respectively, on the 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. On June 12, 2019, the Company amended the vesting terms through a Directors’ Resolution so that 1,400,000 options originally vesting on November 1, 2018 are to be vested on October 12, 2018. On October 12, 2018, 7,200,000 shares were issued upon exercise of the stock options. The weighted average grant date fair value of stock options granted was $0.00009 per share.  On January 5, 2020, the Company amended the vesting terms of the remaining options and the vesting date was changed to August 30 of each subsequent year.  Furthermore, the exercise price was amended to $565 per share for all options vesting on or after August 30, 2019.  The modification did not result in any incremental compensation cost and therefore the stock-based compensation for the unvested portion of the modified options will be recognized based on the original fair value.  On January 15, 2020, 1,400,000 options were exercised at $565 per share.  During the six months ended January 31, 2020 and 2019, the Company recorded stock-based compensation of $59 and $128, respectively, on the consolidated statement of operations.

On February 7, 2018, the Company granted 2,000,000 stock options to a consultant of the Company, exercisable at various prices per share and expire on May 1, 2022. The exercise prices are as follows: 250,000 options at $60 per share, 350,000 options at $225 per share, 300,000 options at $250 per share, 300,000 options at $275 per share, 300,000 options at $300 per share, 500,000 options at $325 per share. On June 12, 2019, the Company amended the vesting terms so that all 2,000,000 options vested by October 12, 2018. On October 12, 2018, 2,000,000 shares that vested pursuant to the amendment were issued. The weighted average grant date fair value of stock options granted was $0.000005 per share. During the six months ended January 31, 2020 and 2019, the Company recorded stock-based compensation of $nil and $4 on the consolidated statement of operations.

On August 30, 2018, the Company granted 4,000,000 stock options to two officers and directors of the Company, exercisable at $357 per share and expire on August 30, 2028. The 4,000,000 options vest according to the following schedule: 1,600,000 options vest immediately, and 400,000 vest annually for the next 6 years. The weighted average grant date fair value of stock options granted was $0.000008 per share. On January 5, 2020, the exercise price was amended to $565 per share for all options vesting on or after August 30, 2019.  The modification did not result in any incremental compensation cost and therefore the stock-based compensation for the unvested portion of the modified options will be recognized based on the original fair value.  On January 15, 2020, 400,000 options were exercised at $565 per share.  During the six months ended January 31, 2020 and 2019, the Company recorded stock-based compensation of $18 and $110 on the consolidated statement of operations.

On August 30, 2018, the Company granted 100,000 stock options to a consultant of the Company, exercisable at $515 per share and expire on August 30, 2028. The 100,000 options vest according to the following schedule: 40,000 options vest immediately, and 10,000 vest annually for the next 6 years. On October 11, 2018, the Company issued 10,000 shares upon the exercise of stock option.  The weighted average grant date fair value of stock options granted was $0.000009 per share. On January 5, 2020, the exercise price was amended to $565 per share for all options vesting on or after August 30, 2019.  The modification did not result in any incremental compensation cost and therefore the stock-based compensation for the unvested portion of the modified options will be recognized based on the original fair value.  During the six months ended January 31, 2020 and 2019, the Company recorded stock-based compensation of $nil and $1 on the consolidated statement of operations.

On June 12, 2019, the Company amended Equity Incentive Plans, Subscription Agreements and Equity Agreements so that options issued after June 12, 2019 would have a strike price equal to the market price at that grant date.

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On January 14, 2020, the Company issued 300,000,000 options to Penndel Land Company, a company owned by Company Founder, for $1,368,217 of loans and accrued interest owed to the Company’s Founder as at December 31, 2019.  These options are exercisable at various prices per share and expire on January 14, 2030. The exercise prices are as follows: 50,000,000 options at $665 per share, 50,000,000 options at $698 per share, 50,000,000 options at $735 per share, 50,000,000 options at $771 per share, 50,000,000 options at $810 per share, 50,000,000 options at $851 per share.  The fair value of the 300,000,000 options was $13,300 on the grant date On February 14, 2020, the Company issued 300,000,000 shares of Class B common stock upon the exercise of stock options.  

On January 18, 2020, the Company granted 2,000,000 stock options to a director of the Company, exercisable at $665 per share and expire on January 18, 2030. The 2,000,000 options vest according to the following schedule: 1,400,000 options vest immediately, 200,000 options vest on August 30, 2020, 200,000 options vest on August 30, 2021, and 200,000 options vest on August 30, 2022.  The exercise price of the 600,000 options vesting on August 30, 2020, 2021 and 2022 are subject to re-set.  The grant date fair value of stock options granted was $0.000046 per share.  On January 18, 2020, 200,000 shares were issued upon the exercise of stock options.  During the six months ended January 31, 2020, the Company recorded stock-based compensation of $65 on the consolidated statement of operations.

A summary of the Company’s stock option activity is as follow:

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, 2020, there was $558 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, 2020.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Related and Non-related Party Agreements

The Company has entered into agreements with related and non-related parties for identified projects. As of January 31, 2020 and through April 27, 2020, the Company has no commitments or obligations under these agreements due to lack of financing and the need for a feasibility study before each project is begun. The Company will be committed to perform agreed upon services once feasibility study is complete and financing is available.

On June 25, 2019, the Company amended the Opportunity License Agreements it entered with 16 related entities.  The amendment clarifies ownership, voting rights, and distribution of profits for the Company and the Company founder.  The amendment also provides that the Company will purchase non-controlling interest of each of the sixteen entities and the Portus de Jewel project.  On June 29, 2019, the Company issued 33,931,475 shares of Class B common stock from the 2015 Incentive Plan which equal to 25% of the Founder’s shares in 15 of the 16 entities and 20,000,000 shares of Class B common stock from the 2015 Incentive Plan which equal to 10% of the Founder’s shares in the Portus de Jewel project.  On January 13, 2020, the Company issued 3,475,248 shares of Class B common stock from the 2015 Incentive Plan which equal to 25% of the Founder’s shares in 1 of the 16 entities.  During the year ended July 31, 2019, the Company recorded an impairment of $8,483 and opportunity license fees of $5,000 which are included in general and administrative expense.  During the six months ended January 31, 2020, the Company recorded an impairment of $869 which is included in general and administrative expense.

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Employee Agreements

The Company has signed an employment agreement with Mr. Shah Mathias (Company Founder) for the Head of Mergers and Acquisitions and Business Development, and as non-board member President, with an effective date of October 2, 2014. The term of the employment agreement is 20 years, with an annual base salary of $1,200,000 and ten percent (10%) of any revenue producing contract entered into by the Company while the Company Founder is in office, while holding any position under any title, and five percent (5%) of any such revenue producing contract afterward, for the benefit of the Company Founder or his estate, for a period of twenty (20) years. The Company Founder is also eligible to earn an annual bonus award of up to 100% of the annual base salary.  In addition, the Company Founder is entitled to receive shares of the Company’s common stock (See Note 5).  Effective September 1, 2019, the Company Founder’s annual base salary is increased to $1,500,000.  On January 5, 2020, the Company amended the employment agreement. Pursuant to the amendment, the Company Founder shall be entitled to receive shares of the Company’s Class B common stock equal to 12% of the authorized number of shares or 480,000,000 shares.  At no other time in the future will the Founder receive any additional shares of any class, other than additional shares resulting from future stock splits or granted by the Board of Directors.

The Company has entered into an employment agreement with the Chief Engineer with an effective date of December 3, 2014.  The term of the employment agreement is 3 years, with an annual base salary of $175,000.  The Chief Engineer is also entitled to 1,000,000 shares of Class “B” common stock as a signing bonus.  On December 30, 2014, the Company issued 1,000,000 shares of Class “B” common stock to the Chief Engineer.

The Company has entered into a directorship agreement with a Director of the Company with an effective date of June 30, 2015.  The initial term of the directorship agreement is one year, with an annual base salary of $150,000.  The director is also entitled to 1,000,000 shares of Class B common stock. On July 24, 2015, the Company issued 1,000,000 shares of Class B common stock to the director.  On March 17, 2016, the term of the agreement was extended to July 31, 2021.

The Company entered into an employment agreement with the Chief General Counsel with an effective date of August 4, 2015.  The term of the employment agreement is 3 years, with an annual base of $500,000.  On March 17, 2016, the term of the agreement was extended to July 31, 2021.

The Company entered into thirteen directorship agreements with thirteen Directors of the Company.  The initial term of the directorship agreements is one year, with an annual base salary of $150,000.  Each of the thirteen directors is also entitled to 1,000,000 shares of Class B common stock. On March 17, 2016, the term of the agreements was extended to July 31, 2021.

On October 19, 2016, the Company appointed three individuals as Directors of the Company and the Audit Committee.   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.

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. Effective September 1, 2019, the Chief Operations Officer’s annual base salary is increased to $500,000.  

The Company has entered into an employment agreement with the Chief Financial Officer of the Company with an effective date of August 30, 2018.  The term of the employment agreement is three years, with an annual base salary of $375,000.  Effective September 1, 2019, the Chief Financial Officer’s annual base salary is increased to $500,000.

As of January 31, 2020, and July 31, 2019, total accrued compensation expenses to related parties related to the above employment agreements were $45,269,331 and $40,605,372, respectively. At January 31, 2020, and July 31, 2019, the Company has accrued payroll taxes of $1,275,828 and $1,154,197, respectively, related to the accrued compensation expenses.

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Operating Lease

Legal Proceedings

On September 14, 2017, the Company received a letter from Zimmerman & Associates, on behalf of J. Harold Hatchett, III and Ronald Silberstein, claiming breach of contract, wrongful termination, and wrongful violations of the Business Corporations Act, and knowingly inaccurate SEC Reporting against the Company and the board of directors. The Company plans to work amicably to come to a settlement. As of January 31, 2020, the Company has accrued $1,263,870 and $1,295,120 in salaries for J. Harold Hatchett III and Ronald Silberstein, respectively.

The Company received a lawsuit on June 13, 2017 by Estate of Robert A. Berry Esq. (decedent, Oct 22, 2015), plaintiff (the “Plaintiff Estate”). The Plaintiff Estate asserted a claim for $50,000 and 11,000 common class “B” shares of the Company relating to shares and accrued stipend beginning 2015. The Company, in 2015, had previously booked the liability of $50,000 without interest accruing and issued the 11,000 shares of common class “B” stock of the Company to decedent Robert A. Berry Esq.  Company anticipates paying the $50,000 when the Company raises capital. 

Memorandum of Understanding

On September 30, 2018, the Company entered into a memorandum of understanding (“MOU”) to purchase 100% of Air Cyprus Aviation Limited (ACA) in exchange for £9,500,000. An amendment to the MOU was signed to cause the MOU to become binding which is subject to government regulatory approval.

NOTE 9 – INCOME TAXES

The Company has not filed its federal and state tax returns for the year ended July 31, 2019 and has filed its federal and state tax returns for the year ended July 31, 2018. The Net operating losses (“NOLs”) for these years will not be available to reduce future taxable income until the returns are filed. Assuming these returns are filed, as of January 31, 2020, the Company had approximately $7.3 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 rate of 21% is utilized for the period. The Company will continue to monitor additional guidance issued by the U.S. Treasury Department, the IRS, and other standard-setting bodies, so we may make adjustments to the provisional amounts (if any). However, management's opinion is that future adjustments due to the 2017 Tax Reform should not have a material impact on the Company's provision for income taxes.  The Company has a full allowance against the deferred tax asset and as a result there was no impact to income tax expense for the periods ended January 31, 2020.

NOTE 10 – SUBSEQUENT EVENTS

On February 14, 2020, the Company issued 300,000,000 shares of Class B common stock upon the exercise of stock options.

On February 18, 2020, the Company issued 480,000,000 shares of Class B common stock to the Company Founder pursuant to the amendment to his employment agreement dated January 5, 2020.  

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On February 18, 2020, the Company issued 3,230,520 shares of Class C common stock to acquire 2% of Global Infrastructure Bank.  By Consent of the Company directors on April 28, 2020 the ownership interest was increased from 2% to 25% by acquiring interest in Susquehanna Mortgage Bankers Corp (SMBC, established December 1994) DBA Global Infrastructure Special Purpose Bankers.  The intent is to become a licensed Commercial & Residential lender, an entity supervised by the State banking commission.  Once licensed, it will then apply for a Fintech mortgage lender with the U.S. Office of Currency Control to become a licensed lender under the U.S. Federal Reserve system. Original Class C non-voting shares in the amount of 23,000,000 shares will be issued for this transaction.  No shares have been issued as of the date of this filing.

On April 28, 2020 the Company agreed by board Consent to buy 25% ownership in Ann Charles International Airport for 23,000,000 Original Class C non-voting shares. The Company is the developer of this project.  No shares have been issued as of the date of this filing.

On March 11, 2020, the Company reinstated 11,292,240 shares of Class B common stock rescinded during the year ended July 31, 2014.   The 11,292,240 shares of Class B common stock were originally issued to a related party as a deposit on a future development.

On March 23, 2020, the Company issued 1,200,000 shares of Class B common stock upon the exercise of stock options.

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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 consolidated financial statements and provides additional information on the Company’s businesses, current developments, financial condition, cash flows and results of operations. The following discussion should be read in conjunction with our unaudited consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”) and with our Annual Report on Form 10-K for the fiscal year ended July 31, 2019.

Forward-Looking Statements

Except for the historical information contained herein, this Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements involve risks and uncertainties, including, among other things, statements concerning: our business strategy; liquidity and capital expenditures; future sources of revenues and anticipated costs and expenses; and trends in industry activity generally. Such forward-looking statements include, among others, those statements including the words such as "may," "will," "should," "expect," "plan," "could," "anticipate," "intend," "believe," "estimate," "predict," "potential," "goal," or similar language or by discussions of our outlook, plans, goals, strategy or intentions.

Our actual results may differ significantly from those projected in the forward-looking statements. These statements are only predictions and involve known and unknown risks, and uncertainties, that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, we cannot guarantee future results, levels of activity, performance or achievements.

The forward-looking statements we make in this Quarterly Report are based on management’s current views and assumptions regarding future events and speak only as of the date of this report. We assume no obligation to update any of these forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting these forward-looking statements, except as required by applicable law, including the securities laws of the United States and the rules and regulations of the Securities and Exchange Commission.

BUSINESS

The Business

Since its incorporation, the Company has developed its business plan, appointed officers and directors, engaged initial project consultants and entered into negotiations and contracts for related and ancillary business. The Company is in the process of developing proposals for high-speed rail service.

The Company was incorporated in the State of Delaware and merged with Ameri Metro 2010 on June 12, 2012.  References to the financial condition and performance of the Company below in this section “Management’s Discussions and Analysis of Financial Condition and Results of Operation” are to financial statements of the Company.

The Company, and its wholly owned subsidiary Global Transportation and Infrastructure, Inc., plan to use Private Public Partnerships (“PPP”) for funding of infrastructure projects and transportation projects. The Company is a conduit to provide general contracting services for infrastructure projects and transportation projects. As a conduit we identify infrastructure projects for both private and public end users. The Company will bring together private and public entities, the end users, including the affiliate entities to organize the revenue bond offering, which will be the private debt vehicle to build the infrastructure project for the end user. The Companies ultimate role is providing general contracting services and construction management services for the private and public entities.

Competition

The Company may face significant competition from other companies that may be developing competing transportation systems.  The Company will, however, face competition in the allocation of monetary resources from governmental agencies, at the local, regional, state and federal levels. The Company believes that government agencies will strongly endorse its proposed plan for high-speed regional rail systems, but believes that, given the economic environment, there may be few or no funds available for such development.

Nevertheless, as an example, traditionally significant competition generally exists in the industry, from government agencies and entities. Due to the federal budgetary constraints, henceforth any completion would come from private or public entities. On the heels of the Department of Transportation’s recent request for high-speed rail proposals, its Federal Railroad Administration received 132 applications from 32 states totaling $8.8 billion. That was more than three times the $2.4 billion available. During the first round of awards in the fall of 2009, applicants submitted more than $55 billion in project proposals. That was nearly six times the initial $8 billion

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available from the American Recovery and Reinvestment Act. Unfortunately, due to federal budgetary setbacks, as of early 2017, very little of this has come to fruition.

Trading Market

While there currently is no market for the shares, the Company has obtained the trading symbol “ARMT” from FINRA.

Employees

In addition to the Chief Executive Officer, the Company has been accruing salaries for employees and twenty six other persons who are working on behalf of the Company to assist in the development of its initial high-speed rail project. None of the twenty six people currently receive salaries or other compensation. The Company has also issued stock to individuals, for their consulting and professional services. At the time the Company launches its planned IPO, the Company will pay the accrued salaries to the employees.

Subsidiaries

The Company has one subsidiary, Global Transportation & Infrastructure Inc. (“GTI”) incorporated in the state of Delaware. GTI is a wholly owned subsidiary of the Company.  The Company owns 25% of each of the companies listed in the section “Related Companies”.  

Reports to Security Holders

The Company is a reporting company pursuant to the Securities Exchange Act of 1934 and files with the Securities and Exchange Commission quarterly, annual, periodic and other reports.  The Company intends to deliver a copy of its annual report to its security holders, and will voluntarily send a copy of the annual report, including audited financial statements, to any registered shareholder who requests.  The Company’s documents filed with the Securities and Exchange Commission may be inspected at the Commission’s principal office in Washington, D.C. Copies of all or any part of the registration statement may be obtained from the Public Reference Section of the Securities and Exchange Commission, 100 F Street N.E., Washington, D.C. 20549. Call the Commission at 1-800-SEC-0330 for further information on the operation of the public reference rooms. The Securities and Exchange Commission also maintains a web site at http://www.sec.gov that contains reports, proxy statements and information regarding registrants that file electronically with the Commission. All of the Company’s filings may be located under the CIK number 0001534155.

Results of Operations

In December 2019, an outbreak of a new strain of coronavirus (“COVID-19”) began in Wuhan, Hubei Province, China. In March 2020, the World Health Organization declared COVID-19 a pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. The extent of the impact of the COVID-19 pandemic on our ability to execute our business plans in the expected time frame and to secure funding, will depend on future developments, including the duration and spread of the pandemic, all of which are uncertain and cannot be predicted.  The management team is closely following the progression of COVID-19 and its potential impact on the Company.  Since the Company is not currently trading and has not begun full-scale operations, there is minimal impact on the Company’s current financial condition.  The Company sees an opportunity for additional U.S. projects given the Administration’s interest in advancing a $2 Trillion infrastructure package.  Although the Company expects a significant reduction in GDP globally, the Company anticipates a return to growth later in the fiscal year 2020.  Management will continue to monitor the situation and take appropriate actions when the Company is capitalized.  

Comparison of the Six Months Ended January 31, 2020 and 2019.

The Company has no source of continuing revenues and received no revenues for the six months ending January 31, 2020 and 2019.   For the six months ended January 31, 2020 and 2019, the Company had total operating expenses of $5,024,860 and $4,657,796, respectively and net losses of $3,704,323 and $4,690,008, respectively. The increase in operating expenses resulted primarily from increases of $123,848 in professional fees, $24,950 in director fees, $243,714 in officer payroll and $25,360 in transfer agent and filing fees and offset by decrease of $34,192 in personnel expenses, $4,691 in telephone expense, and $7,060 in travel expenses. During the six months ended January 31, 2020, the Company recognized a gain of $1,354,610 upon settlement of debt which resulted in a decrease in net loss.

Comparison of the Three Months Ended January 31, 2020 and 2019.

The Company has no source of continuing revenues and received no revenues for the three months ending January 31, 2020 and 2019.   For the three months ended January 31, 2020 and 2019, the Company had total operating expenses of $2,538,996 and $2,335,569, respectively and net losses of $1,199,448 and $2,351,948, respectively. The increase in operating expenses resulted primarily from

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increases of $45,462 in professional fees, $124,977 in officer payroll and $33,831 in transfer agent and filing fees.  During the three months ended January 31, 2020, the Company recognized a gain of $1,354,610 upon settlement of debt which resulted in a decrease in net loss.

Liquidity and Capital Resources

Our cash, current assets, total assets, current liabilities and total liabilities as of January 31, 2020 and July 31, 2019 were as follows:

Cash Requirements

We had $1,139 in cash and cash equivalents as of January 31, 2020.  Our cash used in operations for the six months ended January 31, 2020 was $135,566. We had a net loss for the six months ended January 31, 2020 of $3,704,323. We had an accumulated deficit of $54,399,028 at January 31, 2020. Our cash on hand is not sufficient to cover our monthly expenses and we continue to seek financing in the form of debt or stock sales to finance our operations. There can be no assurance the Company will be successful in these efforts.

Sources and Uses of Cash

Operations

For the six months ended January 31, 2020, our net cash used in operating activities was $135,566, which consisted primarily of our net loss of $3,704,323 and a gain of $1,354,610 upon settlement of debt, offset primarily by increases in accrued compensation expense of $4,663,959. For the six months ended January 31, 2019, our net cash used in operating activities was $136,847, which consisted primarily of our net loss of $2,338,060, offset primarily by increases in accrued expenses of $2,201,587.

Financing

For the six months ended January 31, 2020, our net cash provided by financing activities was $136,390, which consisted of proceeds of $149,820 from related party loans and repayment of $13,430 to related party. For the six months ended January 31, 2019, our net cash provided by financing activities was $137,787, which consisted of proceeds from related party loans.

Going Concern

Management’s plans include selling its equity securities and obtaining debt financing to fund its capital requirement and on-going operations; however, there can be no assurance the Company will be successful in these efforts. These factors create substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.

Critical Accounting Policies

Our critical accounting policies have not changed from the information reported on our Annual Report on Form 10-K for the year ended July 31, 2019.

Recent Accounting Pronouncements

See Note 1 to the accompanying financial statements for recent accounting pronouncements we have not yet adopted.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As a smaller reporting company, we are not required to provide the information required by this Item.

Item 4. Controls and Procedures.

We conducted an evaluation, with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of January 31, 2020, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commission’s rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of January 31, 2020, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses identified and described in our Annual Report on Internal Control Over Financial Reporting filed in our Annual Report on Form 10-K. However, management is focused on putting in place effective controls.

Changes in Internal Control over Financial Reporting

No change in our system of internal control over financial reporting occurred during the period covered by this report, the six month period ended January 31, 2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

On September 14, 2017, the Company received a letter from Zimmerman & Associates, on behalf of J. Harold Hatchett, III and Ronald Silberstein, claiming breach of contract, wrongful termination, and wrongful violations of the Business Corporations Act, and knowingly inaccurate SEC Reporting against the Company and the board of directors. The Company plans to work amicably to come to a settlement. As of October 31, 2017, the Company has accrued $1,263,870 and $1,295,120 in salaries for J. Harold Hatchett III and Ronald Silberstein, respectively.

The Company received lawsuit on June 13, 2017 by Estate of Robert A. Berry Esq. (decedent, Oct 22, 2015), plaintiff (the “Plaintiff Estate”). The Plaintiff Estate asserted a claim for $50,000 and 11,000 common class “B” shares of the Company relating to shares and accrued stipend beginning 2015. The Company, in 2015, had previously booked the liability of $50,000 without interest accruing and issued the 11,000 shares of common class “B” stock of the Company to decedent Robert A. Berry Esq. Company anticipates paying the $50,000 when the Company raises capital.

Item 1A. Risk Factors.

As a smaller reporting company, we are not required to provide the information required by this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Not applicable.

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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