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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2022.

 

OR

 

o TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF 1934

 

From the transition period ____________ to ___________.

 

Commission File Number 000-56318

 

American Metals Recovery and Recycling, Inc.
(Exact name of small business issuer as specified in its charter)

 

Nevada   27-2262066
(State or other jurisdiction of incorporation or organization)   (IRS Employer Identification No.)

 

  4301 West Bank Drive, Suite 110B, Austin, Texas   78746  
  (Address of principal executive offices)   (Zip Code)  

 

(866) 365-0620

(Issuer’s telephone number)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class Trading
Symbol(s)		 Name of each exchange on
which registered
Common Stock, $0.001 par value per share AMRR OTC Market

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 x     No o

 

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 x     No o

 

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,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer o Accelerated Filer o
Non-Accelerated Filer x Smaller Reporting Company x
    Emerging growth company o

 

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. Yes o     No x

 

Indicate by a check mark whether the company is a shell company (as defined by Rule 12b-2 of the Exchange Act): Yes o     No x

 

As of October 31, 2022, there were 11,081,336 shares of Common Stock of the issuer outstanding.

 

 

   
 

 

TABLEOFCONTENTS

 

PART I. FINANCIAL STATEMENTS      
         
ITEM 1. Unaudited Financial Statements   2  
         
  Notes to Unaudited Financial Statements   7  
         
ITEM 2. Management’s Discussion and Analysis and Plan of Operation   16  
         
ITEM 3. Quantitative and Qualitative Disclosure About Market Risk   20  
         
ITEM 4. Controls and Procedures   20  
         
PART II. OTHER INFORMATION      
         
ITEM 1. Legal Proceedings   21  
         
ITEM 2. Unregistered Sales of Securities and Use of Proceeds   21  
         
ITEM 3. Default Upon Senior Securities   21  
         
ITEM 4. Mine Safety Disclosures   21  
         
ITEM 5. Other Information   21  
         
ITEM 6. Exhibits   21  

 

CERTIFICATIONS

 

EXHIBIT 31.1 CHIEF EXECUTIVE OFFICER CERTIFICATION
   
EXHIBIT 31.2 CHIEF FINANCIAL OFFICER CERTIFICATION
   
EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

 

   
 

 

AMERICAN METALS RECOVERY AND RECYCLING, INC.

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2022, and DECEMBER 31, 2021

(Unaudited)

 

   2022   2021 
ASSETS        
Current Assets          
Cash and Cash Equivalents  $2,136,758   $138 
Accounts Receivable, net   7,274,139    - 
Unbilled Accounts Receivable   2,699,142    - 
Costs in Excess of Billings   7,083,425    - 
Inventories   797,940    - 
Prepaids and Other Current Assets   737,600    - 
Total Current Assets   20,729,004    138 
           
Property, Plant and Equipment          
Property, Plant and Equipment (Net of Accumulated
Depreciation of $797,086 and $0)		   2,972,885    - 
Right of Use Asset   1,897,389    - 
Total Property, Plant and Equipment   4,870,274    - 
           
Other Assets          
Goodwill   20,154,379    - 
Intangible Assets (Net of Accumulated Amortization of $400,571 and $0)   5,159,944    - 
Other Receivables   78,741    - 
Long Term Assets   769,078    - 
Total Non-Current Assets   31,032,416    - 
           
TOTAL ASSETS  $51,761,420   $138 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
Current Liabilities:          
Accounts Payable  $2,626,011   $1,031 
Accrued Expenses   1,424,663    - 
Billings In Excess of Costs   2,222,568    - 
Accrued Interest   3,110,945    - 
Note Payable and Accrued Interest – Related Party   103,857    98,232 
Current Portion of Operating Lease Payable   328,174    - 
Current Portion – Capital Leases   600,000    - 
Current Portion of Long-Term Debt   18,895,605    - 
Total Current Liabilities   29,311,823    99,263 
           
Non-Current Liabilities:          
Note Payable, Less Current Portion   25,104,395    - 
Capital Leases Payable, Less Current Portion   1,996,377    - 
Operating Lease Payable, Less Current Portion   1,671,449    - 
Total Non-Current Liabilities   28,772,221    - 
           
TOTAL LIABILITIES   58,084,044    99,263 
           
COMMITMENTS AND CONTINGENCIES   -    - 
           
STOCKHOLDERS’ DEFICIT          
Series A Preferred Stock, $0.001 par value, 1,600,000 shares authorized, 600,000 and 600,000 shares issued and outstanding, respectively   600    600 
Series B Preferred Stock, $0.001 par value, 54,000 shares authorized, zero and zero shares issued and outstanding, respectively   -    - 
Common Stock, $0.001 par value, 50,000,000 shares authorized 11,081,336 issued and outstanding, respectively   11,081    11,081 
Additional Paid In Capital   507,571    507,571 
Accumulated Deficit   (6,841,876)   (618,377)
TOTAL STOCKHOLDERS’ DEFICIT   (6,322,624)   (99,125)
           
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT  $51,761,420   $138 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 2 
 

 

AMERICAN METALS RECOVERY AND RECYCLING, INC.

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022, AND 2021

(Unaudited)

 

                             
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2022   2021   2022   2021 
                 
REVENUE  $13,525,837   $-   $37,493,114   $- 
COST OF REVENUE   10,782,080    -    29,430,109    - 
Gross Profit   2,743,757    -    8,063,005    - 
                     
Operating Expenses:                    
Selling, General and Administrative Expenses   3,773,551    8,483    10,476,908    27,723 
Depreciation and Amortization   689,227    -    1,239,023    - 
Total Operating Expenses   4,462,778    8,483    11,715,931    27,723 
NET OPERATING INCOME (LOSS)   (1,719,021)   (8,483)   (3,652,926)   (27,723)
                     
OTHER INCOME (EXPENSE)                    
Interest Income   58    -    152    - 
Other Income (Expense)   (63,101)   -    (63,101)   - 
Transaction Expenses   (14,832)   -    (149,509)   - 
Gain on Sale of Assets   202,318    -    936,628    - 
Interest Expense   (1,174,710)   (1,124)   (3,294,743)   (3,374)
TOTAL OTHER INCOME (EXPENSE)   (1,050,267)   (1,124)   (2,570,573)   (3,374)
Net (loss)  $(2,769,288)  $(9,607)  $(6,223,499)  $(31,097)
                     
                     
Basic Net (Loss) per Common Share  $(0.24)  $(0.00)  $(0.55)  $(0.00)
Weighted Average Shares Outstanding – Basic   11,081,336    11,081,336    11,081,336    11,081,336 
                     
Fully Diluted Net (Loss) per Common Share  $(0.24)  $(0.00)  $(0.55)  $(0.00)
Weighted Average Shares Outstanding – Diluted   11,081,336    11,081,336    11,081,336    11,081,336 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 3 
 

 

AMERICAN METALS RECOVERY AND RECYCLING, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

FOR THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022, AND 2021

(Unaudited)

 

 

For the Three Months Ended September 30, 2022

 

                                                 
   Preferred A   Preferred B   Common   Stock   Paid In   Accumulated     
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Totals 
                                     
Balance June 30, 2022   600,000   $600    -   $-    11,081,336   $11,081   $507,571   $(4,072,588)  $(3,553,336)
Net Loss   -    -    -    -    -    -    -    (2,769,288)   (2,769,288)
                                              
Balance, September 30, 2022   600,000   $600    -   $-    11,081,336   $11,081   $507,571   $(6,841,876)  $(6,322,624)

 

 

For the Three Months Ended September 30, 2021

 

                                                   
   Preferred A   Preferred B   Common   Stock   Paid In   Accumulated     
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Totals 
                                     
Balance June 30, 2021   600,000   $600    -   $-    11,081,336   $11,081   $507,571   $(592,070)  $(72,818)
Net Loss   -    -    -    -    -    -    -    (9,607)   (9,607)
                                              
Balance, September 30, 2021   600,000   $600    -   $-    11,081,336   $11,081   $507,571   $(601,677)  $(82,425)

 

 4 
 

 

For the Nine Months Ended September 30, 2022

 

                                                   
   Preferred A   Preferred B   Common   Stock   Paid In   Accumulated     
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Totals 
                                     
Balance Dec 31, 2021   600,000   $600    -   $-    11,081,336   $11,081   $507,571   $(618,377)  $(99,125)
Net Loss        -         -         -    -    (6,223,499)   (6,223,499)
                                              
Balance, September 30, 2022   600,000   $600    -   $-    11,081,336   $11,081   $507,571   $(6,841,876)  $(6,322,624)

 

 

For the Nine Months Ended September 30, 2021

 

                                                   
   Preferred A   Preferred B   Common   Stock   Paid In   Accumulated     
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Totals 
                                     
Balance Dec 31, 2021   600,000   $600    -   $-    11,081,336   $11,081   $507,571   $(570,579)  $(51,327)
Net Loss        -         -         -    -    (31,097)   (31,097)
                                              
Balance, September 30, 2021   600,000   $600    -   $-    11,081,336   $11,081   $507,571   $(601,677)  $(82,425)

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 5 
 

 

AMERICAN METALS RECOVERY AND RECYCLING, INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022, AND 2021

(Unaudited)

 

   2022   2021 
CASH FLOWS FROM OPERATING ACTIVITES:        
Net loss  $(6,223,499)  $(31,097)
Adjustments to reconcile net income to cash used in operating activities          
Depreciation and Amortization   1,239,023    - 
Change in Operating Assets and Liabilities          
Change in Operating Assets and Liabilities          
Accounts Receivable   431,170    - 
Unbilled Accounts Receivables   699,172    - 
Cost in Excess of Billings   (186,051)   - 
Inventory   (507,500)   - 
Prepaids and Other Current Assets   1,533,104    - 
Right of Use Assets Amortization   102,234      
Other Assets   (847,819)   - 
Accounts Payable   472,830    (550)
Accrued Expenses   (1,268,602)   - 
Billings in Excess of Costs   873,912    - 
Accrued Interest – Related Party   5,625    3,375 
Accrued Interest Payable   3,110,945    - 
CASH FLOWS USED IN OPERATING ACTIVITIES   (565,456)   (28,272)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Purchase of Equipment   (1,233,409)   - 
Sale of Property and Equipment   365,937    - 
Purchase of AMR Resources   (40,407,648)   - 
CASH FLOWS USED IN INVESTING ACTIVITIES   (41,275,120)     
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from Notes Payable   44,000,000    - 
Borrowings on Short Term Debt   760,000    - 
Payments on Short Term Debt   (760,000)   - 
Borrowings on Loans/Lease   1,233,408    - 
Payments on Loans/Leases   (1,256,212)   - 
CASH FLOWS USED IN FINANCING ACTIVITIES   43,977,196    - 
           
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   2,136,620    (28,272)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD   138    43,436 
CASH AND CASH EQUIVALENTS AT END OF PERIOD  $2,136,758    15,164 
           
SUPPLEMENTAL DISCLOSURES          
Cash Paid for Interest  $178,173   $- 
Cash Paid for Income Taxes  $-   $- 
           
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:          

Right-of-use asset obtained in exchange for lease obligations

  $1,897,389    - 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 6 
 

 

AMERICAN METALS RECOVERY AND RECYCLING, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022 AND 2021

 

NOTE 1 – NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES

 

Nature of Activities, History and Organization

 

American Metals Recovery and Recycling Inc. was incorporated in the State of Nevada on June 29, 2009. We were formed in order to acquire 100% of the outstanding stock of Coil Motor Tubing Corporation, a Texas corporation. Coil Tubing Motor Corporation (“CTM”) was a wholly owned subsidiary of Premier Oil Field Services, Inc. and was formed in June 2006 as a Texas Corporation. CTM served the oil and gas industry with down-hole drilling motors. These motors were used in the gas well drilling process to drill out frac plugs and other debris in the wellbore. The Company later changed its name to American Metals Recovery and Recycling Inc.

 

On August 2, 2021, the Company filed a Registration Statement on Form 10 to register the Company’s 11,081,336 shares of previously issued and outstanding common stock and 600,000 shares of previously issued and outstanding preferred stock. The Company received no proceeds as result of the August 2, 2021 registration of the common and preferred shares.

 

On February 1, 2022, American Metals Recovery and Recycling, Inc. (“AMRR”) (OTC Pink: AMRR), completed an acquisition of AMR Resources, LLC (“AMR” or “the Company”) whereby AMR became a wholly owned subsidiary of AMRR. The Company owns all of the assets exclusively used in the Onepath Integrated Services (“OIS”) business, which were divested by Onepath Systems, LLC. OIS has operated as a standalone division of Onepath Systems and has provided private and public entities large-scale telecommunications, system / network planning and engineering, low voltage cabling, security / access controls, and installation services since 2006. OIS has a nationwide footprint that provides clients with a one stop solution. Key business units include telecom and internet providers, fire and life safety, large building security and access control, audio/visual, multi-dwelling units, military, and large-scale public and commercial developments.

 

The acquisition of all outstanding units of AMR Resources was consummated in exchange for consideration of $40.5 million (the “AMR Resources Acquisition”). In contemplation of the AMR Resources Acquisition, OnePath Systems, LLC (“OnePath”) formed AMR Resources and contributed those assets necessary for the operation of its integrated services business. As a result of the AMR Resources Acquisition, the Company acquired 100% of the outstanding units of AMR Resources and the former integrated services business of OnePath. AMR Resources is a wholly owned subsidiary of the Company as of February 1, 2022. The consideration paid by AMRR was subject to post-closing adjustment as contemplated by the Agreement. The Agreement contained customary provisions reflecting a transaction of such scope and structure, including representations, warranties, indemnification obligations. AMRR funded the purchase price from the AMRR’s readily available funds generated from loan proceeds. AMR Resources designs, deploys and maintains integrated low-voltage systems for the commercial and residential market. This includes Life Safety, Physical Security, Audio-Visual, Networking and Structured Cabling solutions.  With approximately 300 employees and over 5,000 subcontractors, AMR Resources has a national footprint, with a heavy concentration in the Southeastern United States and is headquartered in the Atlanta, Georgia metropolitan area.

  

Significant Accounting Policies

 

The Company’s management selects accounting principles generally accepted in the United States of America and adopts methods for their application. The application of accounting principles requires the estimating, matching and timing of revenues and expenses. The accounting policies used conform to generally accepted accounting principles which have been consistently applied in the preparation of these financial statements.

 

The financial statements and notes are representations of the Company’s management which is responsible for their integrity and objectivity. Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company’s system of internal accounting control is designed to assure, among other items that: 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods presented.

 

Basis of Presentation

 

The Company prepares its unaudited consolidated financial statements on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States.

 

Principles of Consolidation

 

The unaudited consolidated financial statements include the accounts of American Metals Recovery and Recycling, Inc., as well as its wholly owned subsidiary, AMR Resources, LLC. All significant inter-company transactions have been eliminated. All amounts are presented in U.S. Dollars unless otherwise stated.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents. At times, cash balances may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. As of September 30, 2022, the Company had $1,506,213 of deposits in U.S. Banks in excess of the FDIC limit. Management does not believe that the Company is at risk of loss on cash.

 

 7 
 

 

Accounts Receivable and Allowances for Doubtful Accounts

 

The allowance for accounts receivable is recorded when receivables are considered to be doubtful of collection. As of September 30, 2022, and December 31, 2021, respectively, the Company had $615,485 and $0 allowance for doubtful accounts.

 

Unbilled Accounts Receivable

 

Unbilled accounts receivable represents amounts deemed receivable but not yet billed – See Note 3.

 

Costs in Excess of Billings

 

Cost in excess of billings represents costs incurred on contracts which have not yet been invoiced. The balance at September 30, 2022 and December 31, 2021 was $7,083,425 and $0 respectively.

 

Inventory

 

Inventories are carried at the lower of cost or net realizable value and consists of the supplies on-hand for use in future customer arrangements.

 

Prepaids and Other Current Assets

 

These amounts represent prepaid legal, rent and insurance. The balance at September 30, 2022 and December 31, 2021 was $703,964 and $0 respectively.

 

Billings in Excess of Costs

 

Billings in excess of costs represents advance amounts billed customers for work which the company has not yet completed. The balance at September 30, 2022 and December 31, 2021 was $2,222,568 and $0 respectively.

 

Income Taxes

 

The Company accounts for income taxes under ASC 740 “Income Taxes” using the liability method, recognizing certain temporary differences between the financial reporting basis of liabilities and assets and the related income tax basis for such liabilities and assets. This method generates either a net deferred income tax liability or asset for the Company, as measured by the statutory tax rates in effect. The Company derives the deferred income tax charge or benefit by recording the change in either the net deferred income tax liability or asset balance for the year. The Company records a valuation allowance against any portion of those deferred income tax assets when it believes, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized.

 

Use of Estimates

 

In order to prepare unaudited consolidated financial statements in conformity with accounting principles generally accepted in the United States, management must make estimates, judgments and assumptions that affect the amounts reported in the unaudited consolidated financial statements and determines whether contingent assets and liabilities, if any, are disclosed in the unaudited consolidated financial statements. The ultimate resolution of issues requiring these estimates and assumptions could differ significantly from resolution currently anticipated by management and on which the financial statements are based.

 

Revenue Recognition

 

The Company recognizes revenue according to ASC 606 “Revenue from contracts with customers.” The Company generates revenue by providing private and public entities large-scale telecommunications, system / network planning and engineering, low voltage cabling, security / access controls, and installation. The core principles of revenue recognition under ASC 606 include the following five criteria:

 

  1. Identify the contract with the customer
    Contract with our customers may be oral, written, or implied. A written and signed invoice stating the terms and conditions is the Company’ preferred method. The terms of a written contract may be contained within the body of an invoice or in an email. No work is commenced without an understanding between the Company and our client that a valid contract exists.

 

 8 
 

 

  2. Identify the performance obligations in the contract
    Our sales and account management teams define the scope of services to be offered, to ensure all parties are in agreement and obligations are being delivered to the customer as promised. The performance obligation may not be fully identified in a mutually signed contract, but may be outlined in email correspondence, face-to-face meetings, additional proposals or scopes of work, or phone conversations.

 

  3. Determine the transaction price
    Pricing is discussed and identified by the operations team prior to submitting an invoice to the customer.

 

  4. Allocate the transaction price to the performance obligations in the contract
    If a contract involves multiple obligations, the transaction pricing is allocated accordingly, during the performance obligation phase.

 

  5. Recognize revenue when (or as) we satisfy a performance obligation
   

The Company uses digital marketing that includes digital advertising, SEO management and digital ad support. We provide whether presenting a vibrant but simple message about our clients that will enlighten their audience or deploying an influential digital marketing campaign on our online site or across one or multiple social media platforms. Revenue is recognized when ads are run on Company’s advertising platform.

 

The company generates analytical reports monthly or as required to show how the ad dollars were spent and how the targeting resulted in click-through. The report satisfies the performance obligation, regardless of the outcome or effectiveness of the campaign.

 

Sales are recognized when promised services are started in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. Sales for service contracts generally are recognized as the services are being provided.

 

For the nine months ended September 30, 2022 and 2021, there are no deferred contract costs or deferred commissions.

 

Fair Value of Financial Instruments

 

The ASC guidance for fair value measurements and disclosure establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

 

Level 1 Inputs – Quoted prices for identical instruments in active markets.

Level 2 Inputs – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 Inputs – Instruments with primarily unobservable value drivers.

 

As of September 30, 2022, and December 31, 2021, the Company’s financial assets were measured at fair value using Level 3 inputs, with the exception of cash, which was valued using Level 1 inputs.

 

Per Share Amounts

 

Earnings per share are calculated in accordance with ASC 260 “ Earnings per Share”. The weighted average number of common shares outstanding during each period is used to compute basic earnings (loss) per share. Diluted earnings per share are computed using the weighted average number of shares and potentially dilutive common shares outstanding. Potentially dilutive common shares are additional common shares assumed to be exercised. Potentially dilutive common shares consist of stock warrants, convertible preferred shares and convertible notes and are excluded from the diluted earnings per share computation in periods where the Company has incurred a net loss or where the average stock price was below the exercise price of the respective potentially dilutive common share, as their effect would be considered anti-dilutive.

 

 9 
 

 

The Company had no options or warrants outstanding at September 30, 2022 and September 30, 2021.

 

  

Nine Months

Ended

September 30,

2022

  

Nine Months

Ended

September 30,

2021

 
Net income (loss) attributable to common shareholders  $(6,088,499)  $(31,097)
           
Weighted average number of common shares outstanding, Basic   11,081,336    11,081,336 
           
Diluted weighted average number of common shares outstanding,   11,081,336    11,081,336 
           
Basic earnings (loss) per share  $(0.55)  $(0.00)
           
Diluted earnings (loss) per share  $(0.55)  $(0.00)

 

When an entity has a net loss, it is prohibited from including potential common shares in the computation of diluted per share amounts. Accordingly, we have utilized basic shares outstanding to calculate both basic and diluted loss per share for the periods ended September 30, 2022 and 2021. The number of potential anti-dilutive shares excluded from the calculation shares for the period ended September 30, 2022 is 2,770,334.

 

Related Party Transactions

 

FASB ASC 850, “Related Party Disclosures” requires companies to include in their financial statements, disclosures of material related party transactions. The Company discloses all material related party transactions. A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.

 

NOTE 2 – INVENTORIES

 

Inventories are carried at the lower of cost or fair value and consists of the supplies on-hand for use in future customer arrangements. Inventory balances of September 30, 2022, and December 31, 2021, respectively, were as follows:

 

   2022   2021 
Supplies on-hand  $797,940   $- 

 

NOTE 3 – UNBILLED ACCOUNTS RECEIVABLE

 

Unbilled accounts receivable represents amounts for which work has been performed but not yet billed. The balances at September 30, 2022, and December 31, 2021, respectively, were as follows:

 

   September 30, 2022   Dec 31, 2021 
Unbilled Accounts Receivable  $2,699,142   $- 

 

NOTE 4 – PROPERTY, PLANT AND EQUIPMENT

 

Property consists of the following at September 30, 2022 and December 31, 2021:

 

   2022   2021 
Furniture and Fixtures  $29,104   $- 
Computer Equipment   257,809    - 
Machinery and Office Equipment   241,112    - 
Automobiles and Trucks   3,209,236    - 
Software   32,710    - 
Sub-total   3,769,971    - 
Less: Accumulated depreciation   (797,086)   - 
Total Property  $2,972,885   $- 

 

Depreciation has been provided over each asset’s estimated useful life. Depreciation expense was $838,810 and $0 for the nine months ended September 30, 2022 and 2021 respectively.

 

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NOTE 5 – GOODWILL

 

Impairment of Goodwill and Other Intangible Assets. As of January 31, 2022, goodwill recorded on our Condensed Consolidated Balance Sheet aggregated $20.15 million which relates to our purchase of AMR Resources, LLC (AMR) on February 1, 2022. We perform an annual impairment review in the first quarter of each fiscal year.

 

In accordance with ASU 2017-04, “Intangibles – Goodwill and Other - Simplifying the Test for Goodwill Impairment,” The adoption of ASU 2017-04 requires that an entity should perform an annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

 

On March 31, 2022, we performed our annual goodwill impairment test and estimated the fair value of AMR based on the recent purchase of AMR. We concluded that the goodwill assigned to AMR, as of September 30, 2022, was not impaired and that AMR unit was at risk of failing step one of the goodwill impairment test as prescribed under the ASC.

 

NOTE 6 – INTANGIBLE ASSETS

 

Property consists of the following at September 30, 2022 and December 31, 2021:

   2022   2021 
Customer List  $5,370,000   $- 
Research and Development Costs   190,515    - 
Sub-total   5,560,515    - 
Less: Accumulated amortization   (400,571)   - 
Total Intangible Assets  $5,159,944   $- 

 

Amortization has been provided over each asset’s estimated useful life. Amortization expense was $400,571 and $0 for the nine months ended September 30, 2022 and 2021 respectively.

 

NOTE 7 – INCOME TAXES

 

The Company has adopted ASC 740-10, “ Income Taxes”, which requires the use of the liability method in the computation of income tax expense and the current and deferred income taxes payable (deferred tax liability) or benefit (deferred tax asset). Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

 

The Company’s effective tax rate for the period ended September 30, 2022 and for the period ended September 30, 2021 varies from the statutory rate of 21% due to valuation allowance which creates a near zero effective tax rate. The Company intends to continue maintaining a full valuation allowance on our deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of the valuation allowance. However, given our current earnings and anticipated future earnings, it is reasonably possible that in the near future sufficient positive evidence may become available to support the conclusion that no valuation allowance is necessary.

 

NOTE 8– STOCKHOLDERS’ EQUITY

 

Preferred Stock

 

The Company is authorized to issue 1,600,000 shares of Series A Preferred Stock at a par value of $0.001 per share.

The Company is authorized to issue 54,000 shares of Series B Preferred Stock at a par value of $0.001 per share.

 

As of September 30, 2022 and December 31, 2021, the Company has 600,000 shares of Series A Preferred Stock issued and outstanding.

 

As of September 30, 2022 and December 31, 2021, the Company has zero shares of Series B Preferred Stock issued and outstanding.

 

On August 31, 2022, the Company filed with the Secretary of State of the State of Nevada (the “Secretary of State”) a Certificate of Withdrawal (the “Certificate of Withdrawal”) of Certificate for the Certificate of Designation of Preferences, Rights and Limitations of the Old Series A Preferred Stock. All of the issued and outstanding shares of Old Series A Preferred Stock were held by Multiband Global Resources, LLC and surrendered to the Company for cancellation in exchange for the issuance to its designee, the Frinzi Family Trust, of six hundred thousand (600,000) shares of Series A Preferred Stock (as defined below).

 

On August 31, 2022, the Company filed with the Secretary of State a Certificate of Designation of Series A Preferred Stock (the “Series A Certificate of Designation”) and a Certificate of Designation of Series B Convertible Preferred Stock, with a par value of $0.001 per share (the “Series B Preferred Stock”)( such Certificate of Designation the “Series B Certificate of Designation, and together with Series A Certificate of Designation, the “Certificates of Designation”) designating the preferences, limitations, powers, conversion features and relative rights of the Series A Preferred and Series B Preferred, respectively. The Company designated one million six hundred thousand (1,600,000) shares of its authorized and unissued preferred stock as Series A Preferred Stock and fifty-four thousand (54,000) shares of its authorized and unissued preferred stock as Series B Preferred Stock. The Certificates of Designation became effective with the Secretary of State upon filing.

 

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Series A Preferred Stock shall convert into such number of fully paid and non-assessable shares of Common Stock that represent twenty percentage (20%) of the Company’s issued and outstanding Common Stock as computed one day prior the Company is listed on Nasdaq for trading Common Stock. The time of the conversion shall be the date on which the Company’s securities are listed on a national exchange, after giving effect to any securities issued in connection with such uplisting to a national exchange. Upon the conversion and the issuance of the conversion shares further thereto, the shares of Series A Preferred Stock shall be deemed cancelled and of no further force or effect. Series B Preferred Stock shall have the right to convert all or any portion of such holder’s Series B Preferred Stock into fully paid and non-assessable shares of Common Stock at any time or from time to time at such holder’s sole discretion (the “Conversion Right”).

 

Each share of Series B Preferred Stock as to which the Conversion Right is exercised shall be converted into shares of the Company’s issued and outstanding Common Stock at an exercise price of $3.13 per share.

 

Common Stock

 

The Company is authorized to issue 50,000,000 shares of common stock at a par value of $0.001 per share.

 

As of September 30, 2022 and December 31, 2021, the Company had 11,081,336 shares of its common stock issued and outstanding.

 

The Company did not issue any shares of its common stock during the nine months ended September 30, 2022 or 2021.

 

Options

As of both September 30, 2022 and December 31, 2021, the Company had no stock options outstanding.

 

Warrants

As of both September 30, 2021 and December 31, 2021, the Company had no warrants outstanding.

 

NOTE 9 – COMMITMENTS AND CONTINGENCIES

 

Leases

 

The Company accounts for leases according to ASC 842 - Leases, which requires recognition of a right-of-use asset and lease liability for all leases at the commencement date based on the present value of lease payments over the lease term. In addition, the Company has elected other available practical expedients to not separate lease and non-lease components for all classes of underlying assets and to exclude leases with an initial term of 12 months or less. The Company determines if a contract is or contains a lease at inception.

 

As the implicit rate is not readily determinable for most of the Company’s lease agreements, the Company uses an estimated incremental borrowing rate to determine the initial present value of lease payments. These discount rates for leases are calculated using the Company’s interest rate of promissory notes.

 

The Company leases various vehicles under financing leases expiring in various years through 2027. The assets and liabilities under financing leases are recorded at the lower of the present value of the minimum lease payments or the fair value of the asset. The assets are amortized over their estimated useful lives. Amortization of assets under capital leases is included in depreciation expense for the nine months ended September 30, 2022. The following is a summary of property held under capital leases as of September 30, 2022 and December 31, 2021.

 

   September 30, 2022   Dec 31, 2021 
Vehicles  $3,209,236   $         - 
Less: Accumulated Amortization   (608,750)   - 
   $2,600,486   $- 

 

Minimum future lease Payments under financing leases at September 30, 2022 and December 31, 2021 are as follows:

 

   September 30, 2022   Dec 31, 2021 
2022  $228,875   $         - 
2023   843,317    - 
2024   823,980    - 
2025   755,501    - 
2026   393,143    - 
2027   87,308    - 
Total Minimum Lease Payments   3,132,124    - 
Less: Amount Representing Interest   (535,747)   - 
Present Value of Minimum Lease Payments   2,596,377    - 
Less: Current Portion   (600,000)   - 
Financing Lease, Net of Current Portion  $1,996,377   $- 

 

 12 
 

 

Interest rates on financing leases vary from 2.36% to 19.28% and are imputed based upon the lower of the Company’s incremental borrowing rate at the inception of each lease or the lessor’s implicit rate of return.

 

Operating Lease

 

The Company leases office space for its corporate headquarters in Kennesaw, Georgia under a sublease. The lease terminates on December 31, 2022 and since it is all current, the Company has elected not to record any Right of Use Assets and Lease Liabilities. The lease provides for base monthly rent of $60,031.

 

The Company leases corporate office space in Austin, Texas. In January 2022, the Company entered into a sixty-four month lease through June 2027. As part of the agreement the Company received four months free rent. The Company makes tiered lease payments on the 1st of each month. The Company’s lease does not have any residual value guarantees or restrictive covenants.

 

The Company classified the lease as an operating lease and determined that the value of the right of use lease assets (“ROU”) and liability at the inception of the lease was $214,389 using a discount rate of 10%, which is the rate of the note payable. As the implicit rate is not readily determinable for the lease, the Company uses an estimated incremental borrowing rate to determine the initial present value of lease payments. The lease effective date is April 1, 2022.

 

The Company leases office and warehouse space in Marietta, Georgia. In June 2022, the Company entered into a sixty month lease through June 2027. As part of the agreement the Company received $100,000 of finish out allowance. The Company makes tiered lease payments on the 1st of each month. The Company’s lease does not have any residual value guarantees or restrictive covenants.

 

The Company classified the lease as an operating lease and determined that the value of the right of use lease assets (“ROU”) and liability at the inception of the lease was $1,792,342 using a discount rate of 10%, which is the rate of the note payable. As the implicit rate is not readily determinable for the lease, the Company uses an estimated incremental borrowing rate to determine the initial present value of lease payments. The lease effective date is June 15, 2022.

 

The Company’s components of lease cost are as follows:

 

   Period Ended 
   September 30, 2022 
Operating Lease – Office Leases  $385,248 
Short Term Lease Costs   - 
Variable Lease Costs   - 
TOTAL Expense  $385,248 
      
Weighted average remaining lease term and weighted average discount rate are as follows:     
      
Weighted Average Remaining Lease Term (Years) – Operating Leases   6.00 
Weighted Average Discount Rate – Operating Leases   10.00%
Right of Use asset (ROU”)  $1,897,389 
Estimated future minimum lease obligations are as follow for the years ending December 31:     
YEAR     
2022  $126,276 
2023   518,539 
2024   538,759 
2025   559,732 
2026   581,473 
Thereafter   206,046 
Total  $2,530,825 
Less Imputed Interest   (531,202)
OPERATING LEASE PAYABLE  $1,999,623 

 

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Other Contingencies

 

Coronavirus Pandemic

 

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic, which continues to spread throughout the United States of America. Efforts implemented by local and national governments, as well as businesses, including temporary closures, are expected to have adverse impacts on local, national and the global economies. Although the disruption is currently expected to be temporary, there is uncertainty around the duration and the related economic impact. Therefore, while we expect this matter to have an impact our business, the impact to our results of operations and financial position cannot be reasonably estimated at this time.

 

Russia-Ukraine conflict

 

The Russian-Ukraine conflict is a global concern. The Company does not have any direct exposure to Russia or Ukraine through its operations, employee base, investments or sanctions. We have no basis to evaluate the possible risks of this conflict.

 

NOTE 10 – NOTES PAYABLE

 

On January 21, 2022, the Company issued the Note to GNET ATC, INC. in an aggregate principal amount of $44 million. The Note bears interest at a rate of 10% per annum and matures on the Maturity Date, January 21, 2025. The principal balance of the Note must be repaid in equal monthly installments commencing September 23, 2022, with the final payment due on the Maturity Date. Interest is calculated on the basis of a 360-day year for the actual number of days elapsed and is payable as a balloon payment on the Maturity Date. Prepayments are permitted subject to certain terms and conditions. The Note is secured by substantially all of the Company’s assets. The proceeds were used for working capital and to fund the acquisition of AMR Resources as described previously and below.

 

The Company did not make the monthly installments due starting on September 23, 2022 and is in negotiation with the lender to modify the loan and its terms.

 

Acquisition of AMR Resources

 

On February 1, 2022, the Company completed the AMR Resources Acquisition for $40.4 million in cash, pursuant to the AMRR Agreement, subject to post-closing adjustment as contemplated therein. In contemplation of the AMR Resources Acquisition, OnePath formed AMR Resources and contributed those assets necessary for the operation of its integrated services business. As a result of the AMR Resources Acquisition, the Company acquired all of the outstanding limited liability company interests of AMR Resources and the former integrated services business of OnePath and AMR Resources became a wholly owned subsidiary of the Company.

 

AMR Resources has approximately 125 vehicle leases which are accounted for as finance leases and included in assets under property and equipment and in liabilities under notes payable. The following is a schedule of the Company’s long-term debt:

Schedule of long term debt

   September 30, 2022   Dec 31, 2021 
$44,000,000 Note Payable, 10% interest, due Jan 2025  $44,000,000   $- 
Finance Automobile Leases Payable, various rates   2,596,377    - 
     Subtotal  $46,596,377   $- 
Current portion – long-term debt   (19,495,605)   - 
    Total  $27,100,772   $- 

 

The Company purchased the following assets (liabilities) on February 1, 2022 for $40.4 million, with the difference being recorded as goodwill. The following represent the fair value of the assets and liabilities per the best and most current information available at the time of acquisition. The recorded amounts are subject to adjustment from valuation reports post-closing.

   Purchase 
Asset / Liability Purchased  Feb 1, 2022 
Cash   802,000 
Accounts Receivable   7,705,309 
Other Receivables   3,398,314 
Prepaids & Other Current Assets   1,468,703 
Earnings in Excess of Billings   6,897,373 
Inventory   290,440 
Fixed Assets (Net)   2,975,017 
Intangible Assets   190,515 
Goodwill   20,154,379 
Customer List   5,370,000 
Accounts Payable   (2,152,150)
Accrued Expenses   (1,488,304)
Leases Payable – Current   (1,857,576)
Wages and Benefits Payable   (530,178)
Billings in Excess of Costs   (1,348,656)
Short-Term Loans   (802,000)
Leases Payable – Long-Term   (665,539)
Purchase Price   40,407,647 

 

 

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NOTE 11 – SUBSEQUENT EVENTS

 

On November 4, 2022, the Board of Directors of the Company approved, subject to the receipt of stockholder approval, amended and restated articles of incorporation of the Company (the “Articles of Incorporation”) to, among other things, (a) change the Company’s name to “MBG Holdings Inc.”; (b) increase the total number of authorized capital stock from Seventy Million (70,000,000) to Two Hundred Twenty Million (220,000,000) shares, consisting of Two Hundred Million (200,000,000) shares of Common Stock and Twenty Million (20,000,000) shares of preferred stock, (c) a reverse stock split of the issued and outstanding shares of Common Stock, in a range of not less than two (2) shares and not more than ten (10) shares, into one (1) share of Common Stock at any time before September 30, 2023; and (d) the MBG Holdings Inc. 2022 Equity Incentive Plan providing for the issuance of up to 2,000,000 shares of Common Stock pursuant to awards under the 2022 Plan (collectively, the “Stockholder Approval Matters”). The Company expects to file an information statement pursuant to Schedule 14C of the Exchange Act with respect to the Stockholder Approval Matters.

 

 15 
 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

FORWARD-LOOKING STATEMENTS

 

This quarterly report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, which we refer to in this annual report as the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to in this annual report as the Exchange Act. Forward-looking statements are not statements of historical fact but rather reflect our current expectations, estimates and predictions about future results and events. These statements may use words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “predict,” “project” and similar expressions as they relate to us or our management. When we make forward-looking statements, we are basing them on our management’s beliefs and assumptions, using information currently available to us. These forward-looking statements are subject to risks, uncertainties and assumptions, including but not limited to, risks, uncertainties and assumptions discussed in this annual report. Factors that can cause or contribute to these differences include those described under the heading “Management Discussion and Analysis and Plan of Operation.”

 

If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we projected. Any forward-looking statement you read in this annual report reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. All subsequent written and oral forward-looking statements attributable to us or individuals acting on our behalf are expressly qualified in their entirety by this paragraph. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this annual report. The Company expressly disclaims any obligation to release publicly any updates or revisions to these forward-looking statements to reflect any change in its views or expectations. The Company can give no assurances that such forward-looking statements will prove to be correct.

 

The Company

 

The Company was incorporated in the State of Nevada on June 29, 2009 as Premier Oil Field Services, Inc. and changed its name to American Metals Recovery and Recycling Inc. on April 25, 2014. The Company was dormant from 2015 until February 2021.

 

On August 2, 2021, the Company filed a Registration Statement on Form 10 to register the Company’s shares of common stock, $0.001 par value (“Common Stock”) under Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company received no proceeds as result of such registration.

 

Prior to December 23, 2021, Repository Services LLC, a Wyoming limited liability company (“Repository Services”), held 8,123,230 shares, or 73.3% of the issued and outstanding shares of, Common Stock and 100% of the issued and outstanding shares of preferred stock, par value $0.001 (“Preferred Stock”), of the Company. On December 23, 2021, Multiband Global Resources, LLC, a Delaware limited liability company (“Multiband”), acquired 7,923,230 shares, or 71.5% of the issued and outstanding shares of, Common Stock and 100% of the issued and outstanding shares of Preferred Stock in exchange for a cash payment of $500,000 paid by Multiband to Repository Services. Also in December 2021, Repository Services transferred the remaining 200,000 shares of Common Stock that were not purchased by Multiband to Katell Survivors Trust (Gerald Katell, Trustee), an unrelated third party.

 

Since September 25, 2015, the Company has met the definition of a "shell" company, whose sole purpose was to locate and consummate a merger or acquisition with a privately-held operating company private entity.

 

On January 21, 2022, the Company issued a Secured Promissory Note (“Note”) to GNET ATC, Inc. (“GNET”) in an aggregate principal amount of $44 million. The Note bears interest at a rate of 10% per annum and matures on January 21, 2025 (the “Maturity Date”). The principal balance of the Note must be repaid in equal monthly installments commencing September 23, 2022, with the final payment due on the Maturity Date. Interest is calculated on the basis of a 360-day year for the actual number of days elapsed and is payable as a balloon payment on the Maturity Date. Prepayments are permitted subject to certain terms and conditions. The Note is secured by substantially all of the Company’s assets. The proceeds of the Note were used for working capital and to fund the acquisition of AMR Resources, LLC (“AMR Resources”) as described below.

 

On February 1, 2022, the Company completed the acquisition of all outstanding limited liability company interests of AMR Resources for $40.5 million in cash (the “AMR Resources Acquisition”), pursuant to a Unit Purchase Agreement (the “AMRR Agreement”), dated February 1, 2022, by and between the Company and OnePath Systems, LLC (“OnePath”), subject to post-closing adjustment as contemplated therein. In contemplation of the AMR Resources Acquisition, OnePath formed AMR Resources and contributed those assets necessary for the operation of its integrated services business. As a result of the AMR Resources Acquisition, the Company acquired 100% of the outstanding limited liability company interests of AMR Resources and the former integrated services business of OnePath and AMR Resources became a wholly owned subsidiary of the Company.

 

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The Company seeks to acquire assets or shares of one or more additional privately-held entities actively engaged in revenue generating commercial activities in exchange for AMRR securities or cash. The Company is considering other acquisition candidates but has not entered into any acquisition agreements for additional acquisitions.

 

The Company’s common stock is subject to quotation on the OTC Markets Group, Inc. Pink Open Market Platform (“Pink Sheets”) under the symbol AMRR. There is currently only a limited trading market in the Company’s shares, nor do we believe that any active trading market has existed for approximately the last five years. There can be no assurance that there will be an active trading market for our securities following the effective date of this Registration Statement under the Securities Exchange Act of 1934, as amended (“Exchange Act”). In the event that an active trading market commences, there can be no assurance as to the market price of our shares of common stock, whether the trading market will provide liquidity to investors, or whether any trading market will be sustained.

 

Segment Information

 

Not required for smaller reporting Companies

 

Employees

 

As of September 30, 2022, we had approximately 300 employees, all in the United States. Consultants are retained from time to time.

 

Overview.

 

At December 31, 2021, the Company had no business operations.

 

On January 21, 2022, the Company issued a $44 million Note to GNET, which bears interest at a rate of 10% per annum and matures on the Maturity Date, January 21, 2025. The principal balance of the Note must be repaid in equal monthly installments commencing September 23, 2022, with the final payment due on the Maturity Date. Interest is calculated on the basis of a 360-day year for the actual number of days elapsed and is payable as a balloon payment at the maturity date. Prepayments are permitted subject to certain terms and conditions. The Note is secured by substantially all of the Company’s assets. The Company used $40.5 million of the proceeds to acquire AMR Resources on February 1, 2022. The remaining proceeds of the Note have been and will be used to fund the operating activities of the Company and AMR Resources.

 

On February 1, 2022, the Company acquired 100% of the outstanding limited liability company interests of AMR Resources consisting of the former integrated services business of OnePath for $40.5 million in cash subject to post-closing adjustment as contemplated by the AMRR Agreement, and AMR Resources became a wholly owned subsidiary of the Company. Since purchasing AMR Resources, the Company establishing corporate infrastructure necessary to operate our wholly owned subsidiary, AMR Resources, as an independent business.

 

AMR Resources designs, deploys and maintains integrated low-voltage systems for the commercial and residential market. This includes Life Safety, Physical Security, Audio-Visual, Networking and Structured Cabling solutions.  With approximately 300 employees and over 5,000 subcontractors, AMR Resources has a national footprint, with a heavy concentration in the Southeastern United States and is headquartered in the Atlanta, Georgia metropolitan area.

 

As of December 31, 2021, the Company did not have any business operations and as of December 31, 2021, the Company had assets totaling $138, liabilities totaling $99,263, and a working capital deficit of $99,125.

 

Results of Operations for the three and nine months ended September 30, 2022, as compared to the three and nine months ended September 30, 2021

 

The Company purchased AMR Resources on February 1, 2022 and all revenue reflects only eight months of operations through September 30, 2022. We only generated revenues from February to September of 2022 after the acquisition of AMR Resources, LLC and did not generate any revenues during the nine months ended September 30, 2021.

 

We had revenues of $13,525,837 for the three months ended September 30, 2022 and $0 for the three months ended September 30, 2021. Revenues were $37,493,114 and $0 for the nine months ended September 30, 2022 and 2021, respectively.

 

Our cost of revenues was $10,782,080 and $0 for the three months ended September 30, 2022 and 2021, respectively, resulting in gross profit of $2,743,757 and $0 for the same three month periods. Our costs of revenue were $29,430,109 and $0 for the nine months ended September 30, 2022 and 2021, respectively, resulting in gross profit of $8,063,005 and $0 for the same nine month periods. The year over year increase in revenues was due to the purchase of AMR Resources, LLC on February 1, 2022 which had customer contracts.

 

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Operating expenses were $4,462,778 and $8,483 for the three months ended September 30, 2022 and 2021, respectively. Operating expenses were $11,715,931 and $27,723 for the nine months ended September 30, 2022 and 2021, respectively. The increase was due to expenses of operations for AMR Resources LLC which we purchased on February 1, 2022.

 

We had an operating loss of $1,719,021 and $8,483 for the three months ended September 30, 2022 and 2021, respectively. Our operating loss for the nine months ended September 30, 2022 and 2021 was $3,652,926 and $27,723, respectively.

 

For the three months ended September 30, 2022, our other income and expense was made up of interest income of $58 and a gain on sale of assets of $202,318 offset by expenses of extraordinary expenses of $77,933 related to our acquisition of AMR Resources LLC and interest of expense of $1,174,710. The increase was mainly due to the interest of 10% on the Company’s $44 million note payable.

 

For the nine months ended September 30, 2022, our other income and expense was made up of interest income of $152 and gain on sale of assets of $936,628 offset by expenses of extraordinary expenses of $212,610 related to our acquisition of AMR Resources LLC and interest of expense of $3,294,743. The increase was mainly due to the interest of 10% on the Company’s $44 million note payable.

 

During the nine months ended September 30, 2022 and 2021, we incurred net losses of $6,223,499 and $31,097, respectively.

 

Liquidity and Capital Resources.

 

As of September 30, 2022, the Company had assets totaling $51,761,420, liabilities totaling $58,084,044, and negative working capital of $8,582,819.

 

On January 21, 2022, the Company received $44 million of loan proceeds from issuance of the Note. The Company used $40.5 million of the proceeds to acquire AMR Resources on February 1, 2022. The remaining proceeds of the Note will be used to fund the operating activities of the Company and AMR Resources.

 

Following the AMR Resources Acquisition, we will incur significant and undetermined costs to establish corporate infrastructure necessary to operate the Company and AMR Resources, as an independent business. Actions required include preparing and filing required consolidated financial statements of the Company and its subsidiaries. The Company’s ability to obtain debt and equity financing will be very limited until it is able to provide historical financial statements and other financial information to potential investors.

 

During the next 12 months we anticipate incurring costs related to filing of Exchange Act reports, franchise fees, transfer agent fees, registered agent fees, legal fees, accounting fees, and investigating, analyzing, and consummating one or more acquisitions or business combination. The amount of such costs cannot be estimated as it will vary based on the number, size and types of business acquisitions we consider and consummate.

 

The Company currently plans to satisfy our cash requirements for the next 12 months through our cash on hand and additional borrowings. The Company may be unable to obtain debt or equity financing to fund continuing operations and planned business acquisitions. Management believes it can satisfy our cash requirements so long as we are able to obtain the necessary financing. The Company expects that any money borrowed will be used during the next 12 months to fund operating activities and business acquisitions.  

 

Contractual Obligations and Commitments.

 

The Company maintains approximately 125 vehicle leases which are recorded on the balance sheet.

 

Critical Accounting Policies.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. At both September 30, 2022 and December 31, 2021, the Company’s cash balance was $2,136,758 and $138, respectively. The Company maintains cash balances at financial institutions insured up to $250,000 by the Federal Deposit Insurance Corporation.

 

Fair Value of Financial Instruments

 

The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. The carrying amount of the Company’s short-term financial instruments approximates fair value due to the relatively short period to maturity for these instruments.

 

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Accounts Receivable and Allowance for Doubtful Accounts

 

It is the Company’s policy to record accounts receivable at the amount management expects to collect from outstanding balances. The Company generally does not require collateral to support customer receivables. The Company provides an allowance for doubtful accounts based upon a review of the outstanding accounts receivable, historical collection information and existing economic conditions. The Company determines if receivables are past due based on days outstanding, and amounts are written off when determined to be uncollectible by management. The maximum accounting loss from the credit risk associated with accounts receivable is the amount of the receivable recorded, which is the face amount of the receivable net of the allowance for doubtful accounts. As of September 30, 2022, and December 31, 2021, respectively, the Company had accounts receivable of $7,274,139 and $0, respectively, and at September 30, 2022 and December 31, 2021, the Company had $615,485 and $0 allowance for doubtful accounts, respectfully.

 

Revenue Recognition and Cost of Revenues

 

We account for revenue in accordance with FASB ASC Topic 606, Revenue from Contracts with Customers. Under that standard, revenue is recognized at a point in time or over time when performance obligations are fulfilled by delivery of goods or services to the customer. The core principals of revenue recognition under ASC 606 include the following five criteria: 1) Identify the contract with the customer; 2) Identify the performance obligations in the contract; 3) Determine the transaction price; 4) Allocate the transaction price to the performance obligations in the contract; and 5) Recognize revenue when (or as) we satisfy a performance obligation.

 

Equity–based compensation

 

The Company recognizes compensation expense for all equity–based payments in accordance with ASC 718 “Compensation – Stock Compensation”. Under fair value recognition provisions, the Company recognizes equity–based compensation net of an estimated forfeiture rate and recognizes compensation cost only for those shares expected to vest over the requisite service period of the award.

 

The fair value of an option award is estimated on the date of grant using an option pricing model when quoted market prices are not available. Determining the appropriate option pricing model and calculating the fair value of equity–based payment awards require the use of assumptions that may be subjective. The assumptions used in calculating the fair value of equity–based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and the Company uses different assumptions, the equity–based compensation could be materially different from amounts recorded in the financial statements.

 

During the nine months ended September 30, 2022 and 2021, the Company had no equity-based payment awards outstanding and did not issue any equity-based payments. The Company did not record any expense or liabilities for equity-based payment awards for the nine months ended September 30, 2022 and 2021.

 

Income Taxes

 

The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

 

FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of September 30, 2022 and December 31, 2021. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties as of September 30, 2022 and December 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.

 

The Company may be subject to potential examination by federal, state, and city taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions, and compliance with federal, state, and city tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.

 

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Earnings (Loss) Per Share

 

The Company computes net loss per share in accordance with ASC 260, Earnings Per Share, which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

 

For the nine-month periods ended September 30, 2022 and 2021, there were no dilutive instruments as the Company did not have any convertible debt and/or equity instruments issued and outstanding as of these dates.

 

As of September 30, 2022, we did not have any off-balance sheet arrangements, which have or are reasonably likely to have a material adverse effect on our financial condition, results of operations or liquidity.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

 

Not applicable.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2022. This evaluation was accomplished under the supervision and with the participation of our chief financial officer / principal executive officer and our financial consultants who concluded that our disclosure controls and procedures are effective to ensure that all material information required to be filed in the annual report on Form 10-K has been made known to them. The evaluation did not include a 404A assessment. For purposes of this section, the term disclosure controls and procedures mean controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act (15 U.S.C. 78a et seg.) is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure, controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the “Act”) is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Controls over Financial Reporting

 

The Company has not made any changes in its internal controls over financial reporting that occurred during the period covered by this report on Form 10-Q that have materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

 

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PART II

 

ITEM 1 LEGAL PROCEEDINGS

  

The Company is not involved in any material legal proceedings.

 

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

  

None.

 

ITEM 3. Default Upon Senior Securities

 

None.

 

ITEM 4. Mine Safety Disclosures

 

Not applicable.

 

ITEM 5. Other Information

 

None.

 

ITEM 6. Exhibits

 

Exhibit Number   Description of Exhibits
2.1   Asset Purchase Agreement, effective August 31, 2022, by and between the Company and Multiband Global Resources, LLC. (3).
2.2   Amendment to Asset Purchase Agreement, effective November 16, 2022, by and between the Company and Multiband Global Resources, LLC. (6).
3.1   Articles of Incorporation. (1).
3.2   Certificate of Amendment to Articles of Incorporation. (1).
3.3   Amended and Restated Bylaws. (2).
3.4   Certificate of Withdrawal of Certificate for the Certificate of Designation of Preferences, Rights and Limitations of Series A Preferred Stock.(3).
4.1   Certificate of Designation of Series A Convertible Preferred Stock. (3).
4.2   Certificate of Designation of Series B Convertible Preferred Stock. (3).
4.3   Secured Promissory Note by and between the Company and GNET ATC, Inc. (4).
4.4   Security Agreement by and between the Company and GNET ATC, Inc. (4).
4.5   Promissory Note by and between the Company and Specialty Capital Lenders LLC. (4).
10.1   Patent Assignment Agreement, effective August 22, 2022, by and between the Company and Josef Faig. (5).
31.1   Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002.
31.2   Certification of Chief Financial Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002.
32.1   Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes- Oxley Act of 2002.
101.INS*   XBRL Instance Document.
101.SCH*   XBRL Taxonomy Extension Schema Document.
101.CAL*   XBRL Calculation Linkbase Document.
101.DEF*   XBRL Taxonomy Definition Linkbase
101.LAB*   XBRL Taxonomy Labels Linkbase Document.
101.PRE*   XBRL Taxonomy Presentation Linkbase Document.
104   Cover Page Interactive Data File. (formatted as Inline XBRL and contained in Exhibit 101.)

(1) Incorporated by reference to the Exhibit filed with the Form 10 filed by the Company with the SEC on August 2, 2021.

(2) Incorporated by reference to the Exhibit filed with the Form 8-K filed by the Company with the SEC on October 10, 2022.

(3) Incorporated by reference to the Exhibit filed with the Form 8-K filed by the Company with the SEC on September 6, 2022.

(4) Incorporated by reference to the Exhibit filed with the Form 10-K filed by the Company with the SEC on May 27, 2022.

(5) Incorporated by reference to the Exhibit filed with the Form 8-K filed by the Company with the SEC on August 25, 2022.

(6) Incorporated by reference to the Exhibit filed with the Form 8-K filed by the Company with the SEC on November 16, 2022.

 

 

*XBRL related information in Exhibit 101 to this Quarterly Report shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

 

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Dated: November 18, 2022

 

American Metals Recovery and Recycling, Inc.

 

 

By: /s/ James Frinzi    
  James Frinzi    
  Chief Executive Officer    

 

 

 

By: /s/ Jeremie Peterkin    
  Jeremie Peterkin    
  Chief Financial Officer    

 

 

 

Pursuant to the requirements of 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.

 

Date:  November 18, 2022 /s/ James Frinzi  
  James Frinzi  
  Director  

 

 

Date:  November 18, 2022 /s/ Jeremie Peterkin  
  Jeremie Peterkin  
  Director  

 

 

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