Notes
to Condensed Consolidated Financial Statements
June
30, 2017
(Unaudited)
1.
Nature of Business and Ability to Continue as a Going Concern
Arvana
Inc. (“our”, “we”,”us” and the “Company”) was incorporated under the laws of the
State of Nevada as Turinco, Inc. on September 16, 1977. On July 24, 2006, the shareholders approved a change of the Company’s
name from Turinco, Inc. to Arvana Inc.
These
condensed consolidated financial statements for the six month period ended June 30, 2017, include the accounts of the Company
and its subsidiary Arvana Networks Inc. (including its wholly-owned subsidiaries, Arvana Participaçōes S.A. and Arvana
Comunicações do Brasil S. A. The Company has ceased all operations in its subsidiary companies, and has written-off
or disposed of all assets in the subsidiary companies, consequently they are now all considered to be inactive subsidiaries.
Our
reporting currency and functional currency is the United States dollar (“US Dollar”) and the accompanying condensed
consolidated financial statements have been expressed in US Dollars.
These
condensed consolidated financial statements have been prepared on a going concern basis, which assumes the realization of assets
and settlement of liabilities in the normal course of business. For the six month period ended June 30, 2017, the Company recognized
a net loss of $116,414 as a result of general administrative expenses, interest expenses and foreign exchange losses. At June
30, 2017, the Company had a working capital deficiency of $2,368,775. These conditions raise substantial doubt about the Company’s
ability to continue as a going concern.
Accordingly,
the Company will require continued financial support from its shareholders and creditors until it is able to generate sufficient
cash flow from operations on a sustained basis. There is substantial doubt that the Company will be successful at achieving these
results. Failure to obtain the ongoing support of its shareholders and creditors may make the going concern basis of accounting
inappropriate, in which case the Company’s assets and liabilities would need to be recognized at their liquidation values.
These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset
amounts and classification of liabilities that might arise from this uncertainty.
Arvana
Inc.
Notes
to Condensed Consolidated Financial Statements
June
30, 2017
(Unaudited)
2.
Summary of Significant Accounting Policies
Basis
of presentation
The
Company is in the process of transacting a business opportunity and has minimal operating levels. The Company’s fiscal year
end is December 31. The accompanying condensed interim consolidated financial statements of Arvana Inc. for the six months ended
June 30, 2017 and 2016, have been prepared in accordance with accounting principles generally accepted in the United States (“US
GAAP”) for financial information with the instructions to Form 10-Q and Regulation S-X. Results are not necessarily indicative
of results which may be achieved in the future. Although they are unaudited, in the opinion of management, they include all adjustments,
consisting only of normal recurring items, necessary for a fair presentation. Results are not necessarily indicative of results
which may be achieved in the future. The condensed consolidated interim financial statements and notes appearing in this report
should be read in conjunction with our consolidated audited financial statements and related notes thereto, together with Management’s
Discussion and Analysis of Financial Condition and Results of Operations, contained in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2016, as filed with the Securities and Exchange Commission (“SEC”) on April 7, 2017.
Use
of Estimates
The
preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates. These estimates include the recognition of deferred tax assets based on the change in unrecognized deductible
temporary tax differences.
Financial
instruments
The
Company uses the following methods and assumptions to estimate the fair value of each class of financial instruments for which
it is practicable to estimate such values:
Cash
- the carrying amount approximates fair value because the amounts consist of cash held at a bank.
Accounts
payable and accrued liabilities and loans payable - the carrying amount approximates fair value due to the short-term nature of
the obligations.
Arvana
Inc.
Notes
to Condensed Consolidated Financial Statements
June
30, 2017
(Unaudited)
2.
Summary of Significant Accounting Policies (continued)
Financial
instruments (continued)
The
estimated fair values of the Company's financial instruments as of June 30, 2017 and December 31, 2016 follows:
|
|
June
30,
2017
|
|
December
31,
2016
|
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
Cash
|
|
$
|
12,984
|
|
|
$
|
12,984
|
|
|
$
|
6,045
|
|
|
$
|
6,045
|
|
Accounts payable and accrued liabilities
|
|
|
1,019,155
|
|
|
|
1,019,155
|
|
|
|
955,632
|
|
|
|
955,632
|
|
Convertible loan
|
|
|
43,751
|
|
|
|
43,751
|
|
|
|
35,417
|
|
|
|
35,417
|
|
Loans
payable to stockholders
|
|
|
585,659
|
|
|
|
585,659
|
|
|
|
564,399
|
|
|
|
564,399
|
|
Loans payable to related party
|
|
|
130,269
|
|
|
|
130,269
|
|
|
|
129,556
|
|
|
|
129,556
|
|
Loans
payable
|
|
|
65,506
|
|
|
|
65,506
|
|
|
|
47,448
|
|
|
|
47,448
|
|
Amount due to related parties
|
|
|
537,419
|
|
|
|
537,419
|
|
|
|
525,954
|
|
|
|
525,954
|
|
The
following table presents information about the assets that are measured at fair value on a recurring basis as of June 30, 2017,
and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. In general,
fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets. Fair values
determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. Fair
values determined by Level 3 inputs are unobservable data points for the asset or liability, and included situations where there
is little, if any, market activity for the asset:
|
|
June
30,
2017
|
|
Quoted
Prices
in Active
Markets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
$
|
12,984
|
|
|
$
|
12,984
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The
fair value of cash is determined through market, observable and corroborated sources.
Arvana
Inc.
Notes
to Condensed Consolidated Financial Statements
June
30, 2017
(Unaudited)
2.
Summary of Significant Accounting Policies (continued)
Recent
accounting pronouncements
In
January 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2016-01,
Financial Instruments—Overall
(Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.
The update requires several
changes with respect to recognition and measurement as well as disclosure requirements with respect to financial instruments).
The amendments to (ASU) 2016-01 are effective for the annual period ending after December 15, 2017, and for annual periods and
interim periods thereafter. Early application is permitted. The Company is in the process of evaluating the prospective impact
that (ASU) 2016-01 will have on its balance sheet.
In
February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2016-02,
Leases (Topic 842).
The standard requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating
leases. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition.
The standard requires lessors to classify leases as either sales-type, finance or operating. A sales-type lease occurs if the
lessor transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee. If risks and rewards
are conveyed without the transfer of control, the lease is treated as a financing lease. If the lessor does not convey risks and
rewards or control, an operating lease results. The standard will become effective for the Company beginning January 1, 2019.
The Company is currently assessing the impact adoption of this standard will have on its consolidated results of operations, financial
condition, cash flows, and financial statement disclosures
In
March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Updates ASU 2016-9,
Compensation—Stock
Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting
, requiring certain changes to recognition
and measurement as well as disclosure of Share-Based Payments. The standard will become effective for the Company beginning January
1, 2017. The Company is currently assessing the impact adoption of this standard will have on its consolidated results of operations,
financial condition, cash flows, and financial statement disclosures.
In
June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Updates ASU 2016-13,
Financial Instruments—Credit
Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
, requiring certain changes to the recognition and
measurement as well as disclosure of incurred and expected credit losses. The standard will become effective for the Company beginning
January 1, 2020. The Company is currently assessing the impact adoption of this standard will have on its consolidated results
of operations, financial condition, cash flows, and financial statement disclosures.
In
November 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Updates ASU 2016-18, requiring that
restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period
and end-of- period total cash amounts shown on the statement of cash flows. Consequently, transfers between cash and restricted
cash will not be presented as a separate line item in the operating, investing or financing sections of the cash flow statement.
The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods
within those fiscal years. The Company considers that ASU 2016-18 will have a limited impact on the presentation of the statement
of cash flows.
Arvana
Inc.
Notes
to Condensed Consolidated Financial Statements
June
30, 2017
(Unaudited)
2.
Summary of Significant Accounting Policies (continued)
Recent
accounting pronouncements (continued)
In
March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Updates ASU 2017-07, requiring certain
changes to the presentation of the expenses related to postretirement benefits accounted for under Topic 715. The amendments are
effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal
years. The Company is currently assessing the impact adoption of this standard will have on its consolidated results of operations,
financial condition, cash flows, and financial statement disclosures.
3.
Amounts Due to Related Parties and Loans Payable to Stockholders
From
February, 2007, until June 30, 2017, the Company received a number of loans from stockholders, related parties and unrelated third
parties. As of June 30, 2017, the Company had received loans of $585,659 (Euro 225,000; CAD$ 72,300; $273,107) (December 31, 2016
- $564,399: Euro 225,000; CAD$ 72,300; $273,107) from stockholders, loans of $130,269 (CAD$ 27,600; $109,000) (December 31, 2016
– $129,556: CAD$ 27,600; $109,000) from a related party and loans of $65,506 (CAD$ 10,000; $40,000) (December 31, 2016 –
$47,448: CAD$10,000; $40,000) from unrelated third parties. All of the loans bear interest at 6% per annum. The loans were made
in 3 different currencies, Euros, Canadian Dollars and US Dollars. All amounts reflected on these consolidated financial statements
are expressed in US Dollars. Repayment of the loans is due on closing of any future financing arrangement by the Company. The
balance of accrued interest of $390,287 and $349,186 is included in accounts payable and accrued expenses at June 30, 2017, and
December 31, 2016, respectively. Interest expense recognized on these loans was $16,872 and $33,470 for the three and six months
ended June 30, 2017, respectively, compared to $12,082 and $24,277 for the three and six months ended June 30, 2016, respectively.
The Company also received a convertible loan of $50,000 from CaiE Food Partnership Ltd. as per Note 7. This loan bears interest
of 10% and is convertible into common shares of the Company at a price of $0.20 per share. This loan matures on November 17, 2017.
The Company also received an additional loan of $17,800 from CaiE Food Partnership Ltd. with terms and conditions of this loan
to be finalized at a later date.
At
June 30, 2017, and December 31, 2016, the Company had amounts due to related parties of $537,419 and $525,954, respectively. This
amount includes $136,100 at June 30, 2017, and December 31, 2016, payable to two former directors and a current director for services
rendered during 2007. This amount is to be paid part in cash and part in stock at a future date with the number of common shares
determined by the fair value of the shares on the settlement date. The amounts owing bear no interest, are unsecured, and have
no fixed terms of repayment.
Arvana
Inc.
Notes
to Condensed Consolidated Financial Statements
June
30, 2017
(Unaudited)
4.
Common stock
During
the six months ended June 30, 2017 and year ended December 31, 2016, the Company had issued nil shares and 148,900 shares respectively.
Shares
issued during the year ended December 31, 2016 were valued at $0.23 a share in exchange for the extinguishment of debt in the
amount of $74,450, resulting in a gain on settlement of debt of $40,203, an amount comprised of principal and accrued interest
on a loan from 2008.
5.
Segmented Information
The
Company has no reportable segments.
6.
Related Party Transactions
Other
than amounts payable to related parties as disclosed below and in Note 3, the Company also incurred consulting fees of $4,481
(2016 - $5,588) paid to a company controlled by our chief executive officer during the six months ended June 30, 2017.
Our
former chief executive officer and former director entered into a consulting arrangement on a month to month basis that provided
for a monthly fee of CAD$5,000. These amounts have been accrued and are currently unpaid. This consulting arrangement ended on
May 24, 2013. As of June 30, 2017, our former chief executive officer was owed $64,507 (CAD$83,710) for services rendered as an
officer, compared to $62,347 (CAD$83,710) as at December 31, 2016. The amounts owing for past services have been included in the
total payable of $258,714 as of June 30, 2017 and $249,585 as of December 31, 2016.
Our
former chief financial officer and former director had entered into a consulting agreement on a month to month basis that provides
for a monthly fee of $2,000. These amounts have been accrued and are currently unpaid. This consulting arrangement ended on June
14, 2013. As of June 30, 2017 and December 31, 2016 our former chief financial officer was owed $58,870 for services rendered.
Our
former chief executive officer and former director is owed $258,714 for unsecured non-interest bearing amounts due on demand loaned
to the Company as of June 30, 2017, compared to $249,585 as of December 31, 2016.
Our
former chief executive officer and former director is owed $130,269 for unsecured amounts bearing 6% interest due on demand loaned
to the Company as of June 30, 2017, compared to $129,556 as of December 31, 2016.
Our
former chief executive officer and former director entered into a debt assignment agreement during the year ended December 31,
2016 to assume $100,000 in unpaid loans and $83,357 in unpaid amounts payable from a third party.
Our
other former officers are owed a total of $83,734 for their prior services rendered as officers as at June 30, 2017, compared
to $81,399 as of December 31, 2016.
A
director of the Company is owed $60,000 as of June 30, 2017 and December 31, 2016, for services rendered as a director during
2007. Two former directors of the Company are owed $76,100 as of June 30, 2017 and December 31, 2016 for services rendered as
directors during 2007.
Arvana
Inc.
Notes
to Condensed Consolidated Financial Statements
June
30, 2017
(Unaudited)
7.
Convertible Loan
On
May 18, 2016, the Company entered into a Convertible Promissory Note (“Convertible Note”) agreement pursuant to which
the Company received $50,000 (2015 - $Nil) from CaiE Food Partnership Ltd. (“CaiE”). The $50,000 Convertible Note
is convertible into common stock, in whole or in part, at any time and from time to time before maturity at the option of the
holder at a fixed price of $0.20 per share. Due to the conversion price being lower than the closing share price on the grant
date, a beneficial conversion feature resulted from this issuance. The Convertible Note accrues interest at a rate equal to 10%
per year. During the six months ended June 30, 2017 and year ended December 31, 2016, $8,334 and $10,417 of the discount was amortized,
respectively. As at June 30, 2017 and December 31, 2016, the balance of the Convertible Note was $43,751 and $35,417 respectively.
On
March 24, 2017, the Company obtained an additional loan from CaiE in the amount of $17,800. The terms and conditions of this loan
have not been finalized.
8.
Subsequent Events
The
Company evaluated its June 30, 2017, financial statements for subsequent events through the date the financial statements were
issued. The Company is not aware of any subsequent events which would require recognition or disclosure in the financial statements
except as follows:
On
August 11, 2017, the Company received an advance of $10,000 from CaiE Food Partnership Ltd. The terms and conditions of the advance
are to be determined.