Arvana
Inc.
Condensed
Balance Sheets
(Unaudited)
|
|
March
31
|
|
December
31
|
|
|
2020
|
|
2019
|
ASSETS
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
19,464
|
|
|
$
|
2,346
|
|
Total
assets
|
|
$
|
19,464
|
|
|
$
|
2,346
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIENCY
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
930,710
|
|
|
$
|
974,013
|
|
Convertible
loan (Note 8)
|
|
|
107,800
|
|
|
|
107,800
|
|
Loans
payable to stockholders (Note 3)
|
|
|
546,234
|
|
|
|
581,379
|
|
Loans
payable to related party (Note 3)
|
|
|
128,455
|
|
|
|
130,249
|
|
Loans
payable (Note 3)
|
|
|
73,859
|
|
|
|
84,509
|
|
Amounts
due to related parties (Note 7)
|
|
|
326,559
|
|
|
|
338,109
|
|
Total
current liabilities
|
|
|
2,113,617
|
|
|
|
2,216,059
|
|
Stockholders'
deficiency
|
|
|
|
|
|
|
|
|
Common
stock, $0.001 par value 5,000,000 authorized, 2,005,070 and 1,034,030 shares issued and outstanding at March 31, 2020 and
December 31, 2019, respectively
|
|
|
2,005
|
|
|
|
1,034
|
|
Additional
paid-in capital
|
|
|
21,379,650
|
|
|
|
21,283,517
|
|
Deficit
|
|
|
(23,472,472
|
)
|
|
|
(23,494,928
|
)
|
|
|
|
(2,090,817
|
)
|
|
|
(2,210,377
|
)
|
Less:
Treasury stock – 2,085 common shares at
March 31, 2020 and December 31, 2019, respectively
|
|
|
(3,336
|
)
|
|
|
(3,336
|
)
|
Total
stockholders’ deficiency
|
|
|
(2,094,153
|
)
|
|
|
(2,213,713
|
)
|
|
|
$
|
19,464
|
|
|
$
|
2,346
|
|
The
accompanying notes are an integral part of these condensed interim financial statements.
Arvana
Inc,
Condensed
Interim Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
|
|
Three
Months Ended
|
|
|
March
31,
|
|
|
2020
|
|
2019
|
Operating
expenses
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
11,702
|
|
|
|
2,606
|
|
Professional
fees
|
|
|
11,736
|
|
|
|
4,719
|
|
Total
operating expenses
|
|
$
|
23,438
|
|
|
$
|
7,325
|
|
Loss
from operations
|
|
|
(23,438
|
)
|
|
|
(7,325
|
)
|
Interest
expense (Note 3 and Note 8)
|
|
|
(12,996
|
)
|
|
|
(29,773
|
)
|
Foreign
exchange gain (loss)
|
|
|
58,890
|
|
|
|
(1,772
|
)
|
Net
income (loss) and comprehensive income (loss)
|
|
$
|
22,456
|
|
|
$
|
(38,870
|
)
|
|
|
|
|
|
|
|
|
|
Per
common share information - basic and diluted:
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding
|
|
|
1,087,384
|
|
|
|
1,034,030
|
|
Net
income (loss) per common share – basic and diluted
|
|
$
|
0.02
|
|
|
|
(0.04
|
)
|
The
accompanying notes are an integral part of these condensed interim financial statements.
Arvana
Inc.
Condensed
interim Statements of Cash Flows
(Unaudited)
|
|
Three
Months Ended
|
|
|
March
31,
|
|
|
2020
|
|
2019
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
22,456
|
|
|
$
|
(38,870
|
)
|
|
|
|
|
|
|
|
|
|
Items
not involving cash:
|
|
|
|
|
|
|
|
|
Amortization
of discount on convertible loan
|
|
|
—
|
|
|
|
14,450
|
|
Interest
expense
|
|
|
12,996
|
|
|
|
15,323
|
|
Unrealized
foreign exchange
|
|
|
(58,620
|
)
|
|
|
1,772
|
|
Changes
in non-cash working capital:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
|
13,359
|
|
|
|
2,306
|
|
Amounts
due to related parties
|
|
|
1,927
|
|
|
|
(399
|
)
|
Net
cash used in operations
|
|
|
(7,882
|
)
|
|
|
(5,418
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds
of loans payable
|
|
|
25,000
|
|
|
|
5,600
|
|
Net
cash provided by financing activities
|
|
|
25,000
|
|
|
|
5,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in cash
|
|
|
17,118
|
|
|
|
182
|
|
Cash,
beginning of period
|
|
|
2,346
|
|
|
|
815
|
|
Cash,
end of period
|
|
$
|
19,464
|
|
|
$
|
997
|
|
|
|
|
|
|
|
|
|
|
Supplementary
information
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
—
|
|
|
$
|
—
|
|
Cash
paid for income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
The
accompanying notes are an integral part of these condensed interim financial statements.
Arvana
Inc.
Supplemental
Disclosure of Cash Flow Information
(Unaudited)
|
|
Three
Months Ended
|
|
|
March
31,
|
|
|
2020
|
|
2019
|
Non-cash
operating activities (Note 3)
|
|
$
|
37,104
|
|
|
$
|
—
|
|
Non-cash
financing activities (Note 3)
|
|
$
|
60,000
|
|
|
$
|
—
|
|
Non-cash
investing activities
|
|
$
|
—
|
|
|
$
|
—
|
|
The
accompanying notes are an integral part of these condensed interim financial statements.
Arvana
Inc.
Statements
of Stockholders’ Deficiency
(Unaudited)
|
|
Common
Shares
|
|
|
|
|
|
Treasury
|
|
|
|
|
Shares
|
|
Amount
|
|
Additional
Paid-in Capital
|
|
Deficit
|
|
Shares
|
|
Amount
|
|
Total
Stockholders’ Deficiency
|
Balance,
December 31, 2018
|
|
|
1,034,030
|
|
|
|
1,034
|
|
|
|
21,283,517
|
|
|
|
(23,607,180
|
)
|
|
|
(2,085
|
)
|
|
|
(3,336
|
)
|
|
|
(2,325,965
|
)
|
Net
income (loss) for the period ended March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(38,870
|
)
|
|
|
|
|
|
|
|
|
|
|
(38,870
|
)
|
Balance,
March 31, 2019
|
|
|
1,034,030
|
|
|
|
1,034
|
|
|
|
21,283,517
|
|
|
|
(23,646,050
|
)
|
|
|
(2,085
|
)
|
|
|
(3,336
|
)
|
|
|
(2,364,835
|
)
|
Balance,
December 31, 2019
|
|
|
1,034,030
|
|
|
|
1,034
|
|
|
|
21,283,517
|
|
|
|
(23,494,928
|
)
|
|
|
(2,085
|
)
|
|
|
(3,336
|
)
|
|
|
(2,213,713
|
)
|
Debt
settlement
|
|
|
971,040
|
|
|
|
971
|
|
|
|
96,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
97,104
|
|
Net
income (loss) for the period ended March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,456
|
|
|
|
|
|
|
|
|
|
|
|
22,456
|
|
Balance,
March 31, 2020
|
|
|
2,005,070
|
|
|
$
|
2,005
|
|
|
$
|
21,379,650
|
|
|
$
|
(23,472,472
|
)
|
|
|
(2,085
|
)
|
|
$
|
(3,336
|
)
|
|
$
|
(2,094,153
|
)
|
The
accompanying notes are an integral part of these condensed interim financial statements.
Arvana
Inc.
|
Notes
to Condensed Interim Financial Statements
|
March
31, 2020
|
(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 interim 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, 2020, the Company recognized net income of $22,456 as a result of a foreign exchange gain
offset by general administrative expenses, professional fees and interest expenses. The Company had a working capital deficiency
of $2,094,153 as of March 31, 2020. These conditions raise substantial doubt about the Company’s ability to continue as
a going concern.
The
World Health Organization declared coronavirus COVID-19 a global pandemic in March 2020. COVID-19 is a contagious disease that
continues to spread adversely affecting workforces, economies, and financial markets globally, which affects will likely result
in an economic downturn. The Company cannot predict the duration or magnitude of the adverse results connected to COVID-19, nor
can it predict the effect, if any, COVID-19 will have on the Company’s business or its ability to raise funds.
The
Company will require continued financial support from shareholders and creditors until it is able to generate sufficient cash
flow from operations. There is substantial doubt that the Company will be able to accomplish this objective.
Failure
to obtain the ongoing support of shareholders and creditors may indicate that the preparation of these financial statements on
a going concern basis is 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 liabilities that might arise from this uncertainty.
Arvana
Inc.
|
Notes
to Condensed Interim Financial Statements
|
March
31, 2020
|
(Unaudited)
|
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 expenses. 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, 2020 and 2019, 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, 2019,
as filed with the Securities and Exchange Commission (“SEC”) on April 1, 2020. Results are not necessarily indicative
of those which may be achieved in future periods.
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, 2020 and December 31, 2019 are as follows:
|
|
|
|
March
31,
2020
|
|
|
|
December
31,
2019
|
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
Cash
|
|
$
|
19,464
|
|
|
$
|
19,464
|
|
|
$
|
2,346
|
|
|
$
|
2,346
|
|
Accounts
payable and accrued liabilities
|
|
|
930,710
|
|
|
|
930,710
|
|
|
|
974,013
|
|
|
|
974,013
|
|
Convertible
loan
|
|
|
107,800
|
|
|
|
107,800
|
|
|
|
107,800
|
|
|
|
107,800
|
|
Loans
payable to stockholders
|
|
|
546,234
|
|
|
|
546,234
|
|
|
|
581,379
|
|
|
|
581,379
|
|
Loans
payable to related party
|
|
|
128,455
|
|
|
|
128,455
|
|
|
|
130,249
|
|
|
|
130,249
|
|
Loans
payable
|
|
|
73,859
|
|
|
|
73,859
|
|
|
|
84,509
|
|
|
|
84,509
|
|
Amounts
due to related parties
|
|
|
326,559
|
|
|
|
326,559
|
|
|
|
338,109
|
|
|
|
338,109
|
|
Arvana
Inc.
|
Notes
to Condensed Interim Financial Statements
|
March
31, 2020
|
(Unaudited)
|
2.
Summary of Significant Accounting Policies (continued)
c)
Financial instruments (continued)
The
following table presents information about the assets that are measured at fair value on a recurring basis as of March 31, 2020,
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,
2020
|
|
Quoted
Prices
in Active
Markets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
19,464
|
|
|
$
|
19,464
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The
fair value of cash is determined through market, observable and corroborated sources.
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
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. In November 2018, the FASB issued ASU 2018-19 to clarify certain
aspects of the new current expected credit losses impairment model in ASU 2016-13. ASU 2018-19 points out that operating lease
receivables are within the scope of ASC 842 rather than ASC 326. The standard became effective for the Company beginning January
1, 2020. 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
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 standard became effective for the Company beginning January 1,
2020. The amendments in this ASU are the result of a broader disclosure project called FASB Concepts Statement, Conceptual Framework
for Financial Reporting — Chapter 8: Notes to Financial Statements. 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.
Arvana
Inc.
|
Notes
to Condensed Interim Financial Statements
|
March
31, 2020
|
(Unaudited)
|
3.
Loans Payable
As
of March 31, 2020, the Company had received loans of $546,234 (€225,000; CAD$ 72,300; $248,107) (December 31, 2019 - $581,379:
€225,000; CAD$ 72,300; $273,107) from stockholders; loans of $128,455 (CAD$ 27,600; $109,000) (December 31, 2019 –
$130,249: CAD$ 27,600; $109,000) from a related party and loans of $73,859 (CAD$ 10,000; $66,810) (December 31, 2019 – $84,509:
CAD$ 10,000; $76,810) from unrelated third parties. All of the loans bear interest at 6% per annum. The loans were made in 3 different
currencies, Euros, Canadian Dollars and US Dollars. All amounts reflected on these 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
$488,629 and $521,156 is included in accounts payable and accrued expenses at March 31, 2020 and December 31, 2019, respectively.
Interest expense recognized on these loans was $10,301 for the three months ended March 31, 2020, compared to $29,773 for the
three months ended March 31, 2019, respectively. On March 30, 2020, loans of $60,000 and corresponding interest of $37,104 were
settled by the issuance of 971,040 common shares pursuant to three debt settlement agreements dated March 3, 2020, March 4, 2020
and March 4, 2020.
4.
Stock Options
At
March 31, 2020 and December 31, 2019, there were no stock options outstanding. No options were granted, exercised or expired during
the period ended March 31, 2020 and during the year ended December 31, 2019.
5.
Common stock
During
the three months ended March 31, 2020, the Company issued 971,040 shares of its common stock valued at $0.10 a share to settle
$60,000 in loans and $37,104 in interest (Note 3). During the year ended December 31, 2019, the Company had issued nil shares.
6.
Segmented Information
The
Company has no reportable segments.
Arvana
Inc.
|
Notes
to Condensed Interim Financial Statements
|
March
31, 2020
|
(Unaudited)
|
7.
Related Party Transactions and Amounts Due to Related Parties
At
March 31, 2020, and December 31, 2019, the Company had amounts due to related parties of $326,559 and $338,109, respectively.
This amount includes $60,000 at March 31, 2020, and December 31, 2019, payable to 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 $6,913 (2019 - $2,819) paid to a company controlled by our chief executive officer during
the three months ended March 31, 2020.
A
former chief executive officer and director entered into a consulting arrangement that provided for a monthly fee of CAD $5,000,
which amounts were accrued and are unpaid through the termination date on May 24, 2013. As of March 31, 2020, and December 31,
2019, our former chief executive officer was owed $266,559 and $278,109, respectively. The amounts due are unsecured and non-interest
bearing, due on demand.
A
former chief executive officer and director assigned to a related corporation unpaid amounts of $142,925 (CAD $202,759) as of
March 31, 2020 as per a debt assignment agreement effective January 1, 2012.
A
former chief executive officer and director is owed for unsecured amounts bearing 6% interest due on demand along with corresponding
accrued interest payable that remains outstanding as of March 31, 2020 and December 31, 2019 as indicated below.
|
|
March
31,
2020
|
|
December
31, 2019
|
Loans
payable
|
|
$
|
128,455
|
|
|
$
|
130,249
|
|
Accrued
interest payable included in amounts due to related parties
|
|
|
80,013
|
|
|
|
78,962
|
|
Arvana
Inc.
|
Notes
to Condensed Interim Financial Statements
|
March
31, 2020
|
(Unaudited)
|
8.
Convertible Loans
On
May 18, 2016, the Company issued a convertible promissory note to CaiE that accrues 10% per annum, in exchange for $50,000, which
was initially due on November 17, 2017. The note is convertible into the Company’s common stock, in whole or in part, at
any time prior to maturity at the option of the holder at $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 debt. The maturity
date of the note was extended on March 31, 2020, by amendment, to March 31, 2021, while all other terms of the note remain unchanged.
During the three months ended March 31, 2020 and 2019, no discount was amortized as interest expense, while the interest expense
on the note was $1,250 for the period ended March 31, 2020, and $1,250 for the period ended March 31, 2019. As at March 31, 2020
and December 31, 2019, the balance of the note was $50,000.
On
October 12, 2018, the Company issued a convertible note to CaiE that accrues 10% per annum, in exchange for a series of loans
that totaled $57,800, which was initially due on October 11, 2019. The note is convertible into the Company’s common stock,
in whole or in part, at any time prior to maturity at the option of the holder at $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 debt. The maturity date of the note was extended on March 31, 2020, by amendment, to March 31, 2021, while all other terms
of the note remain unchanged. During the three months ended March 31, 2020 and 2019, $nil and $14,450 of the discount was amortized
as interest expense, while the interest expense on the note was $1,445 for the period ended March 31, 2020, and $1,445 for the
period ended March 31, 2019. As at March 31, 2020 and December 31, 2019, the balance of the note was $57,800.
9.
Subsequent Events
The
Company evaluated its March 31, 2020 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.
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 no guarantee 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, 2020 and March 31, 2019.
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 AA Registered Agents, 4869 Nightwood Court, Las Vegas, Nevada 89149.
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, we 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 we will issue shares of its common stock to acquire CaiE through merger or acquisition, will convert existing
debt to equity, increase its authorized common shares, elect a new board of directors and change its name to reflect the new business.
Since the MOU was signed four years ago, the terms of the MOU are expected to change. The lack of progress on concluding a definitive
agreement is primarily due to accounting delays related to the compilation of CaiE’s financial statements. The delays have
caused CaiE to make additional loans to us to ensure that the Company remains in compliance with its reporting obligations while
CaiE compiles its audited financial statements. CaiE has loaned us $169,610 as of the filing date of this report, which sum if
comprised of convertible notes and other outstanding loan amounts.
In
the event that we do not complete the acquisition of CaiE, our intention is to identify and evaluate alternative business opportunities
that might be a good match for us. Towards this end, we have entered into a consulting agreement with one of our stockholders
that has expertise in strategic business alliances, business combinations, mergers and acquisitions to procure an alternative
to the CaiE transaction in the event that we do not reach a definitive agreement to move forward.
We
will not be able to develop any alternative business opportunities presented to us without additional financing. Management continues
to pursue financing from CaiE to maintain operations while a determination of the likelihood of concluding a transaction based
on the MOU remains uncertain.
Plan
of Operation
Our
plan of operation over the next twelve months is to acquire CaiE, on terms to be provided within definitive agreements 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 to complete a definitive transaction with CaiE. We anticipate that required funding in the near term will be in the form of
debt financing from CaiE. On completing the intended transaction with CaiE, we will 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 reach a definitive agreement with CaiE, 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 to maintain operations. Should an alternative
business opportunity be identified, we will need additional funding to complete an alternative transaction. We anticipate that
required prospective funding in this instance will be in the form of unsecured debt or equity financing from stockholders and
third parties. Despite our confidence that funding will become available for an alternative business opportunity, we do not have
such alternative financing arranged. Therefore, we will require continued financial support from stockholders and creditors until
we are able to generate sufficient cash flow to maintain operations.
Results
of Operations
During
the three months ended March 31, 2020, the Company satisfied periodic public disclosure requirements and continued to sustain
operations through the proceeds of debt financing from CaiE.
Operations
for the three months ended March 31, 2020 and 2019, are summarized in the following table.
|
|
Three
months
Ended
March 31, 2020
|
|
Three
months
Ended
March 31, 2019
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
$
|
(11,702
|
)
|
|
$
|
(2,606
|
)
|
Professional
fees
|
|
|
(11,736
|
)
|
|
|
(4,719
|
)
|
Loss
from Operations
|
|
|
|
|
|
|
|
|
Interest
|
|
|
(12,996
|
)
|
|
|
(29,773
|
)
|
Foreign
exchange gain (loss)
|
|
|
58,890
|
|
|
|
(1,772
|
)
|
Net
income (loss) for the period
|
|
$
|
22,456
|
|
|
$
|
(38,870
|
)
|
Net
Income/Losses
Net
income for the three months ended March 31, 2020, were $22,456 as compared to a net loss of $38,870 for the three months ended
March 31, 2019. The decrease in net loss over the three-month period ended March 31, 2020, can be attributed to foreign exchange
gain and a decrease in interest expense, offset by an increase in general administrative expenses, and professional fees over
the comparable three-month period. The decrease in interest expense is due to the elimination of the requirement that we book
accretion interest on convertible loans, while the gain on foreign exchange is due to a decrease in the value of foreign currencies
against the US dollar, which positively impacts the cost of expenses payable in foreign currencies. Net losses for the three months
ended March 31, 2019, can be attributed to the foreign exchange loss and the requirement in the prior comparative period interest
booked for accretion expense on convertible loans, offset by lower general and administrative expenses and professional fees.
We
did not generate revenue during this period and expect to continue to incur losses over the next twelve months.
Capital
Expenditures
The
Company expended no amounts on capital expenditures for the three-month period ended March 31, 2020.
Liquidity
and Capital Resources
Since
inception, we have experienced significant changes in liquidity, capital resources, and stockholders’ deficiency.
The
Company had assets of $19,464 as of March 31, 2020, consisting of cash and a working capital deficit of $2,094,153, as compared
to assets of $2,346, consisting of cash and a working capital deficit of $2,213,713 as of December 31, 2019. Net stockholders'
deficit in the Company was $2,094,153 at March 31, 2020, as compared to a net stockholder’s deficit of $2,213,713 at December
31, 2019.
Cash
Used in Operating Activities
Net
cash flow used in operating activities for the three-month period ended March 31, 2020 was $7,882 as compared to net cash flow
used of $5,418 for the three-month period ended March 31, 2019. 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 expense on 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, accrued liabilities, interest expense 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 the cost of operating activities.
Cash
Used in Investing Activities
Net
cash used in investing activities for the three-month periods ended March 31, 2020, and March 31, 2019, was $nil.
We
do not expect to use net cash in investing activities unless until closing a viable business opportunity.
Cash
Flows from Financing Activities
Cash
flow provided by financing activities for the three-months ended March 31, 2020, was $25,000 as compared to $5,600 for the
three-months ended March 31, 2019. Cash flows provided from financing activities over the comparative three-month periods are
attributed to loans from CaiE.
We
expect to continue to use net cash provided by financing activities to maintain operations.
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 conclude a transaction with CaiE.
Since
entering into an MOU with CaiE, the Company has secured a series of loans from CaiE in the aggregate amount of $169,610. Despite
CaiE’s determination to assist us until such time as we close a definitive transaction as intended by the MOU, we have no
future commitments or arrangements in place to move forward. Despite our predicament, existing stockholders and/or CaiE remain
the most likely sources of funding. The Company’s inability to secure a commitment for sufficient funding going forward
will have a material adverse effect on its ability to sustain 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, 2020.
The
Company had no commitments for future capital expenditures that were material at March 31, 2020.
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, 2020, 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
will continue to rely on debt or equity financing to fund business operations. However, we cannot provide any assurance that financing
sufficient to fund our plan of operation will be forthcoming.
Critical
Accounting Policies
In
Note 2 to the audited financial statements for the years ended December 31, 2020 and 2019, 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 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, we evaluate estimates based on historical experience, and other reasonable facts and circumstances. Our
estimates form the basis for judgments about the carrying value of assets and liabilities. Actual results may differ from these
estimates under different assumptions or conditions.
Going
Concern
Management
has expressed an opinion as to the Company’s ability to continue as a going concern despite an accumulated deficit of $23,472,472
since inception and negative cash flows from operating activities as of March 31, 2020. The Company’s ability to continue
as a going concern requires that it procure 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 debt financing, converting
existing debt into equity, and otherwise settling outstanding amounts due through agreement with its creditors or elimination
through statutory aging of debts. Management believes that it will remain a going concern through the methods discussed above
pending closure with a business opportunity that will produce income, though there can be no assurances that such methods will
prove successful.
The
likelihood that the Company can continue as a going concern has encountered additional urgency in response to the COVID-19 virus
pandemic that continues to adversely affect workforces, economies, and financial markets around the world that will likely result
in an economic downturn. The Company cannot predict the duration or magnitude of the virus, nor can it predict the adverse effects,
if any, will impact the Company’s plan of operation or its ability to sustain its business.