UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
☒QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter ended September 30, 20212022
OR
☐TRANSITION REPORT PURSUANT TO SECTION 14 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Commission File Number: 000-56054
AMERAMEX INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
| Nevada | 88-0501944 | |
| (State of organization) | (I.R.S. Employer Identification No.) |
3930 Esplanade, Chico, CA 95973
(Address of principal executive offices)
(530)895-8955
Registrant’s telephone number, including area code
________________________________
Former address if changed since last report
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered. | ||
| Common Stock | AMMX | OTCQB |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐No ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Non-accelerated filer ☒ | Smaller reporting company ☒ |
| Emerging growth company ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes ☒ No
There are 14,829,155 shares of common stock outstanding as of November 15, 2021. 18, 2022.
TABLE OF CONTENTS
PART I–I–FINANCIAL INFORMATION
ITEM 1. INTERIM FINANCIAL STATEMENTS
AMERAMEX INTERNATIONAL, INC.
UNAUDITED BALANCE SHEETS
| September 30, 2021 | December 31, 2020 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 924,162 | $ | 407,881 | ||||
| Accounts Receivable, Net | 1,403,658 | 768,371 | ||||||
| Inventory, Net | 6,007,450 | 5,873,569 | ||||||
| Other Current Assets | 227,624 | 198,531 | ||||||
| Total Current Assets | 8,562,894 | 7,248,352 | ||||||
| Property and Equipment, Net | 986,922 | 1,035,840 | ||||||
| Rental Equipment, Net | 1,868,863 | 3,624,376 | ||||||
| Deferred Tax Assets, Net | — | 158,124 | ||||||
| Other Assets | 400,797 | 453,410 | ||||||
| Total Other Assets | 3,256,582 | 5,271,750 | ||||||
| TOTAL ASSETS | $ | 11,819,476 | $ | 12,520,102 | ||||
| LIABILITIES & STOCKHOLDERS' EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts Payable | $ | 1,995,644 | $ | 620,200 | ||||
| Accrued Expenses | 254,918 | 231,329 | ||||||
| Joint Venture Liability | 210,000 | 439,500 | ||||||
| Lines of Credit | 4,268,938 | 5,749,801 | ||||||
| Notes Payable, Current Portion | 781,190 | 911,265 | ||||||
| Convertible Notes | — | 150,683 | ||||||
| Total Current Liabilities | 7,510,690 | 8,102,778 | ||||||
| Long-Term Liabilities | ||||||||
| Deferred Tax Liabilities, Net | 62,214 | — | ||||||
| Notes Payable - Related Party | 652 | 226,659 | ||||||
| Notes Payable, Net of Current Portion | 2,071,420 | 2,597,935 | ||||||
| Total Long-Term Liabilities | 2,134,286 | 2,824,594 | ||||||
| TOTAL LIABILITIES | 9,644,976 | 10,927,372 | ||||||
| Commitments and Contingencies (Note 11) | — | — | ||||||
| STOCKHOLDERS' EQUITY: | ||||||||
| Shareholders' Equity | ||||||||
| Preferred Stock, $par value, shares authorized, no | — | — | ||||||
| shares issued and outstanding | ||||||||
| Common Stock, $par value, shares authorized | 14,629 | 14,549 | ||||||
| shares issued and outstanding at September 30, 2021 and | ||||||||
| at December 31, 2020 | ||||||||
| Additional Paid-In Capital | 21,600,734 | 21,545,614 | ||||||
| Accumulated Deficit | (19,440,863 | ) | (19,967,433 | ) | ||||
| Total Stockholders' Equity | 2,174,500 | 1,592,730 | ||||||
| TOTAL LIABILITIES & STOCKHOLDERS' EQUITY | $ | 11,819,476 | $ | 12,520,102 | ||||
| SEPTEMBER 30, 2022 | DECEMBER 31, 2021 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 358,679 | $ | 995,611 | ||||
| Accounts Receivable, Net | 3,046,957 | 1,162,300 | ||||||
| Inventory, Net | 7,439,912 | 5,185,864 | ||||||
| Other Current Assets | 241,947 | 312,963 | ||||||
| Total Current Assets | 11,087,495 | 7,656,738 | ||||||
| Property and Equipment, Net | 1,293,717 | 1,275,717 | ||||||
| Rental Equipment, Net | 800,261 | 1,461,716 | ||||||
| Lease Right of Use Asset | 808,928 | - | ||||||
| Other Assets | 358,806 | 391,330 | ||||||
| Total Other Assets | 3,261,712 | 3,128,763 | ||||||
| TOTAL ASSETS | $ | 14,349,207 | $ | 10,785,501 | ||||
| LIABILITIES & STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts Payable | $ | 734,462 | $ | 560,076 | ||||
| Accrued Expenses | 278,261 | 264,534 | ||||||
| Customer Deposits | 355,522 | 302,000 | ||||||
| Joint Venture Liability | 247,503 | 142,500 | ||||||
| Lines of Credit | 1,367,358 | 3,180,968 | ||||||
| Notes Payable, Current Portion | 1,062,604 | 777,601 | ||||||
| Lease Liability | 129,081 | - | ||||||
| Total Current Liabilities | 4,174,791 | 5,227,679 | ||||||
| Long-Term Liabilities | ||||||||
| Deferred Tax Liabilities, Net | 1,123,368 | 588,792 | ||||||
| Notes Payable, Net of Current Portion | 3,593,015 | 1,689,353 | ||||||
| Lease Liability, Net of Current Portion | 679,847 | - | ||||||
| Total Long-Term Liabilities | 5,396,230 | 2,278,145 | ||||||
| TOTAL LIABILITIES | 9,571,021 | 7,505,824 | ||||||
| Commitments and Contingencies (Note 11) | - | - | ||||||
| STOCKHOLDERS’ EQUITY: | ||||||||
| Shareholders’ Equity | ||||||||
| Preferred Stock, $ par value, shares authorized, shares issued and outstanding | - | - | ||||||
| Common Stock, $ par value, shares authorized and shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively. | 14,829 | 14,629 | ||||||
| Additional Paid-In Capital | 21,671,534 | 21,600,734 | ||||||
| Accumulated Deficit | (16,908,177 | ) | (18,335,686 | ) | ||||
| Total Stockholders’ Equity | 4,778,186 | 3,279,677 | ||||||
| TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY | $ | 14,349,207 | $ | 10,785,501 | ||||
The accompanying notes are an integral part of these unaudited financial statements.
AMERAMEX INTERNATIONAL, INC. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| REVENUES | ||||||||||||||||
| Sales of Equipment and Other Revenues | $ | 7,591,527 | $ | 5,168,949 | $ | 16,494,253 | $ | 7,106,628 | ||||||||
| Rentals and Leases | 588,746 | 711,463 | 2,015,667 | 1,994,938 | ||||||||||||
| Total Sales | 8,180,273 | 5,880,412 | 18,509,920 | 9,101,566 | ||||||||||||
| COST OF SALES | ||||||||||||||||
| Sales of Equipment and Other Revenues | 7,169,018 | 4,824,488 | 14,922,284 | 6,673,745 | ||||||||||||
| Rentals and Leases | 195,994 | 247,398 | 630,240 | 744,796 | ||||||||||||
| Total Cost of Sales | 7,365,012 | 5,071,886 | 15,552,524 | 7,418,541 | ||||||||||||
| GROSS PROFIT | 815,261 | 808,526 | 2,957,396 | 1,683,025 | ||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| Selling Expense | 203,100 | 136,591 | 627,021 | 284,591 | ||||||||||||
| Legal Settlement | — | 428,700 | — | 428,700 | ||||||||||||
| General and Administrative | 269,029 | 223,980 | 743,259 | 772,365 | ||||||||||||
| Total Operating Expenses | 472,129 | 789,271 | 1,370,280 | 1,485,656 | ||||||||||||
| Profit From Operations | 343,132 | 19,255 | 1,587,116 | 197,369 | ||||||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Interest Expense, net | (208,967 | ) | (260,989 | ) | (743,999 | ) | (887,522 | ) | ||||||||
| Loss from Early Extinguishment of Debt | (20,373 | ) | — | (110,551 | ) | — | ||||||||||
| Other Income (Expense) | 3,500 | — | 14,342 | (1,648 | ) | |||||||||||
| Total Other Expense | (225,840 | ) | (260,989 | ) | (840,208 | ) | (889,170 | ) | ||||||||
| INCOME BEFORE PROVISION for INCOME TAXES | 117,292 | (241,734 | ) | 746,908 | (691,801 | ) | ||||||||||
| PROVISION (BENEFIT) for INCOME TAXES | 34,601 | (158,590 | ) | 220,338 | (183,332 | ) | ||||||||||
| NET INCOME (LOSS) | $ | 82,691 | $ | (83,144 | ) | $ | 526,570 | $ | (508,469 | ) | ||||||
| Weighted Average Shares Outstanding: | ||||||||||||||||
| Basic | 14,629,155 | 15,068,318 | 14,629,155 | 15,068,318 | ||||||||||||
| Diluted | 14,629,155 | 15,068,318 | 14,629,155 | 15,068,318 | ||||||||||||
| Earnings (loss) per Share | ||||||||||||||||
| Basic | $ | 0.01 | $ | -0.01 | $ | 0.04 | $ | -0.03 | ||||||||
| Diluted | $ | 0.01 | $ | -0.01 | $ | 0.04 | $ | -0.03 | ||||||||
UNAUDITED STATEMENTS OF OPERATIONS
The accompanying notes are an integral part of these unaudited financial statements.
| Total | ||||||||||||||||||||||||
| Additional | Stockholders' | |||||||||||||||||||||||
| Common Stock | Paid-in | Treasury | Accumulated | Equity/ | ||||||||||||||||||||
| Balance | Shares | Amount | Capital | Stock | Deficit | (Deficit) | ||||||||||||||||||
| December 31, 2019 | 15,068,318 | $ | 15,068 | $ | 21,519,435 | $ | 0 | $ | (19,384,743 | ) | $ | 2,149,760 | ||||||||||||
| Net Loss | — | — | — | — | (508,469 | ) | (508,469 | ) | ||||||||||||||||
| September 30, 2020 | 15,068,318 | $ | 15,068 | $ | 21,519,435 | $ | 0 | $ | (19,893,212 | ) | $ | 1,641,291 | ||||||||||||
| December 31, 2020 | 14,549,155 | $ | 14,549 | $ | 21,545,614 | $ | 0 | $ | (19,967,433 | ) | $ | 1,592,730 | ||||||||||||
| Stock for Services | 80,000 | 80 | 55,120 | 55,200 | ||||||||||||||||||||
| Net Income | — | 0 | 0 | 0 | 526,570 | 526,570 | ||||||||||||||||||
| September 30, 2021 | 14,629,155 | $ | 14,629 | $ | 21,600,734 | $ | 0 | $ | (19,440,863 | ) | $ | 2,174,500 | ||||||||||||
The accompanying notes are an integral part of these unaudited financial statements.
| Nine Months Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net Income (Loss) | $ | 526,570 | $ | (508,469 | ) | |||
| Adjustments to reconcile Net Income Loss to | ||||||||
| Net Cash provided (used) by Operations Activities: | ||||||||
| Depreciation and Amortization | 725,711 | 676,983 | ||||||
| Provision (Benefit) for Deferred Income Taxes | 62,214 | (204,761 | ) | |||||
| Marketing Services Paid in Stock | 46,400 | — | ||||||
| Loss on Early Extinguishment of Debt | 110,551 | — | ||||||
| Amortization and Accretion of Interest | 106,552 | — | ||||||
| Change in Assets and Liabilities: | ||||||||
| Accounts Receivable | (635,287 | ) | (385,333 | ) | ||||
| Inventory | 1,476,799 | (2,612,882 | ) | |||||
| Other Current Assets | (29,093 | ) | (27,531 | ) | ||||
| Accounts Payable | 1,375,444 | 201,626 | ||||||
| Accrued Expenses | 23,589 | 492,674 | ||||||
| NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES | $ | 3,789,450 | $ | (2,367,693 | ) | |||
| INVESTING ACTIVITIES: | ||||||||
| Payments for Property & Equipment | (156,501 | ) | (135,025 | ) | ||||
| Proceeds (Payments) for Rental Equipment | (436,709 | ) | 167,490 | |||||
| NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES | (593,210 | ) | 32,465 | |||||
| FINANCING ACTIVITIES: | ||||||||
| Proceeds from Notes Payable | 2,081,198 | 3,840,481 | ||||||
| Payments on Notes Payable | (2,824,788 | ) | (391,300 | ) | ||||
| Payment on Note Payable - Related Party | (226,007 | ) | (19,672 | ) | ||||
| Joint Venture Liability | (229,500 | ) | (17,500 | ) | ||||
| Net Borrowing Under Lines of Credit | (1,480,862 | ) | (980,546 | ) | ||||
| NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES | (2,679,959 | ) | 2,431,463 | |||||
| NET INCREASE IN CASH & CASH EQUIVALENTS | 516,281 | 96,235 | ||||||
| Cash and Cash Equivalents, BEGINNING OF PERIOD | 407,881 | 114,504 | ||||||
| Cash and Cash Equivalents, END OF PERIOD | $ | 924,162 | $ | 210,739 | ||||
| CASH PAID FOR: | ||||||||
| Interest | $ | 599,030 | $ | 887,522 | ||||
| Income Taxes | $ | — | $ | — | ||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING | ||||||||
| AND FINANCING ACTIVITIES: | ||||||||
| Transfer of Inventory to Rental Equipment | $ | 508,000 | $ | — | ||||
| Equipment Financed under Capital Leases | $ | 178,027 | $ | 239,709 | ||||
| Transfer of Rental Equipment to Inventory | $ | 964,600 | $ | 227,279 | ||||
| THREE MONTHS ENDED SEPTEMBER 30, | NINE MONTHS ENDED SEPTEMBER 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| REVENUES | ||||||||||||||||
| Sales of Equipment and Other Revenues | $ | 7,303,783 | $ | 7,591,527 | $ | 13,904,722 | $ | 16,494,253 | ||||||||
| Rentals and Leases | 180,957 | 588,746 | 910,172 | 2,015,667 | ||||||||||||
| Total Sales | 7,484,740 | 8,180,273 | 14,814,894 | 18,509,920 | ||||||||||||
| COST OF SALES | ||||||||||||||||
| Sales of Equipment and Other Revenues | 4,845,129 | 7,169,018 | 10,197,658 | 14,922,284 | ||||||||||||
| Rentals and Leases | 108,081 | 195,994 | 415,805 | 630,240 | ||||||||||||
| Total Cost of Sales | 4,953,210 | 7,365,012 | 10,613,463 | 15,552,524 | ||||||||||||
| GROSS PROFIT | 2,531,530 | 815,261 | 4,201,431 | 2,957,396 | ||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| Selling Expense | 441,216 | 203,100 | 994,721 | 627,021 | ||||||||||||
| General and Administrative | 386,505 | 269,029 | 989,114 | 743,259 | ||||||||||||
| Total Operating Expenses | 827,721 | 472,129 | 1,983,835 | 1,370,280 | ||||||||||||
| Profit from Operations | 1,703,809 | 343,132 | 2,217,596 | 1,587,116 | ||||||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Interest Expense, net | (275,793 | ) | (208,967 | ) | (549,924 | ) | (743,999 | ) | ||||||||
| Loss from Early Extinguishment of Debt | (18,021 | ) | (20,373 | ) | (33,366 | ) | (110,551 | ) | ||||||||
| Gain on Sale of Asset | 215,624 | - | 215,624 | - | ||||||||||||
| Other Income (Expense) | (174,292 | ) | 3,500 | 175,842 | 14,342 | |||||||||||
| Total Other Income (Expense) | (252,481 | ) | (225,840 | ) | (191,823 | ) | (840,208 | ) | ||||||||
| INCOME BEFORE PROVISION for INCOME TAXES | 1,451,328 | 117,292 | 2,025,773 | 746,908 | ||||||||||||
| PROVISION for INCOME TAXES | 522,478 | 34,601 | 598,264 | 220,338 | ||||||||||||
| NET INCOME | $ | 928,850 | $ | 82,691 | $ | 1,427,509 | $ | 526,570 | ||||||||
| Weighted Average Shares Outstanding: | ||||||||||||||||
| Basic | 14,829,155 | 14,629,155 | 14,829,155 | 14,629,155 | ||||||||||||
| Diluted | 14,829,155 | 14,629,155 | 14,829,155 | 14,629,155 | ||||||||||||
| Earnings (loss) per Share | ||||||||||||||||
| Basic | $ | 0.05 | $ | 0.01 | $ | 0.09 | $ | 0.04 | ||||||||
| Diluted | $ | 0.05 | $ | 0.01 | $ | 0.09 | $ | 0.04 | ||||||||
The accompanying notes are an integral part of these unaudited financial statements.
4
AMERAMEX INTERNATIONAL, INC.
UNAUDITED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
| Additional | Total | |||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Stockholders’Equity/ | |||||||||||||||||
| Balance | Shares | Amount | Capital | Deficit | Deficit | |||||||||||||||
| December 31, 2020 | 14,549,155 | $ | 14,549 | $ | 21,545,614 | $ | (19,967,433 | ) | $ | 1,592,730 | ||||||||||
| Stock for Services | 80,000 | $ | 80 | $ | 55,120 | - | 55,200 | |||||||||||||
| Net Income | - | - | - | 526,570 | 526,570 | |||||||||||||||
| September 30, 2021 | 14,629,155 | $ | 14,629 | $ | 21,600,734 | $ | (19,440,863 | ) | $ | 2,174,500 | ||||||||||
| December 31, 2021 | 14,629,155 | $ | 14,629 | $ | 21,600,734 | $ | (18,335,686 | ) | $ | 3,279,677 | ||||||||||
| Stock for Services | 200,000 | $ | 200 | $ | 70,800 | - | 71,000 | |||||||||||||
| Net Income | - | - | - | 1,427,509 | 1,427,509 | |||||||||||||||
| September 30, 2022 | 14,829,155 | $ | 14,829 | $ | 21,671,534 | $ | (16,908,177 | ) | $ | 4,778,186 | ||||||||||
The accompanying notes are an integral part of these unaudited financial statements.
5
AMERAMEX INTERNATIONAL, INC.
UNAUDITED STATEMENTS OF CASH FLOW
| NINE MONTHS ENDED SEPTEMBER 30, | ||||||||
| 2022 | 2021 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net Income | 1,427,509 | 526,570 | ||||||
| Adjustments to reconcile Net Income to Net Cash provided (used) by Operating Activities: | ||||||||
| Depreciation and Amortization | 562,569 | 725,711 | ||||||
| Provision for Deferred Income Taxes | 534,576 | 62,214 | ||||||
| Marketing Services Paid in Stock | 71,000 | 46,400 | ||||||
| Loss on Early Extinguishment of Debt | 33,366 | 110,551 | ||||||
| Amortization of Right of Use Asset | 19,797 | - | ||||||
| Gain/Loss on Disposal | (215,625 | ) | ||||||
| Amortization and Accretion of Interest | 27,876 | 106,552 | ||||||
| Change in Assets and Liabilities: | ||||||||
| Accounts Receivable | (1,884,657 | ) | (635,287 | ) | ||||
| Inventory | (1,690,298 | ) | 1,476,799 | |||||
| ROU Asset | (808,928 | ) | - | |||||
| Other Current Assets | 71,016 | (29,093 | ) | |||||
| Accounts Payable | 174,386 | 1,375,444 | ||||||
| Customer Deposits | 53,522 | - | ||||||
| Accrued Expenses | 13,727 | 23,589 | ||||||
| Lease Liability | 808,928 | - | ||||||
| NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES | (801,236 | ) | 3,789,450 | |||||
| INVESTING ACTIVITIES: | ||||||||
| Payments for Property & Equipment | (408,199 | ) | (156,502 | ) | ||||
| Payments for Rental Equipment | (233,347 | ) | (436,709 | ) | ||||
| Proceeds from Sale of Equipment | 360,000 | |||||||
| NET CASH (USED) BY INVESTING ACTIVITIES | (281,546 | ) | (593,210 | ) | ||||
| FINANCING ACTIVITIES: | ||||||||
| Proceeds from Notes Payable | 2,117,692 | 2,081,198 | ||||||
| Payments on Notes Payable | (1,370,027 | ) | (2,824,788 | ) | ||||
| Payment on Note Payable - Related Party | - | (226,007 | ) | |||||
| Joint Venture Liability | 105,003 | (229,500 | ) | |||||
| Net Borrowing (Repayments) Under Lines of Credit | (406,818 | ) | (1,480,862 | ) | ||||
| NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES | 445,850 | (2,679,959 | ) | |||||
| NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS | (636,932 | ) | 516,281 | |||||
| Cash and Cash Equivalents, BEGINNING OF PERIOD | 995,611 | 407,881 | ||||||
| Cash and Cash Equivalents, END OF PERIOD | 358,679 | 924,162 | ||||||
| CASH PAID FOR: | ||||||||
| Interest | 564,478 | 599,030 | ||||||
| Income Taxes | 800 | - | ||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Transfer of Inventory to Rental Equipment | - | 508,000 | ||||||
| Equipment Financed under Capital Leases | - | 178,027 | ||||||
| Transfer of Rental Equipment to Inventory | 563,750 | 964,600 | ||||||
The accompanying notes are an integral part of these unaudited financial statements.
AMERAMEX INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS - UNAUDITED
September 30, 20212022
Note 1 - Organization and Basis of Presentation
Organization and Line of Business
AmeraMex International, Inc., (the “Company”) was incorporated on May 29, 1990 under the laws of the state of Nevada. The Company sells, leases and rents new and refurbished heavy equipment primarily in the U.S. The Company operates under the name of Hamre Equipment.
Note 2 – Summary of Significant Accounting Policies
Liquidity Considerations
At September 30, 2021,2022, the Company had working capital of approximately $1,052,0006.9. On February 9, 2021, the Company received a second Paycheck Protection Program (PPP) loan in the amount of $254,147. On October 22, 2021, the Company requested forgiveness for this loan and expects to receive 100% forgiveness. On April 6, 2021, the Company received notice that the SBA had increased the limit on the Economic Injury Disaster Loan program (EIDL) from $150,000 to $500,000. The Company requested the increase and is still awaiting funding. million. The Company is currentlyactively working with several funding agencies to obtain a $10,000,000 linelines of credit that would be secured with real estateor improve the terms compared to existing lines of credit in order to facilitate normal operations and inventory. The Company has met all qualifications but there can be no assurance that the Company will receive such loan at this time.fulfill growth needs.
Moving forward, the Company expects to generate sufficient cash flows from operations to meet its obligations and expects to continue to obtain financing for equipment purchases in the normal course of business. The Company believes that its expected cash flows from operations, together with its current or a futureany new credit facility it obtains, will be sufficient to operate in the normal course of business for the next 12 months.
Risks and Uncertainties
In March 2020, the World Health Organization declared a novel strain of coronavirus (“COVID-19”) a pandemic, as a result of which the Company is subject to additional risks and uncertainties. In response to the pandemic, governments and organizations have taken preventative or protective actions, such as temporary closures of non-essential businesses and “shelter-at-home” guidelines for individuals. As a result, the global economy has been negatively affected, and the Company’s business has been negatively affected in a number of ways, the worst of which was felt in 2020. The Company has had several large transactions that have beenwere put on hold until the State of California is completely reopened. In addition, the Company hashad all sales, administrative and account employees working from home. Shop employees arewere practicing social distancing and only one customer iswas allowed in the facility at a time. Most directly, a number of states and local governments havehad taken steps that have prohibited or curtailed the sale of equipment or curtailed construction activities during the pandemic. In some jurisdictions, shelter-at-home orders, or other orders related to the pandemic, havehad impeded and continue to impede equipment sales. With the reopening of the State of California. the Company has experienced a resurgence in sales and rentals of both new and used equipment. The nationwide shortages in truck drivers and the increase in fuel prices has led to higher costs to transport equipment and delays in deliveries to customers. Our customers have been very understanding during this difficult period and we have not lost any deals because of these difficulties.
The severity of the impact of COVID-19 on the Company’s business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company’s customers, all of which are uncertain and cannot be predicted. The Company’s future results of operations and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms. Given the dynamic nature of this situation, the Company cannot predict with absolute certainty, the ultimate impact of COVID-19 on its financial condition, results of operations or cash flows.
AMERAMEX INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS - UNAUDITED
September 30, 2021
Basis of Presentation
The unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, within the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Certain information and disclosures normally included in the annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations.
AMERAMEX INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS - UNAUDITED
September 30, 2022
The unaudited interim financial statements have been prepared on a basis consistent with the audited financial statements and in the opinion of management, reflect all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of the results for the interim periods presented and of the financial condition as of the date of the interim balance sheet. The financial data and the other information disclosed in these notes to the interim financial statements related to the three and nine-month periods are unaudited. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These unaudited interim financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 20202021 and notes thereto that are included in the Company’s Annual Report on Form 10-K.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions.
These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. It is possible that accounting estimates and assumptions may be material to the Company due to the levels of subjectivity and judgment involved. Significant estimates in these unaudited interim financial statements include the allowance for doubtful accounts, inventory allowances convertible notes policy and estimated useful life of property and equipment.
Convertible Debt and Preferred Stock, and Embedded Derivatives
Convertible debt is accounted for under the guidelines established by Accounting Standards Codification (“ASC”) 470-20, Debt with Conversion and Other Options. ASC 470-20 governs the calculation of an embedded beneficial conversion, a derivative instrument, which is treated as an additional discount to the instruments where derivative accounting does not apply. This applies during the period for which embedded conversion features are either fixed, contingently convertible, or cash or net settlement is in control of the Company. The proceeds allocated to the equity instruments may reduce the carrying value of the convertible debt, and such discount is amortized to interest expense over the term of the debt. The Company generally has the option to pay the convertible notes at a premium ranging from [0% to 135%][2] within the first 180 before they become convertible. The discount relating to the initial recording of the original issue discounts, issue costs, warrants and beneficial conversion feature are accreted, together with the premium, over the estimated term of the debt, which is generally 180 days from the date of issuance.
Many of the conversion features embedded in the Company’s notes become exercisable upon the event of default or upon the passage of time in the event the Company does not repay the notes, at a premium, at 180 days from issuance of the note. If the conversion price is adjusted based on a discount to the market price of the Company’s common stock, the number of shares upon conversion is potentially unlimited. In the event we cannot control the net share settlement and cash settlement, we record the embedded conversion feature as a derivate instrument, at fair value. The excess of fair value of the embedded conversion feature, together with the original issue discounts, warrants, and issue costs over the face value of the debt, is recorded as an immediate charge in the accompanying statements of operations and cash flows. Each reporting period, the Company will compute the estimated fair value of derivatives and record changes to operations. The discounts are accreted over the term of the debt, which is generally six months after the notes become convertible, using the effective interest method.
AMERAMEX INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS - UNAUDITED
September 30, 2021
ASC 470-50, Extinguishments, require entities to record an extinguishment when the terms of the original note are significantly modified, defined as a greater than 10% change in expected cash flows. As a result of modifications made to one of the Company’s convertible notes during the reporting period, we recorded a loss as reported in the accompanying statements of operations and cash flows.
Line of Credit Issuance Costs
The Company capitalizes and amortizes direct issue costs incurred in connection with its line of credit arrangement. On or about March 30, 2019 (see Note 6), the Company incurred $245,000in costs comprised of origination fees totaling approximately $180,000and appraisal costs of approximately $65,000. These costs are amortized on a straight-line basis over the term of the debt. Included in Other Assets in the accompanying balance sheet atsheet. As of September 30, 20212022, there areno remaining unamortized loan fees of $34,724.fees. During the three and nine months ended September 30, 20212022 and 2020,2021, the Company amortized $0, $14,307 and $20,417, $61,250and $20,417, $61,250in loan fees, respectively.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) which supersedes ASC Topic 840, Leases. ASU 2016-02 requires lessees to recognize a right-of-use asset and a lease liability on their balance sheets for all leases with terms greater than 12 months. Based on certain criteria, leases will be classified as either financing or operating, with classification affecting the pattern of expense recognition in the income statement. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. ASU 2016-02 is effective for fiscal years beginning after December 15, 20202021 for smaller reporting companies, and interim periods within those years, with early adoption permitted. [TheThe Company adopted this new standard on January 1, 2021.][3]2022. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. In July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements” that allows entities to apply the provisions of the new standard at the effective date, as opposed to the earliest period presented under the modified retrospective transition approach and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The modified retrospective approach includes a number of optional practical expedients primarily focused on leases that commenced before the effective date of Topic 842, including continuing to account for leases that commence before the effective date in accordance with previous guidance, unless the lease is modified.
On January 1, 2022, the Company adopted Accounting Standards Update No. 2016-02, Lease (topic 842)(ASU 2016-02) which establishes ASC 842 and supersedes the lease accounting guidance under ASC 840. The Company currently expects that most of itsstandard generally requires lessees to recognize operating lease commitments will be subject to the new standard and recognized as operatingfinance lease liabilities and corresponding right-of-use (ROU) assets upon itson the balance sheet
8
AMERAMEX INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS - UNAUDITED
September 30, 2022
and provide enhanced disclosers on the amount, timing and uncertainty of cash flows arising from lease arrangements. The Company adopted ASC 842 using the modified retrospective approach. The Company elected the package of practical expedients available for existing contracts, which allowed the Company to carry forward our historical assessments of lease identification, lease classification and initial direct costs. The Company also elected a policy to not apply the recognition requirements of ASC 842 for short-term leases with a term of 12 months or less.
As of January 1, 2022, the effective date, the Company identified one operating lease arrangement relating to the Company’s headquarter facility. The adoption of TopicASC 842 which will increaseresulted in a recognition of an ROU asset and lease liability on the total assetsCompany’s balance sheet relating to the leases as of January 1, 2022. The adoption of the standard did not have a material effect on the Company’s statements of operations and total liabilities that the Company reports relative to such amounts prior to adoption.
statements of cash flows.
Note 3 – Inventory
Inventory as of September 30, 20212022 and December 31, 20202021 consisted of the following:
| Schedule of Inventory | ||||||||||||||||
September 30, 2021 | December 31, 2020 | September 30, | December 31, | |||||||||||||
| Parts and supplies | $ | 348,941 | $ | 292,616 | $ | 727,826 | $ | 351,755 | ||||||||
| Heavy equipment | 5,658,509 | 5,580,953 | 6,712,086 | 4,834,109 | ||||||||||||
| Total | $ | 6,007,450 | $ | 5,873,569 | $ | 7,439,912 | $ | 5,185,864 | ||||||||
All of the inventory is used as collateral for the lines of credit and notes payable (see Notes 6 and 8).
AMERAMEX INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS - UNAUDITED
September 30, 2021
Note 4 – Property and Equipment
Property and equipment includes assets held for internal use; as of September 30, 20212022 and December 31, 2020,2021, such property and equipment consisted of the following:
| Schedule of Property, Plant and Equipment | ||||||||||||||||
September 30, 2021 | December 31, 2020 | September 30, | December 31, | |||||||||||||
| Furniture and fixtures | $ | 107,105 | $ | 107,105 | $ | 107,105 | $ | 107,105 | ||||||||
| Leasehold improvements | 467,188 | 467,188 | 505,171 | 505,171 | ||||||||||||
| Vehicles and Equipment | 1,775,691 | 1,619,191 | 2,126,125 | 2,086,285 | ||||||||||||
| Total, at cost | 2,349,984 | 2,193,484 | 2,738,401 | 2,698,561 | ||||||||||||
| Less - Accumulated depreciation | (1,363,062 | ) | (1,157,644 | ) | (1,444,684 | ) | (1,422,844 | ) | ||||||||
| Total, Net | $ | 986,922 | $ | 1,035,840 | $ | 1,293,717 | $ | 1,275,717 | ||||||||
Depreciation expense for the three and nine months ended September 30, 20212022 and 20202021 was $81,941, $245,824 and $62,853, $205,419and $72,681, $211,433, respectively.
All of the property and equipment is used as collateral for the lines of credit and notes payable (see Notes 6 and 8).
Note 5 – Rental Equipment
Rental equipment as of September 30, 20212022 and December 31, 20202021 consisted of the following:
| Schedule of Rental Equipment | ||||||||||||||||
September 30, 2021 | December 31, 2020 | September 30, | December 31, | |||||||||||||
| Rental equipment | $ | 4,495,245 | $ | 6,480,478 | $ | 3,865,500 | $ | 4,210,209 | ||||||||
| Less - Accumulated depreciation | (2,626,382 | ) | (2,856,102 | ) | (3,065,239 | ) | (2,748,493 | ) | ||||||||
| Total, Net | $ | 1,868,863 | $ | 3,624,376 | $ | 800,261 | $ | 1,461,716 | ||||||||
Depreciation expense for the three and nine months ended September 30, 20212022 and 20202021 was $79,186, $316,745 and $144,833, $520,292and $246,845, $744,243, respectively.
All of the rental equipment is used as collateral for the lines of credit and notes payable (see Notes 6 and 8).
9
AMERAMEX INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS - UNAUDITED
September 30, 2022
Note 6 – Lines of Credit
On May 22, 2020,April 12, 2022 the limit on [ourour equipment flooring plan]plan line of credit with a finance [whichcompany which previously provided]provided for borrowing up to $500,000 1,050,000was increaseddecreased to $1,050,000.$300,000 due to lack of utilization. The line of credit is secured by the equipment purchased and is interest free if paid within 180 days from the finance datedate.. After the applicable free interest period, interest calculates as follows: 30 day30-day LIBOR plus 6.75% - rate after Free Period to Day 365, 30 day30-day LIBOR plus 7.00% - Rate Day 366 to 720, 30 Day LIBOR plus 7.25% - Rate Day 721 to 1095, 30 Day LIBOR plus 12.00% Matured Rate Day 1096 and above. Each piece of equipment has its own calculations based on the date of purchase. At September 30, 20212022 and December 31, 2020,2021, the amounts outstanding under this line of credit agreement were $177,745 225,244with $872,255 74,756available and $314,400 23,026with $736,000 1,026,974available, respectively. Interest expense for the three and nine months ended September 30, 20212022 and 20202021 was $445, $1,542 and $3,312, $6,344and $851, $2,132, respectively. The agreement has no expiration date provided the Company does not default and as of September 30, 20212022 the Company is in compliance with the debt covenants.
AMERAMEX INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS - UNAUDITED
September 30, 2021
On or about March 31, 2019, the Company entered into a line of credit with a finance company that provides for borrowing and refinancing up to $6.5 million.million. The credit facility expires was to expire on March 22, 2022. Interest is28, 2022; however, a 126-day extension was granted by the finance company as the line of credit was converted to a note payable. Principal and interest are due monthly at a rate of 10%10%, per annum. Principal only becomes due and payable if the Company reaches the maximum balance under the credit facility, which management does not expect to reach. If the maximum balance is reached, the principal becomes payable at 1.25% of the outstanding principal balance per month. The line of credit is secured by specified pieces of equipment. At September 30, 20212022 and December 31, 2020,2021, the amounts outstanding under this line of credit (now note payable) agreement were $4,091,193 $1,550,812with $2,408,807 0available for purchases and $5,435,404 3,157,941with $1,064,596 3,342,059available, respectively. Interest expense for the three and nine months ended September 30, 2022 and 2021 was $59,172, $204,827 and 2020 was $107,757, $369,085and $135,000, $437,531, respectively.
On January 28, 2022, the Company entered into a line of credit (flooring plan) with a finance company that provides for borrowing up to $3,500,000. The line of credit is secured by the equipment purchased and is interest free if paid within 180 days from finance date. After applicable free interest period the line rolls over to a 60-month amortization. Pricing after the interest free period will be one month Secured Overnight Financing Rate (“SOFT”) + 4.00. At September 30, 2022, the amount outstanding under the line of credit agreement was $1,192,111 with $2,307,889 available for purchases with an interest expense for the three and nine months ended September 30, 2022 of $33,968.
Note 7 – Related-Party Transactions
Related-Party Note Payable
The Company hashad a note payable to the Company’s President.Chief Executive Officer, which was fully repaid in 2021. The note iswas interest bearing at 10% 10% per annum, unsecured and payable upon demand. The balance of the note at September 30, 2021 and December 31, 2020 was $652 and $226,659, respectively. During the nine months ended September 30, 2021 and 2020, the Company repaid $202,099 and $11,844 on this note payable, respectively. The note incurred $7,803, $27,250 and $9,955, $27,031 in interest expense for the three and nine months ended September 30, 2021, the note incurred $7,803and 2020,$27,250 in interest expense, respectively.
Lease
The Company leases a building and real property in Chico, California under a one-year lease agreement renewing annually every March from a trust whose trustee is the Company’s President, Lee Hamre.Chief Executive Officer. The overall term of the lease is ten (10) years. The lease provided for monthly lease payments of $9,800 12,000per month and expired on December 1, 2017. The Company was leasing the building and real property at the same rate on a month-to-month lease until March 1, 2020when a one-year agreement was signed renewable at anniversary for up to ten years. The new lease provides for monthly lease payments of $12,000.month. Rent expense during the three and nine months ended September 30, 20212022 and 2020,2021, was $36,000, $108,000and $36,000, $99,135108,000, respectively.
The operating lease liabilities of $808,928 as of September 30, 2022, represents the discounted (at 8% incremental borrowing rate) value of the future lease payments at September 30, 2022.
10
AMERAMEX INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS - UNAUDITED
September 30, 2022
At September 30, 2022, the future undiscounted minimum lease payments under the noncancellable leases are as follows:
| Minimum lease payment under noncancellable leases | ||||
| For the three-month period ending December 31, 2022 | $ | 36,000 | ||
| Year ending December 31, 2023 | 144,000 | |||
| Year ending December 31, 2024 | 144,000 | |||
| Year ending December 31, 2025 | 144,000 | |||
| Year ending December 31, 2026 | 144,000 | |||
| Thereafter | 456,000 | |||
| Total undiscounted finance lease payments | $ | 1,068,000 | ||
| Less: Imputed interest | (259,072 | ) | ||
| Present value of finance lease liabilities | 808,928 |
Transactions with Director
Two separate customers lost financing for purchases of equipment after already receiving the machines,delivery, so the Company sold the machines to the brokerage company of one of the Company’s Directors. The customers are now renting the machines on a rent-to-own basis and the Company is purchasing the machines from the brokerage. The Company has two notes payable tied to these transactions that, at September 30, 20212022 and December 31, 2020,2021, have a combined total due of $124,374 66,000and $168,151 109,482respectively. The brokerage made $42,681 on the transactions. The notes are secured by the equipment.equipment.
The Company also has another note payable that was brokered through the same Director’s company. The note is secured with equipment and as of September 30, 2021 and December 31, 2020 had a total due of $96,391 and $0, respectively.
AMERAMEX INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS - UNAUDITED
September 30, 2021
Note 8 – Notes Payable
Notes payable as of September 30, 20212022 and December 31, 20202021 consisted of the following:
| Schedule of Notes Payable | ||||||||||||||||
September 30, 2021 | December 31, 2020 | September 30, | December 31, | |||||||||||||
| Payable to insurance company; secured by cash surrender value of life insurance policy; no due date | $ | 158,535 | $ | 158,535 | $ | 158,535 | $ | 158,535 | ||||||||
| Notes Payable to various finance companies with varying start dates and interest rates; combined monthly payments of $71,231; secured by equipment | 2,694,075 | 3,350,665 | ||||||||||||||
| Notes Payable to various finance companies with varying start dates and interest rates; Interest rates on September 30, 2022 and December 31, 2021, were a 7% weighted average. As of September 30, 2022 notes maturing from December 25, 2022 to September 24, 2050 have combined monthly payments of $98,977; secured by equipment and stock. | 4,497,084 | 2,308,420 | ||||||||||||||
| Total | 2,852,610 | 3,509,200 | 4,655,619 | 2,466,955 | ||||||||||||
| Less Current Portion | 781,190 | 911,265 | (1,062,604 | ) | (777,602 | ) | ||||||||||
| Long Term Portion | $ | 2,071,420 | $ | 2,597,935 | $ | 3,593,015 | $ | 1,689,353 | ||||||||
Interest expense for all notes payable for the three and nine months ended September 30, 20212022 and 20202021 was $72,975, $161,472 and $60,123, $162,604and $165,562, $298,359, respectively.
Note 9 – Convertible Notes
On January 21, 2021, the Company entered into a securities purchase agreement with Geneva Roth Remark Holdings, Inc. (“Holder”), whereby Holder purchased shares of Series A Preferred Stock for a purchase price of $103,500. After payment of transaction-related expenses, net proceeds to the Company were $100,000. The proceeds were used for working capital. On July 26, 2021, the Company paid $146,616 to pay off the securities purchase agreement with Holder in full and the shares of Series A Preferred Stock were returned to [and cancelled by] the Company.
On March 23, 2021, the Company entered into a second securities purchase agreement with Holder whereby Holder purchased shares of Series A Preferred Stock for a purchase price of $78,000. After payment of transaction-related expenses, net proceeds to the Company were $75,000. The proceeds were used for working capital. On September 21, 2021, the Company paid $110,493 to pay off the securities purchase agreement with Holder in full and the shares of Series A Preferred Stock were returned to [and cancelled by] the Company.
Note 109 – Joint Venture
In 2019, the Company entered into a joint venture with one of its long-time collaborators whereby costs and profits are shared equally. This arrangement was made in order to purchase 30 machines from a closing terminal in Seattle, Washington for $1,089,000. The machines were titled in the Company’s name, and accordingly, revenues and costs are recorded in the Company’s financial statements. During the nine months ended September 30, 2021,2022, the Company had seven sales of such equipment and recorded its partner’s share of accrued $50% 110,003of the in joint venture profits totaling $341,090.that will be disbursed upon payment from customer. The amount due to the collaborator as of September 30, 20212022 and December 31, 20202021 was $210,000 247,503and $439,500142,500, respectively.
11
AMERAMEX INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS - UNAUDITED
September 30, 2022
Note 1110 – Commitments and Contingencies
From time to time, the Company is involved in routine litigation that arises in the ordinary course of business. At the present time, the Company is not involved in any litigation.
[See Note 7 for operating lease with related party operating lease.party.]
AMERAMEX INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS - UNAUDITED
September 30, 2021
Note 1211 – Stockholders’ Equity
The Company has authorized shares of $par value preferred stock, of which shares have been designated as Series A Convertible Preferred Stock of which zero shares are issued and outstanding as of September 30, 20212022 andas of December 31, 2020.2021.
On April 28, 2021, theThe Company paid outhas authorized shares of $ par value common stock, of which were issued and outstanding as of September 30, 2022 and were issued and outstanding as of December 31, 2021.
The Company issued fully vested shares of the Company’s Common StockStock as final payment per the contract between the Company and M Vest LLC, an SEC registered, FINRA member broker-dealer for marketing services. The shares of Common Stock have and the same rights afforded other holders of the Company’s Common Stock.
Note 13 – Subsequent Events
On October 19, 2021, the Company and Sixth Street Lending LLC (“Sixth Street”) entered into a Securities Purchase Agreement (the "SPA"). Pursuant to the SPA, The Company sold to Sixth Street a Promissory Note for the principal amount of $222,500 (the "Sixth Street Promissory Note "). Under the Sixth Street Promissory Note the Company received net proceeds of $200,000, which included deductions for a 10% original issue discount, $2,000 for legal fees and $500 as a due diligence fee.The Sixth Street Promissory Note matures in one (1) year, requires ten (10) monthly payments of $24,475 beginning November 25, 2021, and is unsecured.Upon an event of default, the balance under the Sixth Street Promissory Note will increase to 150% of the sum of the then outstanding principal, become immediately due, and become convertible into shares of common stock at an exercise price of 75% multiplied by the lowest trading price of the Company’s common stock during the five (5) trading day period prior to conversion. Sixth Street has agreed to restrict its ability to convert the Sixth Street Promissory Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. Proceeds were used for capital expansion.The Company does not believe a default will occur.
On November 3, 2021, the Company received confirmation that the SBA had forgiven 100% of the 2nd Paycheck Protection Loan.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
FORWARD LOOKING STATEMENTS
Statements made in this Form 10-Q that are not historical or current facts are “forward-looking statements” made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 (the “Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements often can be identified by the use of terms such as “may,” “expect,” “believe,” “anticipate,” “estimate,” “approximate” or “continue,” or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. Readers should not place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.
Recent Developments Related to the COVID-19 Outbreak
All of the disclosures set forth in this Item 2 should be read in the context of the recent COVID-19 related developments discussed immediately below. All of the disclosures recited in “Recent Developments Related to the COVID-19 Outbreak” are as of the date of this filing.
The occurrence of the COVID-19 pandemic may negatively affect our operations depending on the severity and longevity of the pandemic.
The COVID-19 pandemic is currently impacting countries, communities, supply chains and markets as well as the global financial markets. The pandemic has resulted in social distancing, travel bans and quarantine, and this has limited and may continue to limit access to our facilities, customers, management, support staff and professional advisors. These factors, in turn, may not only impact our operations, financial condition and demand for our goods and services but our overall ability to react timely to mitigate the impact of this event. Also, it may hamper our efforts to comply with our filing obligations with the SEC. Depending on the severity and longevity of the COVID-19 pandemic, our business, customers, and shareholders may experience a significant negative impact. (See Financial Statements, Note 2 – Summary of Significant Accounting Policies – Risks and Uncertainties.)
COVID-19 Update
In connection with the COVID-19 pandemic, we have been approved by the Small Business Administration (SBA) for the following financial assistance:
With the vaccination of multiple employees and as the State of California reduces restrictions, our sales, administrative, and accounting employees have returned to our main office. We are continuing our extended cleaning efforts and restrictions on the number of customers allowed inside the facility at a time. Shop employees are servicing contracts with our essential customers and are often traveling to do so. All employees are practicing social distancing.
Overview of the Business
We sell, lease, and rent heavy equipment to companies within four industries: construction (light and infrastructure), shipping logistics, mining, and commercial farming. With customers in the United States, Canada, Latin America, Asia and Africa, we have over 30 years of experience in heavy equipment sales and service and inventories of top-of-the-line equipment from manufacturers such as Taylor Machine Works Inc. and Terex Heavy Equipment. We were originally incorporated as Hamre Equipment Company, Inc. in California on November 17, 1989. We merged into AmeraMex International, Inc., a Nevada corporation, on November 2, 2006.
Results of Operations
| September 30, 2021 | September 30, 2020 | |||||||
| REVENUES | (unaudited) | (unaudited) | ||||||
| Sales of Equipment and Other Revenues | $ | 16,494,253 | $ | 7,106,628 | ||||
| Rentals and Leases | 2,015,667 | 1,994,938 | ||||||
| Total Revenues | 18,509,920 | 9,101,566 | ||||||
| COST OF REVENUES | ||||||||
| Sales of Equipment and Other Revenues | 14,922,284 | 6,673,745 | ||||||
| Rentals and Leases | 630,240 | 744,796 | ||||||
| Total Cost of Revenues | 15,552,524 | 7,418,541 | ||||||
| GROSS PROFIT | 2,957,396 | 1,683,025 | ||||||
| OPERATING EXPENSES | ||||||||
| Selling Expense | 627,021 | 284,591 | ||||||
| Legal Settlement | — | 428,700 | ||||||
| General and Administrative | 743,259 | 744,796 | ||||||
| Total Operating Expenses | 1,370,280 | 1,485,656 | ||||||
| INCOME FROM OPERATIONS | 1,587,166 | 197,369 | ||||||
| OTHER INCOME (EXPENSE) | ||||||||
| Interest Expense, net | (743,999 | ) | (887,522 | ) | ||||
| Loss from Early Extinguishment of Debt | (110,551 | ) | — | |||||
| Other Income | 14,342 | (1,648 | ) | |||||
| Total Other Expense | (840,208 | ) | (889,170 | ) | ||||
| PROFIT (LOSS) BEFORE BENEFIT FOR INCOME TAXES | 746,908 | (691,801 | ) | |||||
| PROVISION (BENEFIT) FOR INCOME TAXES | 220,338 | (183,332 | ) | |||||
| NET PROFIT (LOSS) | $ | 526,570 | $ | (508,469 | ) | |||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||||||
| REVENUES | ||||||||||||||||
| Sales of Equipment and Other Revenues | $ | 7,303,783 | $ | 7,591,527 | $ | 13,904,722 | $ | 16,494,253 | ||||||||
| Rentals and Leases | 180,957 | 588,746 | 910,172 | 2,015,667 | ||||||||||||
| Total Revenues | 7,484,740 | 8,180,273 | 14,814,894 | 18,509,920 | ||||||||||||
| COST OF REVENUES | ||||||||||||||||
| Sales of Equipment and Other Revenues | 4,845,129 | 7,169,018 | 10,197,658 | 14,922,284 | ||||||||||||
| Rentals and Leases | 108,081 | 195,994 | 415,805 | 630,240 | ||||||||||||
| Total Cost of Revenues | 4,953,210 | 7,365,012 | 10,613,463 | 15,552,524 | ||||||||||||
| GROSS PROFIT | 2,531,530 | 815,261 | 4,201,431 | 2,957,396 | ||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| Selling Expense | 441,216 | 203,100 | 994,721 | 627,021 | ||||||||||||
| General and Administrative | 385,505 | 269,029 | 989,114 | 743,259 | ||||||||||||
| Total Operating Expenses | 827,721 | 472,129 | 1,983,835 | 1,370,280 | ||||||||||||
| INCOME FROM OPERATIONS | 1,703,809 | 343,132 | 2,217,596 | 1,587,116 | ||||||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Interest Expense, net | (275,793 | ) | (208,967 | ) | (549,924 | ) | (743,999 | ) | ||||||||
| Loss from Early Extinguishment of Debt | (18,021 | ) | (20,373 | ) | (33,366 | ) | (110,551 | ) | ||||||||
| Gain on Sale of Assets | 215,625 | - | 215,625 | - | ||||||||||||
| Other Income | (174,292 | ) | 3,500 | 175,842 | 14,342 | |||||||||||
| Total Other Income (Expense) | (252,481 | ) | (225,840 | ) | (191,823 | ) | (840,208 | ) | ||||||||
PROFIT BEFORE PROVISION FOR INCOME TAXES | 1,451,328 | 117,292 | 2,025,773 | 746,908 | ||||||||||||
| PROVISION FOR INCOME TAXES | 522,478 | 34,601 | 598,264 | 220,338 | ||||||||||||
| NET PROFIT | $ | 928,850 | $ | 82,691 | $ | 1,427,509 | $ | 526,570 | ||||||||
Revenue
Revenue for the nine months endingended September 30, 20212022 was $18,509,920$14,814,894 compared to $9,101,566$18,509,920 for the same time during 2020,2021, a 103% increase.20% decrease. Sales of Equipment and Other Revenues for the nine months endingended September 30, 20212022 was $16,494,253$14,814,894 and made up 89%94% of our Total Revenues. For the nine months endingended September 30, 2020,2021, Sales of Equipment and Other Revenues made up $7,106,628,$16,494,253, or 78%89% of Total Revenues. The remaining portion of Total Revenues, Rentals and Leases, for the respective periods were $910,172, or 6%, in 2022 and $2,015,667 or 11%, in 2021 and2021. The 16% decrease in 2020, Rentals and Leases made up 22% of Total Revenues and totaled $1,994,938. Sales of Equipment and Other Revenues more than doubled year over year is due to lower interest rates, which made financing easier for our customers,continuing delays the company experienced shipping machines to customers. While the delays were not as wellsignificant as they were in the continued momentum we have experienced as the Statesecond quarter they are still primarily due to back-ordered parts, interstate trucking delays and lack of California reduces restrictions tied to the COVID-19 pandemic which shut down our state and halted all major sales from March 2020 through June 2020.availability of third-party shippers. Rentals and Leases stayed consistentrevenue decreased by 55% year over year dueas the long-standing government rental contract came to a higher amountan end. The rental contract has been renewed with new equipment purchases to meet the needs of short-termthe contract. The rentals offsettingwill start to be delivered in the conversion4th quarter of two long-term rentals into sales.2022 and we will see the Rentals and Leases revenue reflecting that income in the first quarter of 2023.
Revenue for the three months endingended September 30, 20212022 was $8,180,273$7,484,740 compared to $5,880,412$8,180,273 for the same periodtime during 2020,2021, this is a 39% increase.9% decrease. Had all of the equipment shipped as planned, as noted above, the Sales of Equipment and Other Revenues forwould have been $8,289,783, $698,256 more than the three months ending September 30, 2021 was $7,591,527 and made up 93% of our Total Revenues. For the three months ending September 30, 2020, Sales of Equipment and Other Revenues made up $5,168,949 or 88% of Total Revenues. Sales of Equipment and Other Revenues increased by 47%same time in the third quarter due in part to a multi-machine order for one of our long-standing customers. The remaining portion of Total Revenues,2021. Rentals and Leases were down 69% for the respective three-month periods were $588,746, or 7%, in 2021 and in 2020, Rentals and Leases made up 12% of Total Revenues and totaled $711,463. This is a 17% reduction in Rentals and Leases and is due to the conversion of two long-term rentals into sales. same period year over year.
Cost of Revenue
Nine Months Ended September 30, 2021. Costs of Revenue for the nine months ending September 30, 20212022 were $15,552,524 $10,613,463 compared to the same period in 2020$15,552,524, a decrease of $7,418,541, an increase of 110% as our revenue increased.
Three Months Ended September 30, 202132%. Costs of Revenue for the three months ending September 30, 20212022 were $7,365,012$4,953,210 compared to $5,071,886, an increase of 45%.$7,365,012, a 33% decrease. The price of used equipment has been increasing since the beginning of 2021 and was noticeably higher during the third quarter.first and second quarter of 2022; however, these decreases are directly tied to the continuing sells of equipment purchased years ago at much lower prices.
Operating Expenses
Operating expenses decreasedincreased by $115,376$613,555 during the nine months ending September 30, 20212022 compared to the nine months ending September 30, 2020 and2021. The operating expenses increase by $317,142 for$355,592 during the three months ending atthird quarter of 2022 compared to the same time respectively. This decrease wasin 2021. The 45% increase for the first nine months of 2022 is due to the Company paying higher wages to stay competitive in a one-time legal settlement that hit in 2020.highly volatile job market and the higher costs spent on marketing our equipment.
Interest Expense
The nine months ending September 30, 20212022 compared to the nine months ending September 30, 20202021 shows a reduction in interest expense from $887,522$743,999 to $743,999. The three months ending September 30, 2021 compared$549,924. This 26% reduction is due to the three months ending September 30, 2020 shows a slight decrease from $260,989Company’s continuing efforts to $208,967.pay off debt.
Operating Results
We
The Company had a net profit of $1,427,509 for the nine months ending September 30, 2022 as compared to net profit of $526,570 for the nine months ending September 30, 2021 as compared to net loss of $508,469 for the nine months ending September 30, 2020.30,2021. The 171% increase in profit is duetied to the liquidation of old inventory purchased at significantly lower interest rates making it easierprices than the current trend. This created a much higher profit margin than the same quarter last year when the Company sold a higher percentage of new equipment. The third quarter of 2022 reflects the continuing trend of easy financing terms for customers to purchase equipment.equipment offset by higher input costs and rising operational costs.
Liquidity
Moving forward, we expect to generate sufficient cash flows from operations to meet our obligations and expect to continue to obtain financing for equipment purchases in the normal course of business. The Company believes that our expected cash flows from operations, together with our currentavailable credit facility,facilities, will be sufficient to operate in the normal course of business for the next 12 months.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.
Seasonality
Our operating results are not affected by seasonality.
Inflation
[Our business and operating results are not affected in any material way by inflation.][4]
Critical Accounting Policies
The SEC issued Financial Reporting Release No. 60, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies” suggesting that companies provide additional disclosure and commentary on their most critical accounting policies. In Financial Reporting Release No. 60, the SEC has defined the most critical accounting policies as the ones that are most important to the portrayal of a company’s financial condition and operating results and require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. The nature of our business generally does not call for the preparation or use of estimates. Due to that fact, we do not believe that we have any such critical accounting policies.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, under the supervision of our President and Chief Financial Officer performed an evaluation (the “Evaluation”) of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide a reasonable level of assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our PresidentChief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2021,2022, our disclosure controls and procedures were effective.
There can be no assurance that our disclosure controls and procedures will detect or uncover all failures of persons within our Company and our consolidated subsidiaries to disclose material information otherwise required to be set forth in our periodic reports. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable, not absolute, assurance of achieving their control objectives.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal controls over financial reporting for our Company. Internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act is a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
| Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; |
| Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and |
| Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failure. Internal control over financial reporting can also be circumvented by collusion or improper management override.
Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
We assessed the effectiveness of our internal control over financial reporting as of September 30, 2021.2022. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission’s Internal Control-Integrated Framework.
As a result of this assessment, we have determined that our internal control over financial reporting was effective as of September 30, 2021.March 31, 2022.
It should be noted that any system of controls, however well designed and operated, can provide only reasonable and not absolute assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of certain events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
Changes in Internal Control Over Financial Reporting
An evaluation was performed under the supervision of our management, including our President and Chief Financial Officer, of whether any change in our internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) occurred during the quarter ended September 30, 2021.2022. Based on that evaluation, our management, including our President and Chief Financial Officer, concluded that there were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 20212022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We anticipate that we will from time to time become subject to claims and legal proceedings arising in the ordinary course of business. It is not feasible to predict the outcome of any such proceedings and we cannot assure that their ultimate disposition will not have a materially adverse effect on our business, financial condition, cash flows or results of operations. As of the filing of this report, we have no legal proceedings pending.
ITEM 1A. RISK FACTORS
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
18
SIGNATURES
In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| AMERAMEX INTERNATIONAL, INC. | |||||
| Date: November | By: /s/ Lee Hamre | ||||
Lee Hamre Chief Executive Officer | President | ||||
| Date: November 18, 2022 | By: /s/ Hope Stone | ||||
Hope Stone Chief Financial Officer | |||||