UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
þ
Quarterly
report
pursuant
to
Section
13
or
15(d)
of
the
Securities
Exchange
Act
of
1934
for
the
quarterly period ended
March 31, 2017
.
o
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the
transition period from
to
.
Commission file number:
0-30695
ARVANA INC.
(Exact name of registrant as specified in its charter)
Nevada
87-0618509
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
299 S. Main Street, 13th Floor, Salt Lake City, Utah 84111
(Address of principal executive offices) (Zip Code)
(801) 232-7395
Registrant’s telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or
15(d)
of
the
Securities
Exchange
Act
of
1934
during
the
preceding
12
months
(or
for
such
shorter
period
that
the
registrant
was
required
to
file
such
reports),
and
(2)
has
been
subject
to
such
filing
requirements
for the past 90 days. Yes
þ
No
¨
Indicate
by
check
mark
whether
the
registrant
has
submitted
electronically
and
posted
on
its
corporate
Web
site,
if
any,
every
Interactive
Data
File
required
to
be
submitted
and
posted
pursuant
to
Rule
405
of
Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files). Yes
¨
No
þ
Indicate
by
check
mark
whether
the
registrant
is
a
large
accelerated
filer,
an
accelerated
filer,
a
non-
accelerated
filer,
or
a
smaller
reporting
company.
See
the
definitions
of
“large
accelerated
filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
þ
Indicate by
check mark
whether the
registrant is a shell company
(as defined in
Rule 12b-2
of
the
Exchange Act). Yes
þ
No
o
Indicate
the
number
of
shares
outstanding
of
each
of
the
registrant’s
classes
of
common
stock,
as
of
the
latest
practicable
date.
The
number
of
shares
outstanding
of
the
registrant’s
common
stock,
$0.001
par
value (the only class of voting stock), at May 15, 2017, was 1,034,030.
1
TABLE OF CONTENTS
PART I
Item1
.
Financial Statements
3
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
14
Item 3
.
Quantitative and Qualitative Disclosures about Market Risk
19
Item 4.
Controls and Procedures
19
PART II
Item 1
.
Legal Proceedings
20
Item 1A
.
Risk Factors
20
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
20
Item 3.
Defaults Upon Senior Securities
20
Item 4
.
Mine Safety Disclosures
20
Item 5
.
Other Information
20
Item 6
.
Exhibit
20
Signatures
21
2
ITEM 1.
FINANCIAL
STATEMENTS
As used herein, the terms “Company,” “we,” “our,” “us,” “it,” and “its” refer to Arvana Inc., a Nevada
corporation and its wholly owned subsidiaries, unless otherwise indicated. In the opinion of management,
the accompanying unaudited condensed consolidated financial statements included in this Form 10-Q
reflect all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of
the results of operations for the periods presented. The results of operations for the periods presented are
not necessarily indicative of the results to be expected for the full year.
3
Arvana Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
March 31
December 31
2017
2016
ASSETS
Current assets:
Cash
$
18,339
$
6,045
Total assets
$
18,339
$
6,045
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities
Accounts payable and accrued liabilities
$
979,350
$
955,632
Convertible loan (net of discount of $10,416 and $14,583
respectively (Note 8)
39,584
35,417
Loans payable to stockholders (Note 3)
585,976
564,399
Loans payable to related party (Note 3)
129,736
129,556
Loans payable (Note 3)
47,513
47,448
Amounts due to related parties (Note 3)
529,804
525,954
Total current liabilities
2,311,963
2,258,406
Stockholders' deficiency
Common stock, $0.001 par value 5,000,000 authorized,
1,034,030 shares issued and outstanding at
March 31, 2017 and December 31, 2016, respectively
(Note 4)
1,034
1,034
Additional paid-in capital
21,225,717
21,225,717
Deficit
(23,517,039)
(23,475,776)
(2,290,288)
(2,249,025)
Less: Treasury stock – 2,085 common shares at
March 31, 2017 and December 31, 2016, respectively
(3,336)
(3,336)
Total stockholders’ deficiency
(2,293,624)
(2,252,361)
$
18,339
$
6,045
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Arvana Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
Three Months Ended
March 31,
2017
2016
Operating expenses
General and administrative
2,576
2,569
Professional fees
5,381
1,775
Total operating expenses
$
7,957
$
4,344
Loss from operations
(7,957)
(4,344)
Interest expense
(16,598)
(12,195)
Foreign exchange loss
(16,708)
(66,903)
Net loss and comprehensive loss
$
(41,263)
$
(83,442)
Per common share information - basic and diluted:
Weighted average shares outstanding
1,034,030
885,130
Net loss per common shares – basic and diluted
$
(0.04)
(0.09)
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Arvana Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31,
2017
2016
Cash flows from operating activities
Net loss
$
(41,263)
$
(83,442)
Item not involving cash:
Unrealized foreign exchange
13,397
65,972
Accretion
4,167
-
Changes in non-cash working capital:
Accounts payable and accrued liabilities
16,247
16,993
Amounts due to related parties
1,946
454
Net cash used in operations
(5,506)
(23)
Cash flows from investing activities
Net cash used in investing activities
-
-
Cash flows from financing activities
Loans corresponding to MOU (Note 7)
17,800
20,000
Net cash provided by financing activities
17,800
20,000
Increase in cash
12,294
19,977
Cash , beginning of period
6,045
53
Cash, end of period
$
18,339
$
20,030
Supplementary information
Cash paid for interest
$
-
$
-
Cash paid for income taxes
$
-
$
-
There were no non-cash investing or financing transactions for the three month periods ended March 31,
2017 and 2016.
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
Arvana Inc.
Notes to Condensed Consolidated Financial Statements
March 31, 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 three month period ended March 31, 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
three month period ended March 31, 2017, the Company recognized a net loss of $41,263 as a result of
general administrative expenses, interest expenses and foreign exchange losses. At March 31, 2017, the
Company had a working capital deficiency of $2,293,624. 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.
7
Arvana Inc.
Notes to Condensed Consolidated Financial Statements
March 31, 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 three months ended March 31, 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.
8
Arvana Inc.
Notes to Condensed Consolidated Financial Statements
March 31, 2017
(Unaudited)
2. Summary of Significant Accounting Policies (continued)
Financial instruments (continued)
The estimated fair values of the Company's
financial instruments as of March 31, 2017 and December 31,
2016 follows:
March 31,
December 31,
2017
2016
Carrying
Fair
Carrying
Fair
Amount
Value
Amount
Value
Cash
$18,339
$18,339
$6,045
$6,045
Accounts payable and accrued liabilities
979,350
979,350
955,632
955,632
Convertible loan
39,584
39,584
35,417
35,417
Loans payable to stockholders
585,976
585,976
564,399
564,399
Loans payable to related party
129,736
129,736
129,556
129,556
Loans payable
47,513
47,513
47,448
47,448
Amounts due to related parties
529,804
529,804
525,954
525,954
The following table presents information about the assets that are measured at fair value on a recurring
basis as of March 31, 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:
Quoted
Significant
Prices
Other
Significant
in Active
Observable
Unobservable
March 31,
Markets
Inputs
Inputs
2017
(Level 1)
(
L
evel 2)
(Level 3)
Assets:
Cash
$
18,339
$
18,339
$
—
$
—
The fair value of cash is determined through market, observable and corroborated sources.
9
Arvana Inc.
Notes to Condensed Consolidated Financial Statements
March 31, 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.
10
Arvana Inc.
Notes to Condensed Consolidated Financial Statements
March 31, 2017
(Unaudited)
3. Amounts Due to Related Parties and Loans Payable to Stockholders
From February,
2007,
until March
31,
2017,
the Company received a number
of loans from stockholders,
related
parties
and
unrelated
third
parties. As
of
March
31,
2017,
the
Company
had
received
loans
of
$585,976 (Euro 225,000; CAD$ 72,300; $273,107) (December 31, 2016 - $564,399: Euro 225,000;
CAD$ 72,300; $273,107) from stockholders, loans of $129,736 (CAD$ 27,600; $109,000) (December 31,
2016
–
$129,556:
CAD$
27,600;
$109,000)
from
a
related
party
and
loans
of
$47,513
(CAD$
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
$371,365 and
$349,186
is
included in
accounts
payable
and
accrued
expenses
at
March
31,
2017,
and
December
31,
2016,
respectively.
Interest
expense
recognized
on
these
loans
was
$16,598
for
the
three
months
ended
March
31,
2017,
compared
to
$12,195
for
the
three
months
ended
March
31,
2016, respectively.
The
Company
also
received
a
convertible
loan
of
$50,000
from CaiE
Food Partnership
Ltd.
as
per Note
8.
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 March 31, 2017, and December 31, 2016, the Company had amounts due to related parties of $529,804
and $525,954, respectively. This amount includes $136,100 at March 31, 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.
4. Common stock
During
the
three
months
ended
March
31,
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.
11
Arvana Inc.
Notes to Condensed Consolidated Financial Statements
March 31, 2017
(Unaudited)
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
$1,981
(2016
-
$275)
paid
to
a
company
controlled
by
our
chief
executive
officer during the three months ended March 31, 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 March 31, 2017, our former
chief executive officer was
owed $62,891 (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
$252,846
as
of
March
31,
2017
and
$249,585
as
of
December
31,
2016
detailed below.
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 March 31, 2017 and
December
31,
2016
our
former
chief
financial
officer
was
owed
$58,870
for
services
rendered
as
an
officer.
Our
former
chief
executive officer
and former director
is
owed $252,846
for
unsecured
non-interest
bearing
amounts
due
on
demand
loaned
to
the
Company as
of
March
31,
2017,
compared
to
$249,585
as
of December 31, 2016.
Our
former
chief
executive
officer
and
former
director
is
owed
$129,736
for
unsecured
amounts
bearing
6%
interest
due
on
demand
loaned
to
the
Company
as
of
March
31,
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
$81,988
for
their
prior
services
rendered
as
officers
as
at
March 31, 2017, compared to $81,399 as of December 31, 2016.
A
director
of
the
Company
is
owed
$60,000
as
of
March
31,
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 March
31, 2017 and December 31, 2016 for services rendered as directors during 2007.
12
Arvana Inc.
Notes to Condensed Consolidated Financial Statements
March 31, 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
three
months
ended
March
31,
2017
and
year
ended
December
31,
2016,
$4,167 and $10,417 of the discount was amortized, respectively.
As
at March 31, 2017 and December 31,
2016, the balance of the Convertible Note was $39,584 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
March
31,
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.
13
Item 2.
Management's
Discussion and Analysis of Financial Condition and Results of
Operations.
This
Management’s Discussion and Analysis of Financial Condition and Results of Operations
and other
parts of this quarterly report contain forward-looking statements that involve risks and uncertainties.
Forward-looking statements can also be identified by words such as “anticipates,” “expects,” “believes,”
“plans,” “predicts,” and similar terms. Forward-looking statements are not guarantees of future
performance and our actual results may differ significantly from the results discussed in the forward-
looking statements. Factors that might cause such differences include but are not limited to those
discussed in the subsection entitled
Forward-Looking Statements and Factors That May Affect Future
Results and Financial Condition
below. The following discussion should be read in conjunction with our
financial statements and notes thereto included in this report. Our fiscal year end is December 31. All
information presented herein is based on the three months ended March 31, 2017 and March 31, 2016.
Overview
On March 17, 2016, the Company entered into a non-binding Memorandum of Understanding (“MOU”)
with CaiE Food Partnership Ltd. (“CaiE”) for the purpose of acquiring CaiE as a wholly owned
subsidiary. CaiE is in the business of manufacturing and distributing fresh Dim Sum food products from a
facility based in Sparks Nevada. The MOU anticipates that the Company will issue, subject to shareholder
approval, a fully diluted sixty-seven percent (67%) interest in its common stock in exchange for CaiE.
The MOU further provides that CaiE lend the Company fifty thousand dollars ($50,000) on a convertible
basis prior to the consummation of the transaction. The anticipated transaction will require the Company
to convert existing debt into shares of its common stock, increase the number of authorized common
shares, elect a new Board of Directors and change its name to reflect the new business. CaiE had loaned
the Company $67,800 as of the filing date of this report and the Company is working with CaiE to
finalize a definitive transaction.
In the event that the Company does not complete the acquisition of CaiE, its intention will be to identify
and evaluate alternative business opportunities that might be a good match for the Company. We will not
be able to develop any identified business opportunities without additional financing. Our Board of
Directors and management are actively pursuing financing in order to maintain operations but are not
evaluating other potential opportunities pending the anticipated transaction with CaiE.
Our Plan of Operation
The Company’s plan of operation over the next twelve months is to acquire CaiE as a wholly owned
subsidiary on those terms to be provided within definitive agreements based on the MOU and thereafter to
focus on CaiE’s business model. We will require a minimum of $50,000 in funding over the next 12
months to maintain operations and acquire CaiE. On completing the acquisition of CaiE the Company
may need additional capital to grow CaiE’s business. The amount of funding that may be required for this
purpose is not determinable at this time.
Should the Company not complete the anticipated transaction with CaiE then it will seek to identify an
alternative business opportunity for which purpose it will require a minimum of $25,000 in funding over
the next 12 months. The Company will most likely need additional funding to complete any alternative
transaction that might be identified within this time frame.
14
We anticipate that the required prospective funding in the near term will be in the form of convertible
debt financing from CaiE. Should the Company not complete the anticipated transaction with CaiE, then
requisite funding may come from the sale of our common shares or unsecured shareholder loans. The
Company does not have any alternative financing arranged and cannot be certain that it will be able to
realize funding from the sale of equity or that shareholders will continue to provide loans. Accordingly,
we will require continued financial support from our shareholders and creditors until the Company is able
to generate sufficient cash flow to maintain operations on a sustained basis. There is substantial doubt that
the Company will be successful in maintaining operations unless it completes the acquisition of CaiE.
Results of Operations
During the three months ended March 31, 2017, the Company (i) obtained an additional loan from CaiE;
and (ii) satisfied continuous public disclosure requirements.
Our operations for the three months ended March 31, 2017 and 2016 are summarized below.
Three months
Three months
Ended
Ended
March 31, 2017 March 31, 2016
Expenses:
General and administration
($2,576)
($2,569)
Professional fees
(5,381)
(1,775)
Interest
(16,598)
(12,195)
Foreign exchange loss
(16,708)
(66,903)
Net loss and comprehensive loss
for the period
($41,263)
($83,442)
Net Losses
Net loss for the three months ended March 31, 2017 was $41,263 as compared to net loss of $83,442 for
the three months ended March 31, 2016. The decrease of net loss over the three month period ended
March 31, 2017, compared to the three month period ended March 31, 2016, can be attributed to a
decrease in foreign exchange loss, offset by an increase in professional fees over the comparable three
month periods. The loss on foreign exchange is due to an increase in the value of foreign currencies
against the US dollar, which increase has negatively impacted the cost of those expenses that are payable
in foreign currencies.
We did not generate revenue during this period and expect to continue to incur losses over the next twelve
months at a rate comparable to the prior annual period presented here or until such time as we are able to
conclude the acquisition or development of a new business opportunity that produces net income.
Capital Expenditures
The Company expended no amounts on capital expenditures for the three month period ended March 31,
2017.
Income Tax Expense (Benefit)
The Company has a prospective income tax benefit resulting from a net operating loss carry-forward and
start up costs that will offset any future operating profit.
15
Impact of Inflation
The Company believes that inflation has had a negligible effect on operations over the past three years.
Liquidity and Capital Resources
Since inception, the Company has experienced significant changes in liquidity, capital resources, and
stockholders’ deficiency.
The Company had current and total assets of $18,339 as of March 31, 2017, consisting solely of cash and
a working capital deficit of $2,293,624, as compared to current and total assets of $6,045, consisting
solely of cash and a working capital deficit of $2,252,361 as of December 31, 2016. Net stockholders'
deficiency in the Company was $2,293,624 at March 31, 2017, as compared to a net stockholder’s
deficiency in the Company of $2,252,361 at December 31, 2016.
Cash Used in Operating Activities
Net cash flow used in operating activities for the three month period ended March 31, 2017 was $5,506 as
compared to $23 for the three month period ended March 31, 2016. Changes in net cash used in operating
activities in the current three month period can be attributed primarily to a number of items that are book
expense items which do not affect the total amount relative to actual cash used such as unrealized foreign
exchange and accretion of convertible debt. Balance sheet accounts that actually affect cash, but are not
income statement related items that are added or deducted to arrive at net cash used in operating activities,
include accounts payable and amounts due to related parties.
We expect to continue to use net cash flow in operating activities over the next twelve months or until
such time as the Company can generate sufficient revenue to offset operating expenses.
Cash Used in Investing Activities
We do expect to use net cash flow in investing activities in connection with the prospective acquisition of
CaiE. However, until such time as such transaction is concluded, we do not expect to use net cash flows
in investing activities.
Cash Flows from Financing Activities
Cash flow provided by financing activities for the three months ended March 31, 2017, was $17,800 as
compared to $20,000 for the three months ended March 31, 2016. The cash flows provided from
financing activities over the comparative three month periods can be attributed to loans received from
CaiE.
We expect to continue to use cash flow provided by financing activities to maintain operations, acquire
CaiE and alternatively, in the event that our shareholders do not approve the acquisition of CaiE, to seek
out suitable business opportunities.
16
The Company’s current assets are insufficient to conduct its plan of operation over the next twelve (12)
months as it will need at least $25,000 to maintain operations. The Company secured a convertible loan in
the amount of $50,000 in 2016 and has received an additional $17,800 in 2017 from CaiE to maintain
operations. However, the Company has no commitments or arrangements for the funding necessary to
complete the prospective acquisition of CaiE though it does expect that funding will become available.
The Company’s shareholders or CaiE remain the most likely sources of new funding in the form of loans
or equity placements though none have made any commitment for future investment as of the date of this
report. The Company’s inability to obtain sufficient funding to maintain operations would have a material
adverse affect on its ability to acquire CaiE.
The Company does not intend to pay cash dividends in the foreseeable future.
The Company had no lines of credit or other bank financing arrangements as of March 31, 2017.
The Company had no commitments for future capital expenditures that were material at March 31, 2017.
The Company has no defined benefit plan or contractual commitment with any of its officers or directors.
The Company has no current plans for the purchase or sale of any plant or equipment.
The Company has no current plans to make any changes in the number of employees.
Off-Balance Sheet Arrangements
As of March 31, 2017, we have no significant off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are
material to stockholders.
Future Financings
We anticipate continuing to rely on debt or equity sales of our shares of common stock in order to
continue to fund our business operations. There is no assurance that we will achieve any additional sales
of our equity securities or arrange for debt or other financing to fund our plan of operations.
Critical Accounting Policies
In Note 2 to the audited consolidated financial statements for the years ended December 31, 2016 and
2015, included in our Form 10-K, the Company discusses those accounting policies that are considered to
be significant in determining the results of operations and its financial position. The Company believes
that the accounting principles utilized by it conform to accounting principles generally accepted in the
United States.
The preparation of consolidated financial statements requires Company management to make significant
estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. By
their nature, these judgments are subject to an inherent degree of uncertainty. On an on-going basis, the
Company evaluates estimates. The Company bases its estimates on historical experience and other facts
and circumstances that are believed to be reasonable, and the results form the basis for making judgments
about the carrying value of assets and liabilities. The actual results may differ from these estimates under
different assumptions or conditions.
17
Going Concern
Management of the Company has expressed an opinion as to the Company’s ability to continue as a going
concern as a result of an accumulated deficit of $23,517,039
since
inception and negative cash flows
from
operating activities
as of March 31, 2017. The Company’s ability to continue as a going concern is
subject to the ability of the Company to obtain funding from outside sources. Management’s plan to
address the Company’s ability to continue as a going concern includes obtaining funding from the private
placement of equity or through debt financing. Management believes that it will be able to obtain funding
to allow the Company to remain a going concern through the methods discussed above, though there can
be no assurances that such methods will prove successful.
Forward-Looking Statements and Factors That May Affect Future Results and Financial Condition
The statements contained in the section titled
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
and elsewhere in this current report, with the exception of historical
facts, are forward-looking statements. Forward-looking statements reflect our current expectations and
beliefs regarding our future results of operations, performance, and achievements. These statements are
subject to risks and uncertainties and are based upon assumptions and beliefs that may or may not
materialize. These statements include, but are not limited to, statements concerning:
§
our anticipated financial performance and business plan;
§
the sufficiency of existing capital resources;
§
our ability to raise capital to fund cash requirements for future operations;
§
uncertainties related to the Company’s future business prospects;
§
the volatility of the stock market and;
§
general economic conditions.
We wish to caution readers that our operating results are subject to various risks and uncertainties that
could cause our actual results to differ materially from those discussed or anticipated. We also wish to
advise readers not to place any undue reliance on the forward-looking statements contained in this report,
which reflect our beliefs and expectations only as of the date of this report. We assume no obligation to
update or revise these forward-looking statements to reflect new events or circumstances or any changes
in our beliefs or expectations, other than as required by law.
Stock-Based Compensation
We have adopted Accounting Standards Codification Topic (“ASC”) 718, Share-Based Payment, which
addresses the accounting for stock-based payment transactions in which an enterprise receives employee
services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair
value of the enterprise’s equity instruments or that may be settled by the issuance of such equity
instruments.
We account for equity instruments issued in exchange for the receipt of goods or services from other than
employees in accordance with ASC 505. Costs are measured at the estimated fair market value of the
consideration received or the estimated fair value of the equity instruments issued, whichever is more
reliably measurable. The value of equity instruments issued for consideration other than employee
services is determined on the earliest of a performance commitment or completion of performance by the
provider of goods or services.
18
Item 3.
Quantitative
and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4.
Controls
and Procedures
Disclosure Controls and Procedures
In connection with the preparation of this quarterly report, an evaluation was carried out by the
Company’s management, with the participation of the chief executive officer and the acting chief
financial officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)) as of March
31, 2017. Disclosure controls and procedures are designed to ensure that information required to be
disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and
reported within the time periods specified in the Commission’s rules and forms, and that such information
is accumulated and communicated to management, including the chief executive officer and the chief
financial officer, to allow timely decisions regarding required disclosures.
Based on that evaluation, the Company’s management concluded, as of the end of the period covered by
this report, that the Company’s disclosure controls and procedures were ineffective in recording,
processing, summarizing, and reporting information required to be disclosed, within the time periods
specified in the Commission’s rules and forms, and such information was not accumulated and
communicated to management, including the chief executive officer and the chief financial officer, to
allow timely decisions regarding required disclosures.
Changes in Internal Control over Financial Reporting
There have been no changes in internal control over financial reporting (as defined in Rule 13a-15(f) of
the Exchange Act) during the quarter ended March 31, 2017, that materially affected, or are reasonably
likely to materially affect, the Company’s internal control over financial reporting.
19
PART II
Item 1.
Legal
Proceedings.
None.
Item 1A.
Risk
Factors
Not required.
Item 2.
Unregistered Sales of
Equity
Securities and Use of Proceeds
None.
Item 3.
Defaults Upon
Senior
Securities
None.
Item 4.
Mine
Safety Disclosures
Not applicable.
Item 5.
Other
Information
None.
Item 6.
Exhibits
Exhibits required to be attached by Item 601 of Regulation S-K are listed in the Index to Exhibits on page
22 of this Form 10-Q, and are incorporated herein by this reference.
20
SIGNATURES
Pursuant to the requirements 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.
ARVANA INC.
By:
/s/ Ruairidh Campbell
Ruairidh Campbell, Chief Executive Officer,
Chief Financial Officer and Principal
Accounting Officer
Date:
May 15, 2017
21
INDEX
TO EXHIBITS
Regulation
S-K
Exhibit
Number
2.1
Agreement and Plan of Reorganization between the Company, Arvana Networks, Inc. and
the Shareholders of Arvana Networks, Inc. dated August 18, 2005
(1)
3.1
Articles of Incorporation
(2)
3.2
Bylaws, as amended
(2)
3.3
Amendment to Articles of Incorporation
(3)
14.1
Code of Ethics
(4)
31
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-
14(a) of the Exchange Act
(5)
32
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-
14(d) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
(5)
101.INS
XBRL Instance Document
(6)
101.PRE
XBRL Taxonomy Extension Presentation Linkbase
(6)
101.LAB
XBRL Taxonomy Extension Label Linkbase
(6)
101.DEF
XBRL Taxonomy Extension Label Linkbase
(6)
101.CAL
XBRL Taxonomy Extension Label Linkbase
(6)
101.SCH
XB RL Taxonomy Extension Label Linkbase
(6)
(1) Previously filed with the SEC as an exhibit to the Company’s Current Report on Form 8-K filed
with the SEC on August 19, 2005.
(2) Previously filed with the SEC as exhibits to the Company’s registration statement on Form 10- SB
filed with the SEC on May 24, 2000.
(3) Previously filed with the SEC as an exhibit to the Company’s registration statement on Form 8-K
filed with the SEC on October 12, 2010.
(4) Previously filed with the SEC as an exhibit to the Company’s Annual Report on Form 10-KSB filed
with the SEC on April 16, 2007.
(5) Filed as exhibits to this Periodic Report on Form 10-Q.
(6) Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed “furnished” and not
“filed” or part of a registration statement or prospectus for purposes of Section 11 or 12 of the
Securities Act of 1933, or deemed “furnished” and not “filed” for purposes of Section 18 of the
Securities and Exchange Act of 1934, and otherwise is not subject to liability under these sections.
22