Arvana
Inc.
Condensed
Balance Sheets
(Unaudited)
|
|
|
September
30,
|
|
December
31,
|
|
|
|
2018
|
|
2017
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
257
|
|
|
$
|
4,730
|
|
|
Total
assets
|
|
$
|
257
|
|
|
$
|
4,730
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
DEFICIENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities (Note 9)
|
|
$
|
1,027,954
|
|
|
$
|
1,075,409
|
|
|
Convertible
loan (net of discount of $nil and $14,583 respectively) (Note 8)
|
|
|
50,000
|
|
|
|
50,000
|
|
|
Loans
payable to stockholders (Note 3)
|
|
|
590,027
|
|
|
|
600,651
|
|
|
Loans
payable to related party (Note 3)
|
|
|
130,321
|
|
|
|
131,000
|
|
|
Loans
payable (Note 3)
|
|
|
85,525
|
|
|
|
75,813
|
|
|
Amounts
due to related parties (Note 7)
|
|
|
499,338
|
|
|
|
549,132
|
|
|
Total
current liabilities
|
|
|
2,383,165
|
|
|
|
2,482,005
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficiency
|
|
|
|
|
|
|
|
|
|
Common
stock, $0.001 par value 5,000,000 authorized, 1,034,030 shares issued and outstanding at September 30, 2018 and December 31,
2017, respectively
|
|
|
1,034
|
|
|
|
1,034
|
|
|
Additional
paid-in capital
|
|
|
21,225,717
|
|
|
|
21,225,717
|
|
|
Deficit
|
|
|
(23,606,323
|
)
|
|
|
(23,700,690
|
)
|
|
|
|
|
(2,379,572
|
)
|
|
|
(2,473,939
|
)
|
|
Less:
Treasury stock – 2,085 common shares at September 30, 2018 and December 31, 2017, respectively
|
|
|
(3,336
|
)
|
|
|
(3,336
|
)
|
|
Total
stockholders’ deficiency
|
|
|
(2,382,908
|
)
|
|
|
(2,477,275
|
)
|
|
|
|
$
|
257
|
|
|
$
|
4,730
|
|
The
accompanying notes are an integral part of these condensed financial statements.
Arvana
Inc.
Condensed
Statements of Operations and Comprehensive Loss
(Unaudited)
|
|
|
Three
Months Ended
|
|
Nine
Months Ended
|
|
|
|
September
30,
|
|
September
30,
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
2,657
|
|
|
|
3,758
|
|
|
|
9,541
|
|
|
|
9,138
|
|
|
Professional
fees
|
|
|
6,062
|
|
|
|
3,200
|
|
|
|
16,275
|
|
|
|
12,581
|
|
|
Total
operating expenses
|
|
$
|
8,719
|
|
|
$
|
6,958
|
|
|
$
|
25,816
|
|
|
$
|
21,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(8,719
|
)
|
|
|
(6,958
|
)
|
|
|
(25,816
|
)
|
|
|
(21,719
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense (Note 3)
|
|
|
(12,771
|
)
|
|
|
(17,056
|
)
|
|
|
(38,555
|
)
|
|
|
(50,526
|
)
|
|
Foreign
exchange gain (loss)
|
|
|
(7,949
|
)
|
|
|
(47,177
|
)
|
|
|
44,501
|
|
|
|
(115,360
|
)
|
|
Gain
on sale of subsidiaries (Note 9)
|
|
|
114,237
|
|
|
|
—
|
|
|
|
114,237
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) and comprehensive income (loss)
|
|
$
|
84,798
|
|
|
$
|
(71,191
|
)
|
|
$
|
94,367
|
|
|
$
|
(187,605
|
)
|
|
Per
common share information - basic and diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding
|
|
|
1,034,030
|
|
|
|
885,130
|
|
|
|
1,034,030
|
|
|
|
885,130
|
|
|
Net
income (loss) per common shares – basic and diluted
|
|
$
|
0.08
|
|
|
$
|
(0.08
|
)
|
|
$
|
0.09
|
|
|
$
|
(0.21
|
)
|
The
accompanying notes are an integral part of these condensed financial statements.
Arvana
Inc.
Condensed
Statements of Cash Flows
(Unaudited)
|
|
|
Nine
Months Ended
|
|
|
|
September
30,
|
|
|
|
2018
|
|
2017
|
|
Cash flows from operating
activities
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
94,367
|
|
|
$
|
(187,605
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Item not involving
cash:
|
|
|
|
|
|
|
|
|
|
Unrealized
foreign exchange
|
|
|
16,773
|
|
|
|
113,637
|
|
|
Accretion
|
|
|
—
|
|
|
|
12,501
|
|
|
Gain
on sale of subsidiaries (Note 9)
|
|
|
(114,237
|
)
|
|
|
—
|
|
|
Changes in non-cash
working capital:
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
|
(6,548
|
)
|
|
|
30,344
|
|
|
Amounts
due to related parties
|
|
|
(4,784
|
)
|
|
|
5,900
|
|
|
Net
cash used in operations
|
|
|
(14,429
|
)
|
|
|
(25,223
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities
|
|
|
|
|
|
|
|
|
|
Cash
disposed on sale of subsidiaries
|
|
|
(44
|
)
|
|
|
—
|
|
|
Net
cash used in investing activities
|
|
|
(44
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities
|
|
|
|
|
|
|
|
|
|
Proceeds
of loans payable
|
|
|
10,000
|
|
|
|
27,800
|
|
|
Net
cash provided by financing activities
|
|
|
10,000
|
|
|
|
27,800
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in cash
|
|
|
(4,473
|
)
|
|
|
2,577
|
|
|
Cash, beginning
of period
|
|
|
4,730
|
|
|
|
6,045
|
|
|
Cash, end of period
|
|
$
|
257
|
|
|
$
|
8,622
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary information
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Cash
paid for income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
There
were no non-cash investing or financing transactions for the nine month periods ended September 30, 2018 and 2017 except the settlement
of accounts payable of $23,206 pursuant to the sale of subsidiaries (Note 9).
The
accompanying notes are an integral part of these condensed financial stat
|
Arvana
Inc.
|
|
Notes
to Condensed Financial Statements
|
|
September
30, 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.
The
reporting currency and functional currency of the Company is the United States dollar (“US Dollar”) and the accompanying
financial statements have been expressed in US Dollars.
These
condensed 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 nine-month period ended September 30, 2018, the Company recognized net
income of $94,367 as a result of a gain on the sale of subsidiaries (Note 9). At September 30, 2018, the Company had a working
capital deficiency of $2,382,908. 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.
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 financial statements of Arvana Inc. for the nine months ended September
30, 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 interim financial statements and notes appearing in this report should be read
in conjunction with our 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.
|
Arvana
Inc.
|
|
Notes
to Condensed Financial Statements
|
|
September
30, 2018
|
|
(Unaudited)
|
2.
Summary of Significant Accounting Policies - (continued)
Use
of Estimates
The
preparation of 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 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.
The
estimated fair values of the Company's financial instruments as of September 30, 2018 and December 31, 2017 follows:
|
|
|
September
30,
2018
|
|
December
31,
2017
|
|
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Cash
|
|
$
|
257
|
|
|
$
|
257
|
|
|
$
|
4,730
|
|
|
$
|
4,730
|
|
|
Accounts payable
and accrued liabilities
|
|
|
1,027,954
|
|
|
|
1,027,954
|
|
|
|
1,075,409
|
|
|
|
1,075,409
|
|
|
Convertible loan
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
50,000
|
|
Loans payable to
stockholders
|
|
|
590,027
|
|
|
|
590,027
|
|
|
|
600,651
|
|
|
|
600,651
|
|
|
Loans payable to
related party
|
|
|
130,321
|
|
|
|
130,321
|
|
|
|
131,000
|
|
|
|
131,000
|
|
Loans payable
|
|
|
85,525
|
|
|
|
85,525
|
|
|
|
75,813
|
|
|
|
75,813
|
|
|
Amounts due to related
parties
|
|
$
|
499,338
|
|
|
$
|
499,338
|
|
|
$
|
549,132
|
|
|
$
|
549,132
|
|
The
following table presents information about the assets that are measured at fair value on a recurring basis as of September 30,
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 include situations where
there is little, if any, market activity for the asset:
|
|
|
September
30,
2018
|
|
Quoted
Prices
in Active
Markets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
257
|
|
|
$
|
257
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The
fair value of cash is determined through market, observable and corroborated sources.
|
Arvana
Inc.
|
|
Notes
to Condensed Financial Statements
|
|
September
30, 2018
|
|
(Unaudited)
|
2.
Summary of Significant Accounting Policies - (continued)
Recent
accounting pronouncements
The
accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period.
New
and amended standards adopted by the Company
There
were no new and amended standards adopted by the Company for the first time in this reporting period which had a material impact
on the Company’s unaudited condensed consolidated interim financial statement except the following:
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 is not presented as a separate line item in the operating, investing or financing sections of the cash flow statement. The
amendments were 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 has had only a limited impact on the presentation of the statement
of cash flows.
New
standards and interpretations not yet adopted by the Company
Several
new standards and amendments to standards and interpretations are effective for annual periods beginning after the closing date
of this report and have not been applied in preparing these unaudited condensed consolidated interim financial statements:
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 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, which results in an operating lease. The standard will become effective for the Company beginning January 1, 2019.
The Company is currently assessing the impact that the 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 that the 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 Financial Statements
|
|
September
30, 2018
|
|
(Unaudited)
|
2.
Summary of Significant Accounting Policies - (continued)
New
standards and interpretations not yet adopted – (continued)
In
July 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Updates ASU 2017-11, requiring certain
changes to the presentation and disclosures of changes to liability or equity classification of financial instruments. The amendments
are effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those
fiscal years. The Company is currently assessing the impact that the adoption of this standard will have on its consolidated results
of operations, financial condition, cash flows, and financial statement disclosures.
In
June 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Updates ASU 2018-07, requiring certain
changes to nonemployee share-based payment accounting. The amendments are effective for public business entities for fiscal years
beginning after December 15, 2018, and interim periods within those fiscal years. The Company is currently assessing the impact
that the adoption of this standard will have on its consolidated results of operations, financial condition, cash flows, and financial
statement disclosures.
3.
Loans Payable
As
of September 30, 2018, the Company had received loans of $590,027 (Euro 225,000; CAD$ 72,300; $273,107) (December 31, 2017 - $600,651:
Euro 225,000; CAD$ 72,300; $273,107) from stockholders, loans of $130,321 (CAD$ 27,600; $109,000) (December 31, 2017 – $131,000:
CAD$ 27,600; $109,000) from a related party and loans of $85,525 (CAD$ 10,000; $77,800) (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 $37,800 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 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 $456,785 and $425,405 is included
in accounts payable and accrued liabilities at September 30, 2018, and December 31, 2017, respectively. Interest expense recognized
on these loans was $12,771 for the three months ended September 30, 2018, compared to $17,056 for the three months ended September
30, 2017, respectively. Interest expense includes $nil in accretion of the discount on the convertible debt during the three months
ended September 30, 2018, compared to $4,167 for the three months ended September 30, 2017. Interest expense recognized on these
loans was $38,555 for the nine months ended September 30, 2018, compared to $50,526 for the nine months ended September 30, 2017,
respectively. Interest expense includes $nil in accretion of the discount on the convertible debt during the nine months ended
September 30, 2018, compared to $12,501 for the nine months ended September 30, 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 loan to March 31, 2019. All other terms remained unchanged. Interest expense recognized on the convertible loan was
$1,250 for the three months ended September 30, 2018, compared to $1,250 for the three months ended September 30, 2017. Interest
expense recognized on the convertible loan was $3,750 for the nine months ended September 30, 2018, compared to $3,750 for the
nine months ended September 30, 2017.
|
Arvana
Inc.
|
|
Notes
to Condensed Financial Statements
|
|
September
30, 2018
|
|
(Unaudited)
|
4.
Stock Options
The
Company’s 2006 Stock Option Plan expired on June 4, 2016.
At
September 30, 2018 and December 31, 2017, there were no stock options outstanding. No options were granted, exercised or expired
during the period ended September 30, 2018 and during the year ended December 31, 2017.
5.
Common stock
During
the nine months ended September 30, 2018 and year ended December 31, 2017, the Company had issued nil shares respectively.
6.
Segmented Information
The
Company has no reportable segments.
7.
Related Party Transactions and Amounts Due to Related Parties
At
September 30, 2018, and December 31, 2017, the Company had amounts due to related parties of $499,338 and $549,132, respectively.
This amount includes $136,100 at September 30, 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 $8,675 (2017 - $6,181) paid to a company controlled by our chief executive officer during
the nine months ended September 30, 2018. A total of $2,663 (2017 - $nil) is included in amounts due to related parties.
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 September 30, 2018, our former chief executive officer was owed $268,874 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 entered into a consulting agreement on a month to month basis that provided
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 September 30, 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 $156,631 (CAD$202,759) of unpaid amounts payable.
|
Arvana
Inc.
|
|
Notes
to Condensed Financial Statements
|
|
September
30, 2018
|
|
(Unaudited)
|
7.
Related Party Transactions and Amounts Due to Related Parties – (continued)
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 $130,321 for unsecured amounts bearing 6% interest due on demand loaned
to the Company as of September 30, 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 $32,831 for their prior services rendered as officers as at September 30, 2018, compared
to $86,133 as of December 31, 2017. As a result of the sale of subsidiaries (Note 9), $51,075 of amounts owed to former officers
were eliminated as these amounts were owed by the subsidiaries to said former officers.
8.
Convertible Loan
On
May 18, 2016, the Company issued a convertible promissory note (“Convertible Note”) 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 September
30, 2018 and 2017, $nil and $4,167 of the discount was amortized as interest expense, respectively. During the nine months ended
September 30, 2018 and 2017, $nil and $12,501 of the discount was amortized as interest expense, respectively. Interest expense
recognized on this loan was $1,250 for the three months ended September 30, 2018, compared to $1,250 for the three months ended
September 30, 2017, respectively. Interest expense recognized on this loan was $3,750 for the nine months ended September 30,
2018, compared to $3,750 for the nine months ended September 30, 2017, respectively. As at September 30, 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.
|
Arvana
Inc.
|
|
Notes
to Condensed Financial Statements
|
|
September
30, 2018
|
|
(Unaudited)
|
9.
Sale of subsidiaries
On
September 24, 2018, the Company entered into a sale and purchase agreement with Nazleal S.A. (“Nazleal”) to dispose
of the Company’s subsidiaries, Arvana Networks Inc., Arvana Participaçōes S.A. and Arvana Comunicações
do Brasil S. A. (collectively, the “Subsidiaries”). Under the terms of the agreement, Nazleal purchased the Subsidiaries
for €20,000 ($23,206) by executing a settlement and release agreement to extinguish amounts previously payable to Nazleal
by the Company.
Effective
September 30, 2018, Nazleal assumed all debts, obligations, and guarantees of the Subsidiaries, which totaled $1,822,152. Of this
amount, $1,731,077 was written off (concurrently upon completion of the transaction), as these amounts represented amounts due
to the Company from the Subsidiaries (previously eliminated on consolidation). The remaining $91,075 comprised $40,000 in accounts
payable (due to arm’s length parties) and $51,075 in amounts due to related parties which were eliminated on completion
of the sale.
As
at September 30, 2018, the Subsidiaries had total assets of $44 which consisted solely of cash. The net effect of the above transactions
resulted in a total gain to the Company of $114,237.
10.
Subsequent Events
The
Company evaluated its September 30, 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 its financial
statements except the following:
On
October 12, 2018, the Company entered into a securities purchase agreement with Caie pursuant to which the Company issued an additional
convertible promissory note to CaiE in the amount of $57,800 due on October 11, 2019, to document $37,800 in loans received by
the Company from CaiE prior to September 30, 2018, and an additional $20,000 loan received by the Company on October 12, 2018.
The note accrues interest of at annual rate of 10% over the term of the note and is convertible, along with the principal amount,
into shares of the Company’s stock at a fixed price of $0.20 per share.
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 nine months ended September
30, 2018 and September 30, 2017.
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 has loaned the Company $107,800 as of the filing date of this report.
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 is actively pursuing financing to maintain operations.
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.
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 its 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 and nine months ended September 30, 2018, the Company sought additional funding to maintain operations and satisfy continuous
public disclosure requirements.
Our
operations for the three and nine months ended September 30, 2018, and 2017 are summarized below.
|
|
|
Three
months
Ended
September 30, 2018
|
|
Three
months
Ended
September 30, 2017
|
|
Nine
months
Ended
September 30, 2018
|
|
Nine
months
Ended
September 30, 2017
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administration
|
|
|
(2,657
|
)
|
|
|
(3,758
|
)
|
|
|
(9,541
|
)
|
|
|
(9,138
|
)
|
|
Professional
fees
|
|
|
(6,062
|
)
|
|
|
(3,200
|
)
|
|
|
(16,275
|
)
|
|
|
(12,581
|
)
|
|
Interest
|
|
|
(12,771
|
)
|
|
|
(17,056
|
)
|
|
|
(38,555
|
)
|
|
|
(50,526
|
)
|
|
Foreign
exchange gain (loss)
|
|
|
(7,949
|
)
|
|
|
(47,177
|
)
|
|
|
44,501
|
|
|
|
(115,360
|
)
|
|
Gain
on sale of subsidiaries
|
|
|
114,237
|
|
|
|
—
|
|
|
|
114,237
|
|
|
|
—
|
|
|
Net
income (loss) and comprehensive income (loss) for the period
|
|
$
|
84,798
|
|
|
($
|
71,191
|
)
|
|
$
|
94,367
|
|
|
($
|
187,605
|
)
|
Net
Income/Losses
Net
income for the three months ended September 30, 2018, was $84,798 as compared to a net loss of $71,191 for the three months ended
September 30, 2017. The transition from net losses to net income over the three-month period ended September 30, 2018, when compared
to the three-month period ended September 30, 2017, can be primarily attributed to the gain on sale of subsidiaries, offset by
interest expense, foreign exchange loss, general administrative expenses and 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 during the
three-month period, the increase of which negatively impacted the cost of those expenses that are payable in foreign currencies.
Net
income for the nine months ended September 30, 2018, was $94,367 as compared to a net loss of $187,605 for the nine months ended
September 30, 2017. The transition from net losses to net income over the nine-month period ended September 30, 2018, when compared
to the nine-month period ended September 30, 2017, can primarily be attributed to the gain on sale of subsidiaries and foreign
exchange gain, offset by interest expense, general administrative expenses and professional fees over the comparable nine month
periods. The gain on foreign exchange is due to a decrease in the value of foreign currencies against the US dollar during the
nine-month period, the decrease of which positively impacted the cost of those expenses that are payable in foreign currencies.
We
did not generate revenue during this period and expect to incur losses over the next twelve months at 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 nine-month period ended September 30, 2018.
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.
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.
As of September 30, 2018, the Company had a working capital deficit of $2,382,908.
Total
assets and current assets as of September 30, 2018, were $257 which consisted solely of cash.
Total
liabilities and current liabilities as of September 30, 2018, were $2,383,165 which consisted of accounts payable, convertible
loans to an unrelated party, loans payable to related parties and amounts due to related parties.
Net
stockholders' deficit in the Company was $2,382,908 at September 30, 2018.
Cash
Used in Operating Activities
Net
cash flow used in operating activities for the nine-month period ended September 30, 2018, was $14,429 as compared to $25,223
for the nine-month period ended September 30, 2017. Changes in net cash used in operating activities in the current nine-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, accretion of convertible debt and gain on sale of subsidiaries. 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
expect to use net cash flow in investing activities in connection with the prospective acquisition of CaiE. However, until such
time a transaction is concluded, we are without and do not expect to use net cash flows in investing activities.
Cash
Flows from Financing Activities
Cash
flow provided by financing activities for the nine months ended September 30, 2018, was $10,000 as compared to $17,800 for
the nine months ended September 30, 2017. The cash flows provided from financing activities in both comparative nine-month periods
can be attributed to loans from CaiE.
We
expect to continue to use cash flow provided by financing activities to maintain operations and acquire CaiE. In the event the
prospective acquisition of CaiE is not completed, the Company will seek to identify an alternative business opportunity.
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 $50,000 to maintain operations and acquire CaiE. The Company secured a convertible loan of $50,000 in 2016, an additional
loan of $27,800 in 2017, and two additional loans of $10,000 and $20,000 in 2018 from CaiE. However, the Company has no commitments
or arrangements for the funding necessary to complete the prospective acquisition of CaiE. 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. The Company’s inability to obtain sufficient funding to maintain operations would have a material
adverse effect 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 September 30, 2018.
The
Company had no commitments for future capital expenditures that were material at September 30, 2018.
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 September 30, 2018, 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 operations.
Critical
Accounting Policies
In
Note 2 to the audited financial statements for the years ended December 31, 2017 and 2016, 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 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.
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 $23,606,323 since inception and negative cash flows from operating activities as of September 30, 2018. 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 intention to acquire CaiE;
|
|
|
•
|
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.