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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, 2022

 

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

 

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 18, 2022.

 

 

 

 

 

 

TABLE OF CONTENTS

 

    Page
     
  PART I - FINANCIAL INFORMATION 3
     
ITEM 1. INTERIM FINANCIAL STATEMENTS 3
  BALANCE SHEETS AS OF SEPTEMBER 30, 2022 AND DECEMBER 31, 2021 3
  STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021 4
  STATEMENTS OF STOCKHOLDERS’ EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021  5 
  STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021 6
  NOTES TO FINANCIAL STATEMENTS 7
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 13
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 15
ITEM 4. CONTROLS AND PROCEDURES 16
     
  PART II - OTHER INFORMATION 18
     
ITEM 1. LEGAL PROCEEDINGS 18
ITEM 1A. RISK FACTORS 18
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES 18
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 18
ITEM 4. MINE SAFETY DISCLOSURES 18
ITEM 5. OTHER INFORMATION 18
ITEM 6. EXHIBITS 18
     
SIGNATURES 19

 

2

 

 

PART I–FINANCIAL INFORMATION

 

ITEM 1. INTERIM FINANCIAL STATEMENTS

 

AMERAMEX INTERNATIONAL, INC.

UNAUDITED BALANCE SHEETS

 

           
   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, $0.001 par value, 5,000,000 shares authorized, no shares issued and outstanding   -    - 
Common Stock, $0.001 par value, 1,000,000,000 shares authorized 14,829,155 and 14,629,155 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. 

 

3

 

 

AMERAMEX INTERNATIONAL, INC.

UNAUDITED STATEMENTS OF OPERATIONS

 

                     
   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.

 

6

 

 

AMERAMEX INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS - UNAUDITED

September 30, 2022 

 

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, 2022, the Company had working capital of approximately $6.9 million. The Company is actively working to obtain lines of credit or improve the terms compared to existing lines of credit in order to facilitate normal operations and 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 any 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 had several large transactions that were put on hold until the State of California completely reopened. In addition, the Company had all sales, administrative and account employees working from home. Shop employees were practicing social distancing and only one customer was allowed in the facility at a time. Most directly, a number of states and local governments had taken steps that 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, had 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.

 

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.

 

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.

 

7

 

 

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, 2021 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 and estimated useful life of property and equipment.

 

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 $245,000 in costs comprised of origination fees totaling approximately $180,000 and 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. As of September 30, 2022, there are no remaining unamortized loan fees. During the three and nine months ended September 30, 2022 and 2021, the Company amortized $0, $14,307 and $20,417, $61,250 in 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, 2021 for smaller reporting companies, and interim periods within those years, with early adoption permitted. The Company adopted this new standard on January 1, 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 standard generally requires lessees to recognize operating and finance lease liabilities and corresponding right-of-use (ROU) assets on 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 ASC 842 resulted in a recognition of an ROU asset and lease liability on the Company’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 statements of cash flows.

 

Note 3 – Inventory

 

Inventory as of September 30, 2022 and December 31, 2021 consisted of the following: 

 

          
 

September 30,
2022

  

December 31,
2021

 
Parts and supplies  $727,826   $351,755 
Heavy equipment   6,712,086    4,834,109 
Total  $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).

 

Note 4 – Property and Equipment

 

Property and equipment includes assets held for internal use; as of September 30, 2022 and December 31, 2021, such property and equipment consisted of the following:

 

          
  

September 30,
2022

  

December 31,
2021

 
Furniture and fixtures  $107,105   $107,105 
Leasehold improvements   505,171    505,171 
Vehicles and Equipment   2,126,125    2,086,285 
Total, at cost   2,738,401    2,698,561 
Less - Accumulated depreciation   (1,444,684)   (1,422,844)
Total, Net  $

1,293,717

   $1,275,717 

 

Depreciation expense for the three and nine months ended September 30, 2022 and 2021 was $81,941, $245,824 and $62,853, $205,419, respectively.

 

All 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, 2022 and December 31, 2021 consisted of the following: 

 

          
  

September 30,
2022

  

December 31,
2021

 
Rental equipment  $3,865,500   $4,210,209 
Less - Accumulated depreciation   (3,065,239)   (2,748,493)
Total, Net  $800,261   $1,461,716 

 

Depreciation expense for the three and nine months ended September 30, 2022 and 2021 was $79,186, $316,745 and $144,833, $520,292, respectively.

 

All 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 April 12, 2022 the limit on our equipment flooring plan line of credit with a finance company which previously provided for borrowing up to $1,050,000 was decreased to $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 date. After the applicable free interest period, interest calculates as follows: 30-day LIBOR plus 6.75% - rate after Free Period to Day 365, 30-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, 2022 and December 31, 2021, the amounts outstanding under this line of credit agreement were $225,244 with $74,756 available and $23,026 with $1,026,974 available, respectively. Interest expense for the three and nine months ended September 30, 2022 and 2021 was $445, $1,542 and $3,312, $6,344, respectively. The agreement has no expiration date provided the Company does not default and as of September 30, 2022 the Company is in compliance with the debt covenants.

 

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. The credit facility was to expire on March 28, 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%, per annum. At September 30, 2022 and December 31, 2021, the amounts outstanding under this line of credit (now note payable) agreement were $1,550,812 with $0 available for purchases and $3,157,941 with $3,342,059 available, respectively. Interest expense for the three and nine months ended September 30, 2022 and 2021 was $59,172, $204,827 and $107,757, $369,085, 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 had a note payable to the Company’s Chief Executive Officer, which was fully repaid in 2021. The note was interest bearing at 10% per annum, unsecured and payable upon demand. During the three and nine months ended September 30, 2021, the note incurred $7,803 and $27,250 in interest expense, respectively. 

 

Lease

 

The Company leases a building and real property in Chico, California under a lease agreement renewing annually every March from a trust whose trustee is the Company’s Chief Executive Officer. The overall term of the lease is ten (10) years. The lease provided for monthly lease payments of $12,000 per month. Rent expense during the three and nine months ended September 30, 2022 and 2021, was $36,000, $108,000 and $36,000, $108,000, 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:

 

     
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 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, 2022 and December 31, 2021, have a combined total due of $66,000 and $109,482 respectively. The notes are secured by the equipment.

   

Note 8 – Notes Payable 

 

Notes payable as of September 30, 2022 and December 31, 2021 consisted of the following:

          
  

September 30,
2022

  

December 31,
2021

 
Payable to insurance company; secured by cash surrender value of life insurance policy; no due date  $158,535   $158,535 
           
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   4,655,619    2,466,955 
           
Less Current Portion   (1,062,604)   (777,602)
           
Long Term Portion  $3,593,015   $1,689,353 

 

Interest expense for all notes payable for the three and nine months ended September 30, 2022 and 2021 was $72,975, $161,472 and $60,123, $162,604, respectively.

 

Note 9 – 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, 2022, the Company accrued $110,003 in joint venture profits that will be disbursed upon payment from customer. The amount due to the collaborator as of September 30, 2022 and December 31, 2021 was $247,503 and $142,500, respectively. 

 

11

 

 

AMERAMEX INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS - UNAUDITED

September 30, 2022

 

Note 10 – 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.]

 

Note 11 – Stockholders’ Equity

 

The Company has authorized 5,000,000 shares of $0.001 par value preferred stock, of which 1,000,000 shares have been designated as Series A Convertible Preferred Stock of which zero shares are issued and outstanding as of September 30, 2022 and December 31, 2021.

 

The Company has authorized 1,000,000,000 shares of $0.001 par value common stock, of which 14,829,155 were issued and outstanding as of September 30, 2022 and 14,629,155 were issued and outstanding as of December 31, 2021.

 

The Company issued 200,000 fully vested shares of the Company’s Common Stock as payment for marketing services.

 

12

 

 

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.)

 

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. 

 

13

 

 

Results of Operations

 

   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 ended September 30, 2022 was $14,814,894 compared to $18,509,920 for the same time during 2021, a 20% decrease. Sales of Equipment and Other Revenues for the nine months ended September 30, 2022 was $14,814,894 and made up 94% of our Total Revenues. For the nine months ended September 30, 2021, Sales of Equipment and Other Revenues made up $16,494,253, or 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. The 16% decrease in Sales of Equipment and Other Revenues year over year is due to continuing delays the company experienced shipping machines to customers. While the delays were not as significant as they were in the second quarter they are still primarily due to back-ordered parts, interstate trucking delays and lack of availability of third-party shippers. Rentals and Leases revenue decreased by 55% year over year as the long-standing government rental contract came to an end. The rental contract has been renewed with new equipment purchases to meet the needs of the contract. The rentals will start to be delivered in the 4th quarter of 2022 and we will see the Rentals and Leases revenue reflecting that income in the first quarter of 2023.

 

Revenue for the three months ended September 30, 2022 was $7,484,740 compared to $8,180,273 for the same time during 2021, this is a 9% decrease. Had all of the equipment shipped as planned, as noted above, the Sales of Equipment and Other Revenues would have been $8,289,783, $698,256 more than the same time in 2021. Rentals and Leases were down 69% for the same period year over year.

 

Cost of Revenue

 

Costs of Revenue for the nine months ending September 30, 2022 were $10,613,463 compared to $15,552,524, a decrease of 32%. Costs of Revenue for the three months ending September 30, 2022 were $4,953,210 compared to $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 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. 

 

14

 

 

Operating Expenses

 

Operating expenses increased by $613,555 during the nine months ending September 30, 2022 compared to the nine months ending September 30, 2021. The operating expenses increase by $355,592 during the third quarter of 2022 compared to the same time in 2021. The 45% increase for the first nine months of 2022 is due to the Company paying higher wages to stay competitive in a highly volatile job market and the higher costs spent on marketing our equipment.

 

Interest Expense

 

The nine months ending September 30, 2022 compared to the nine months ending September 30, 2021 shows a reduction in interest expense from $743,999 to $549,924. This 26% reduction is due to the Company’s continuing efforts to pay off debt.

 

Operating Results

 

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. The 171% increase in profit is tied to the liquidation of old inventory purchased at significantly lower prices 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 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 available credit 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.

 

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.

 

15

 

 

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 Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 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, 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.

 

16

 

 

As a result of this assessment, we have determined that our internal control over financial reporting was effective as of 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, 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, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

17

 

 

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

 

Exhibit No.   Description
     
  3.1     Amended and Restated Certificate of Incorporation, dated January 30, 2017 (incorporated by reference from Exhibit 3.1 to registrant’s Form 10 filed with the SEC on May 10, 2019).
  3.2     Amended Bylaws, dated June 17, 2019 (incorporated by reference from Exhibit 3.2 to registrant’s Amended No. 1 to Form 10 filed with the SEC on July 2, 2019).
  3.3     Certificate of Designation, dated January 26, 2021 (incorporated by reference from Exhibit 3.1 to registrant’s Current Report on Form 8-K filed with the SEC on January 29, 2021).
  10.1     Line of Credit, dated March 29, 2019 (incorporated by reference from Exhibit 3.3 to registrant’s Form 10 filed with the SEC on May 10, 2019).
  10.2     Amendment to $6.5m Line of Credit, dated April 17, 2019 (incorporated by reference from Exhibit 3.4 to registrant’s Form 10 filed with the SEC on May 10, 2019).
  10.3     Chico Property Lease Agreement, dated December 1, 2012 (incorporated by reference from Exhibit 3.5 to registrant’s Form 10 filed with the SEC on May 10, 2019).
  10.4     Description of Oral Agreement for Note with Lee Hamre, as of January 1, 2019 (incorporated by reference from Exhibit 3.6 to registrant’s Amended No. 1 to Form 10 filed with the SEC on July 2, 2019).
  31.1     Certification of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  31.2     Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  32     Certification of Principal Executive Officer and Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  101. INS   XBRL Instance Document
  101. SCH   XBRL Taxonomy Extension Schema Document
  101. CAL   XBRL Taxonomy Extension Calculation Linkbase Document
  101. DEF   XBRL Taxonomy Extension definition Linkbase Document
  101. LAB   XBRL Taxonomy Extension Label Linkbase Document
  101. PRE   XBRL Taxonomy Extension Presentation Linkbase Document

 

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 18, 2022   By: /s/ Lee Hamre  
   

Lee Hamre

Chief Executive Officer 

  
       
       
Date: November 18, 2022   By: /s/ Hope Stone    
   

Hope Stone  

Chief Financial Officer 

  

 

19

 

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