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
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 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 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 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 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 alternative financing arranged and is not certain that it will be able to realize funding from the sale
of its equity or that shareholders will continue to provide loans. We will require continued financial support from our shareholders
and creditors until the Company is able to generate sufficient cash flow to maintain operations. There is substantial doubt that
the Company will be able to maintain operations unless it can complete a financing in order to pursue a merger or acquisition
of an operating business in the near term.
Results
of Operations
During
the year ended December 31, 2019, the Company satisfied continuous public disclosure requirements and continued to finance its
operations with loans that originated from CaiE.
Our
operations for the years ended December 31, 2019 and 2018 are summarized in the following table.
|
|
|
2019
|
|
2018
|
|
Operating Expenses:
|
|
|
|
|
|
General
and administration
|
|
|
(20,931
|
)
|
|
|
(12,055
|
)
|
|
Professional
fees
|
|
|
(31,494
|
)
|
|
|
(29,819
|
)
|
|
Loss
from Operations
|
|
|
(52,425
|
)
|
|
|
(41,874
|
)
|
|
Interest
expense
|
|
|
(102,543
|
)
|
|
|
(63,948
|
)
|
|
Foreign
exchange gain (loss)
|
|
|
(20,096
|
)
|
|
|
85,095
|
|
|
Gain
on sale of subsidiaries
|
|
|
—
|
|
|
|
114,237
|
|
|
Gain
on write-down of liabilities
|
|
|
287,316
|
|
|
|
—
|
|
|
Net
Income (Loss) for the Year
|
|
$
|
112,252
|
|
|
$
|
93,510
|
|
Net
Income
Net
income for the year ended December 31, 2019 was $112,252, as compared to net income of $93,510 for the year ended December 31,
2018. The net income over the twelve month period ended December 31, 2019, is attributed to the write-down of certain amounts
due to related parties, certain amounts included in accounts payable, and accrued liabilities. The write-down is based on the
statutory laws pertaining to claims that are no longer collectibe. Net income for the year ended December 31, 2018, is attributed
to the sale of foreign subsidiaries, and a gain on foreign exchange due to a decrease in the value of foreign currencies against
the US dollar that positively impacted the cost of expenses payable in foreign currencies.
The
Company did not generate revenue during either twelve-month period and does not expect revenue over the next twelve months unless
it acquires CaiE or develops a revenue producing business opportunity.
Capital
Expenditures
The
Company expended no amounts on capital expenditures for the year ended December 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’ deficit.
The
Company had assets of $2,346 as of December 31, 2019, that consisted solely of cash and a working capital deficit of $2,213,713,
as compared to assets of $815 as of December 31, 2018, that consisted solely of cash and a working capital deficit of $2,325,965
as of December 31, 2018. Net stockholders' deficiency in the Company was $2,213,713 at December 31, 2019, as compared to a net
stockholders' deficiency in the Company of $2,325,965 at December 31, 2018.
Cash
Used in Operating Activities
Net
cash used in operating activities for the twelve month period ended December 31, 2019 was $35,279 as compared to net cash used
in operating activities of $33,871 for the twelve month period ended December 31, 2018. Net cash used in operating activities
in the current 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 gain, amortization of discount on convertible loan, and
other income from the write-down of liabilities. 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 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, 2019, was $nil as compared to $44 for the year ended December
31, 2018. The net cash used in investing activities in the prior year can be attributed to the sale of the Company’s foreign
subsidiaries.
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
Net
cash provided by financing activities for the year ended December 31, 2019, were $36,810, as compared to $30,000 for
the year ended December 31, 2018. The increase in net cash provided from financing activities over the prior year can be attributed
to an increase in loans received from CaiE in the current period.
We
expect to continue to use net cash provided by financing activities as necessary 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 wtih CaiE. Since entering into an MOU with CaiE the Company
has secured a series of loans from CaiE pending a merger or acquisition transaction. CaiE has loaned the Company $169,610 as of
the filing date of this report. Despite the historical CaiE loans, the Company has no future commitments or arrangements in place
to fund the completion of the intended merger or acquisition of CaiE. The Company’s shareholders or CaiE remain the most
likely sources of funding for this purpose though none have made any commitment for such funding. The Company’s inability
to obtain sufficient funding to maintain operations and a merger with or acquisition of CaiE would 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, 2019.
The
Company had no commitments for future capital expenditures at December 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 December 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 operations.
Critical
Accounting Policies
In
Note 2 to the audited financial statements for the years ended December 31, 2019 and 2018, 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 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
As
at December 31, 2019, the Company had an accumulated deficit of $23,494,928 and negative cash flows
from operating activities. These conditions raise substantial doubt about the Company’s ability to continue as a
going concern which will require funding from outside sources in the form debt or equity. Management believes that it will be
able to obtain the funding required to enable the Company to continue as a going concern though there can be no assurances that
its efforts 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 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, 2019, 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, 2019 and 2018
|
F-2
|
|
Statements
of Operations and Comprehensive Income (Loss) for the years ended December 31, 2019 and 2018
|
F-3
|
|
Statements
of Cash Flows for the years ended December 31, 2019 and 2018
|
F-4
|
|
Statements
of Stockholders’ Deficiency for the years ended December 31, 2019 and 2018
|
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, 2019 and 2018, and
the related statements of operations and comprehensive income (loss), stockholders’ deficiency, and cash flows for the years
ended December 31, 2019 and 2018, 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, 2019 and 2018, and the results of its operations and its cash flows for the years ended December 31, 2019 and 2018
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 Company has suffered recurring losses from operations and has a net capital deficiency
that raise 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
the Company’s 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 Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatements 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.
We
have served as the Company’s auditor since 2005.
“DAVIDSON
& COMPANY LLP”
/s/
Davidson & Company LLP
|
Vancouver,
Canada
|
|
Chartered
Professional Accountants
|
March
27 , 2020
Arvana
Inc.
Balance Sheets
(Expressed
in US Dollars)
|
|
|
December
31,
|
|
December
31,
|
|
|
|
2019
|
|
2018
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
2,346
|
|
|
$
|
815
|
|
|
Total
assets
|
|
$
|
2,346
|
|
|
$
|
815
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
DEFICIENCY
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
974,013
|
|
|
$
|
1,012,714
|
|
|
Convertible
loans (net of discount of $nil and $45,059, respectively (Note 9)
|
|
|
107,800
|
|
|
|
62,741
|
|
|
Loans
payable to stockholders (Note 3)
|
|
|
581,379
|
|
|
|
583,593
|
|
|
Loans
payable to related party (Note 3)
|
|
|
130,249
|
|
|
|
129,231
|
|
|
Loans
payable (Note 3)
|
|
|
84,509
|
|
|
|
47,330
|
|
|
Amounts
due to related parties (Note 8)
|
|
|
338,109
|
|
|
|
491,171
|
|
|
Total
current liabilities
|
|
|
2,216,059
|
|
|
|
2,326,780
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficiency
|
|
|
|
|
|
|
|
|
|
Common
stock, $0.001 par value 5,000,000 authorized,1,034,030 shares issued and outstanding at December 31, 2019 and 2018, respectively
|
|
|
1,034
|
|
|
|
1,034
|
|
|
Additional
paid-in capital
|
|
|
21,283,517
|
|
|
|
21,283,517
|
|
|
Deficit
|
|
|
(23,494,928
|
)
|
|
|
(23,607,180
|
)
|
|
|
|
|
(2,210,377
|
)
|
|
|
(2,322,629
|
)
|
Less:
Treasury stock – 2,085 common shares at
December 31, 2019 and 2018, respectively
|
|
|
(3,336
|
)
|
|
|
(3,336
|
)
|
|
Total
stockholders’ deficiency
|
|
|
(2,213,713
|
)
|
|
|
(2,325,965
|
)
|
|
|
|
$
|
2,346
|
|
|
$
|
815
|
|
The
accompanying notes are an integral part of these financial statements.
Arvana
Inc.
Statements of Operations and Comprehensive Income
(Expressed in US Dollars)
|
|
|
For
the years ended
|
|
|
|
December
31,
|
|
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
$
|
20,931
|
|
|
$
|
12,055
|
|
|
Professional
fees
|
|
|
31,494
|
|
|
|
29,819
|
|
|
Total
operating expenses
|
|
|
52,425
|
|
|
|
41,874
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(52,425
|
)
|
|
|
(41,874
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (Notes
3 and 9)
|
|
|
(102,543
|
)
|
|
|
(63,948
|
)
|
|
Foreign exchange gain
(loss)
|
|
|
(20,096
|
)
|
|
|
85,095
|
|
|
Gain on sale of subsidiaries
(Note 10)
|
|
|
—
|
|
|
|
114,237
|
|
|
Other
income (Note 11)
|
|
|
287,316
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income and comprehensive income
|
|
$
|
112,252
|
|
|
$
|
93,510
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share information
– basic and diluted:
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding - basic
|
|
|
1,034,030
|
|
|
|
1,034,030
|
|
|
Net
income per common share – basic
|
|
$
|
0.11
|
|
|
$
|
0.09
|
|
|
Weighted
average shares outstanding - diluted
|
|
|
1,580,838
|
|
|
|
1,348,164
|
|
|
Net
income per common share – diluted
|
|
$
|
0.07
|
|
|
$
|
0.07
|
|
The
accompanying notes are an integral part of these financial statements.
Arvana
Inc.
Statements of Cash Flows
(Expressed in US Dollars)
|
|
|
For
the years ended
|
|
|
|
December
31,
|
|
|
|
2019
|
|
2018
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
Net
income for the year
|
|
$
|
112,252
|
|
|
$
|
93,510
|
|
|
|
|
|
|
|
|
|
|
|
|
Items
not involving cash:
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
57,484
|
|
|
|
51,207
|
|
|
Foreign
exchange (gain) loss
|
|
|
20,096
|
|
|
|
(85,095
|
)
|
|
Gain
on sale of subsidiaries
|
|
|
—
|
|
|
|
(114,237
|
)
|
|
Other
income (Note 11)
|
|
|
(287,316
|
)
|
|
|
—
|
|
|
Amortization
of discount on convertible loan
|
|
|
45,059
|
|
|
|
12,741
|
|
|
Changes
in non-cash working capital:
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
|
14,974
|
|
|
|
(2,368
|
)
|
|
Amounts
due to related parties
|
|
|
3,172
|
|
|
|
10,371
|
|
|
Net
cash used in operations
|
|
|
(35,279
|
)
|
|
|
(33,871
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
Cash
disposed on sale of subsidiaries
|
|
|
—
|
|
|
|
(44
|
)
|
|
Net
cash used in investing activities
|
|
|
—
|
|
|
|
(44
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
Proceeds
of loans payable (Note 9)
|
|
|
36,810
|
|
|
|
—
|
|
|
Proceeds
of convertible loan (Note 9)
|
|
|
—
|
|
|
|
30,000
|
|
|
Net
cash provided by financing activities
|
|
|
36,810
|
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease)
in cash
|
|
|
1,531
|
|
|
|
(3,915
|
)
|
|
Cash,
beginning of year
|
|
|
815
|
|
|
|
4,730
|
|
|
Cash,
end of year
|
|
$
|
2,346
|
|
|
$
|
815
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary information:
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Cash
paid for income taxes paid
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Accounts
payable and accrued liabilities written off
|
|
$
|
287,316
|
|
|
$
|
—
|
|
|
Accounts
payable and accrued liabilities settled as consideration for the sale of subsidiaries
|
|
$
|
—
|
|
|
$
|
23,206
|
|
|
Discount
on convertible notes from beneficial conversion feature
|
|
$
|
—
|
|
|
$
|
57,800
|
|
The
accompanying notes are an integral part of these financial statements.
Arvana
Inc.
Statements of Stockholders' Deficiency
(Expressed in US Dollars)
|
|
|
Common
Shares
|
|
|
|
|
|
Treasury
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Additional
Paid-in Capital
|
|
Deficit
|
|
Shares
|
|
Amount
|
|
Total
Stockholders’ Deficiency
|
|
Balance,
December 31, 2015
|
|
|
885,130
|
|
|
$
|
885
|
|
|
$
|
21,166,619
|
|
|
$
|
(23,413,245
|
)
|
|
|
(2,085
|
)
|
|
$
|
(3,336
|
)
|
|
$
|
(2,249,077
|
)
|
|
Debt
settlement
|
|
|
148,900
|
|
|
|
149
|
|
|
|
34,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,247
|
|
|
Discount
on convertible notes from beneficial conversion feature
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
Net
loss for the year ended
December
31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(62,531
|
)
|
|
|
|
|
|
|
|
|
|
|
(62,531
|
)
|
|
Balance,
December 31, 2016
|
|
|
1,034,030
|
|
|
$
|
1,034
|
|
|
$
|
21,225,717
|
|
|
$
|
(23,475,776
|
)
|
|
|
(2,085
|
)
|
|
$
|
(3,336
|
)
|
|
$
|
(2,252,361
|
)
|
|
Net
loss for the year ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(224,914
|
)
|
|
|
|
|
|
|
|
|
|
|
(224,914
|
)
|
|
Balance,
December 31, 2017
|
|
|
1,034,030
|
|
|
$
|
1,034
|
|
|
$
|
21,225,717
|
|
|
$
|
(23,700,690
|
)
|
|
|
(2,085
|
)
|
|
$
|
(3,336
|
)
|
|
$
|
(2,477,275
|
)
|
|
Discount
on convertible notes from beneficial conversion feature
|
|
|
|
|
|
|
|
|
|
|
57,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,800
|
|
|
Net
income for the year ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93,510
|
|
|
|
|
|
|
|
|
|
|
|
93,510
|
|
|
Balance,
December 31, 2018
|
|
|
1,034,030
|
|
|
$
|
1,034
|
|
|
$
|
21,283,517
|
|
|
$
|
(23,607,180
|
)
|
|
|
(2,085
|
)
|
|
$
|
(3,336
|
)
|
|
$
|
(2,325,965
|
)
|
|
Net
income for the year ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
112,252
|
|
|
|
|
|
|
|
|
|
|
|
112,252
|
|
|
Balance,December
31, 2019
|
|
|
1,034,030
|
|
|
$
|
1,034
|
|
|
$
|
21,283,517
|
|
|
$
|
(23,494,928
|
)
|
|
|
(2,085
|
)
|
|
$
|
(3,336
|
)
|
|
$
|
(2,213,713
|
)
|
The
accompanying notes are an integral part of these financial statements.
|
Arvana
Inc.
|
|
Notes
to Financial Statements
|
|
For the
Years Ended December 31, 2019 and 2018
|
|
(Expressed
in U.S. Dollars)
|
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, with authorized common stock of 2,500 shares with a par value of $0.25.
On October 16, 1998, the authorized capital stock was increased to 100,000,000 common shares with a par value of $0.001 and a
forward common stock split of eight shares for each outstanding share. In 2005, we completed another forward common stock split
of nine shares for each outstanding share. On July 24, 2006, the shareholders approved a change of the Company’s name from
Turinco, Inc. to Arvana Inc. On September 30, 2010, the authorized capital stock was decreased to 5,000,000 common shares with
a par value of $0.001 in combination with a reverse split of one share for every twenty shares outstanding.
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.
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, 2019, the Company recognized net income of $112,252, as a result
of a other income (Note 11). At December 31, 2019, the Company had a working capital deficiency of $2,213,713. 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 preduct 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 its stockholders 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 objectives.
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.
|
Arvana
Inc.
|
|
Notes
to Financial Statements
|
|
For the
Years Ended December 31, 2019 and 2018
|
|
(Expressed
in U.S. Dollars)
|
2.
Summary of Significant Accounting Policies
a)
Basis of presentation
The
Company is in the process of evaluating CaiE as a business opportunity 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, 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-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, 2019.
|
Arvana
Inc.
|
|
Notes
to Financial Statements
|
|
For the
Years Ended December 31, 2019 and 2018
|
|
(Expressed
in U.S. Dollars)
|
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, 2019 and December 31, 2018 follows:
|
|
|
December
31,
2019
|
|
December
31,
2018
|
|
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Cash
|
|
$
|
2,346
|
|
|
$
|
2,346
|
|
|
$
|
815
|
|
|
$
|
815
|
|
|
Accounts
payable and accrued liabilities
|
|
|
974,013
|
|
|
|
974,013
|
|
|
|
1,012,714
|
|
|
|
1,012,714
|
|
|
Convertible
loans
|
|
|
107,800
|
|
|
|
107,800
|
|
|
|
62,741
|
|
|
|
62,741
|
|
|
Loans
payable to stockholders
|
|
|
581,379
|
|
|
|
581,379
|
|
|
|
583,593
|
|
|
|
583,593
|
|
|
Loans
payable to related party
|
|
|
130,249
|
|
|
|
130,249
|
|
|
|
129,231
|
|
|
|
129,231
|
|
|
Loans
payable
|
|
|
84,509
|
|
|
|
84,509
|
|
|
|
47,330
|
|
|
|
47,330
|
|
|
Amounts
due to related parties
|
|
$
|
338,109
|
|
|
$
|
338,109
|
|
|
$
|
491,171
|
|
|
$
|
491,171
|
|
The
following table presents information about the assets that are measured at fair value on a recurring basis as of December 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:
|
|
|
December
31,
2018
|
|
Quoted
Prices
in Active
Markets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
2,346
|
|
|
$
|
2,346
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The
fair value of cash is determined through market, observable and corroborated sources.
|
Arvana
Inc.
|
|
Notes
to Financial Statements
|
|
For the
Years Ended December 31, 2019 and 2018
|
|
(Expressed
in U.S. Dollars)
|
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, 2019
and 2018.
|
Arvana
Inc.
|
|
Notes
to Financial Statements
|
|
For the
Years Ended December 31, 2019 and 2018
|
|
(Expressed
in U.S. Dollars)
|
2.
Summary of Significant Accounting Policies (continued)
l)
Recent accounting pronouncements
New
and amended standards adopted by the Company
There
were no new and amended standards adopted by the Company during the year which had a material impact on the Company’s audited
financial statements except the following:
In
February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2016-02, Leases (Topic 842).
In July 2018 and December 2018, FASB issued Accounting Standards Update 2018-11, and 2018-20, respectively. These standards require
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 standards
require 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 Company considers that these standards has had no impact on its 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 Company
considers that the adoption of this standard has had no impact on its 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 Company is considers that the adoption of this standard has had no
impact on its 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 audited 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. 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 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 Financial Statements
|
|
For the
Years Ended December 31, 2019 and 2018
|
|
(Expressed
in U.S. Dollars)
|
2.
Summary of Significant Accounting Policies (continued)
l)
Recent accounting pronouncements (continued)
New
standards and interpretations not yet adopted (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 called 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 December 31, 2019, the Company had received loans of $581,379 (€225,000; CAD$ 72,300; $273,107) (December 31, 2018 - $583,593:
€225,000; CAD$ 72,300; $273,107) from stockholders, loans of $130,249 (CAD$ 27,600; $109,000) (December 31, 2018 –
$129,231: CAD$ 27,600; $109,000) from a related party and loans of $84,509 (CAD$ 10,000; $76,810) (December 31, 2018 – $47,330:
CAD$ 10,000; $40,000) 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
$521,156 and $470,192 is included in accounts payable and accrued liabilities at December 31, 2019 and December 31, 2018, respectively.
Interest expense recognized on these loans was $57,484 for the year ended December 31, 2019, compared to $51,207 for the year
ended December 31, 2018, respectively.
4.
Stock Options
At
December 31, 2019 and December 31, 2018, there were no stock options outstanding. No options were granted, exercised or expired
during the year ended December 31, 2019 or the year ended December 31, 2018.
5.
Common Stock
During
the years ended December 31, 2019 and December 31, 2018, the Company issued nil shares and nil shares, respectively.
6.
Segmented Information
The
Company has no reportable segments.
|
Arvana
Inc.
|
|
Notes
to Financial Statements
|
|
For the
Years Ended December 31, 2019 and 2018
|
|
(Expressed
in U.S. Dollars)
|
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,
2019 and 2018, 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:
|
|
|
2019
|
|
2018
|
|
Income
(loss) for the year before income taxes
|
|
$
|
112,252
|
|
|
$
|
93,510
|
|
|
|
|
|
|
|
|
|
|
|
|
Computed expected tax
expense (benefit)
|
|
$
|
27,963
|
|
|
$
|
23,294
|
|
|
Non-deductible expenses
|
|
|
5,006
|
|
|
|
(21,198
|
)
|
|
Change in tax rates
|
|
|
(4,088
|
)
|
|
|
—
|
|
|
True up of prior-year
provision to statutory tax returns
|
|
|
(236,196
|
)
|
|
|
—
|
|
|
Change
in valuation allowance
|
|
|
207,315
|
|
|
|
—
|
|
|
Income
tax expense
|
|
$
|
—
|
|
|
$
|
2,096
|
|
8.
Related Party Transactions and Amounts Due to Related Parties
At
December 31, 2019 and December 31, 2018, the Company had amounts due to related parties of $338,109 and $491,171, respectively.
This amount includes $60,000 at December 31, 2019, and $136,100 at December 31, 2018, respectively, payable to current and former
directors for services rendered during 2007. During the year ended December 31, 2019, the Company determined that $76,100 of the
$136,100 that was payable at December 31, 2018, was no longer considered collectible from the two former directors and written
off. The $60,000 payable to a current director at December 31, 2019 is to be paid part in cash and part in stock at a future date
with the number of common shares determined by the fair value of the shares on the settlement date. The amounts owing bear no
interest, are unsecured, and have no fixed terms of repayment.
The
Company incurred consulting fees of $8,894 (2018 - $11,819) paid to a company controlled by our chief executive officer during
the year ended December 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 December 31, 2019, our former chief executive officer was owed $278,109 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 at December 31, 2019 and December 31, 2018, the Company had amounts due to this former chief financial officer of
$nil and $58,870, respectively. During the year ended December 31, 2019, the Company determined that the $58,870 was no longer
considered collectible from our former chief financial officer and written off.
Our
former chief executive officer and former director entered into a debt assignment agreement effective January 1, 2012, with a
corporation with a former director in common and thereby assigned $156,104 (CAD$202,759) of unpaid amounts payable.
|
Arvana
Inc.
|
|
Notes
to Financial Statements
|
|
For the
Years Ended December 31, 2019 and 2018
|
|
(Expressed
in U.S. Dollars)
|
8.
Related Party Transactions and Amounts Due to Related Parties (continued)
Our
former chief executive officer and former director entered into a debt assignment agreement effective January 1, 2012, with an
unrelated third party and thereby assigned $53,357 of unpaid amounts payable and $100,000 of unpaid loans.
Our
former chief executive officer and former director is owed $130,249 for unsecured amounts bearing 6% interest due on demand loaned
to the Company as of December 31, 2019, compared to $129,231 as of December 31, 2018. Total interest expense of $78,962 (2018
- $70,711) is included in accounts payable and accrued liabilities as at December 31, 2019.
At
December 31, 2019 and December 31, 2018, the Company had amounts due to another former officer and a company controlled by that
former officer of $nil and $31,153, respectively. During the year ended December 31, 2019, the Company determined that the $31,153
was no longer considered collectible from our former officer and written off.
9.
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
year ended December 31, 2019 and 2018, $nil and $nil of the discount was amortized as interest expense, respectively. Interest
expense recognized on this loan was $5,000 for the year ended December 31, 2019, compared to $5,000 for the year ended December
31, 2018. As at December 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 March 31, 2019, the Company entered into an additional amending
agreement to further extend the maturity date of the Convertible Note to March 31, 2020. 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, 2018 and $30,000 during the year ended December 31, 2019. The $57,800 convertible note was 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. Effective October 11, 2019, the Company entered into an amending
agreement to extend the maturity date to March 31, 2020. All other terms remained unchanged. 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 year ended December 31,
2019 and 2018, $45,059 and $12,741 of the discount was amortized as interest expense, respectively. Interest expense recognized
on this loan was $5,780 for the year ended December 31, 2019, compared to $1,420 for the year ended December 31, 2018. As at December
31, 2019 and December 31, 2018, the balance of the convertible note was $57,800 and $nil, respectively.
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Arvana
Inc.
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Notes
to Financial Statements
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For the
Years Ended December 31, 2019 and 2018
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(Expressed
in U.S. Dollars)
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10.
Sale of Subsidiaries
On
September 24, 2018, the Company entered into a sale and purchase agreement with Nazleal S.A. (“Nazleal”) to dispose
of the Company’s subsidiaries, Arvana Networks Inc., Arvana Participaçōes S.A. and Arvana Comunicações
do Brasil S. A. (collectively, the “Subsidiaries”). Under the terms of the agreement, Nazleal purchased the Subsidiaries
for €20,000 ($23,206) by executing a settlement and release agreement for the same amount pertaining to amounts previously
payable by the Company to Nazleal.
Effective
September 30, 2018, Nazleal assumed all debts, obligations, and guarantees of the Subsidiaries, which totaled $1,822,152. Of this
amount, $1,731,077 was written off (concurrently upon completion of the transaction), as these amounts represented amounts due
to the Company from the Subsidiaries (previously eliminated on consolidation). The remaining $91,075 comprised $40,000 in accounts
payable (due to arm’s length parties) and $51,075 in amounts due to related parties which were derecognized upon completion
of the sale. The net effect of the above transactions resulted in a total gain to the Company of $114,237.
As
at December 31, 2019 and 2018, the Subsidiaries had total assets of $44 which consisted solely of cash.
11.
Other Income
During
the year ended December 31, 2019, the Company recognized other income in the amount of $287,316 corresponding to the write down
of $167,691 included in amounts due to related parties and $119,625 included in accounts payable and accrued liabilities, that
based on statutory law are deemed to no longer be collectibe by these individuals and vendors.
12.
Subsequent Events
The
Company evaluated its December 31, 2019, financial statements for subsequent events through the date the financial statements
were issued. The Company is aware of the following subsequent events which would require recognition or disclosure in the financial
statements:
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(a)
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On
March 3, 2020, the Company entered into a Debt Settlement Agreement with Olga Volger,
an assignee of a debt due to AG Consultants, Inc., to settle in full $14,883 in principal
and interest due on loans made to the Company for 148,830 shares of its common stock
valued at $0.10 a share.
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(b)
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On
March 4, 2020, the Company entered into a Debt Settlement Agreement with Conrad Swanson
to settle in full $39,592 in principal and interest due on loans made to the Company
for 395,920 shares of its common stock valued at $0.10 a share.
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(c)
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On
March 4,2020, the Company entered into a Debt Settlement Agreement with Raymond Wicki
to settle $42,629 in principal and interest due on loans made to th Company for 426,290
shares of its common stock valued at $0.10 a share.
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(d)
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On
March 17, 2020, the Company received an additional loan from CaiE in the amount of $25,000
with terms and conditions of this loan to be finalized at a latter date.
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.