ARVANA INC - Quarter Report: 2012 September (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
þ
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the
quarterly period ended September 30, 2012
o
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the
transition period from
to
.
000-30695
(Commission file number)
ARVANA INC.
(Exact name of registrant as specified in its charter)
NEVADA
87-0618509
State or other jurisdiction of
(I.R.S. Employer
incorporation or organization
Identification No.)
90 Madison Street, Suite 701, Denver, Colorado 80206
(Address of principal executive offices) (Zip Code)
(303) 329-3008
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate
Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-
accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,”
“accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes þ No ¨
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest
practicable date: The number of shares outstanding of the issuer’s common stock, $0.001 par value (the
only class of voting stock), at November 12, 2012 was 885,130.
1
TABLE OF CONTENTS
PART 1- FINANCIAL INFORMATION
Item1.
3
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
13
Operations
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
18
Item 4.
Controls and Procedures
18
PART II-OTHER INFORMATION
Item 1.
Legal Proceedings
20
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
20
Item 3.
Defaults Upon Senior Securities
20
Item 4.
Mine Safety Disclosures
20
Item 5.
Other Information
20
Item 6.
20
21
2
ITEM 1.
As used herein, the terms “Company,” “we,” “our,” “us,” “it,” and “its” refer to Arvana Inc., a Nevada
corporation and its wholly owned subsidiaries, unless otherwise indicated. In the opinion of management,
the accompanying unaudited consolidated financial statements included in this Form 10-Q reflect all
adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results
of operations for the periods presented. The results of operations for the periods presented are not
necessarily indicative of the results to be expected for the full year.
3
Arvana Inc.
(A Development Stage Company)
Condensed Consolidated Balance Sheets
September 30,
December 31,
2012
2011
ASSETS
(Unaudited)
(Audited)
Current asset
Cash
$
4,120
$
1,734
Total assets
$
4,120
$
1,734
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities
Accounts payable and accrued liabilities
$ 989,533
$
695,550
Loans payable stockholders (Note 3)
624,596
604,930
Loans payable related party (Note 3)
34,428
118,833
Loans payable (Note 3)
145,171
44,833
Amounts due to related parties (Note 3 and 6)
450,432
516,719
Total current liabilities
2,244,160
1,980,865
Stockholders' deficiency
Common stock, $0.001 par value 5,000,000 shares authorized
885,130 shares issued and outstanding at
September 30, 2012 and at December 31, 2011 (Note 4)
885
885
Additional paid-in capital
21,166,619
21,166,619
Deficit
(22,705,422)
(22,705,422)
Deficit accumulated during the development stage
(698,786)
(437,877)
(2,236,704)
(1,975,795)
Less: Treasury stock - 2,085 common shares at
September 30, 2012 and at December 31, 2011
(3,336)
(3,336)
Total stockholders’ deficiency
(2,240,040)
(1,979,131)
Total liabilities and deficiency
$
4,120
$
1,734
Subsequent events (Note 7)
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Arvana Inc.
(A Development Stage Company)
Condensed Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 2012 and 2011
(Unaudited)
Cumulative
Amounts from the
Beginning of the
Development
Three Months Ended
Nine Months Ended
Stage on
September 30,
September 30,
January 1, 2010 to
September 30,
2012
2011
2012
2011
2012
Operating expenses
General and administrative
$ 70,349
$ 82,119
$ 210,940
$ 224,391
$
615,092
Depreciation
-
-
-
-
103
Total operating expenses
70,349
82,119
210,940
224,391
615,195
Loss from operations
(70,349)
(82,119)
(210,940)
(224,391)
(615,195)
Interest expense
(11,861)
(11,504)
(35,279)
(34,489)
(123,981)
Foreign exchange gain (loss)
(32,235)
89,920
(14,690)
29,626
40,390
Net loss and comprehensive loss for
the period
$(114,445)
$ (3,703)
$ (260,909)
$ (229,254) $ $
(698,786)
Per share information - basic and diluted:
Weighted average shares outstanding
885,130
1,012,576
885,130
1,044,104
Net loss per share
$
(0.13)
$ (0.01)
$
(0.29) $
(0.22)
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Arvana Inc.
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Cumulative
amounts from the
beginning of the
development stage
on
For the Nine Months Ended
January 1, 2010 to
September 30,
September 30,
2012
2011
2012
Cash flows from operating activities
Net loss for the period
$ (260,909) $ (229,254)
$
(698,786)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization
-
-
103
Unrealized foreign exchange
10,938
(16,499)
(39,874)
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities
38,705
46,906
145,027
Amounts due to related parties
178,225
162,299
476,961
Net cash used in operations
(33,041)
(36,548)
(116,569)
Cash flows from financing activities
Proceeds of loans payable stockholders
20,171
4,770
41,233
Proceeds of loans payable related parties
15,256
14,540
34,089
Proceeds of loans payable
-
19,080
44,833
Net cash provided by financing activities
35,427
38,390
120,155
Increase in cash
2,386
1,842
3,586
Cash, beginning of period
1,734
2,074
534
Cash, end of period
$
4,120 $
3,916
$
4,120
Supplementary information
Interest paid
$
-
$
- $
-
Taxes paid
$
- $
- $
-
Transactions not involving cash
Decrease in accounts payable due to related
parties due to debt assignment
$
252,507 $
-
$
252,507
Decrease in loans payable due to related parties
due to debt assignment
$
100,000 $
- $
100,000
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
Arvana Inc.
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
September 30, 2012
(Unaudited)
1.
Nature of Business and Ability to Continue as a Going Concern
Arvana Inc. (“our”, “we”, ”us” and the “Company”) was incorporated under the laws of the State of
Nevada as Turinco, Inc. on September 16, 1977, 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 and effected a reverse split of one share for every twenty shares
outstanding.
These consolidated financial statements for the nine month period ended September 30, 2012 include the
accounts of the Company and its subsidiary Arvana Networks Inc. (including its wholly-owned
subsidiaries, Arvana Participaçōes S.A. (“Arvana Par”) and Arvana Comunicações do Brasil S. A.
(“Arvana Com”)). The Company has ceased all operations in its subsidiary companies, and has written-
off or disposed of all assets in the subsidiary companies, consequently they are now all considered to be
inactive subsidiaries. As a result of this inactivity, the Company entered into a new development stage as
of January 1, 2010.
Our functional currency and reporting currency is the United States dollar (“US Dollar”) and the
accompanying condensed consolidated financial statements have been expressed in US Dollars.
These consolidated 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 nine month
period ended September 30, 2012, we incurred a loss from operations of $260,909. At September 30,
2012, we had a working capital deficiency of $2,240,040. These conditions raise substantial doubt about
our ability to continue as a going concern.
Accordingly, the Company will require continued financial support from its shareholders and creditors
until it is able to generate sufficient cash flow from operations on a sustained basis. There is substantial
doubt that the Company will be successful at achieving these results. Failure to obtain the ongoing
support of its shareholders and creditors may make the going concern basis of accounting inappropriate,
in which case the Company’s assets and liabilities would need to be recognized at their liquidation values.
These consolidated 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.
7
Arvana Inc.
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
September 30, 2012
(Unaudited)
2.
Summary of Significant Accounting Policies
Basis of presentation
We are in the process of evaluating business opportunities and have entered a new development stage as
of January 1, 2010 and present our financial statements in accordance with the Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (the “Codification” or “ASC”) Topic 915.
Our fiscal year end is December 31. The accompanying consolidated interim financial statements of
Arvana Inc. for the nine month periods ended September 30, 2012 and 2011, and for the cumulative
amounts from the beginning of the development stage on January 1, 2010, through September 30, 2012,
have been prepared in accordance with accounting principles generally accepted in the United States (“US
GAAP”) for financial information with the instructions to Form 10-Q and Regulation S-X. Although they
are unaudited, in the opinion of management, they include all adjustments, consisting only of normal
recurring items, necessary for a fair presentation. Results are not necessarily indicative of results which
may be achieved in the future. The consolidated interim financial statements and notes appearing in this
report should be read in conjunction with our consolidated audited financial statements and related notes
thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of
Operations, contained in the our Annual Report on Form 10-K for the fiscal year ended December 31,
2011, as filed with the Securities and Exchange Commission (the “SEC”) on April 13, 2012.
Use of 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, the disclosure of
contingent assets and liabilities at the date of the financial statements and the reported revenues and
expenses during the reporting periods. Actual results could differ from those estimates.
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 and loans payable to - the carrying amount approximates fair
value due to the short-term nature of the obligations.
8
Arvana Inc.
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
September 30, 2012
(Unaudited)
2.
Summary of Significant Accounting Policies (continued)
Financial instruments (continued)
The estimated fair values of the Company's financial instruments as of September 30, 2012 and December
31, 2011 follows:
September 30,
December 31,
2012
2011
Carrying
Fair
Carrying
Fair
Amount
Value
Amount
Value
Cash
$4,120
$4,120
$1,734
$1,734
Accounts payable and accrued liabilities
989,533
989,533
695,550
695,550
Loans payable to stockholders
624,596
624,596
604,930
604,930
Loans payable to related party
34,428
34,428
118,833
118,833
Loans payable
145,171
145,171
44,833
44,833
Amounts due to related parties
450,432
450,432
516,719
516,719
The following table presents information about the assets that are measured at fair value on a recurring
basis as of September 30, 2012, 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:
Quoted
Significant
Prices
Other
Significant
September
in Active
Observable
Unobservable
30,
Markets
Inputs
Inputs
2012
(Level 1)
(Level 2)
(Level 3)
Assets:
Cash
$
4,120
$
4,120
$
—
$
—
The fair value of cash is determined through market, observable and corroborated sources.
9
Arvana Inc.
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
September 30, 2012
(Unaudited)
2.
Summary of Significant Accounting Policies (continued)
Recent accounting pronouncements
We have reviewed all recently issued, but not yet effective, accounting pronouncements and do not
believe the future adoption of any such pronouncements may be expected to cause a material impact on
our financial condition or the results of our operations.
3.
Amounts Due to Related Parties and Loans Payable to Stockholders
From February, 2007 until September 30, 2012 the Company received a number of loans from
stockholders, related parties and unrelated third parties. As of September 30, 2012 the Company had
received loans of $624,596 (Euro 225,000; CAD 72,300; $261,800) (December 31, 2011 - $604,930:
Euro 225,000; CAD 62,300; $251,800) from stockholders, loans of $34,428 (CAD 25,000; $9,000)
(December 31, 2011 – $118,833: CAD 10,000; $109,000) from a related party and loans of $145,171
(CAD 10,000; $ 135,000) (December 31, 2011 – $ 44,833: CAD 10,000; $35,000) 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 consolidated 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 $200,630 and $156,015 is included in
accounts payable and accrued expenses at September 30, 2012 and December 31, 2011, respectively.
Interest expense recognized on these loans was $35,279 for the nine months ended September 30, 2012,
compared to $34,489 for the nine months ended September 30, 2011.
At September 30, 2012 and December 31, 2011 the Company had amounts due to related parties of
$450,432 and $516,719, respectively. This amount includes $136,100 at September 30, 2012 and
December 31, 2011, payable to two former directors and a current director for services rendered during
2007. This amount is to be paid part in cash and part in stock at a future date with the number of common
shares determined by the fair value of the shares on the settlement date. The amounts owing bear no
interest, are unsecured, and have no fixed terms of repayment.
4.
Common Stock
We have a stock option plan in place under which we are authorized to grant options to executive officers
and directors, employees and consultants enabling them to acquire up to 10% of our issued and
outstanding common stock. Under the plan, the exercise price of each option equals the market price of
our stock as calculated on the date of grant. The options can be granted for a maximum term of 10 years.
Vesting terms are determined at the time of grant.
At September 30, 2012 and December 31, 2011, there were no stock options outstanding. No options
were granted, exercised or expired during the nine months ended September 30, 2012 and the year ended
December 31, 2011.
10
Arvana Inc.
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
September 30, 2012
(Unaudited)
4.
Common Stock (continued)
At September 30, 2012 and December 31, 2011, there were no warrants outstanding. No warrants were
granted, exercised or expired during the nine months ended September 30, 2012 and the year ended
December 31, 2011.
On September 30, 2010, the Company completed a common stock reverse split of one share for each
twenty shares outstanding. These consolidated financial statements have been prepared showing after
reverse stock split shares with a par value of $0.001.
On September 6, 2011, the Company cancelled 175,000 shares of its treasury stock of which cancellation
removed $175 from common stock and $279,825 from additional paid-in capital.
5.
Segmented Information
The Company has no reportable segments.
6.
Related Party Transactions
Other than amounts payable to related parties as disclosed below and in Note 3, the Company did not
have any other related party transactions for the periods ended September 30, 2012 and 2011.
Our chief executive officer and director has entered into a consulting arrangement on a month to month
basis that provides for a monthly fee of CAD 5,000. These amounts have been accrued and are currently
unpaid. As of September 30, 2012 our chief executive officer was owed $45,769 (CAD 45,000) for
services rendered as an officer.
Our chief financial officer and director has 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. As
of September 30, 2012 our chief financial officer was owed $42,000 for services rendered as an officer.
Our chief executive officer and director entered into a debt assignment agreement effective January 1,
2012 with a corporation with a director in common and thereby assigned $199,150 (CAD 202,759) of
unpaid amounts payable.
Our chief executive officer and 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 chief executive officer and director is owed $120,520 for unsecured non-interest bearing amounts due
on demand loaned to the Company as of September 30, 2012.
Our chief executive officer and a director is owed $34,428 for unsecured amounts bearing 6% interest due
on demand loaned to the Company as of September 30, 2012.
Our former officers are owed a total of $106,043 for their prior services rendered as officers.
11
Arvana Inc.
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
September 30, 2012
(Unaudited)
6.
Related Party Transactions (continued)
A director of the Company is owed $60,000 as of September 30, 2012 for services rendered as a director
during 2007. Two former directors of the Company are owed $76,100 as of September 30, 2012 for
services rendered as directors during 2007.
7.
Subsequent Events
The Company evaluated its September 30, 2012 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.
12
Item 2.
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 quarterly report contain forward-looking statements that involve risks and uncertainties.
Forward-looking statements can also be identified by words such as “anticipates,” “expects,” “believes,”
“plans,” “predicts,” and similar terms. Forward-looking statements are not guarantees of future
performance and our actual results may differ significantly from the results discussed in the forward-
looking statements. Factors that might cause such differences include but are not limited to those
discussed in the subsection entitled Forward-Looking Statements and Factors That May Affect Future
Results and Financial Condition below. The following discussion should be read in conjunction with our
financial statements and notes thereto included in this report. Our fiscal year end is December 31. All
information presented herein is based on the nine month periods ended September 30, 2012 and
September 30, 2011.
Overview
The Company is currently in the process of evaluating business opportunities having entered a new
development stage as of January 1, 2010. We can provide no assurance that we will be successful in
identifying suitable business opportunities, or if we are able to identify suitable business opportunities,
that we will be able to find an adequate source of financing to acquire any business or business assets, and
commence operations, or that those operations, if commenced, will be successful in generating profits.
Our Plan of Operations
The Company’s plan of operation over the next twelve months is to identify and acquire a suitable
business opportunity. However, we will not be able to pursue any new business opportunities that we
might identify without additional financing to provide for ongoing operations. Management is actively
seeking new financing to this end while we evaluate potential businesses.
We anticipate that in order to maintain operations while we evaluate new businesses the Company will
need additional debt or equity funding of $50,000 over the next twelve months since we had cash of
$4,120 and a working capital deficit of $2,240,040 as at September 30, 2012. Should we be successful in
identifying a new business opportunity the Company will require additional funding to evaluate and
prospectively acquire any given opportunity. The amount of such additional funding will depend on the
business and is not determinable at this time.
Other than shareholder loans, we do not believe that debt financing will be an attractive means of funding
additional phases of our business development as we do not have tangible assets to secure any debt
financing. Rather, we anticipate that additional funding will be in the form of equity financing from the
sale of our common stock. However, we do not have any financing arranged and we cannot provide
investors with any assurance that we will be able to obtain sufficient funding from the sale of our
common stock to fund our plan of operations. Accordingly, we will require continued financial support
from our shareholders and creditors until we are able to generate sufficient cash flow from operations on a
sustained basis.
13
Results of Operations
During the nine months ended September 30, 2012, the Company (i) sought out prospective business
opportunities; and (ii) satisfied continuous public disclosure requirements.
Our operations for the three months ended September 30, 2012 and 2011 are summarized below.
Nine Months
Nine Months
Ended
Ended
September 30, 2012
September 30, 2011
Expenses:
General and administration
$70,349
$82,119
Interest
11,861
11,504
Foreign exchange (gain) loss
32,235
(89,920)
Comprehensive Loss for the Period
$114,445
$3,703
Our operations for the nine months ended September 30, 2012 and 2011 are summarized below.
Nine Months
Nine Months
Ended
Ended
September 30, 2012
September 30, 2011
Expenses:
General and administration
$210,940
$224,391
Interest
35,279
34,489
Foreign exchange (gain) loss
14,690
(29,626)
Comprehensive Loss for the Period
$260,909
$229,254
Comprehensive loss for the period
For the period from January 1, 2010 to September 30, 2012, the Company recorded a net loss of
$698,786. The Company’s cumulative net losses are primarily due to costs associated with general and
administrative expenses. General and administrative costs include accounting costs, consulting fees,
professional fees, travel costs, project development expenses, due diligence costs and office operation
costs.
Net losses for the three months ended September 30, 2012 were $114,445 as compared to $3,703 for the
three months ended September 30, 2011. The increase in net losses over the comparative three month
periods can be attributed to a slight decline in general and administrative expenses and a significant loss
on unrealized foreign exchange in the current period over a gain in the prior period due to that portion of
our liabilities that are payable in foreign currencies and the corresponding changes in the value of those
foreign currencies.
14
Net losses for the nine months ended September 30, 2012 were $260,909 as compared to $229,254 for the
nine months ended September 30, 2011. The increase in net losses over the comparative nine month
periods can be attributed to a slight decline in general and administrative expenses and a significant loss
on unrealized foreign exchange in the current period over a gain in the prior period due to that portion of
our liabilities that are payable in foreign currencies and the corresponding changes in the value of those
foreign currencies.
We did not generate revenue during this period and expect to continue to incur losses over the next twelve
months at a rate comparable to the three and nine months presented here or until such time as a new
business opportunity that produces income is concluded.
Capital Expenditures
The Company expended no amounts on capital expenditures for the period from January 1, 2010, to
September 30, 2012.
Income Tax Expense (Benefit)
The Company has a prospective income tax benefit resulting from a net operating loss carry-forward and
start up costs that will offset any future operating profit.
Impact of Inflation
The Company believes that inflation has had a negligible effect on operations over the past three years.
Liquidity and Capital Resources
The Company is in the development stage and, since inception, has experienced significant changes in
liquidity, capital resources, and stockholders’ deficit.
The Company had current and total assets of $4,120 as of September 30, 2012, consisting solely of cash.
Current and total liabilities as of September 30, 2012 were $2,244,160 consisting of accounts payable and
accrued liabilities of $989,533, loans payable to stockholders of $624,596, loans payable to a related party
of $34,428, loans payable of $145,171 and amounts due to related parties of $450,432. The Company had
a working capital deficit of $2,240,040 and a net stockholders deficit of $2,240,040 as of September 30,
2012.
The Company had current and total assets of $1,734 as of December 31, 2011, consisting solely of cash.
Current and total liabilities of December 31, 2011 were $1,980,865 consisting of accounts payable and
accrued liabilities of $695,550, loans payable to stockholders of $604,930, loans payable to a related party
of $118,833, loans payable of $44,833 and amounts due to related parties of $516,719. The Company had
a working capital deficit of $1,979,131 and a net stockholders deficit of $1,979,131 as of December 31,
2011.
15
Cash Used in Operating Activities
Cash flow used in operating activities was $116,569 for the period from January 1, 2010, to September
30, 2012. Our cumulative cash flow used in operating activities was used on accounting, administration,
consulting, legal expenses and filing fees.
We used cash in operations in the amount of $33,041 during the nine months ended September 30, 2012
compared to $36,548 during the nine months ended September 30, 2011. The cash flow used in
operations during the nine months ended September 30, 2012 was attributable primarily to net losses due
to administration expenses and unrealized foreign exchange losses offset by accounts payable and accrued
liabilities, and amounts due to related parties. We expect to continue to use cash flow in operating
activities over the next twelve months or until such time as the Company can generate sufficient revenue
to transition away from net losses.
Cash Used in Investing Activities
Cash flow used in investing activities was $0 for the period from January 1, 2010, to September 30, 2012.
We do expect to use cash flow in investing activities in connection with the development or acquisition of
a suitable business opportunity. Until such time as such unidentified opportunity is concluded, we do not
expect to use cash flows in investing activities.
Cash Flows from Financing Activities
Cash flow provided from financing activities was $120,155 for the period from January 1, 2010, to
September 30, 2012. Our cumulative cash flows from financing activities can be mainly attributed to
loans contributed by shareholders, related parties and unrelated parties.
Cash flow provided by financing activities for the nine months ended September 30, 2012 was $35,427 as
compared to $38,390 for the nine months ended September 30, 2011. The change in cash flow provided
from financing activities over the comparative nine month periods can be attributed to the timing
differences involved with the procurement of unsecured loans. We expect to continue to use cash flow
provided by financing activities to raise additional funds to maintain operations and seek out suitable
business opportunities.
The Company’s current assets are insufficient to conduct its plan of operation over the next twelve (12)
months. We will have to seek at least $50,000 in debt or equity financing over the next twelve months to
maintain operations. The Company has no current commitments or arrangements with respect to, or
immediate sources of this funding. Further, no assurances can be given that funding is available. The
Company’s shareholders are the most likely source of new funding in the form of loans or equity
placements though none have made any commitment for future investment and the Company has no
agreement formal or otherwise. The Company’s inability to obtain sufficient funding to maintain
operations will have a material adverse affect on its ability to fulfill its current plan of operation to search
for suitable business opportunities.
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 September 30, 2012.
16
The Company had no commitments for future capital expenditures that were material at September 30,
2012.
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 September 30, 2012, 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.
Critical Accounting Policies
In Note 2 to the audited financial statements for the years ended December 31, 2011 and 2010, included
in our Form 10-K, the Company discusses those accounting policies that are considered to be significant
in determining the results of operations and its financial position. The Company believes that the
accounting principles utilized by it conform to accounting principles generally accepted in the United
States.
The preparation of financial statements requires Company management to make significant estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and expenses. By their nature,
these judgments are subject to an inherent degree of uncertainty. On an on-going basis, the Company
evaluates estimates. The Company bases its estimates on historical experience and other facts and
circumstances that are believed to be reasonable, and the results form the basis for making judgments
about the carrying value of assets and liabilities. The actual results may differ from these estimates under
different assumptions or conditions.
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.
Going Concern
Our auditors have expressed an opinion as to the Company’s ability to continue as a going concern as a
result of an accumulated deficit during the development stage of $437,877 and negative cash flows from
operating activities as of December 31, 2011. The Company’s ability to continue as a going concern is
subject to the ability of the Company to realize a profit and /or obtain funding from outside sources.
Management’s plan to address the Company’s ability to continue as a going concern includes: (i)
obtaining funding from the private placement of debt or equity; and (ii) realizing revenues from its
prospective development or acquisition of a suitable business opportunity. Management believes that it
will be able to obtain funding to allow the Company to remain a going concern through the methods
discussed above, though there can be no assurances that such methods will prove successful.
17
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 additional capital to fund cash requirements for future operations;
uncertainties related to the Company’s future business prospects;
our ability to generate revenues from future operations;
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.
Stock-Based Compensation
We have adopted Accounting Standards Codification Topic (“ASC”) 718, Share-Based Payment, which
addresses the accounting for stock-based payment transactions in which an enterprise receives employee
services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair
value of the enterprise’s equity instruments or that may be settled by the issuance of such equity
instruments. We account for equity instruments issued in exchange for the receipt of goods or services
from other than employees in accordance with ASC 505. Costs are measured at the estimated fair market
value of the consideration received or the estimated fair value of the equity instruments issued, whichever
is more reliably measurable. The value of equity instruments issued for consideration other than employee
services is determined on the earliest of a performance commitment or completion of performance by the
provider of goods or services.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Not required.
Item 4.
Controls and Procedures
Disclosure Controls and Procedures
In connection with the preparation of this report on Form 10-Q, an evaluation was carried out by the
Company’s management, with the participation of the chief executive officer and chief financial officer,
of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)). Disclosure controls and
procedures are designed to ensure that information required to be disclosed in reports filed or submitted
18
under the Exchange Act is recorded, processed, summarized, and reported within the time periods
specified in the Commission’s rules and forms and that such information is accumulated and
communicated to management, including the chief executive officer and chief financial officer, to allow
timely decisions regarding required disclosures.
Based on that evaluation, the Company’s management concluded, as of the end of the period covered by
this report, that the Company’s disclosure controls and procedures were ineffective in recording,
processing, summarizing, and reporting information required to be disclosed, within the time periods
specified in the Commission’s rules and forms.
Changes in Internal Control over Financial Reporting
There have been no changes in internal control over financial reporting (as defined in Rule 13a-15(f) of
the Exchange Act) during the period ended September 30, 2012, that materially affected, or are
reasonably likely to materially affect, the Company’s internal control over financial reporting.
19
PART II
Item 1.
Legal Proceedings.
None
Item 1A.
Risk Factors
Not required.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3.
Defaults Upon Senior Securities
None.
Item 4.
Mine Safety Disclosures
Not applicable.
Item 5.
Other Information
None.
Item 6.
Exhibits required to be attached by Item 601 of Regulation S-K are listed in the Index to Exhibits on page
19 of this Form 10-Q, and are incorporated herein by this reference.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized.
ARVANA INC.
By:
/s/ Zahir Dhanani
Zahir Dhanani, Chief Executive Officer
Date: November 13, 2012
By: /s/ Arnold Tinter
Arnold Tinter, Chief Financial Officer,
Principal Accounting Officer
Date: November 13, 2012
21
INDEX TO EXHIBITS
Exhibit
Number
Description of Exhibit
2.1
Agreement and Plan of Reorganization between the Company, Arvana Networks, Inc.
and the Shareholders of Arvana Networks, Inc. dated August 18, 2005(1)
3.1
Articles of Incorporation(2)
3.2
Bylaws, as amended(2)
3.3
Amendment to Articles of Incorporation(3)
10.1
2006 Stock Option Plan, dated June 5, 2006(4)
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange
Act(5)
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act(5)
Certification of Chief Executive Officer pursuant to Rule 13a-14(b) of the Exchange Act
and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002(5)
Certification of Chief Financial Officer pursuant to Rule 13a-14(b) of the Exchange Act
and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002(5)
101. INS
XBRL Instance Document†
101. PRE
XBRL Taxonomy Extension Presentation Linkbase†
101. LAB
XBRL Taxonomy Extension Label Linkbase†
101. DEF
XBRL Taxonomy Extension Label Linkbase†
101. CAL
XBRL Taxonomy Extension Label Linkbase†
101. SCH
XBRL Taxonomy Extension Schema†
(1)
Incorporated by reference to the exhibits to the Company’s Current Report on Form 8-K
filed with the SEC on August 19, 2005.
(2)
Incorporated by reference to the exhibits to the Company’s registration statement on
Form 10-SB filed with the SEC on May 24, 2000.
(3)
Incorporated by reference to the exhibits to the Company’s Current Report on Form 8-K
filed with the SEC on October 12, 2010.
(4)
Incorporated by reference to the exhibits to the Company’s Current Report on Form 8-K
filed with the SEC on June 7, 2006.
(5)
Filed as an exhibit to this Quarterly Report on Form 10-Q.
†
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed
“furnished” and not “filed” or part of a registration statement or prospectus for purposes
of Section 11 or 12 of the Securities Act of 1933, or deemed “furnished” and not “filed”
for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise is
not subject to liability under these sections.
22