Notes
to Condensed Interim Financial Statements
June 30,
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 six-month period ended June 30, 2020, the Company recognized a net loss of $41,849 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 $2,158,458 as of June 30, 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
June 30,
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 and six months ended June 30, 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 June 30, 2020 and December 31, 2019 are as follows:
|
|
June
30, 2020
|
|
December
31 2019
|
|
|
CarryingAmount
|
|
Fair
Value
|
|
CarryingAmount
|
|
Fair
Value
|
Cash
|
|
$
|
804
|
|
|
$
|
804
|
|
|
$
|
2,346
|
|
|
$
|
2,346
|
|
Accounts
payable and accrued liabilities
|
|
|
955,244
|
|
|
|
955,244
|
|
|
|
974,013
|
|
|
|
974,013
|
|
Convertible
loan
|
|
|
107,800
|
|
|
|
107,800
|
|
|
|
107,800
|
|
|
|
107,800
|
|
Loans
payable to stockholders
|
|
|
554,148
|
|
|
|
554,148
|
|
|
|
581,379
|
|
|
|
581,379
|
|
Loans
payable to related party
|
|
|
129,253
|
|
|
|
129,253
|
|
|
|
130,249
|
|
|
|
130,249
|
|
Loans
payable
|
|
|
73,859
|
|
|
|
73,859
|
|
|
|
84,509
|
|
|
|
84,509
|
|
Amounts
due to related parties
|
|
|
338,958
|
|
|
|
338,958
|
|
|
|
338,109
|
|
|
|
338,109
|
|
Arvana
Inc.
Notes
to Condensed Interim Financial Statements
June 30,
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 June 30, 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:
|
|
June
30,
2020
|
|
Quoted
Prices
in Active
Markets
(Level
1)
|
|
Significant
Other
Observable
Inputs
(Level
2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
804
|
|
|
$
|
804
|
|
|
$
|
—
|
|
|
$
|
—
|
|
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
June 30,
2020
(Unaudited)
3.
Loans Payable
As
of June 30, 2020, the Company had received loans of $554,148 (€225,000; CAD$ 72,300; $248,107) (December 31, 2019 - $581,379:
€225,000; CAD$ 72,300; $273,107) from stockholders; loans of $129,253 (CAD$ 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
$507,973 and $521,156 is included in accounts payable and accrued expenses at June 30, 2020 and December 31, 2019, respectively.
Interest expense recognized on these loans was $10,432 for the three months ended June 30, 2020, compared to $11,430 for the three
months ended June 30, 2019, respectively. Interest expense recognized on these loans was $20,733 for the six months ended June
30, 2020, compared to $24,058 for the six months ended June 30, 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.
Since
March 17, 2016, CaiE has provided an aggregate of $169,610 in loans to the. Company, of which $107,800 is formalized in two convertible
promissory notes for $50,000 and $57,800 dated May 18, 2016, and October 12, 2018, respectively (Note 8). The additional amounts
due to CaiE are yet to be formalized by written agreement though the Company believes that the terms and conditions of such agreements
will be identical to those determined in the convertible promissory notes referenced here.
4.
Stock Options
At
June 30, 2020 and December 31, 2019, there were no stock options outstanding. No options were granted, exercised or expired during
the period ended June 30, 2020 and during the year ended December 31, 2019.
5.
Common stock
During
the six months ended June 30, 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
June 30,
2020
(Unaudited)
7.
Related Party Transactions and Amounts Due to Related Parties
At
June 30, 2020, and December 31, 2019, the Company had amounts due to related parties of $338,958 and $338,109, respectively. This
amount includes $60,000 at June 30, 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 $10,069 (2019 - $5,394) paid to a company controlled by our chief executive officer during
the six months ended June 30, 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 June 30, 2020, and December 31,
2019, our former chief executive officer was owed $274,502 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 $148,785 (CAD $202,759) as of
June 30, 2020, as provided in 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 June 30, 2020 and December 31, 2019 as indicated below.
|
|
June
30, 2020
|
|
December
31, 2019
|
Loans
payable
|
|
$
|
129,253
|
|
|
$
|
130,249
|
|
Accrued
interest payable included in amounts due to related parties
|
|
|
82,353
|
|
|
|
78,962
|
|
Arvana
Inc.
Notes
to Condensed Interim Financial Statements
June 30,
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, that
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 by amendment, to March 31, 2021, while all other terms of the note remain unchanged. During the
three and six months ended June 30, 2020 and 2019, no discount was amortized as interest expense. Interest expense recognized
on this loan was $1,250 for the three months ended June 30, 2020, compared to $1,250 for the three months ended June 30, 2019.
Interest expense recognized on this loan was $2,500 for the six months ended June 30, 2020, compared to $2,500 for the six months
ended June 30, 2019. As at June 30, 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 that 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 by amendment, to March 31, 2021, while all other terms of the note remain
unchanged. During the three months ended June 30, 2020 and 2019, $nil and $14,450 of the discount was amortized as interest expense
and during the six months ended June 30, 2020 and 2019, $nil and $28,900 of the discount was amortized as interest expense. Interest
expense recognized on this loan was $1,445 for the three months ended June 30, 2020, compared to $nil for the three months ended
June 30, 2019. Interest expense recognized on this loan was $2,890 for the six months ended June 30, 2020, compared to $nil for
the six months ended June 30, 2019. As at June 30, 2020 and December 31, 2019, the balance of the note was $57,800.
9.
Subsequent Events
On
August 17, 2020, the Company obtained an additional loan from CaiE in the amount of $5,000, which amount is yet to be documented
in a written agreement. We expect that the terms and conditions attached to his loan will be identical to those determined in
the aforesaid convertible loan agreements.