ITEM 7. 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 annual 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.
Discussion
and Analysis
Our
present activities are focused on evaluating business opportunities that are sufficient to support operations and increase stockholder
value. While this process remains in the discovery phase, the Company will look to its stockholders and creditors for sufficient financial
support to sustain operations. We will require a minimum of $50,000 in funding over the next 12 months. Funding will likely take the
form of unsecured debt or equity financing, provided by stockholders, creditors and third parties. We have no assurance that our stockholders
or creditors will respond positively to these efforts and have no financing committed at this time. Given these uncertainties, there
is substantial doubt as to whether the Company will be able to sustain operations in the near term.
Results
of Operations
During
the year ended December 31, 2021, the Company satisfied periodic public disclosure requirements, settled debt, secured forgiveness of
debt, relied on the statutory discharge of debt, secured a loan from our controlling stockholder to sustain operations, anticipated the
now abandoned acquisition of a media platform, and continued its search for a suitable business enterprise.
Our operations
for the years ended December 31, 2021 and 2020 are summarized in the following table.
| |
2021 | |
2020 |
Operating Expenses: | |
| |
|
General and administration | |
| (15,608 | ) | |
| (38,037 | ) |
Professional fees | |
| (87,096 | ) | |
| (40,318 | ) |
Loss from Operations | |
| (102,704 | ) | |
| (78,355 | ) |
Interest expense | |
| (19,207 | ) | |
| (51,902 | ) |
Foreign exchange gain (loss) | |
| 6,708 | | |
| (64,753 | ) |
Loss on debt settlement | |
| (12,460,079 | ) | |
| (282,586 | ) |
Other income | |
| 458,833 | | |
| — | |
Net Income (Loss) for the Year | |
$ | (12,116,448 | ) | |
$ | (477,596 | ) |
Net
Income (Loss)
Net
loss for the year ended December 31, 2021, was $12,116,448 as compared to net loss of $477,596 for the year ended December 31, 2020.
The increase in net loss in the current twelve month period is attributed to a loss on debt settlements as the values for stock issued
in settlement were less than the market value of the stock on the respective settlement dates, and the increase in professional fees
due to the preparation of coincident settlement documentation, due diligence, and documentation tied to the abandoned acquisition, offset
by other income from debt forgiveness agreements and the statutory discharge of debts, a foreign exchange gain due to a decrease in the
value of foreign currencies against the US dollar, and a decrease in general administrative and interest expenses.
We
did not generate revenue during this period and expect to continue to incur losses over the next twelve months until such time as we
are able to secure a business opportunity that generates income.
Capital
Expenditures
The Company
expended no amounts on capital expenditures for the year ended December 31, 2021.
Liquidity
and Capital Resources
Since
inception, the Company has experienced significant changes in liquidity, capital resources, and stockholders’ deficit.
The
Company had assets of $3,340 as of December 31, 2021, that consisted solely of cash and a working capital deficit of $101,585, as compared
to assets of $4,994 as of December 31, 2020, that consisted solely of cash and a working capital deficit of $2,051,060 as of December
31, 2020. Net stockholders' deficiency in the Company was $101,585 at December 31, 2021, as compared to a net stockholders' deficiency
in the Company of $2,051,060 at December 31, 2020.
Cash
Used in Operating Activities
Net
cash used in operating activities for the twelve month period ended December 31, 2021 was $33,579 as compared to net cash used in operating
activities of $37,352 for the twelve month period ended December 31, 2020. Net cash used in operating activities in the current period
can be attributed to a number of book expense items that do not affect the total amount relative to actual cash used, such as unrealized
foreign exchange loss, other income, loss on debt settlements, other income and interest expense. Balance sheet accounts that actually
affect cash, but are not income statement related that are added or deducted to arrive at cash used in operating activities, include
accounts payable and amounts due to related parties.
We
expect to continue to use net cash in operating activities over the next twelve months or until such time as the Company can generate
sufficient revenue to transition to providing net cash from operations.
Cash
Used in Investing Activities
Net
cash used in investing activities for the year ended December 31, 2021, and December 31, 2020, was $nil.
We
do not expect to use net cash in investing activities until such time as a transaction is concluded through merger, acquisition or development
of viable business opportunity.
Cash
Flows from Financing Activities
Cash
flow provided by financing activities for the year ended December 31, 2021 was $31,925, as compared to $40,000 for the year
ended December 31, 2020. Cash flows provided from financing activities in the current period consist of loans from a controlling stockholder.
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 sustain operations while seeking a suitable business opportunity. While the Company will look to its stockholders and
creditors to provide debt or equity financing to secure those amounts necessary, it has no definitive commitments or arrangements for
financial support. The Company’s inability to secure funding 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 December 31, 2021.
The
Company had no commitments for future capital expenditures at December 31, 2021.
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 December 31, 2021, 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 sales of our common stock and the foreberance of existing creditors to continue our business
even though we have secured no commitments to date for future financial support.
Critical
Accounting Policies
In
Note 2 to the audited financial statements for the years ended December 31, 2021 and 2020, included in our Form 10-K, the Company discusses
accounting policies that are considered to be significant in determining results of operations and the currency of its financial position.
The Company believes that the accounting principles utilized by it conform to Accounting Principles Generally Accepted in the United
States (GAAP).
The
preparation of financial statements requires Company management to make significant estimates and judgments that affect reported assets,
liabilities, revenues and expenses. By their very. nature, these judgments are subject to an inherent degree of uncertainty. On an on-going
basis, the Company evaluates its estimates based on historical experience and other facts and circumstances that are believed to be reasonable.
The results of each evaluation form the basis upon which management makes judgments about the carrying value of assets and liabilities.
The actual results may differ from these estimates recorded here under different assumptions or conditions.
Going
Concern
Management
has expressed an opinion as to the Company’s ability to continue as a going concern given an accumulated deficit of $36,088,972
and negative cash flows from operating activities as of December 31, 2021. Our ability to continue as a going concern requires that we
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 to equity, and otherwise settling
outstanding amounts due in agreement with its creditors. Management believes that it will remain a going concern through the methods
discussed above pending closure with an income generating business opportunity though there can be no assurances that continuation as
a going concern will prove successful.
Forward-Looking
Statements and Factors That May Affect Future Results and Financial Condition
The
statements contained in this 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 current expectations and beliefs regarding future results of operations, performance, and achievements subject to risks and uncertainties
based upon assumptions and beliefs that may not materialize, including but are not limited to, statements concerning:
| • | our
financial performance and business plan; |
| • | the
sufficiency of existing capital resources; |
| • | our
ability to raise capital to fund cash requirements; |
| • | uncertainties
related to future business prospects; |
| • | 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.
Recent
Accounting Pronouncements
Please
see Note 2 to our financial statements for a discussion of recent accounting pronouncements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our
audited financial statements for the year ended December 31, 2021, as set forth below, are included with this Annual Report on Form 10-K.
Our audited financial statements are prepared on the basis of accounting principles generally accepted in the United States and are expressed
in U.S. dollars.
|
PAGE |
Report
of Independent Registered Public Accounting Firm |
F-1
|
Balance
Sheets, December 31, 2021 and 2020 |
F-2
|
Statements
of Operations and Comprehensive Income (Loss) for the years ended December 31, 2021 and 2020 |
F-3 |
Statements
of Cash Flows for the years ended December 31, 2021 and 2020 |
F-4 |
Statements
of Stockholders’ Deficiency for the years ended December 31, 2020 and 2020 |
F-5 |
Notes
to Financial Statements |
F-6 |
Report
of Independent Registered Public Accounting Firm
To
the Shareholders and Directors of Arvana Inc.
Opinion
on the Financial Statements
We
have audited the accompanying balance sheets of Arvana Inc. (the “Company”) as of December 31, 2021 and 2020, and the related
statements of operations and comprehensive income (loss), changes in stockholders’ deficiency, and cash flows for the years ended
December 31, 2021 and 2020, and the related notes and schedules (collectively referred to as the “financial statements”).
In our opinion, the financial statements present fairly, in all material respects, the financial position of Arvana Inc. as of December
31, 2021 and 2020, and the results of its operations and its cash flows for each of the years ended December 31, 2021 and 2020, in conformity
with accounting principles generally accepted in the United States of America.
Going
Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note
1 to the financial statements, the entity has suffered recurring losses from operations and has a net capital deficiency that raises
substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described
in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
Critical
Audit Matters
The
critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated
or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit
matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
We
determined that there are no critical audit matters.
We
have served as the Company’s auditor since 2005.
/s/
DAVIDSON & COMPANY LLP
Chartered
Professional Accountants
Vancouver,
Canada
#731
731
April 19, 2022
Arvana
Inc.
Balance Sheets
(Expressed in US Dollars)
The
accompanying notes are an integral part of these financial statements.
Arvana
Inc.
Statements of Operations and Comprehensive Income (Loss)
(Expressed in US Dollars)
The
accompanying notes are an integral part of these financial statements.
Arvana
Inc.
Statements of Cash Flows
(Expressed in US Dollars)
The
accompanying notes are an integral part of these financial statements.
Arvana
Inc.
Statements of Stockholders' Deficiency
(Expressed in US Dollars)
The
accompanying notes are an integral part of these financial statements.
1. Nature
of Business and Ability to Continue as a Going Concern
The
Company was incorporated in the State of Nevada on June 16, 1977, as “Turinco, Inc.”, and on July 24, 2006, changed its name
to Arvana Inc. to reflect the acquisition of a telecommunications business. We discontinued efforts related to our telecommunications
business as of December 31, 2009. The Company is presently focused on evaluating business opportunities for merger or acquisition sufficient
to support operations and increase stockholder value.
We
entered into a non-binding memorandum of understanding on March 17, 2016, with the intent of acquiring a fresh food manufacturer and
distributor. On November 11, 2020, we notified the acquisition target that the Company was no longer interested in pursuing the acquisition
of its business given the delays attendant to the prospective transaction.
On
May 21, 2021, the Company entered into a non-binding term sheet with the intention of acquiring a multi-media platform. The term sheet
required that the owner of the acquisition target first secure voting control of the Company as pre-condition to his facilitating a transaction.
The owner effectively secured voting control on June 30, 2021. On October 26, 2021, the Company entered into a recission agreement and
mutual release with the owner of the intended acquisition, the parties being unable to agree on the structure of the prospective transaction.
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
financial statements have been prepared on a going concern basis, which assumes the realization of assets and settlement of liabilities
in the normal course of business. For the year ended December 31, 2021, the Company recognized net loss of $12,116,448. At December 31,
2021, the Company had a working capital deficiency of $101,585. 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 search to identify a business opportunity or its ability to attract sufficient capital
to sustain operations.
The
Company’present intention is to identify, evaluate and secure a business opportunity to create value for its stockholders. During
this search the Company will require continued financial support from stockholders and creditors until it is able to generate net cash
flow from operations. While the Company is confident that a business opportunity will be identified, the insufficiency of our financial
resources casts substantial doubt on whether it will be able to fulfill this objective.
Failure
to obtain the ongoing support of stockholders 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. The Company’s 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.
2. Summary
of Significant Accounting Policies
a) Basis
of presentation
The
Company is in the process of evaluating business opportunities and has minimal operating expenses. Our fiscal year end is December 31.
The accompanying financial statements of Arvana Inc. for the years ended December 31, 2021 and 2020 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-K and Regulation S-K. Results are not necessarily indicative of results which may be achieved in the future.
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.
c) Foreign
currency translation and transactions
Transactions
conducted in foreign currencies are recorded using the exchange rate in effect on the transaction date. At the period end, monetary assets
and liabilities are translated to the functional currency of each entity using the exchange rate in effect at the period end date. Transaction
gains and losses are recorded in foreign exchange gain or loss in the statement of operations and comprehensive loss.
d) Comprehensive
income (loss)
The
Company considers comprehensive income (loss) as a change in equity (net assets) of a business entity during a period from transactions
and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from
investments by owners and distributions to owners.
e) Cash
equivalents
The
Company considers all highly-liquid investments, with terms to maturity of three months or less when acquired, to be cash equivalents.
The Company did not have any cash equivalents as at December 31, 2021. 0
2. Summary
of Significant Accounting Policies (continued)
f) 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 loans, 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 December 31, 2021 and December 31, 2020 follows:
Estimated fair values | |
| | | |
| | | |
| | | |
| | |
| |
December 31, 2021 | |
December 31, 2020 |
| |
Carrying Amount | |
Fair Value | |
Carrying Amount | |
Fair Value |
Cash | |
$ | 3,340 | | |
$ | 3,340 | | |
$ | 4,994 | | |
$ | 4,994 | |
Accounts payable and accrued liabilities | |
| 54,931 | | |
| 54,931 | | |
| 867,710 | | |
| 867,710 | |
Convertible loans | |
| — | | |
| — | | |
| 107,800 | | |
| 107,800 | |
Loans payable to stockholders | |
| 15,500 | | |
| 15,500 | | |
| 522,552 | | |
| 522,552 | |
Loans payable to related party | |
| 300 | | |
| 300 | | |
| 130,677 | | |
| 130,677 | |
Loans payable | |
| — | | |
| — | | |
| 74,664 | | |
| 74,664 | |
Amounts due to related parties | |
$ | 34,194 | | |
$ | 34,194 | | |
$ | 352,651 | | |
$ | 352,651 | |
The
following table presents information about the assets that are measured at fair value on a recurring basis as of December 31, 2021, 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:
Fair Value, Assets Measured on Recurring Basis | | |
| | | |
| | | |
| | | |
| | |
| |
December 31, 2021 | |
Quoted Prices in Active Markets (Level 1) | |
Significant Other Observable Inputs (Level 2) | |
Significant Unobservable Inputs (Level 3) |
Assets: | | |
| | | |
| | | |
| | | |
| | |
Cash | | |
$ | 3,340 | | |
$ | 3,340 | | |
$ | — | | |
$ | — | |
The
fair value of cash is determined through market, observable and corroborated sources.
2. Summary
of Significant Accounting Policies (continued)
g) Concentration
of credit risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash. The Company maintains cash in bank
accounts that, at times, may exceed federally-insured limits. The Company has not experienced any losses in such accounts and believes
it is not exposed to any significant risks on its cash in bank accounts.
h) Income
taxes
A
deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss
carry-forwards. Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities.
Deferred
tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.
i) Stock-based
compensation
The
Company accounts for all stock-based payments to employees and non-employees under ASC 718 “Stock Compensation,” using the
fair value method. Under the fair value method, stock-based payments are measured at the fair value of the consideration received, or
the fair value of the equity instruments issued, or liabilities incurred, whichever is more reliably measurable. The cost of stock-based
payments to non-employees that are fully vested and non-forfeitable at the grant date is measured and recognized at that date.
j) Beneficial
conversion feature
From
time-to-time, the Company may issue convertible notes that may have conversion prices that create an embedded beneficial conversion feature.
A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to
which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation
of a portion of the note proceeds to the fair value of any attached equity instruments, if any related equity instruments were granted
with the debt. The intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to
additional paid in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest
method.
k) Earnings
(loss) per share
Basic
earnings (loss) per share are computed using the weighted average number of common shares outstanding during the year. Diluted earnings
(loss) per share are computed using the weighted average number of common shares and potentially dilutive common stock equivalents, including
stock options and warrants. There were no outstanding stock options or warrants as at December 31, 2021 and 2020.
2. Summary
of Significant Accounting Policies (continued)
l) 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.
3. Loans
Payable
As
of December 31, 2021, the Company had loans outstanding of $15,500
(December 31, 2020 - $522,552:
€225,000; CAD$ 60,000; $199,600) from stockholders; loans of $300
(December 31, 2020 – $130,677:
CAD$ 27,600; $109,000) from a related party and loans of $nil 0 (December 31, 2020 – $74,664: CAD$ 10,000; $66,810) from
unrelated third parties. The majority of the historical loans bore interest at 6% per annum while $92,935 of the loans were
non-interest bearing. The historical loans were made in 3 different currencies, Euros, Canadian Dollars and US Dollars. The current
loan outstanding bears interest at 5% per annum. The balance of accrued interest of $85 and $515,263 is included in accounts payable
and accrued liabilities at December 31, 2021 and December 31, 2020, respectively. Interest expense recognized on these loans was
$19,207 for the year ended December 31, 2021, compared to $51,902 for the year ended December 31, 2020, 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. The Company recorded a loss on settlement of
debt of $19,421.
During
the year ended December 31, 2021, the Company extinguished $50,000 in loans payable to stockholders and corresponding accrued interest
of $38,945.
On
July 23, 2021, loans payable to stockholders of $480,960, and $74,762, respectively, loans payable to a related party of $130,947, accrued
interest of $361,283 on loans payable to stockholders, and accrued interest of $89,124 on loans payable to a related party were settled
by the issuance of 21,127,123 common shares pursuant to three debt settlement agreements dated April 1, 2021, and five debt settlement
agreements dated June 30, 2021.
On
July 23, 2021, accounts payable and accrued liabilities of $262,056 were settled by the issuance of 6,551,392 common shares pursuant
to two debt settlement agreements dated June 30, 2021.
On
November 10, 2020, debt in the amount of $224,560 due on loans or payables, including accrued interest, and in payment for services rendered
in the amount of $36,000 were settled by the issuance of 2,605,600 common shares pursuant to three debt settlement agreements dated November
10, 2020. The Company recorded a loss on settlement of debt of $263,165.
4. Stock
Options
At
December 31, 2021, and December 31, 2020, there were no stock options outstanding. No options were granted, exercised or expired during
the year ended December 31, 2021, or the year ended December 31, 2020.
5.
Common Stock
During
the year ended December 31, 2021, the Company issued 29,537,848 shares of its restricted common stock with a fair value of $14,065,923
to settle $662,251 in accounts payable and accrued liabilities, $107,800 in convertible loans, $480,960 in loans payable to stockholders,
$130,947 in loans payable to related party, $74,762 in loans payable, and $149,124 in amounts due to related parties (Notes 3, 8, 9,
10).
During
the year ended December 31, 2020, the Company issued 3,576,640 shares.
6.
Segmented Information
The
Company has no reportable segments.
7. Income
Taxes
Income
tax benefits attributable to losses from operations in the United States of America was $Nil for the years ended December 31, 2021 and
2020, and differed from the amounts computed by applying the United States of America combined federal and Utah tax rate of 24.91% to
pretax losses from operations as a result of the following:
Schedule of income tax expense benefit | |
| | | |
| | |
| |
2021 | |
2020 |
| |
| | | |
| | |
Computed expected tax expense (benefit) | |
$ | (3,018,268 | ) | |
$ | (118,972 | ) |
Non-deductible expenses | |
| 3,102,197 | | |
| 86,519 | |
Change in tax rates | |
| — | | |
| — | |
True up of prior-year provision to statutory tax returns | |
| 23,150 | | |
| (41,753 | ) |
Change in valuation allowance | |
| (107,079 | ) | |
| 74,206 | |
Income tax expense | |
$ | — | | |
$ | — | |
The
Company’s deferred tax assets that have not been recognized are as follows:
Schedule of deferred tax assets | |
| | | |
| | |
Start-up costs | |
$ | 196,402 | | |
$ | 303,476 | |
Valuation allowance | |
| (196,402 | ) | |
| (303,476 | ) |
Deferred tax assets (liabilities) | |
$ | — | | |
$ | — | |
A
full valuation allowance has been provided because the Company has a history of losses as evidenced by its accumulated deficit. At December
31, 2021, and December 31, 2020, the Company had deductible temporary differences of $788,429 and $1,218,267, respectively.
8. Related
Party Transactions and Amounts Due to Related Parties
At
December 31, 2021, and December 31, 2020, the Company had amounts due to related parties of $34,494 and $352,651, respectively.
A
company controlled by our chief executive officer was owed $34,494 at December 31, 2021, and $3,488 at December 31, 2020. The amount
due bears no interest, is unsecured, and has no fixed terms for repayment. The Company incurred advisory fees of $64,482 (2020 - $11,888)
to that company during the year ended December 31, 2021.
A
former director was owed $nil 0 at December 31, 2021, and $60,000
at December 31, 2020, for services rendered during 2007, that was settled on July 23, 2021 by the issuance of 1,500,000 common
shares with a fair value of $712,800 resulting in a loss on debt settlement of $652,800, pursuant to a debt settlement agreement
dated effective June 30, 2021.
A
former director and related entities were owed $nil 0 at December 31, 2021, and $579,088
at December 31, 2020 for loans, services rendered, accrued interest, and accounts payable and accrued liabilities.
During
the year ended December 31, 2021, $220,071 ($130,947 in loans payable to related party and $89,124 in accrued interest on loans) was
settled on July 23, 2021, by the issuance of 436,492 shares with a fair value of $207,421 resulting in a gain on debt settlement of $12,650,
pursuant to a debt settlement agreement dated April 1, 2021.
During
the year ended December 31, 2021, amounts due to the the former director and related entities of $369,888
0 (2020 - $Nil) were forgiven pursuant to two debt forgiveness agreements dated June 30, 2021, that forgave $206,302 (Note 10) and
$163,586 (Note 10) respectively recorded as other income.
9. Convertible
Loans
On
May 18, 2016, the Company issued a convertible promissory note to CaiE that accrued 10%
per annum, in exchange for $50,000,
initially due on November 17, 2017. The note was 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. Since the conversion price was 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 remained unchanged. The Company and CaiE agreed to a debt settlement agreement to
extinguish these loans and accrued interest by the issuance of common shares. During the year ended December 31, 2021 and 2020, no
discount was amortized as interest expense. Interest expense recognized on this loan was $1,250
for the year ended December 31, 2021, compared to $5,000
for the year ended December 31, 2020. As at December 31, 2021, and December 31, 2020, the balance of the note was $nil 0 and $50,000,
respectively.
On
October 12, 2018, the Company issued a convertible note to CaiE that accrued 10%
per annum, in exchange for a series of loans that totaled $57,800
initially due on October 11, 2019. The note was 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. Since the conversion price was 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 remained unchanged. The Company and CaiE agreed to a debt settlement agreement to
extinguish these loans and accrued interest by the issuance of common shares. During the nine months ended December 31, 2021 and
2020, $nil 0
and $57,800
of the discount was amortized as interest expense. Interest expense recognized on this loan was $1,445
for the year ended December 31, compared to $5,780
for the year ended December 31, 2020. As at December 31, 2021 and December 31, 2020, the balance of the note was $nil 0 and $57,800,
respectively.
On
July 23, 2021, CaiE settled a total of $146,712 corresponding to convertible loans of $107,800, and accrued interest on convertible loans
of $38,912 by the issuance of 359,333 common shares pursuant to a debt settlement agreement dated April 1, 2021.
10.
Other Income
During
the year ended December 31, 2021, the Company recognized other income in the amount of $458,833 corresponding to: (1) debt forgiveness
of $206,302 included in amounts due to related parties (Note 7); (2) debt forgiveness of $163,586 included in accounts payable and accrued
liabilities (Note 7); and (3) extinguishment of $88,945 (Note 3) in loans and accrued interest expense.
11.
Subsequent Events
The
Company evaluated its December 31, 2021, 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 19, 2022, the Company secured a loan of $20,244 pursuant to a credit agreement dated November 15, 2021, as amended, and a credit
note in even amount was provided to the lender.