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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. 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 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 ended July 31, 2015, as reported in Form 10-K, have been omitted.
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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 April 30, 2016, the Company has a working capital deficiency of $14,770,454 and has accumulated losses of $20,302,091 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.
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NOTE 3 DUE TO RELATED PARTIES
At April 30, 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.
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NOTE 4 LOANS PAYABLE RELATED PARTIES
As of April 30, 2016, $748,847 (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%, $25,647 is due December 31, 2016 with an interest at 3%, $95,600 is due on October 26, 2016 with an interest rate of 2% and $107,240 is due on March 1, 2017 with an interest rate of 7%. At April 30, 2016, accrued interest on these loans is $2,462 (July 31, 2015 - $506).
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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 April 30, 2015. The Company has repaid $2,597 as of April 30, 2016. At April 30, 2016, accrued interest on these loans is $251 (July 31, 2015 - $206). At April 30, 2016, this loan is past due
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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 63,476,191 post-split shares of Class B common stock that had previously been issued to the former CFO for services as the former CFO did not fully perform on the original contract.
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.
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NOTE 7 STOCK OPTIONS
On March 8, 2016, the Company adopted a stock option plan named 2016 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 during the nine month period ended April 30, 2016 was $0.00009. During the nine months ended April 30, 2016, the Company recorded stock-based compensation of $324 (2015 - $nil), as officer payroll on the consolidated statement of operations.
A summary of the Companys stock option activity is as follow:
| Number of Options | Weighted Average Exercise Price $ |
Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value $ |
Outstanding, July 31, 2015 | 0 | 0 | 0 | 0 |
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Granted | 8,000,000 | 42.00 | 0 | 0 |
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Outstanding, April 30, 2016 | 8,000,000 | 42.00 | 9.86 | 0 |
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:
| Nine months ended April 30, 2016 | »Nine months ended April 30, 2015 |
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Expected dividend yield | 0% | 0 |
Expected volatility | 150% | 0 |
Expected life (in years) | 10 | 0 |
Risk-free interest rate | 1.83% | 0 |
A summary of the status of the Companys non-vested stock options as of April 30, 2016, and changes during the nine month period ended April 30, 2016, is presented below:
Non-vested options | Number of options |
Weighted Average Grant Date Fair Value $ |
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Non-vested at July 31, 2015 | 0 | 0 |
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Granted | 8,000,000 | 0.00009 |
Vested | (3,200,000) | 0.00009 |
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Non-vested at April 30, 2016 | 4,800,000 | 0.00009 |
At April 30, 2016, there was $419 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 April 30, 2016.
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NOTE 8 COMMITMENTS AND CONTINGENCIES
Employee Agreements
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.
The Company had 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 was also entitled to 60,000,000 post-split shares of Class B common stock.. On December 30, 2014, the Company issued 60,000,000 post-split shares of Class B common stock to the former CFO. 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 as the former CFO did not fully perform on his employment agreement.
The Company 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 was 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 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. 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 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. 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 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. 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 salary of $500,000. On March 17, 2016, the term of the agreement was extended to July 31, 2021.
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 March 17, 2016, the term of the agreements was extended to July 31, 2021.
Operating Lease
On April 30, 2014, the Company terminated its existing office space lease, and entered into a new month to month rent agreement for office space. The new agreement which 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 April 30, 2016, no stock has been issued in payment of rent.
Master Consulting Agreement
On March 20, 2016, the Company entered into a Master Consulting Agreement with Global Infrastructure Finance & Development Authority, Inc. (GIF&DA), a division of Hi Speed Rail Facilities, Inc. Hi Speed Rail Facilities, Inc. is a non-profit entity organized and established by the Founder of the Company. GIF&DA has or is about to secure all necessary approvals by certain Joint Resolutions enacted by the federal and state(s) governmental agencies Legislature for the construction of a project consisting of financing, construction and operation of Hi Speed Rail Passenger, Freight, Air, Sea, Ground, Other Transportation Projects and other Parallel and Ancillary Infrastructure Projects
Pursuant to the Agreement, the Company was appointed as the agent and representative of GIF&DA to facilitate GIF&DA in securing the first and future phases of financing the project and the construction of the project. The Company shall receive 1.5% the face amount of each master trust indenture (bond indenture) in consideration for arranging financing and developing the sponsorship mechanism of the project. The term of the Agreement shall continue until the completion of the project. At April 30, 2016, the Company has not secured any financing for GIF&DA. .
Stock Split
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.
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NOTE 9 - INCOME TAXES
For the period ended April 30, 2016, the Company has net losses in addition to prior years net taxable losses; the result is a net taxable loss carry-forward, and therefore the Company has no tax liability. The net deferred tax asset generated by the loss carry-forward has been fully reserved. For the periods ended April 30, 2016 and July 31, 2015, the cumulative net operating loss carry-forward from operations is approximately $20,238,000 and $13,995,000; respectively, and will expire beginning in the year 2030.
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:
Deferred tax asset attributable to: |
| April 30, 2016 |
| July 31, 2015 |
Net operating loss carryover |
| $ 6,881,000 |
| $ 4,758,300 |
Valuation allowance |
| (6,881,000) |
| (4,758,300) |
Net deferred tax asset |
| $ 0 |
| $ 0 |
Due to the change in ownership provisions of the Tax Reform Act of 1986, the net operating loss carry forwards for Federal income tax reporting purposes are subject to annual limitations.
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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. 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.
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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 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 ended July 31, 2015, as reported in Form 10-K, have been omitted.
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Employee Agreements
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.
The Company had 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 was also entitled to 60,000,000 post-split shares of Class B common stock.. On December 30, 2014, the Company issued 60,000,000 post-split shares of Class B common stock to the former CFO. 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 as the former CFO did not fully perform on his employment agreement.
The Company 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 was 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 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. 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 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. 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 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. 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 salary of $500,000. On March 17, 2016, the term of the agreement was extended to July 31, 2021.
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 March 17, 2016, the term of the agreements was extended to July 31, 2021.
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Operating Lease
On April 30, 2014, the Company terminated its existing office space lease, and entered into a new month to month rent agreement for office space. The new agreement which 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 April 30, 2016, no stock has been issued in payment of rent.
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Master Consulting Agreement
On March 20, 2016, the Company entered into a Master Consulting Agreement with Global Infrastructure Finance & Development Authority, Inc. (GIF&DA), a division of Hi Speed Rail Facilities, Inc. Hi Speed Rail Facilities, Inc. is a non-profit entity organized and established by the Founder of the Company. GIF&DA has or is about to secure all necessary approvals by certain Joint Resolutions enacted by the federal and state(s) governmental agencies Legislature for the construction of a project consisting of financing, construction and operation of Hi Speed Rail Passenger, Freight, Air, Sea, Ground, Other Transportation Projects and other Parallel and Ancillary Infrastructure Projects
Pursuant to the Agreement, the Company was appointed as the agent and representative of GIF&DA to facilitate GIF&DA in securing the first and future phases of financing the project and the construction of the project. The Company shall receive 1.5% the face amount of each master trust indenture (bond indenture) in consideration for arranging financing and developing the sponsorship mechanism of the project. The term of the Agreement shall continue until the completion of the project. At April 30, 2016, the Company has not secured any financing for GIF&DA. .
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Stock Split
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.
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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:
| Nine months ended April 30, 2016 | »Nine months ended April 30, 2015 |
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Expected dividend yield | 0% | 0 |
Expected volatility | 150% | 0 |
Expected life (in years) | 10 | 0 |
Risk-free interest rate | 1.83% | 0 |
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A summary of the status of the Companys non-vested stock options as of April 30, 2016, and changes during the nine month period ended April 30, 2016, is presented below:
Non-vested options | Number of options |
Weighted Average Grant Date Fair Value $ |
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Non-vested at July 31, 2015 | 0 | 0 |
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Granted | 8,000,000 | 0.00009 |
Vested | (3,200,000) | 0.00009 |
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Non-vested at April 30, 2016 | 4,800,000 | 0.00009 |
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The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:
Deferred tax asset attributable to: |
| April 30, 2016 |
| July 31, 2015 |
Net operating loss carryover |
| $ 6,881,000 |
| $ 4,758,300 |
Valuation allowance |
| (6,881,000) |
| (4,758,300) |
Net deferred tax asset |
| $ 0 |
| $ 0 |
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