Arvana
Inc.
Balance
Sheets
(Expressed
in US Dollars)
|
|
March
31
|
|
December
31
|
|
|
2019
|
|
2018
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
997
|
|
|
$
|
815
|
|
Total
assets
|
|
$
|
997
|
|
|
$
|
815
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
DEFICIENCY
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
1,031,541
|
|
|
$
|
1,012,714
|
|
Convertible
loan (net of discount of $30,609 and $45,059 respectively (Note 8)
|
|
|
77,191
|
|
|
|
62,741
|
|
Loans
payable to stockholders (Note 3)
|
|
|
579,795
|
|
|
|
583,593
|
|
Loans
payable to related party (Note 3)
|
|
|
129,653
|
|
|
|
129,231
|
|
Loans
payable (Note 3)
|
|
|
53,083
|
|
|
|
47,330
|
|
Amounts
due to related parties (Note 7)
|
|
|
494,569
|
|
|
|
491,171
|
|
Total
current liabilities
|
|
|
2,365,832
|
|
|
|
2,326,780
|
|
Stockholders' deficiency
|
|
|
|
|
|
|
|
|
Common
stock, $0.001 par value 5,000,000 authorized, 1,034,030 shares issued and outstanding at March 31, 2019 and December 31, 2018,
respectively
|
|
|
1,034
|
|
|
|
1,034
|
|
Additional
paid-in capital
|
|
|
21,283,517
|
|
|
|
21,283,517
|
|
Deficit
|
|
|
(23,646,050
|
)
|
|
|
(23,607,180
|
)
|
|
|
|
(2,361,499
|
)
|
|
|
(2,322,629
|
)
|
Less:
Treasury stock – 2,085 common shares at
March 31, 2019 and December 31, 2018, respectively
|
|
|
(3,336
|
)
|
|
|
(3,336
|
)
|
Total
stockholders’ deficiency
|
|
|
(2,364,835
|
)
|
|
|
(2,325,965
|
)
|
|
|
$
|
997
|
|
|
$
|
815
|
|
The
accompanying notes are an integral part of these condensed interim financial statements.
Arvana
Inc.
Statements
of Operations and Comprehensive Income (Loss)
(Expressed
in US Dollars)
|
|
Three
Months Ended
|
|
|
March
31,
|
|
|
2019
|
|
2018
|
Operating expenses
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
2,606
|
|
|
|
3,541
|
|
Professional
fees
|
|
|
4,719
|
|
|
|
3,538
|
|
Total
operating expenses
|
|
$
|
7,325
|
|
|
$
|
7,079
|
|
Loss
from operations
|
|
|
(7,325
|
)
|
|
|
(7,079
|
)
|
Interest
expense (Note 3 and Note 8)
|
|
|
(29,773
|
)
|
|
|
(13,013
|
)
|
Foreign
exchange gain (loss)
|
|
|
(1,772
|
)
|
|
|
4,182
|
|
|
|
|
|
|
|
|
|
|
Net
loss and comprehensive loss
|
|
$
|
(38,870
|
)
|
|
$
|
(15,910
|
)
|
Per
common share information - basic and diluted:
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding
|
|
|
1,034,030
|
|
|
|
1,034,030
|
|
Net
loss per common shares – basic and diluted
|
|
$
|
(0.04
|
)
|
|
|
(0.02
|
)
|
The
accompanying notes are an integral part of these condensed interim financial statements.
Arvana
Inc.
Statements
of Cash Flows
(Expressed
in US Dollars)
|
|
Three
Months Ended
|
|
|
March
31,
|
|
|
2019
|
|
2018
|
Cash flows from operating
activities
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(38,870
|
)
|
|
$
|
(15,910
|
)
|
Item
not involving cash:
|
|
|
|
|
|
|
|
|
Amortization
of discount on convertible loan
|
|
|
14,450
|
|
|
|
—
|
|
Interest
expense
|
|
|
15,323
|
|
|
|
—
|
|
Unrealized
foreign exchange
|
|
|
1,772
|
|
|
|
12,264
|
|
Changes
in non-cash working capital:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
|
2,306
|
|
|
|
13,334
|
|
Amounts
due to related parties
|
|
|
(399
|
)
|
|
|
(10,709
|
)
|
Net
cash used in operations
|
|
|
(5,418
|
)
|
|
|
(1,021
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities
|
|
|
|
|
|
|
|
|
Proceeds
of loans payable
|
|
|
5,600
|
|
|
|
—
|
|
Net
cash provided by financing activities
|
|
|
5,600
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Change in cash
|
|
|
182
|
|
|
|
(1,021
|
)
|
Cash, beginning
of period
|
|
|
815
|
|
|
|
4,730
|
|
Cash, end of period
|
|
$
|
997
|
|
|
$
|
3,708
|
|
|
|
|
|
|
|
|
|
|
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, 2019 and 2018.
The
accompanying notes are an integral part of these condensed interim financial statements.
Arvana
Inc.
|
Notes
to Condensed Interim Financial Statements
|
March
31, 2019
|
(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.
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. 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.
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 three-month period ended March 31, 2019, the Company recognized a net
loss of $38,870 as a result of general administrative expenses, professional fees, interest expenses and foreign exchange. At
March 31, 2019, the Company had a working capital deficiency of $2,364,835. These conditions raise substantial doubt about the
Company’s ability to continue as a going concern.
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
a)
Basis of presentation
The
Company is in the process of evaluating CaiE Food Partnership Ltd. (“CaiE”) as a business opportunity and has minimal
operating expensess. The Company’s fiscal year end is December 31. The accompanying condensed interim financial statements
of Arvana Inc. for the three months ended March 31, 2019 and 2018, 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. 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, 2018,
as filed with the Securities and Exchange Commission (“SEC”) on April 15, 2019. Results are not necessarily indicative
of those which may be achieved in future periods.
Arvana
Inc.
|
Notes
to Condensed Interim Financial Statements
|
March
31, 2019
|
(Unaudited)
|
2.
Summary of Significant Accounting Policies (continued)
b)
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 unrecognized deductible temporary
tax differences.
c)
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.
The
estimated fair values of the Company's financial instruments as of March 31, 2019 and December 31, 2018 are as follows:
|
|
March
31,
2019
|
|
December
31,
2018
|
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
Cash
|
|
$
|
997
|
|
|
$
|
997
|
|
|
$
|
815
|
|
|
$
|
815
|
|
Accounts
payable and accrued liabilities
|
|
|
1,031,541
|
|
|
|
1,031,541
|
|
|
|
1,012,714
|
|
|
|
1,012,714
|
|
Convertible
loan
|
|
|
77,191
|
|
|
|
77,191
|
|
|
|
62,741
|
|
|
|
62,741
|
|
Loans
payable to stockholders
|
|
|
579,795
|
|
|
|
579,795
|
|
|
|
583,593
|
|
|
|
583,593
|
|
Loans payable to related
party
|
|
|
129,653
|
|
|
|
129,653
|
|
|
|
129,231
|
|
|
|
129,231
|
|
Loans
payable
|
|
|
53,083
|
|
|
|
53,083
|
|
|
|
47,330
|
|
|
|
47,330
|
|
Amounts due to related
parties
|
|
|
494,569
|
|
|
|
494,569
|
|
|
|
491,171
|
|
|
|
491,171
|
|
The
following table presents information about the assets that are measured at fair value on a recurring basis as of March 31, 2019,
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,
2019
|
|
Quoted
Prices
in Active
Markets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
997
|
|
|
$
|
997
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The
fair value of cash is determined through market, observable and corroborated sources.
Arvana
Inc.
|
Notes
to Condensed Interim Financial Statements
|
March
31, 2019
|
(Unaudited)
|
2.
Summary of Significant Accounting Policies (continued)
d)
Recent accounting pronouncements
New
and amended standards adopted by the Company
The
following new and amended standards were adopted by the Company for the first time in this reporting period.
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 became effective for the Company beginning January 1, 2019. The
adoption of this standard did not have a material impact on the Company’s results of operations, financial condition, cash
flows, and financial statement disclosures.
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 adoption of this standard did not have a material impact on the Company’s 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 adoption of this standard did not have a
material impact on the Company’s results of operations, financial condition, cash flows, and financial statement disclosures.
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 condensed interim financial statements:
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 results of operations,
financial condition, cash flows, and financial statement disclosures.
Arvana
Inc.
|
Notes
to Condensed Interim Financial Statements
|
March
31, 2019
|
(Unaudited)
|
2.
Summary of Significant Accounting Policies (continued)
d)
Recent Accounting Pronouncements (continued)
New
standards and interpretations not yet adopted by the Company (continued)
In
August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Updates ASU 2018-13 which changes the
fair value measurement disclosure requirements of ASC 820. The amendments in this ASU are the result of a broader disclosure project
known as FASB Concepts Statement, Conceptual Framework for Financial Reporting – Chapter 8: Notes to Financial Statements.
The amendments are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods
within those fiscal years. The Company is currently assessing the impact that the adoption of this standard will have on its results
of operations, financial condition, cash flows, and financial statement disclosures.
3.
Loans Payable
As
of March 31, 2019, the Company had received loans of $579,795 (€225,000; CAD$ 72,300; $273,107) (December 31, 2018 - $583,593:
€225,000; CAD$ 72,300; $273,107) from stockholders; loans of $129,653 (CAD$ 27,600; $109,000) (December 31, 2018 –
$129,231: CAD$ 27,600; $109,000) from a related party and loans of $53,083 (CAD$ 10,000; $45,600) (December 31, 2018 – $47,330:
CAD$ 10,000; $40,000) 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 bear 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 $477,556 and $470,192
is included in accounts payable and accrued expenses at March 31, 2019 and December 31, 2018, respectively. Interest expense recognized
on these loans was $12,628 for the three months ended March 31, 2019, compared to $13,013 for the three months ended March 31,
2018, respectively.
4.
Stock Options
At
March 31, 2019 and December 31, 2018, there were no stock options outstanding. No options were granted, exercised or expired during
the period ended March 31, 2019 and during the year ended December 31, 2018.
5.
Common stock
During
the three months ended March 31, 2019 and year ended December 31, 2018, the Company had issued nil shares, respectively.
6.
Segmented Information
The
Company has no reportable segments.
Arvana
Inc.
|
Notes
to Condensed Interim Financial Statements
|
March
31, 2019
|
(Unaudited)
|
7.
Related Party Transactions and Amounts Due to Related Parties
At
March 31, 2019, and December 31, 2018, the Company had amounts due to related parties of $494,569 and $491,171, respectively.
This amount includes $136,100 at March 31, 2019 and December 31, 2018, 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 $2,819 (2018 - $1,238) paid to a company controlled by our chief executive officer during
the three months ended March 31, 2019.
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, 2019, our former chief executive officer was owed $267,796 and $262,705 as of December 31, 2018
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, 2019 and December 31, 2018, 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 $151,725 (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 $129,653 for unsecured amounts bearing 6% interest due on demand loaned
to the Company as of March 31, 2019, compared to $129,231 as of December 31, 2018. Total interest expense of $72,836 (December
31, 2018 - $70,711) is included in accounts payable and accrued liabilities as at March 31, 2019.
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 $31,803 for their prior services rendered as officers as at March 31, 2019, compared
to $31,153 as of December 31, 2018.
Arvana
Inc.
|
Notes
to Condensed Interim Financial Statements
|
March
31, 2019
|
(Unaudited)
|
8.
Convertible Loans
On
May 18, 2016, the Company issued a convertible promissory note (“Convertible Note”) pursuant to which the Company
received $50,000 from CaiE due on November 17, 2017. 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, 2019 and 2018, $nil and $nil of the discount was amortized as interest expense, respectively. Interest
expense recognized on this loan was $1,250 for the period ended March 31, 2019, compared to $1,250 for the period ended March
31, 2018. As at March 31, 2019 and December 31, 2018, 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 additional amending agreement to further extend the maturity date of the Convertible
Note to March 31, 2019. All other terms remained unchanged.
On
October 12, 2018, the Company issued an additional convertible note with CaiE pursuant to which the Company received $27,800 during
the year ended December 31, 2017 and $30,000 during the year ended December 31, 2018. The $57,800 convertible note is due on October
11, 2019 and 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 period ended March 31, 2019 and 2018, $14,450 and $nil of the discount
was amortized as interest expense, respectively. Interest expense recognized on this loan was $1,445 for the period ended March
31, 2019, compared to $nil for the period ended March 31, 2018. As at March 31, 2019 and December 31, 2018, the balance of the
convertible note was $57,800.
9.
Subsequent Events
The
Company evaluated its March 31, 2019 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, 2019, the Company received an additional loan from CaiE in the amount of $3,000 with terms and conditions of this loan
to be finalized at a later date.
Item
2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
FORWARD
LOOKING STATEMENTS
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, 2019 and March 31, 2018.
Overview
The
Company was incorporated in the State of Nevada on June 16, 1977, as “Turinco, Inc.” to engage in any legal undertaking.
On July 24, 2006, the Company’s name was changed from Turinco, Inc. to Arvana Inc. to reflect the acquisition of Arvana
Networks, Inc., a telecommunications business. We discontinued efforts related to our telecommunications business as of December
31, 2009. We have since been in the process of seeking other business opportunities.
Our
office is located at 299 S. Main Street, 13th Floor, Salt Lake City, Utah 84111, and our telephone number is (801) 232-7395. Our
registered agent is JAD Communications LLC., 5209 West Gowan Road, Las Vegas, Nevada 89130.
The
Company currently is traded on the OTC Markets Group, Inc.’s Pink Sheets Current Information over the counter market platform
under the symbol “AVNI.”
Company
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 $116,400 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.
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 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, 2019, the Company satisfied periodic public disclosure requirements and continued to finance
its operations with convertible loans from CaiE.
Our
operations for the three months ended March 31, 2019 and 2018 are summarized in the following table.
|
|
Three
months
Ended
March 31, 2019
|
|
Three
months
Ended
March 31, 2018
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
$
|
(2,606
|
)
|
|
$
|
(3,541
|
)
|
Professional
fees
|
|
|
(4,719
|
)
|
|
|
(3,538
|
)
|
Loss
from Operations
|
|
|
|
|
|
|
|
|
Interest
|
|
|
(29,773
|
)
|
|
|
(13,013
|
)
|
Foreign
exchange gain (loss)
|
|
|
(1,772
|
)
|
|
|
4,182
|
|
Net
loss for the period
|
|
$
|
(38,870
|
)
|
|
$
|
(15,910
|
)
|
Net
Losses
Net
loss for the three months ended March 31, 2019 was $38,870 as compared to net loss of $15,910 for the three months ended March
31, 2018, an increase of 144%. The increase of net loss over the three-month period ended March 31, 2019, compared to the three-month
period ended March 31, 2018, can be primarily attributed to an increase in interest expense and foreign exchange loss, offset
by a decrease in general administrative expenses over the comparable three-month periods. The increase in interest expense is
attributed to amounts owed to creditors that include CaiE, while 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 over the comparable three-month periods.
The
Company did not generate revenue during this period and expects to continue to incur losses over the next twelve months or until
such time as operations generate more income than expenses.
Capital
Expenditures
The
Company expended no amounts on capital expenditures for the three-month period ended March 31, 2019.
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 assets of $997 as of March 31, 2019, consisting of cash and a working capital deficit of $2,364,835, as compared to
assets of $815, consisting of cash and a working capital deficit of $2,325,965 as of December 31, 2018. Net stockholders' deficit
in the Company was $2,364,835 at March 31, 2019, as compared to a net stockholder’s deficit in the Company of $2,325,965
at December 31, 2018.
Cash
Used in Operating Activities
Net
cash flow used in operating activities for the three-month period ended March 31, 2019 was $5,418 as compared to $1,021 for the
three-month period ended March 31, 2018. 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 accrued liabilities, 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 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, 2019, was $5,600 as compared to $nil for
the three months ended March 31, 2018. The cash flows provided from financing activities over the comparative three-month periods
are 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
convertible loan of $57,800 in 2017 and 2018, and an additional loan of $5,600 in the first quarter of 2019 from CaiE. Subsequent
to the period end, the Company received an additional loan of $3,000 from CaiE. Despite these loans, the Company has no commitments
or arrangements for the funding necessary to complete the acquisition of CaiE. The Company’s shareholders or CaiE are the
most likely sources of funding, 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 continue operations.
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, 2019.
The
Company had no commitments for future capital expenditures that were material at March 31, 2019.
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, 2019, 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 operation.
Critical
Accounting Policies
In
Note 2 to the audited financial statements for the years ended December 31, 2018 and 2017, 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 $23,646,050 since inception and negative cash flows from operating activities as of March 31, 2019. 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.