Notes
to Consolidated Financial Statements
June
30, 2018
(Unaudited)
Note
1 - Organization and Nature of Operations
Argentum
47, Inc., formerly Global Equity International Inc. (the “Company” or “ARG”), a reporting company since
June 21, 2012, was organized under the laws of the state of Nevada on October 1, 2010. Global Equity Partners, Plc. (“GEP”),
a private company, was organized under the laws of the Republic of Seychelles on September 2, 2009. On November 15, 2010, GEP
executed a reverse recapitalization with ARG. On August 22, 2014, we formed a Dubai subsidiary of GEP called GE Professionals
DMCC. On June 10, 2016, ARG incorporated its wholly owned subsidiary, called GEP Equity Holdings Limited (“GEP EH”),
under the laws of the Republic of Seychelles. On March 14, 2017, the Company´s board of directors unanimously voted to transfer
the ownership of GE Professionals DMCC (Dubai) to GEP EH. On June 5, 2017, the Company sold 100% of the issued and outstanding
common stock of GEP to a citizen of the Republic of Thailand by entering into a Stock Purchase and Debt Assumption Agreement.
On December 12, 2017, ARG incorporated another wholly owned subsidiary, called Argentum 47 Financial Management Limited (“Argentum”),
under the Companies Act 2006 of England and Wales as a private limited company.
On
March 29, 2018, the Company formally changed its name from Global Equity International, Inc. to Argentum 47, Inc.
The
Company´s consolidated revenues are entirely generated from business consulting services and employment placement services.
Note
2 - Basis of Presentation
The
accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission
for interim financial information. Accordingly, they do not include all the information and disclosures necessary for a comprehensive
presentation of financial position, results of operations, or cash flows. It is management’s opinion, however, that all
material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statements
presentation.
The
unaudited interim consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form
10-K, which contains the audited financial statements and notes thereto, together with the Management’s Discussion and Analysis,
for the year ended December 31, 2017. The interim results for the period ended June 30, 2018 are not necessarily indicative of
results for the full fiscal year.
Note
3 - Going Concern
The
accompanying unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business. These consolidated financial statements do not
include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be
necessary should the Company be unable to continue as a going concern.
As
reflected in the accompanying unaudited consolidated financial statements, the Company had a loss from operations of $351,137
and $623,784 for the three and six months ended June 30, 2018 respectively; net cash used in operations of $452,573 for the six
months ended June 30, 2018; and accumulated deficit of $8,845,583 as of June 30, 2018. It is management’s opinion that these
factors raise substantial doubt about the Company’s ability to continue as a going concern for twelve months from the issuance
date of this report.
Argentum
47, Inc. and Subsidiaries
(Formerly
known as Global Equity International, Inc.)
Notes
to Consolidated Financial Statements
June
30, 2018
(Unaudited)
The
ability for the Company to continue its operations is primarily dependent on:
|
|
a)
|
Continually
engaging with new clients, and
|
|
|
b)
|
Consummating
and executing current engagements, and
|
|
|
c)
|
Continuing
to receive fixed funding, via equity or debt, for acquisition and growth; and
|
|
|
d)
|
Acquiring
and managing various financial advisory firms with funds under management located around the globe.
|
Note
4 - Summary of Significant Accounting Policies
Principles
of Consolidation
Argentum
47, Inc. (“ARG”) is the parent company of its two 100% owned subsidiaries called GEP Equity Holdings
Limited (“GEP EH”) and Argentum 47 Financial Management Limited (“Argentum”). Up to June 5, 2017, ARG
also owned 100% shareholding of a subsidiary called Global Equity Partners Plc., which was sold in 2017 pursuant to a stock purchase
and debt assumption agreement. GEP EH is the parent company of its 100% owned subsidiary, GE Professionals DMCC (Dubai). All significant
inter-company accounts and transactions have been eliminated in consolidation.
Use
of Estimates
The
preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting
period.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect
of a condition, situation, or set of circumstances that existed at the date of the financial statements, which management considered
in formulating its estimate could change in the near term due to one or more future non-confirming events. Accordingly, the actual
results could differ from those estimates. Significant estimates in the accompanying financial statements include allowance for
doubtful accounts and loans, estimates of fair value of securities received for services, estimates of fair value of securities
held, depreciation of fixed assets, valuation allowance on deferred tax assets, derivative valuations and equity valuations for
non-cash equity grants.
Risks
and Uncertainties
The
Company’s operations are subject to significant risk and uncertainties including financial, operational, competition and
potential risk of business failure. The risk of social and governmental factors is also a concern since the Company is headquartered
in Dubai.
Cash
Equivalents
The
Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At June
30, 2018 and December 31, 2017, the Company had no cash equivalents.
Argentum
47, Inc. and Subsidiaries
(Formerly
known as Global Equity International, Inc.)
Notes
to Consolidated Financial Statements
June
30, 2018
(Unaudited)
Comprehensive
Income / (Loss)
The
Comprehensive Income Topic of the FASB Accounting Standards Codification establishes standards for reporting and presentation
of comprehensive income and its components in a full set of financial statements. Comprehensive income from January 1, 2018 through
June 30, 2018, includes only foreign currency translation gain, and is presented in the Company’s consolidated statements
of comprehensive income. Pursuant to ASU 2016-01, the Company reclassified the opening balance of unrealized gain on available
for sale marketable securities from other comprehensive income to retained earnings as a cumulative effect adjustment as at January
1, 2018.
Changes
in Accumulated Other Comprehensive Income (Loss) by Component during the six months ended June 30, 2018 were as follows:
|
|
|
Foreign
Currency
Translation Adjustment
|
|
|
Unrealized
gain on available for sale marketable securities
|
|
|
Total
|
|
|
Balance,
December 31, 2017
|
|
$
|
120
|
|
|
$
|
1,181,675
|
|
|
$
|
1,181,795
|
|
|
Other
comprehensive loss before reclassification
|
|
|
(302
|
)
|
|
|
-
|
|
|
|
(302
|
)
|
|
Amounts
reclassified from accumulated other comprehensive income as a cumulative effect adjustment
|
|
|
-
|
|
|
|
(1,181,675
|
)
|
|
|
(1,181,675
|
)
|
|
Net
current-period other comprehensive income
|
|
|
(302
|
)
|
|
|
(1,181,675
|
)
|
|
|
(1,181,977
|
)
|
|
Balance,
June 30, 2018
|
|
$
|
(182
|
)
|
|
$
|
-
|
|
|
$
|
(182
|
)
|
Accounts
Receivable and Allowance for Doubtful Accounts
The
Company recognizes accounts receivable in connection with the services provided. The Company recognizes an allowance for doubtful
accounts based on an analysis of current receivables aging and expected future write-offs, as well as an assessment of specific
identifiable customer accounts considered at risk or uncollectible. There was no allowance for bad debt at June 30, 2018 and December
31, 2017.
Foreign
currency policy
The
Company’s accounting policies related to the consolidation and accounting for foreign operations are as follows: The accompanying
consolidated financial statements are presented in U.S. dollars. The functional currency of the Company’s Dubai subsidiary
is the Arab Emirates Dirham (“AED”) and the functional currency of the Company’s UK subsidiary
is Great Britain Pounds (“GBP”). All foreign currency balances and transactions are translated into
United States dollars (“$” and/or “USD”) as the reporting currency. Assets and liabilities
are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate
of exchange prevailing during the reporting period. Equity transactions are translated at each historical transaction date spot
rate. Translation adjustments arising from the use of different exchange rates from period to period are included as a component
of our stockholders’ equity (deficit) as “Accumulated other comprehensive income (loss).” Gains and losses
resulting from foreign currency transactions are included in the non-operating income or expenses of the statement of operations.
Argentum
47, Inc. and Subsidiaries
(Formerly
known as Global Equity International, Inc.)
Notes
to Consolidated Financial Statements
June
30, 2018
(Unaudited)
Investments
(A)
Classification of Securities
Marketable
Securities
As
of January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2016-01, “Financial Instruments
- Overall (Topic 825-10): “Recognition and Measurement of Financial Assets and Financial Liabilities,” which
amends the guidance on the classification and measurement of financial instruments. Some of the amendments in ASU 2016-01 include
the following: 1) requires equity investments (except those accounted for under the equity method of accounting or those that
result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income;
2) It simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative
assessment to identify impairment; 3) It requires public business entities to use the exit price notion when measuring
the fair value of financial instruments for disclosure purposes; 4) It requires an entity to present separately in other
comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific
credit risk when the entity has elected to measure the liability at fair value; among others. After evaluating the potential impact
of this guidance on our consolidated financial statements, our management has reversed $1,181,675 from accumulated other
comprehensive income to opening retained earnings as a cumulative effect adjustment on January 1, 2018, using the modified
retrospective method.
At
the time of the acquisition, a marketable security is designated as held-to-maturity, available-for-sale or trading, which depends
on the ability and intent to hold such security to maturity. Securities classified as trading and available-for-sale are reported
at fair value, while securities classified as held-to-maturity are reported at amortized cost.
All
changes in the fair value of the securities are reported in the earnings as they occur in a single line item “Gain on available
for sale marketable securities, net.” Therefore, no gain/loss is recognized on the sale of securities.
Cost
Method Investments
Securities
that are not classified as marketable securities are accounted for under the cost method. These securities are recorded at their
original cost basis and are subject to impairment testing.
(B)
Other than Temporary Impairment
The
Company reviews its equity investment portfolio for any unrealized losses that would be deemed other than temporary and require
the recognition of an impairment loss in the statement of operations. If the cost of an investment exceeds its fair value, the
Company evaluates, among other factors, general market conditions, the duration and extent to which the fair value is less than
cost, and the Company’s intent and ability to hold the investments. Management also considers the type of security, related-industry
and sector performance, as well as published investment ratings and analyst reports, to evaluate its portfolio. Once a decline
in fair value is determined to be other than temporary, an impairment charge is recorded and a new cost basis in the investment
is established. If market, industry, and/or investee conditions deteriorate, the Company may incur future impairments. The Company
did not record any permanent impairment during the six months ended June 30, 2018 or June 30, 2017.
Argentum
47, Inc. and Subsidiaries
(Formerly
known as Global Equity International, Inc.)
Notes
to Consolidated Financial Statements
June
30, 2018
(Unaudited)
Fixed
Assets
Fixed
assets are stated at cost of acquisition less accumulated depreciation. Depreciation is provided based on estimated useful lives
of the assets. Cost of improvements that substantially extend the useful lives of assets are capitalized. Repairs and maintenance
expenses are charged to expense when incurred. In case of sale or disposal of an asset, the cost and related accumulated depreciation
are removed from the consolidated financial statements.
Beneficial
Conversion Feature
For
conventional convertible debt where the rate of conversion is below market value, the Company records any “beneficial conversion
feature” (“BCF”) intrinsic value as additional paid in capital and related debt discount.
When
the Company records a BCF, the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective
debt instrument. The discount is amortized over the life of the debt. If a conversion of the underlying debt occurs, a proportionate
share of the unamortized amounts is immediately expensed.
Debt
Issue Costs
The
Company may pay debt issue costs in connection with raising funds through the issuance of debt whether convertible or not or with
other consideration. These costs are recorded as debt discounts and are amortized over the life of the debt to the statement of
operations as amortization of debt discount.
Original
Issue Discount
If
debt is issued with an original issue discount, the original issue discount is recorded to debt discount, reducing the face amount
of the note and is amortized over the life of the debt to the statement of operations as amortization of debt discount. If a conversion
of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
Valuation
of Derivative Instruments
ASC
815 “Derivatives and Hedging” requires that embedded derivative instruments be bifurcated and assessed, along with
free-standing derivative instruments such as warrants, on their issuance date and measured at their fair value for accounting
purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option pricing formula. Upon conversion
of a note where the embedded conversion option has been bifurcated and accounted for as a derivative liability, the Company records
the shares at fair value, relieves all related notes, derivatives and debt discounts and recognizes a net gain or loss on debt
extinguishment.
Revenue
Recognition
As
of January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers
(“ASC 606”), that affects the timing of when certain types of revenue will be recognized.
Argentum
47, Inc. and Subsidiaries
(Formerly
known as Global Equity International, Inc.)
Notes
to Consolidated Financial Statements
June
30, 2018
(Unaudited)
Revenue
is recognized when the Company satisfies a performance obligation by transferring services promised in a contract to a customer,
in an amount that reflects the consideration that the Company expects to receive in exchange for those services. A single contract
could include one or multiple performance obligations. For those contracts that have multiple performance obligations, the Company
allocates the total transaction price to each performance obligation based on its relative standalone selling price, which is
determined based on the Company´s overall pricing objectives, taking into consideration market conditions and other factors.
Performance obligations in the Company´s contracts generally include general due diligence, assistance in designing client’s
capitalization strategy, introductions to potential capital funding sources and Human Resources / Employment Placements.
Revenue
is recognized by evaluating our revenue contracts with customers based on the five-step model under ASC 606:
|
|
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 separate performance obligations; and
|
|
|
5.
|
Recognize
revenue when (or as) each performance obligation is satisfied.
|
The
Company generates the majority of its revenue by providing business consulting services and employment placement services to its
clients. Most of the Company´s business consultancy services contracts are based on a combination of both fixed fee arrangements
and performance based or contingent arrangement. In addition, the Company´s employment placement contracts are based on
fixed fee arrangements only.
In
fixed-fee billing arrangements, the Company agrees to a pre-established fee in exchange for a predetermined set of professional
services. The Company sets the fees based on its estimates of the costs and timing for completing the engagements. The Company
generally recognizes revenues under fixed fee billing arrangements using the input method, which is based on work completed to
date versus the Company’s estimates of the total services to be provided under the engagement.
Performance
based or contingent arrangements represent forms of variable consideration. In these arrangements, the Company´s fees are
linked to the attainment of contractually defined objectives with its clients, such as receiving an agreed post-funding equity
position of the client´s stock or assisting the client in achieving a specific business objective. These arrangements include
conditional payments, commonly referred to as cash success fees and/or equity success fees. The Company typically satisfies its
performance obligations for these services over time as the related contractual objectives are met. The Company determines the
transaction price based on the expected probability of achieving the agreed upon outcome and recognize revenue earned to date
by applying the input method.
Reimbursable
expenses, including those relating to travel, out-of-pocket expenses, outside consultants and other outside service costs, are
generally included in revenues, and an equivalent amount of reimbursable expenses is included in costs of services in the period
in which the expense is incurred.
The
payment terms and conditions in the Company´s customer contracts vary. Differences between the timing of billings and the
recognition of revenue are recognized as either accrued accounts receivable, an asset or deferred revenues or as a liability.
Revenues recognized for services performed but not yet billed to clients are recorded as accrued accounts receivable. Client prepayments
and retainers are classified as deferred revenues and recognized over future periods as earned in accordance with the applicable
engagement agreement.
Argentum
47, Inc. and Subsidiaries
(Formerly
known as Global Equity International, Inc.)
Notes
to Consolidated Financial Statements
June
30, 2018
(Unaudited)
All
revenues are generated from clients whose operations are based outside of the United States. For the six months ended June 30,
2018 and 2017, the Company had the following concentrations of revenues with customers:
|
Customer
|
|
Location
|
|
June
30, 2018
|
|
|
June
30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
SAC
|
|
United
Kingdom and Norway
|
|
|
0
|
%
|
|
|
46.16
|
%
|
|
SCL
|
|
United
Kingdom
|
|
|
0
|
%
|
|
|
4.62
|
%
|
|
TLF
|
|
United
Arab Emirates
|
|
|
0
|
%
|
|
|
5.93
|
%
|
|
FAD
|
|
Saudi
Arabia
|
|
|
0
|
%
|
|
|
10.46
|
%
|
|
AGL
|
|
United
Arab Emirates
|
|
|
0
|
%
|
|
|
1.88
|
%
|
|
DHG
|
|
United
Arab Emirates
|
|
|
0
|
%
|
|
|
16.33
|
%
|
|
FAT
|
|
United
Arab Emirates
|
|
|
0
|
%
|
|
|
1.97
|
%
|
|
EEC
|
|
Saudi
Arabia
|
|
|
41.68
|
%
|
|
|
12.19
|
%
|
|
DUO
|
|
Sri
Lanka
|
|
|
2.85
|
%
|
|
|
0.46
|
%
|
|
GRL
|
|
United
Kingdom
|
|
|
42.69
|
%
|
|
|
0
|
%
|
|
OCS
|
|
United
Arab Emirates
|
|
|
12.78
|
%
|
|
|
0
|
%
|
|
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
At
June 30, 2018 and December 31, 2017, the Company had the following concentrations of accounts receivables with customers:
|
Customer
|
|
June
30, 2018
|
|
|
December
31, 2017
|
|
|
|
|
|
|
|
|
|
|
EEC
|
|
|
47.79
|
%
|
|
|
94.82
|
%
|
|
DUO
|
|
|
3.26
|
%
|
|
|
5.18
|
%
|
|
GRL
|
|
|
48.95
|
%
|
|
|
0
|
%
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
Share-based
payments
The
Company recognizes all forms of share-based payments to employees, including stock option grants, warrants and restricted stock
grants at their fair value on the grant date, which is based on the estimated number of awards that are ultimately expected to
vest.
Share
based payment awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered
or the fair value of the share-based payment, whichever is more readily determinable as of the measurement date. Amounts recorded
prior to the measurement date are adjusted to fair value at each reporting period until a measurement date is achieved. The grants
are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period.
Share
based payments, excluding restricted stock, are valued using a Black-Scholes pricing model.
Argentum
47, Inc. and Subsidiaries
(Formerly
known as Global Equity International, Inc.)
Notes
to Consolidated Financial Statements
June
30, 2018
(Unaudited)
When
computing fair value, the Company considered the following variables:
|
|
●
|
The
risk-free interest rate assumption is based on the U.S. Treasury yield for a period consistent with the expected term of the
share based payment in effect at the time of the grant.
|
|
|
●
|
The
expected term is developed by management estimate.
|
|
|
●
|
The
Company has not paid any dividends on common stock since inception and does not anticipate paying dividends on its common
stock in the near future.
|
|
|
●
|
The
expected volatility is based on management estimates which are based upon our historical volatility.
|
|
|
●
|
The
forfeiture rate is based on historical experience.
|
Earnings
per Share
The
basic net earnings (loss) per share are computed by dividing net income (loss) by weighted average number of shares of common
stock outstanding during each period. Diluted earnings (loss) per share are computed by dividing net income (loss) by the weighted
average number of shares of common stock and common stock equivalents outstanding during the period.
As
at June 30, 2018 and 2017, the Company had common stock equivalents of 61,750,000 and 33,854,186 common shares respectively, in
the form of convertible notes, which, if converted, may be dilutive. See Note 7(F).
As
at June 30, 2018 and 2017, the Company had common stock equivalents of 770,000,000 and 450,000,000 common shares respectively,
in the form of convertible preferred stock, which, if converted, may be dilutive. See Note 8(A).
|
|
|
Number
of Common Shares
|
|
|
|
|
June
30, 2018
|
|
|
June
30, 2017
|
|
|
Potential
dilutive common stock
|
|
|
|
|
|
|
|
|
|
Convertible
notes
|
|
|
61,750,000
|
|
|
|
33,854,186
|
|
|
Series
“B” preferred stock
|
|
|
450,000,000
|
|
|
|
450,000,000
|
|
|
Series
“C” preferred stock
|
|
|
320,000,000
|
|
|
|
-
|
|
|
Total
potential dilutive common stock
|
|
|
831,750,000
|
|
|
|
483,854,186
|
|
|
|
|
|
|
|
|
|
|
|
|
Add:
Weighted average number of common shares – Basic
|
|
|
525,534,409
|
|
|
|
|
|
|
Weighted
average number of common shares – Dilutive
|
|
|
1,357,284,409
|
|
|
|
|
|
As
of June 30, 2017, the potentially dilutive common stock equivalents were not included in the computation of net loss per share
because the effects would have been anti-dilutive due to the net losses.
As
of June 30, 2018, diluted weighted average number of common shares exceeds total authorized common shares. However, 770,000,000
common shares would result from the conversion of the preferred “B” and preferred “C” stock into common
stock. The option to convert the abovementioned preferred “B” and “C” stock into common stock cannot be
any earlier than September 27, 2020.
Fair
Value of Financial Assets and Liabilities
The
Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance
on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability,
as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that
market participants would use in pricing an asset or liability.
Argentum
47, Inc. and Subsidiaries
(Formerly
known as Global Equity International, Inc.)
Notes
to Consolidated Financial Statements
June
30, 2018
(Unaudited)
The
authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring
or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical
levels of inputs to measure fair value:
|
|
●
|
Level
1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
|
|
|
|
|
|
●
|
Level
2: Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar
assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities;
or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
|
|
|
|
|
|
●
|
Level
3: Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair
value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.
|
The
carrying amounts reported in the balance sheet for prepaid expenses, accounts receivable, accounts payable, accounts payable to
related parties and loans payable to related parties, approximate fair value are based on the short-term nature of these instruments.
The
Company measures its derivative liabilities at fair market value on a recurring basis and measures its non-marketable securities
at fair value on a non-recurring basis. Consequently, the Company may have gains and losses reported in the statement of operations.
The
following are the Company’s assets and liabilities measured at fair value on a recurring and nonrecurring basis at
June 30, 2018 and December 31, 2017, using quoted prices in active markets for identical assets (Level 1), significant other observable
inputs (Level 2), and significant unobservable inputs (Level 3):
|
|
|
June
30, 2018
|
|
|
December
31, 2017
|
|
|
Level
1 –Marketable Securities – Recurring
|
|
$
|
3,561,055
|
|
|
$
|
2,029,340
|
|
|
Level
3 – Non-Marketable Securities – Non-recurring
|
|
$
|
-
|
|
|
$
|
136
|
|
The
following section describes the valuation methodologies the Company uses to measure financial instruments at fair value:
Marketable
Securities
— The Level 1 position consists of the Company’s investment in equity securities of stock held in publically
traded companies. The valuation of these securities is based on quoted prices in active markets.
Argentum
47, Inc. and Subsidiaries
(Formerly
known as Global Equity International, Inc.)
Notes
to Consolidated Financial Statements
June
30, 2018
(Unaudited)
Changes
in Level 1 marketable securities measured at fair value for the six months ended June 30, 2018 were as follows:
|
Balance,
December 31, 2017
|
|
$
|
2,029,340
|
|
|
Securities
transferred from long term investments valued at cost
|
|
|
136
|
|
|
Sales
and settlements during the period
|
|
|
(120
|
)
|
|
Gain
on available for sale marketable securities, net
|
|
|
1,531,699
|
|
|
Balance,
June 30, 2018
|
|
$
|
3,561,055
|
|
Non-Marketable
Securities at Fair Value on a Non-Recurring Basis
— Certain assets are measured at fair value on a nonrecurring basis.
The Level 3 position consists of investments accounted for under the cost method. The Level 3 position consists
of investments in equity securities held in private companies.
Management
believes that an “other-than-temporary impairment” would be justified, as according to ASC 320-10 an investment is
considered impaired when the fair value of an investment is less than its amortized cost basis. The impairment is considered either
temporary or other-than-temporary. The accounting literature does not define other-than-temporary. It does, however, state that
other-than-temporary does not mean permanent, although, all permanent impairments are considered other-than-temporary. The literature
does provide some examples of factors, which may be indicative of an “other-than-temporary impairment,” such
as:
|
|
●
|
the
length of time and extent to which market value has been less than cost;
|
|
|
●
|
the
financial condition and near-term prospects of the issuer; and
|
|
|
●
|
the
intent and ability of the holder to retain its investment in the issuer for a period of time sufficient to allow for any anticipated
recovery in market value.
|
Management
believes that the fair value of its investment has been correctly measured, as the length of time that the stock has been less
than cost is nominal.
Changes
in Level 3 assets measured at fair value for the six months ended June 30, 2018 were as follows:
|
Balance,
December 31, 2017
|
|
$
|
136
|
|
|
Securities
received for services during the period
|
|
|
-
|
|
|
Securities
transferred to marketable securities
|
|
|
(136
|
)
|
|
Impairment
loss
|
|
|
-
|
|
|
Balance,
June 30, 2018
|
|
$
|
-
|
|
Recent
Accounting Pronouncements
There
are no new accounting pronouncements that we expect to have an impact on the Company’s financial statements except as follows:
In June 2018, the FASB issued ASU 2018-07,
Compensation – Stock Compensation (Topic 718). This update is intended to reduce cost and complexity and to improve financial
reporting for share-based payments issued to non-employees (for example, service providers, external legal counsel, suppliers,
etc.). The ASU expands the scope of Topic 718, Compensation—Stock Compensation, which currently only includes share-based
payments issued to employees, to also include share-based payments issued to non-employees for goods and services. Consequently,
the accounting for share-based payments to non-employees and employees will be substantially aligned. This standard will be effective
for financial statements issued by public companies for the annual and interim periods beginning after December 15, 2018. Early
adoption of the standard is permitted. The standard will be applied in a retrospective approach for each period presented. Management
currently does not plan to early adopt this guidance and is evaluating the potential impact of this guidance on the consolidated
financial statements as well as transition methods.
In
August 2016, the FASB issued ASU 2016-15, Statement of Cash Flow (Topic 230). This update is intended to reduce diversity in practice
in how certain transactions are classified in the statement of cash flows. The update provides new guidance regarding the classification
of debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments
made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned
life insurance policies including bank-owned life insurance policies, distributions received from equity method investments, beneficial
interests in securitized transactions, and separately identifiable cash flows and application of the predominance principle. This
standard will be effective for financial statements issued by public companies for the annual and interim periods beginning after
December 15, 2017. Early adoption of the standard is permitted. The standard will be applied in a retrospective approach for each
period presented. We have completed an initial evaluation of this standard, which requires cash payments for debt prepayment or
debt extinguishment costs should be classified as cash outflows for financing activities. We have determined that there were no
cash payments involved in debt extinguishment during the six months ended June 30, 2018; hence, there will be no
potential impact on our financial statements due to this update. We will continue to evaluate the potential impact of this guidance
on our consolidated financial statements.
Argentum
47, Inc. and Subsidiaries
(Formerly
known as Global Equity International, Inc.)
Notes
to Consolidated Financial Statements
June
30, 2018
(Unaudited)
In
February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842)” (“ASU 2016-02”). The FASB issued ASU 2016-02
to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance
sheet and disclosing key information about leasing arrangements. Under ASU 2016-02, a lessee will recognize in the statement of
financial position a liability to make lease payments (the lease liability) and a right-to-use asset representing its right to
use the underlying asset for the lease term. The amendments of this ASU are effective for reporting periods beginning after December
15, 2018, with early adoption permitted. An entity will be required to recognize and measure leases at the beginning of the earliest
period presented using a modified retrospective approach. Management currently does not plan to early adopt this guidance and
is evaluating the potential impact of this guidance on the consolidated financial statements as well as transition methods.
Note
5 – Investments
|
A.
|
Marketable
Securities at Fair Value
|
Following
is the summary of Company’s investment in marketable securities at fair value as at June 30, 2018 and December 31, 2017:
|
|
|
June
30, 2018
|
|
|
December
31, 2017
|
|
|
Company
|
|
No.
of Shares
|
|
|
Book
value
|
|
|
No.
of Shares
|
|
|
Book
value
|
|
|
Duo
World Inc. (DUUO)
|
|
|
5,935,092
|
|
|
$
|
3,561,055
|
|
|
|
3,382,233
|
|
|
$
|
2,029,340
|
|
|
|
|
|
5,935,092
|
|
|
$
|
3,561,055
|
|
|
|
3,382,233
|
|
|
$
|
2,029,340
|
|
On
January 12, 2018, the Company converted its investment in 136,600 preferred shares of Duo World Inc. valued at cost of $0.001
per share or $136 to 1,366,000 common shares of Duo World Inc. having the same cost basis of $136; no gain or loss was recorded
on this conversion. See Note 5B.
During
the six months ended June 30, 2018, the Company sold 200 common shares of Duo World Inc. at $0.60 per share or $120.
Argentum
47, Inc. and Subsidiaries
(Formerly
known as Global Equity International, Inc.)
Notes
to Consolidated Financial Statements
June
30, 2018
(Unaudited)
On
May 31, 2018, the Company received common stock dividend of 1,187,059 common shares of Duo World Inc. based on the stock split
ratio of 4:5. There was no net accounting effect of the receipt of these shares.
At
June 30, 2018, the Company revalued 5,935,092 common shares to their fair value of $0.60 per share, totaling $3,561,055.
Following is a summary of net gain on available for sale marketable securities for the six months ended June 30, 2018;
|
Net
gain recognized on marketable equity securities during the six months ended June 30, 2018
|
|
$
|
1,531,699
|
|
|
Less:
Gain recognized on marketable equity securities sold during the six months ended June 30, 2018
|
|
|
-
|
|
|
Unrealized
gain recognized during the six months ended June 30, 2018 on marketable equity securities still held at June 30, 2018
|
|
$
|
1,531,699
|
|
The
Company, through its subsidiary, GEP Equity Holdings Limited, holds following common equity securities in private and reporting
companies as at June 30, 2018 and December 31, 2017:
|
|
|
June
30, 2018
|
|
|
December
31, 2017
|
|
|
|
|
Company
|
|
No.
of Shares
|
|
|
Book
value
|
|
|
No.
of Shares
|
|
|
Book
value
|
|
|
Status
|
|
Primesite
Developments Inc.
|
|
|
5,006,521
|
|
|
$
|
-
|
|
|
|
5,006,521
|
|
|
$
|
-
|
|
|
Private
Company
|
|
Quartal
Financial Solutions AG
|
|
|
2,271
|
|
|
|
-
|
|
|
|
2,271
|
|
|
|
-
|
|
|
Private
Company
|
|
|
|
|
5,008,792
|
|
|
$
|
-
|
|
|
|
5,008,792
|
|
|
$
|
-
|
|
|
|
The
Company, through its subsidiary, GEP Equity Holdings Limited, held the following preferred equity securities in
private and reporting companies as at June 30, 2018 and December 31, 2017:
|
|
|
June
30, 2018
|
|
|
December
31, 2017
|
|
|
|
|
Company
|
|
No.
of Shares
|
|
|
Book
value
|
|
|
No.
of Shares
|
|
|
Book
value
|
|
|
Status
|
|
Duo
World Inc.
|
|
|
-
|
|
|
$
|
-
|
|
|
|
136,600
|
|
|
$
|
136
|
|
|
Reporting
Company – OTC
|
|
Primesite
Developments Inc.
|
|
|
450,000
|
|
|
|
-
|
|
|
|
450,000
|
|
|
|
-
|
|
|
Private
Company
|
|
|
|
|
450,000
|
|
|
$
|
-
|
|
|
|
586,600
|
|
|
$
|
136
|
|
|
|
On
January 12, 2018, the Company converted its investment in 136,600 preferred shares of Duo valued at cost of $0.001 per share or
$136 to 1,366,000 common shares of Duo World Inc. having the same cost basis of $136; no gain or loss was recorded on this conversion.
Note
6 – Fixed Assets
Following
table reflects net book value of fixed assets as of June 30, 2018 and December 31, 2017:
|
|
|
June
30, 2018
|
|
|
December
31, 2017
|
|
|
Useful
Life
|
|
Furniture
and Equipment
|
|
$
|
44,814
|
|
|
$
|
40,016
|
|
|
3
to 5 years
|
|
Accumulated
depreciation
|
|
|
(38,867
|
)
|
|
|
(37,949
|
)
|
|
|
|
Net
fixed assets
|
|
$
|
5,947
|
|
|
$
|
2,067
|
|
|
|
Argentum
47, Inc. and Subsidiaries
(Formerly
known as Global Equity International, Inc.)
Notes
to Consolidated Financial Statements
June
30, 2018
(Unaudited)
Depreciation
expense for the six months ended June 30, 2018 and 2017 was $918 and $5,575, respectively.
Note
7 – Debt, Accounts Payable and Accrued Liabilities
(A) Accounts
Payable and Accrued Liabilities
The
following table represents breakdown of accounts payable as of June 30, 2018 and December 31, 2017, respectively:
|
|
|
June
30, 2018
|
|
|
December
31, 2017
|
|
|
Accrued
salaries and benefits
|
|
$
|
109,080
|
|
|
$
|
113,770
|
|
|
Accounts
payable
|
|
|
88,654
|
|
|
|
64,032
|
|
|
|
|
$
|
197,734
|
|
|
$
|
177,802
|
|
(B) Accrued
Contingencies and Penalties
At
December 31, 2017, the Company accrued $5,000 as a provision for late filing fee for 2014 IRS Form 5472 Tax Return. On January
19, 2018, the Company paid the entire outstanding penalty of $5,000 and the interest amounting to $390 to the IRS.
(C) Accounts
Payable and Accrued Liabilities – Related Parties
The
following table represents the accounts payable and accrued expenses to related parties as of June 30, 2018 and December 31, 2017,
respectively:
|
|
|
June
30, 2018
|
|
|
December
31, 2017
|
|
|
Accrued
salaries and benefits
|
|
$
|
109,265
|
|
|
$
|
233,869
|
|
|
Expenses
payable
|
|
|
7,796
|
|
|
|
5,096
|
|
|
|
|
$
|
117,061
|
|
|
$
|
238,965
|
|
On
June 5, 2018, all of the officers and directors of the Company decided to convert their partial accrued salaries balance amounting
to $160,000 to 800,000 Series “C” preferred stock at par value of $0.001 per share having an equivalent common
stock fair value of $0.004 per share or $320,000 at the date of issuance of preferred stock. Each share of the Series
“C” preferred stock is convertible into 100 common shares, resulting in an equivalent 80,000,000 shares
of common stock having a fair value of $320,000, thereby recognizing additional stock based compensation of $160,000. (See
Note 8(A)). As a result of this conversion, the Company issued following shares of Series “C” preferred stock
to its officers and directors:
|
|
●
|
400,000
shares of Series “C” preferred stock to the Company´s CEO, having a par value of $0.001 per
share or $400 for his accrued salary balance of $80,000. The equivalent common stock issued would be 40,000,000 having a fair
value of $0.004 per share or $160,000 at the date of issuance of preferred stock, thereby recognizing a stock based compensation
of $80,000, and
|
|
|
●
|
400,000
shares of Series “C” preferred stock to the Company´s
CFO, having a par value of $0.001 per share or $400 for his accrued salary balance of
$80,000. The equivalent common stock issued would be 40,000,000 having a fair value of
$0.004 per share or $160,000 at the date of issuance of preferred stock, thereby recognizing
a stock based compensation of $80,000.
|
Argentum
47, Inc. and Subsidiaries
(Formerly
known as Global Equity International, Inc.)
Notes
to Consolidated Financial Statements
June
30, 2018
(Unaudited)
|
(D)
|
Loans
Payable – Related Parties
|
The
Company received short-term loans from one of its officers and directors. The loans were non-interest bearing, unsecured and due
on demand. The following table represents the related parties’ loans payable activity during the six months ended June 30,
2018:
|
Balance,
December 31, 2017
|
|
$
|
-
|
|
|
Proceeds
from loans
|
|
|
1,663
|
|
|
Repayments
|
|
|
(1,663
|
)
|
|
Balance,
June 30, 2018
|
|
$
|
-
|
|
Following
is the summary of all non-convertible notes, net of debt discount, including the accrued interest as at June 30, 2018:
|
Date
of Note
|
|
Principal
|
|
|
Accrued
Interest
|
|
|
Total
|
|
|
October
17, 2013
|
|
$
|
319,598
|
|
|
$
|
160,402
|
|
|
$
|
480,000
|
|
|
November 26,
2013
|
|
|
-
|
|
|
|
37,971
|
|
|
|
37,971
|
|
|
November
3, 2017
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Balance
– June 30, 2018
|
|
$
|
319,598
|
|
|
$
|
198,373
|
|
|
$
|
517,971
|
|
|
|
●
|
On
October 17, 2013, the Company secured a non-convertible three-month bridge loan for 200,000 GBP (equivalent to $319,598) with
the agreement to repay the principal plus 5% per month interest on or before January 18, 2014. The note holder received, as
a form of guarantee, 1,600,000 shares of an investment we held then in a company called Direct Security Integration Inc. and
the note holder is currently trying to sell these shares. The shares used as a form of guarantee formed part of the assets
of our Company at that time but are not considered an asset since the date we provided them to the lender as we were no longer
in control of such shares.
|
On
September 18, 2015, the Company and the note holder agreed to amend the previous terms of the agreement and both parties agreed
on the new terms whereby the Company is now liable to pay $500,000 as full and final payment of the October 17, 2013 loan
principal, accrued interest, and all other related penalties. This repayment will not accrue any further interest or penalties.
On
December 21, 2015, the company repaid first installment of the accrued interest amounting to $20,000; leaving the accrued interest
balance of $160,402 and principal loan balance of $319,598 as on December 31, 2015. The remaining installments totaling to $480,000,
as per the amended agreement, have not been paid as of June 30, 2018.
|
|
●
|
On
November 3, 2017, the Company secured from a private individual, a two-month non-convertible loan amounting to $16,000 GBP
(equivalent to $21,075). The company agreed to pay one-off interest amounting to GBP 4,000 (equivalent to $5,269) upon maturity
of the loan.
|
Argentum
47, Inc. and Subsidiaries
(Formerly
known as Global Equity International, Inc.)
Notes
to Consolidated Financial Statements
June
30, 2018
(Unaudited)
During
the year ended December 31, 2017, the company recorded $5,269 as interest expense. Due to default in payment on due date, the
company recorded additional interest of $1,689 during the six months ended June 30, 2018, making the total accrued interest balance
of $6,958.
On
January 19, 2018, the Company fully repaid principal loan amount of $21,075 and accrued interest of $6,958.
|
(F)
|
Fixed
Price Convertible Notes Payable
|
Following
is the summary of all fixed price convertible notes, net of debt discount and debt issue cost, including the accrued interest
as at June 30, 2018:
|
Date
of Note
|
|
Principal
|
|
|
Discount
|
|
|
Principal,
net of discount
|
|
|
Accrued
Interest
|
|
|
Total
|
|
|
June 5, 2017
– Mammoth Corp.
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
August 9,
2017 – Mammoth Corp.
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
November 15,
2017 – Mammoth Corp.
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
January
17, 2018 - Xantis PE Fund
|
|
|
400,000
|
|
|
|
19,500
|
|
|
|
380,500
|
|
|
|
11,178
|
|
|
|
391,678
|
|
|
January 23,
2018 - William Marshal Plc.
|
|
|
100,000
|
|
|
|
-
|
|
|
|
100,000
|
|
|
|
2,795
|
|
|
|
102,795
|
|
|
June
8, 2018 - Xantis AION Sec Fund
|
|
|
735,000
|
|
|
|
106,267
|
|
|
|
628,733
|
|
|
|
2,779
|
|
|
|
631,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
June 30, 2018
|
|
$
|
1,235,000
|
|
|
$
|
125,767
|
|
|
$
|
1,109,233
|
|
|
$
|
16,752
|
|
|
$
|
1,125,985
|
|
|
|
●
|
On
June 5, 2017, after receipt of $167,500 from Mammoth Corporation (New Lender), St. George (Previous Lender) assigned and transferred
to the Mammoth Corporation all of its rights, title and interest in and to the promissory note initially issued by GEQU to
St. George Investments LLC in the amount of $167,500 dated December 6, 2016. The Company re-negotiated the loan terms with
new lender (Mammoth Corporation) after the above assignment and issued a restated 9 months fixed price convertible promissory
note amounting to $184,250 dated June 5, 2017. The terms of this exchanged note were a one-time 10% increase in the principal
loan of $16,750, increasing the principal sum from $167,500 to $184,250. The new lender also has a right, at any time after
the issue date of the revised note until the outstanding balance has been paid in full, to convert all or any part of the
outstanding balance into common shares of the Company at a fixed conversion price of $0.012. Fair value of the Company´s
stock as on the date of the note was $0.0071. Hence, there was no beneficial conversion feature (BCF) of the Note, as the
agreed conversion price is higher than the fair value of the Company´s stock as on June 5, 2017. The Company accounted
for this exchange as a debt extinguishment of previous note dated December 6, 2016 and $16,750 was recognized as loss on debt
extinguishment.
|
On
December 4, 2017, the Company re-negotiated the loan terms and entered into a rider agreement with the noteholder. The terms of
this rider agreement were a one-time 35% increase in the principal loan of $64,487, increasing the principal sum from $184,250
to $248,737. In addition, both parties also agreed to re-negotiate the loan terms of another note dated August 9, 2017 with a
one-time 35% increase in the principal loan of $19,775, increasing the principal sum from $56,500 to $76,275. This rider agreement
further consolidated the revised principal note balances of the two notes into a single payable of $325,012. The Company agreed
a repayment plan of six monthly installments of $54,168 commencing from January 15, 2018 and ending on June 15, 2018. The noteholder
agreed to suspend the conversion of the notes if the Company continued to repay all six installments as per the
revised payment plan. The Company accounted for this one-time increase on both notes amounting to $64,487 and $19,775 as a loss
on debt extinguishment. As of December 31, 2017, the outstanding balance amounted to $248,737 and $73,386, net of $2,889 discount,
against the two notes dated June 5, 2017 and August 9, 2017, respectively.
Argentum
47, Inc. and Subsidiaries
(Formerly
known as Global Equity International, Inc.)
Notes
to Consolidated Financial Statements
June
30, 2018
(Unaudited)
During
the six months ended June 30, 2018, the Company fully repaid the six installments of $54,168 each, thereby leaving an outstanding
principal loan balance of $0 as on June 30, 2018.
|
|
●
|
On
August 9, 2017, the Company secured a 9 months fixed price convertible loan for $56,500 (see amendment discussed in above
paragraph) carrying an original issue discount of $6,500. Interest will not be accrued on the outstanding principal balance
unless an event of default occurs. The lender has a right, at any time after the issue date of the note until the outstanding
balance has been paid in full, to convert all or any part of the outstanding balance into common shares of the Company at
a fixed conversion price of $0.012 subject to change based on certain default provisions as defined in the Note. Fair value
of the Company´s stock as on the date of issuance of this note was $0.0045. Hence, there was no beneficial conversion
feature (BCF) of the Note, as the agreed conversion price is higher than the fair value of the Company´s stock as on
August 9, 2017.
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During
the year ended December 31, 2017, $3,611 of the debt discount balance was amortized to income statement. During the six months
ended June 30, 2018, $2,889 of the debt discount balance was amortized to income statement, leaving an unamortized discount balance
of $0.
With
the payments of all six installments of $54,168 each as per the amendment discussed in above paragraph, the Company first
settled these payments against this convertible note in full amounting to $76,275, thereby leaving an outstanding principal loan
balance of $0 as on June 30, 2018.
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●
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On
November 15, 2017, the Company secured a 9-month convertible loan for $53,000 carrying an original issue discount of $3,000
and an interest at the rate of 12% accrued on the outstanding principal balance. The lender has a right, at any time after
the issue date of the note until the outstanding balance has been paid in full, to convert all or any part of the outstanding
balance into common shares of the Company at a conversion price of 65% of the average of the lowest 2 trading prices during
the ten trading days’ period ending on the latest trading day prior to the conversion date, subject to change based
on certain default provisions as defined in the Note. The Company recorded this fixed discount of 35% as a premium on stock
settled debt amounting to $28,538.
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During
the year ended December 31, 2017, $500 of the debt discount balance was amortized to income statement, leaving an unamortized
discount balance of $2,500. The Company also recorded an accrued interest expense of $819 during the year ended December 31, 2017.
On
January 17, 2018, the Company opted for the prepayment of this note by paying 117% of the outstanding note balance. This early
settlement of this note in cash resulted in a prepayment charge of $9,188. Hence, the Company paid $53,000 of principal, $1,045
of accrued interest and $9,188 of prepayment charge in cash totaling to $63,233 as a full and final settlement of this convertible
note.
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●
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On
January 12, 2018, the Company secured a 12-month fixed price convertible loan, from Xantis Private Equity Fund (Luxembourg),
for a minimum of 2,000,000 Great Britain Pounds (equivalent to approximately $2,680,000) carrying an interest at the rate
of 6% per annum. The Company has a right to pay this note on earlier than 366 days’ post investment of each tranche
of funding, by issuing common shares at greater of $0.02 or the average closing ask price of the Company’s common stock
on the OTCBB for the prior 60 trading days.
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Argentum
47, Inc. and Subsidiaries
(Formerly
known as Global Equity International, Inc.)
Notes
to Consolidated Financial Statements
June
30, 2018
(Unaudited)
On
January 17, 2018, the Company received an initial tranche of funding from Xantis Private Equity Fund amounting to $400,000. The
Company paid a $36,000 cash commission, which is treated as debt issuance cost for this note. This particular Convertible Note
issued to Xantis Private Equity Fund will mature on January 13, 2019 as January 12, 2018 was the date that the funds were effectively
wired to the Company.
During
the six months ended June 30, 2018, $16,500 of the debt issuance costs was amortized to income statement, leaving an unamortized
debt issue cost balance of $19,500. The Company further recorded $11,178 as interest expense during the six months ended
June 30, 2018 and the outstanding note balance amounted to $400,000 as of June 30, 2018.
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●
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On
January 12, 2018, the Company secured a 12-month fixed price convertible loan, from William Marshal Plc., a United Kingdom
Public Limited Company listed on the Cyprus Public Exchange Emerging Companies Market, for a maximum of 2,000,000 Great Britain
Pounds (equivalent to approximately $2,680,000) carrying an interest at the rate of 6% per annum. The Company has a right
to pay this note on earlier than 366 days’ post investment of each tranche of funding, by issuing common shares at greater
of $0.02 or the average closing ask price of the Company’s common stock on the OTCBB for the prior 60 trading days.
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On
January 23, 2018, the Company received its first tranche of funding from William Marshal Plc. amounting to $100,000. This particular
Convertible Note issued to William Marshal Plc. will mature on January 24, 2019.
During
the six months ended June 30, 2018, the company recorded $2,795 as interest expense and the outstanding note balance amounted
to $100,000 as of June 30, 2018.
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●
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On
June 6, 2018, the Company secured a 12-month fixed price convertible loan, from Xantis AION Securitization Fund (Luxembourg),
for a minimum of 1,700,000 Great Britain Pounds (equivalent to approximately $1,940,000) carrying an interest at the rate
of 6% per annum. The Company has a right to pay this note on earlier than 366 days’ post investment of each tranche
of funding, by issuing common shares at greater of $0.02 or the average closing ask price of the Company’s common stock
on the OTCBB for the prior 60 trading days.
|
On
June 8, 2018, the Company received an initial tranche of funding from Xantis AION Securitization Fund amounting to $735,000. The
Company paid a $110,887 cash commission, which is treated as debt issuance costs for this note. This particular Convertible Note
issued to Xantis AION Securitization Fund will mature on June 9, 2019.
During
the six months ended June 30, 2018, $4,260 of the debt issuance costs was amortized to income statement, leaving an unamortized
debt issue cost balance of $106,267. The Company further recorded $2,779 as interest expense during the six months ended
June 30, 2018 and the outstanding note balance amounted to $735,000 as of June 30, 2018.
Argentum
47, Inc. and Subsidiaries
(Formerly
known as Global Equity International, Inc.)
Notes
to Consolidated Financial Statements
June
30, 2018
(Unaudited)
Note
8 - Stockholders’ Equity
(A) Preferred
Stock
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●
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Series
“A” Convertible Preferred Stock
|
On
November 30, 2011, the Company designated 5,000,000 of its authorized preferred stock as Series “A” convertible preferred
stock. On November 13, 2012, the Company’s board of directors approved an amendment to the Certificate of Designation
to amend the voting rights and conversion rights of the Company’s Series “A” preferred shares as follows:
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●
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Voting
Rights: 10 votes per share (votes along with common stock);
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●
|
Conversion
Rights: Each share of Series “A” Preferred is convertible into ten (10) shares of common stock 1 day after the
second anniversary of issuance;
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●
|
Dividend
Rights: None;
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●
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Liquidation
Rights: None
|
On
May 19, 2015, the board of directors agreed to the non-redemption of the redeemable Series “A” Preferred Shares and
the officers of the Company who held these shares of Series “A” Preferred Stock, returned
all 1,983,332 Shares of the Company to Treasury. Since the preferred shares were vested upon issuance in prior years, the cancellation
of these shares was considered a contribution back to the Company at zero cost with no gain or loss recognized.
On
July 15, 2015 the Certificate of Designation of the 5,000,000 Series “A” preferred shares was withdrawn.
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●
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Series
“B” Convertible Preferred Stock
|
On
November 10, 2016, the Company designated 45,000,000 of its authorized preferred stock as Series “B” convertible preferred
shares. The Certificate of Designation stated the following:
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●
|
Voting
Rights: 10 votes per share (votes along with common stock);
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●
|
Conversion
Rights: Each share of Series “B” Preferred is convertible at any time, and from time to time, into ten (10) shares
of common stock 1 day after the first anniversary of issuance. Pursuant to two funding agreements entered into in January
2018, the management contractually agreed to not convert or sell any of these preferred shares until September 27, 2020;
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●
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Dividend
Rights: In the event the Board of Directors declares a dividend on the common stock, each Series “B” Preferred
share will be entitled to receive an equivalent dividend as if the Series “B” Preferred share had been converted
into common stock prior to the declaration of such dividend.
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|
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●
|
Liquidation
Rights: None
|
On
November 11, 2016, certain Officers and Directors of the Company, offered to retire and exchange an aggregate 450,000,000
shares of Common Stock owned by them for 45,000,000 Series “B” Preferred Stock. The Company permitted Officers and
Directors of the Company to exchange 200,000,000, 50,000,000 and 200,000,000 shares of Common Stock, respectively, for 20,000,000,
5,000,000 and 20,000,000 shares of Series “B” Preferred Stock, respectively.
Argentum
47, Inc. and Subsidiaries
(Formerly
known as Global Equity International, Inc.)
Notes
to Consolidated Financial Statements
June
30, 2018
(Unaudited)
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●
|
Series
“C” Convertible Preferred Stock
|
On
September 18, 2017, the Company designated 5,000,000 of its authorized preferred stock as Series “C” Convertible
Preferred Stock. The Certificate of Designation stated the following:
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●
|
Voting
Rights: 100 votes per share (votes along with common stock);
|
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●
|
Conversion
Rights: Each share of Series “C” Preferred is convertible at any time, and from time to time, into one hundred
(100) shares of common stock 1 day after the third anniversary of issuance;
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|
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●
|
Dividend
Rights: In the event the Board of Directors declares a dividend on the common stock, each Series “C” Preferred
share will be entitled to receive an equivalent dividend as if the Series “C” Preferred stock had been converted
into common stock prior to the declaration of such dividend.
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|
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●
|
Liquidation
Rights: None
|
On
September 26, 2017, all of the officers and directors of the Company decided to convert their partial accrued salary balances
amounting to $240,000 into 2,400,000 shares of Series “C” Preferred Stock at par value
of $0.001 per share, having an equivalent common stock fair value of $0.0028 per share or $672,000 at the date of issuance
of such preferred stock.
On
June 5, 2018, all of the officers and directors of the Company decided to convert their partial accrued salary balances
amounting to $160,000 into 800,000 shares of Series “C” Preferred Stock at par value
of $0.001 per share, having an equivalent common stock fair value of $0.004 per share or $320,000 at the date of issuance
of such preferred stock. See Note 7(C).
(B) Common
Stock
As
at June 30, 2018 and December 31, 2017, the Company had 950,000,000 authorized shares of common stock having a par value of $0.001.
As at June 30, 2018, the Company had 525,534,409 shares of common stock issued and outstanding.
During
the six months ended June 30, 2018, the Company did not issue any new shares of common stock.
Note
9 – Revenue
For
the six months ended June 30, 2018 and 2017, the Company recognized total revenues amounting to $70,267 and $216,639, respectively.
After the implementation of the ASC 606, the Company´s management believes that the estimated transaction price has not
changed based on a re-assessment of the expected probability of achieving the agreed-upon outcome for the Company´s performance
based and contingent arrangements. Hence, during the six months ended June 30, 2018, there were no revenues recorded related to
the catch-up adjustment due to a change in the transaction price in the current period.
Unfulfilled
performance obligations represent the remaining contract transaction prices allocated to the performance obligations that are
unsatisfied, or partially unsatisfied, and therefore revenues have not yet been recorded. Unfulfilled performance obligations
primarily consist of the remaining fees not yet recognized under the Company´s proportional performance method for both
our fixed fee arrangements, and the portion of performance based and contingent arrangements, which we have deemed probable. As
of June 30, 2018, the Company´s management believes that all of the fixed fee, performance based and contingent arrangements
have an original expected duration of one year or less; hence, the Company elected to utilize the optional exemption to exclude
it from this disclosure.
Argentum
47, Inc. and Subsidiaries
(Formerly
known as Global Equity International, Inc.)
Notes
to Consolidated Financial Statements
June
30, 2018
(Unaudited)
Contract
Assets and Liabilities
Contract
assets are defined as assets for which we have recorded revenue because we determined that it is probable that we will earn a
performance based or contingent fee, but we are not yet entitled to receive our fees, because certain events, such as completion
of the measurement period or client approval, must occur. The contract asset balance was immaterial as of June 30, 2018 and December
31, 2017.
Contract
liabilities are defined as liabilities incurred when we have received consideration from a client but have not yet performed the
agreed upon services. This may occur when we receive advance billings before delivery of services when clients pay us up-front
fees before we begin work for them. The contract liability balance was immaterial as of June 30, 2018 and December 31, 2017.
Note
10 – Related Party Transactions
At
June 30, 2018, there were accounts payable and accrued liabilities due to related parties. See Note 7(C).
Note
11 – Commitments and contingencies
Contingencies
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●
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On
October 9, 2013, the Company secured a two-month loan for GBP 75,000 (equivalent to $120,420) and issued 10,000 restricted
shares of common stock to the lender, The Able Foundation, on December 7, 2013, and also repay 35,000 GBP (equivalent to $56,196)
in lieu of interest. As the principal and interest was not paid back to the lender on time, the Company compensated the lender
with an additional 20,000 restricted shares of common stock in consideration for a for a five-month extension on the loan.
This stock compensation was issued to the lender also on December 12, 2013.
|
The
plaintiff, The Able Foundation, was requesting a settlement of $411,272, which was the $226,616 owed by the Company at
that time, and an additional $184,656 accrued in 2015 as a provision for potential damages.
On
June 1, 2015, the Company (the defendant in the lawsuit) retained the legal services of a Dubai based law firm called Al
Safar & Partners. At March 31, 2017, there was a judgment against the Company (the defendant) for the recovery of $411,272.
During
2015 and 2016, the Company’s Dubai lawyers, Al Safar & Partners, had appealed this judgment various times based on the
fact that they believed from a legal stand point that:
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|
1)
|
the
Company (the defendant) has not been heard, which is a violation of the fundamental principle of law “
Audi Alteram
Partem
”.
|
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2)
|
there
is no legal existence of Global Equity Partners Plc. in Dubai, as it is a Republic of Seychelles corporation; hence, the Courts
of Dubai have no jurisdiction in the matter.
|
All
prior appeals were rejected by the Dubai Courts, however a new appeal against the formal execution of this judgement was filed
in September 2016.
Argentum
47, Inc. and Subsidiaries
(Formerly
known as Global Equity International, Inc.)
Notes
to Consolidated Financial Statements
June
30, 2018
(Unaudited)
On
June 5, 2017, a citizen of Republic of Thailand assumed the above total amount of $411,272 by way of a stock purchase and debt
assumption agreement; hence, the Company’s liability and respective litigation in respect of this loan was transferred to
the acquiring individual.
On
March 6, 2018, the Company provided the Dubai attorneys with a signed, stamped and apostilled Certificate of Incumbency issued
by the Seychelles Authorities. This Certificate of Incumbency stated that as of June 5, 2017, the company, Global Equity Partners
Plc., was sold to a citizen of the Republic of Thailand and that the new owner assumed his role as sole shareholder and sole director
of Global Equity Partners Plc. as of the date of sale.
To
date, the Dubai attorneys are in the process of transferring the entire court case to the new owner of Global Equity Partners
Plc.
Aside
from the above matter, we are not subject to any other pending or threatened litigation.
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●
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From
time to time, the Company may be involved in litigation or disputes relating to claims arising out of its operations in the
normal course of business. As of March 31, 2017, the Company was in dispute with a former client regarding certain payments
that we made on behalf of this former client. On June 5, 2017, the underlying deferred revenue liability was transferred to
the acquiring individual as part of the stock purchase and debt assumption agreement.
|
Commitments
|
●
|
On
November 6, 2017, the Company renewed its rent agreement for its head office at Dubai for a further period of one year amounting
to a reduced rental of $29,942 per annum (from November 2017 until October 2018). This agreement is further renewable for
a period of one year at 5% higher than the current rent. Rent expense for the six months ended June 30, 2018 was $14,971.
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