Notes
to Condensed Consolidated Financial Statements
March
31, 2018
(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, 2018, 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 same are all considered to be inactive subsidiaries.
The
reporting currency and functional currency of the Company and its subsidiaries is the United States dollar (“US Dollar”)
and the accompanying 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 the settlement of liabilities in the normal course of business. For the three-month period ended March 31, 2018, the Company
recognized a net loss of $15,910 as a result of general administrative expenses, professional fees, interest expenses and foreign
exchange. At March 31, 2018, the Company had a working capital deficiency of $2,493,185. These conditions raise substantial doubt
about the Company’s ability to continue as a going concern.
Accordingly,
the Company will require continued financial support from its shareholders and creditors until it is able to generate sufficient
cash flow from operations on a sustained basis. There is substantial doubt that the Company will be successful at achieving these
results. Failure to obtain the ongoing support of its shareholders and creditors may make the going concern basis of accounting
inappropriate, in which case the Company’s assets and liabilities would need to be recognized at their liquidation values.
These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset
amounts and classification of liabilities that might arise from this uncertainty.
Arvana
Inc.
Notes
to Condensed Consolidated Financial Statements
March
31, 2018
(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, 2018 and 2017, 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, 2017, as filed with the Securities and Exchange Commission (“SEC”) on April 16, 2018.
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, convertible loan, loans payable and amounts due to related parties - the carrying amount approximates
fair value due to the short-term nature of the obligations.
Arvana
Inc.
Notes
to Condensed Consolidated Financial Statements
March
31, 2018
(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, 2018 and December 31, 2017 follows:
|
|
March
31,
2018
|
|
December
31,
2017
|
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
Cash
|
|
$
|
3,708
|
|
|
$
|
3,708
|
|
|
$
|
4,730
|
|
|
$
|
4,730
|
|
Accounts
payable and accrued liabilities
|
|
|
1,088,046
|
|
|
|
1,088,046
|
|
|
|
1,075,409
|
|
|
|
1,075,409
|
|
Convertible
loan
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
50,000
|
|
Loans
payable to stockholders
|
|
|
606,068
|
|
|
|
606,068
|
|
|
|
600,651
|
|
|
|
600,651
|
|
Loans payable to related party
|
|
|
130,407
|
|
|
|
130,407
|
|
|
|
131,000
|
|
|
|
131,000
|
|
Loans
payable
|
|
|
75,556
|
|
|
|
75,556
|
|
|
|
75,813
|
|
|
|
75,813
|
|
Amounts due to related parties
|
|
$
|
546,816
|
|
|
$
|
546,816
|
|
|
$
|
549,132
|
|
|
$
|
549,132
|
|
The
following table presents information about the assets that are measured at fair value on a recurring basis as of March 31, 2018,
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:
|
|
March
31,
2018
|
|
Quoted
Prices
in Active
Markets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
3,708
|
|
|
$
|
3,708
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The
fair value of cash is determined through market, observable and corroborated sources.
Arvana
Inc.
Notes
to Condensed Consolidated Financial Statements
March
31, 2018
(Unaudited)
2.
Summary of Significant Accounting Policies (continued)
Recent
accounting pronouncements
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
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.
Arvana
Inc.
Notes
to Condensed Consolidated Financial Statements
March
31, 2018
(Unaudited)
3.
Loans Payable
As
of March 31, 2018, the Company had received loans of $606,068 (Euro 225,000; CAD$ 72,300; $273,107) (December 31, 2017 - $600,651:
Euro 225,000; CAD$ 72,300; $273,107) from stockholders, loans of $130,407 (CAD$ 27,600; $109,000) (December 31, 2017 – $131,000:
CAD$ 27,600; $109,000) from a related party and loans of $75,556 (CAD$ 10,000; $67,800) (December 31, 2017 – $75,813: CAD$
10,000; $67,800) from unrelated third parties. All of the loans bear interest at 6% per annum except for $27,800 in loans to unrelated
third parties which bears interest at 10% 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 $441,655 and $425,405
is included in accounts payable and accrued expenses at March 31, 2018, and December 31, 2017, respectively. Interest expense
recognized on these loans was $13,013 for the three months ended March 31, 2018, compared to $16,598 for the three months ended
March 31, 2017, respectively. Interest expense includes $nil in accretion of the discount on the convertible debt during the three
months ended March 31, 2018, compared to $4,167 for the three months ended March 31, 2017. The Company also received a convertible
loan of $50,000 from CaiE Food Partnership Ltd. (“CaiE”) 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 matured on March 31, 2018 pursuant to an amending agreement
dated November 17, 2017. On March 31, 2018, the Company entered into an amending agreement to extend the maturity date of the
Convertible Note to March 31, 2019. All other terms remained unchanged. Interest expense recognized on the CaiE loan was $1,250
for the three months ended March 31, 2018, compared to $1,250 for the three months ended March 31, 2017.
4.
Stock Options
The
Company’s 2006 Stock Option Plan expired on June 4, 2016.
At
March 31, 2018 and December 31, 2017, there were no stock options outstanding. No options were granted, exercised or expired during
the period ended March 31, 2018 and during the year ended December 31, 2017.
5.
Common stock
During
the three months ended March 31, 2018 and year ended December 31, 2017, the Company had issued nil shares respectively.
6.
Segmented Information
The
Company has no reportable segments.
Arvana
Inc.
Notes
to Condensed Consolidated Financial Statements
March
31, 2018
(Unaudited)
7.
Related Party Transactions and Amounts Due to Related Parties
At
March 31, 2018, and December 31, 2017, the Company had amounts due to related parties of $546,816 and $549,132, respectively.
This amount includes $136,100 at March 31, 2018, and December 31, 2017, 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.
The
Company incurred consulting fees of $1,238 (2017 - $1,981) paid to a company controlled by our chief executive officer during
the three months ended March 31, 2018.
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, 2018, our former chief executive officer was owed $265,599 and $268,029 as of December 31, 2017
which are unsecured non-interest bearing amounts due on demand.
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 31,2018 and December 31, 2017 our former chief financial officer was owed $58,870 for services rendered
as an officer.
Our
former chief executive officer and former director entered into a debt assignment agreement effective January 1, 2012, with a
corporation with a former director in common and thereby assigned $157,260 (CAD$202,759) of unpaid amounts payable.
Our
former chief executive officer and former director entered into a debt assignment agreement effective January 1, 2012, with an
unrelated third party and thereby assigned $53,357 of unpaid amounts payable and $100,000 of unpaid loans.
Our
former chief executive officer and former director is owed $130,407 for unsecured amounts bearing 6% interest due on demand loaned
to the Company as of March 31, 2018, compared to $131,000 as of December 31, 2017.
Our
former chief executive officer and former director entered into a debt assignment agreement effective 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 $84,187 for their prior services rendered as officers as at March 31, 2018, compared
to $86,133 as of December 31, 2017.
A
director of the Company is owed $60,000 as of March 31, 2018 and December 31, 2017, for services rendered as a director during
2007. Two former directors of the Company are owed $76,100 as of March 31, 2018 and December 31, 2017 for services rendered as
directors during 2007.
Arvana
Inc.
Notes
to Condensed Consolidated Financial Statements
March
31, 2018
(Unaudited)
8.
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 from 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 issuance date, a beneficial conversion feature was recognized as a discount
against the convertible note. The Convertible Note accrues interest at a rate equal to 10% per year. During the three months ended
March 31, 2018 and 2017, $nil and $4,167 of the discount was amortized as interest expense, respectively. Interest expense recognized
on this loan was $1,250 for the three months ended March 31, 2018, compared to $1,250 for the three months ended March 31, 2017,
respectively. As at March 31, 2018 and December 31, 2017, the balance of the Convertible Note was $50,000. On November 17, 2017,
the Company entered into an amending agreement to extend the maturity date to March 31, 2018, all other terms remained unchanged.
On March 31, 2018, the Company entered into an amending agreement to extend the maturity date of the Convertible Note to March
31, 2019. All other terms remained unchanged.
9.
Subsequent Events
The
Company evaluated its March 31, 2018, financial statements for subsequent events through the date the financial statements were
issued. The Company is not aware of any subsequent events which would require recognition or disclosure in the financial statements
except as provided below:
On
April 12, 2018, the Company received an additional loan from CaiE in the amount of $10,000 with terms and conditions of this loan
to be finalized at a later date.