ARVANA INC - Quarter Report: 2016 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, 2016.
oTransition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the
transition period from
to
.
Commission file number: 0-30695
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.)
299 S. Main Street, 13th Floor, Salt Lake City, Utah 84111
(Address of principal executive offices) (Zip Code)
(801) 232-7395
Registrant’s telephone number, including area code
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 ¨ No þ
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 o Accelerated filer o Non-accelerated filer o 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 o
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the
latest practicable date. The number of shares outstanding of the registrant’s common stock, $0.001 par
value (the only class of voting stock), at November 16, 2016, was 1,034,030.
1
TABLE OF CONTENTS
PART I
Financial Statements
3
Management's Discussion and Analysis of Financial Condition and Results of Operations 14
Quantitative and Qualitative Disclosures about Market Risk
19
Controls and Procedures
19
PART II
Legal Proceedings
20
Unregistered Sales of Equity Securities and Use of Proceeds
20
Defaults Upom Senior Securities 20
Mine Safety Disclosures
20
Other Information
20
Exhibit
20
21
2
ITEM 1.
FINANCIAL STATEMENTS
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 condensed 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.
Condensed Consolidated Balance Sheets
(Unaudited)
(Expressed in US Dollars)
September
December
30,
31,
2016
2015
ASSETS
Current assets:
Cash
$
10,456
$
53
Total assets
$
10,456
$
53
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities
Accounts payable and accrued liabilities
$ 1,069,084
$
1,018,963
Convertible loan (Note 7)
50,000
-
Loans payable to stockholders (Note 3)
631,084
619,671
Loans payable to related party (Note 3)
30,042
28,941
Loans payable (Note 3)
147,624
147,225
Amounts due to related parties (Note 3)
447,301
434,330
Total current liabilities
2,375,135
2,249,130
Stockholders' deficiency
Common stock, $0.001 par value 5,000,000 authorized,
885,130 shares issued and outstanding at
September 30, 2016 and December 31, 2015, respectively
(Note 4)
885
885
Additional paid-in capital
21,166,619
21,166,619
Deficit
(23,528,847)
(23,413,245)
(2,361,343)
(2,245,741)
Less: Treasury stock – 2,085 common shares at
September 30, 2016 and December 31, 2015,
respectively
(3,336)
(3,336)
Total stockholders’ deficiency
(2,364,679)
(2,249,077)
$
10,456
$
53
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Arvana Inc.
Condensed Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 2016 and 2015
(Unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2016
2015
2016
2015
Operating expenses
General and administrative
3,976
2,926
12,510
9,302
Professional fees
3,380
5,066
12,257
13,052
Total operating expenses
$
7,356 $
7,992 $
24,767 $
22,354
Loss from operations
(7,356)
(7,992)
(24,767)
(22,354)
Interest expense
(12,132)
(12,084)
(36,409)
(36,151)
Foreign exchange gain (loss)
278
47,581
(54,426)
144,616
Net income (loss) and comprehensive
income (loss)
$ (19,210) $
27,505 $ (115,602) $
86,111
Per common share information - basic and
diluted:
Weighted average shares outstanding
885,130
885,130
885,130
885,130
Net income (loss) per common shares –
basic and diluted
$
(0.02)
0.03 $
(0.13) $
0.10
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Arvana Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Expressed in US Dollars)
Nine Months Ended
September 30,
2016
2015
Cash flows from operating activities
Net income (loss)
$
(115,602)
$
86,111
Item not involving cash:
Unrealized foreign exchange
53,816
(142,062)
Changes in non-cash working capital:
Accounts payable and accrued liabilities
20,837
44,904
Amounts due to related parties
1,352
1,336
Net cash used in operations
(39,597)
(9,711)
Cash flows from investing activities
Net cash used in investing activities
-
-
Cash flows from financing activities
Proceeds of loans payable to stockholders
-
10,000
Loans corresponding to MOU (Note 7)
50,000
-
Net cash provided by financing activities
50,000
10,000
Increase in cash
10,403
289
Cash , beginning of period
53
1,876
Cash, end of period
$
10,456
$
2,165
Supplementary information
Cash paid for interest
$
-
$
-
Cash paid for income taxes
$
-
$
-
There were no non-cash investing or financing transactions for the nine month periods ended September
30, 2016 and 2015.
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
Arvana Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 2016
(Unaudited)
(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. On July 24, 2006, the shareholders approved a change of
the Company’s name from Turinco, Inc. to Arvana Inc.
These condensed consolidated financial statements for the nine month period ended September 30, 2016,
include the accounts of the Company and its subsidiary Arvana Networks Inc. (including its wholly-
owned subsidiaries, Arvana Participaçōes S.A. and Arvana Comunicações do Brasil S. A. 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.
Our reporting currency and functional currency is the United States dollar (“US Dollar”) and the
accompanying condensed consolidated financial statements have been expressed in US Dollars.
These condensed 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, 2016, the Company recognized a net loss of $115,602 as a result of
general administrative expenses and foreign exchange losses. At September 30, 2016, the Company had a
working capital deficiency of $2,364,679. These conditions raise substantial doubt about the Company’s
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 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.
Notes to Condensed Consolidated Financial Statements
September 30, 2016
(Unaudited)
(Expressed in U.S. Dollars)
2. Summary of Significant Accounting Policies
Basis of presentation
The Company is in the process of transacting a business opportunity and has minimal operating levels.
The Company’s fiscal year end is December 31. The accompanying condensed interim consolidated
financial statements of Arvana Inc. for the nine months ended September 30, 2016 and 2015, 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. Results are not
necessarily indicative of results which may be achieved in the future. 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 condensed 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 our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as filed with
the Securities and Exchange Commission (“SEC”) on April 14, 2016.
Use of Estimates
The preparation of consolidated financial statements in conformity with US GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those estimates. These
estimates include the recognition of deferred tax assets based on the change in unrecognized deductible
temporary tax differences.
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 - the carrying amount approximates fair value
due to the short-term nature of the obligations.
8
Arvana Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 2016
(Unaudited)
(Expressed in U.S. Dollars)
2. Summary of Significant Accounting Policies (continued)
Financial instruments (continued)
The estimated fair values of the Company's financial instruments as of September 30, 2016 and December
31, 2015 follows:
September 30,
December 31,
2016
2015
Carrying
Fair
Carrying
Fair
Amount
Value
Amount
Value
Cash
$10,456
$10,456
$53
$53
Accounts payable and accrued liabilities
1,069,084
1,069,084
1,018,963
1,018,963
Convertible loan
50,000
50,000
-
-
Loans payable to stockholders
631,084
631,084
619,671
619,671
Loans payable to related party
30,042
30,042
28,941
28,941
Loans payable
147,624
147,624
147,225
147,225
Amounts due to related parties
447,301
447,301
434,330
434,330
The following table presents information about the assets that are measured at fair value on a recurring
basis as of September 30, 2016, 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
2016
(Level 1)
(Level 2)
(Level 3)
Assets:
Cash
$
10,456
$
10,456
$
—
$
—
The fair value of cash is determined through market, observable and corroborated sources.
9
Arvana Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 2016
(Unaudited)
(Expressed in U.S. Dollars)
2. Summary of Significant Accounting Policies (continued)
Recent accounting pronouncements
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards
Update 2016-02, Leases (Topic 842). The standard requires 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 standard
requires lessors to classify leases as either sales-type, finance or operating. A sales-type lease occurs if the
lessor transfers all of 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, an operating lease results. The standard will
become effective for the Company beginning January 1, 2019. The Company is currently assessing the
impact adoption of this standard will have on its consolidated results of operations, financial condition,
cash flows, and financial statement disclosures.
In August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Updates
(ASU) 2014-15 requiring an entity’s management to evaluate whether there are conditions or events,
considered in aggregate, that raise substantial doubt about entity’s ability to continue as a going concern
within one year after the date that the financial statements are issued (or within one year after the date that
the financial statements are available to be issued when applicable). The amendments to (ASU) 2014-15
are effective for the annual period ending after December 15, 2016, and for annual periods and interim
periods thereafter. Early application is permitted. The Company is in the process of evaluating the
prospective impact that (ASU) 2014-15 will have on its consolidated balance sheet.
10
Arvana Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 2016
(Unaudited)
(Expressed in U.S. Dollars)
3. Amounts Due to Related Parties and Loans Payable to Stockholders
From February, 2007, until September 30, 2016, the Company received a number of loans from
stockholders, related parties and unrelated third parties. As of September 30, 2016, the Company had
received loans of $631,084 (Euro 225,000; CAD$ 72,300; $323,107) (December 31, 2015 - $619,671:
Euro 225,000; CAD$ 72,300; $323,107) from stockholders, loans of $30,042 (CAD$ 27,600; $9,000)
(December 31, 2015 – $28,941: CAD$ 27,600; $9,000) from a related party and loans of $147,624
(CAD$ 10,000; $140,000) (December 31, 2015 – $147,225: CAD$10,000; $140,000) 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 $372,900 and $330,536 is
included in accounts payable and accrued expenses at September 30, 2016, and December 31, 2015,
respectively. Interest expense recognized on these loans was $12,132 and $36,409 for the three and nine
months ended September 30, 2016, respectively, compared to $12,084 and $36,151 for the three and nine
months ended September 30, 2015, respectively. The Company also received a convertible loan of
$50,000 from CaiE Food Partnership Ltd. as per Note 7 below.
At September 30, 2016, and December 31, 2015, the Company had amounts due to related parties of
$447,301 and $434,330, respectively. This amount includes $136,100 at September 30, 2016, and
December 31, 2015, 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, 2016 and December 31, 2015, there were no stock options outstanding. No options
were granted, exercised or expired during the nine month period ended September 30, 2016 or the year
ended December 31, 2015.
5. Segmented Information
The Company has no reportable segments.
11
Arvana Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 2016
(Unaudited)
(Expressed in U.S. Dollars)
6. Related Party Transactions
Other than amounts payable to related parties as disclosed below and in Note 3, the Company also
incurred consulting fees of $7,438 (2015 - $6,394) paid to a company controlled by our chief executive
officer during the nine months ended September 30, 2016.
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 September 30, 2016, our
former chief executive officer was owed $64,808 (CAD$83,710) for services rendered as an officer,
compared to $63,821 (CAD$83,710) as at December 31, 2015. The amounts owing for past services have
been included in the total payable of $169,339 as of September 30, 2016 and $159,979 as of December
31, 2015 detailed below.
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 of September 30, 2016 and
December 31, 2015 our former chief financial officer was owed $58,870 for services rendered as an
officer.
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 $154,583
(CAD$202,759) of unpaid amounts payable.
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 $169,339 for unsecured non-interest
bearing amounts due on demand from the Company as of September 30, 2016, compared to $159,979 as
of December 31, 2015.
Our former chief executive officer and former director is owed $30,042 for unsecured amounts bearing
6% interest due on demand loaned to the Company as of September 30, 2016, compared to $28,941 as of
December 31, 2015.
Our other former officers are owed a total of $82,992 for their prior services rendered as officers as at
September 30, 2016, compared to $79,381 as of December 31, 2015.
A director of the Company is owed $60,000 as of September 30, 2016 and December 31, 2015, for
services rendered as a director during 2007. Two former directors of the Company are owed $76,100 as of
September 30, 2016 and December 31, 2015 for services rendered as directors during 2007.
12
Arvana Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 2016
(Unaudited)
(Expressed in U.S. Dollars)
7. Memorandum of Understanding
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. The MOU anticipates that the Company will issue, subject to shareholder approval, a fully
diluted 67% interest in its common stock in exchange for CaiE. The MOU also provides that the
Company enter into debt settlement agreements with certain of its existing creditors (see Note 8),
whereby the Company will issue shares of its common stock in order to settle certain historical debt. It is
anticipated that the shares will be issued at a deemed value of $0.50 per share pursuant to the debt
settlement agreements. Concurrently, the Company will increase the number of its authorized common
shares, elect a new Board of Directors and change its name to reflect the new business.
The MOU further provides that CaiE lend the Company $50,000 on a convertible basis prior to the
consummation of the transaction. The terms and conditions of the conversion of this loan have not been
agreed, though the intention of each party is that the conversion be effected at the same price as that of
Debt Settlement Agreements discussed above. CaiE has loaned the Company $50,000 as of the filing date
of this report, which has been accounted for as a liability as at September 30, 2016, but will be reassessed
for a beneficial conversion feature once the terms of the loan have been finalized.
8. Subsequent Events
On October 25, 2016, the Company entered into a Settlement Agreement and Release dated effective
September 30, 2016, in connection with satisfying a debt in the amount of $74,450, comprised of a loan
and accrued interest, in exchange for 148,900 shares of the Company’s common stock pursuant to the
exemptions from registration provided under Section 4(2) and Regulation S of the Securities Act of 1933,
as amended (“Securities Act”). No commissions or fees were paid in connection with this offering.
13
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 three and nine months ended September 30, 2016 and
September 30, 2015.
Overview
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. The MOU anticipates that the Company will issue, subject to shareholder
approval, a fully diluted sixty-seven percent (67%) interest in its common stock in exchange for CaiE.
The MOU further provides that CaiE lend the Company fifty thousand dollars ($50,000) on a convertible
basis prior to the consummation of the transaction. The anticipated transaction will require the Company
to convert existing debt into shares of its common stock, increase the number of authorized common
shares, elect a new Board of Directors and change its name to reflect the new business. CaiE had loaned
the Company $50,000 as of the filing date of this report and the Company is working with CaiE to
finalize a definitive transaction.
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. We will not
be able to develop any identified business opportunities without additional financing. Our board of
directors and management are actively pursuing financing in order to maintain operations but are not
currently evaluating potential businesses pending the anticipated transaction with CaiE.
Our Plan of Operation
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 based on the MOU 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
may 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 most likely need additional funding to complete any alternative
transaction that might be identified within this time frame.
14
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 any alternative financing arranged and cannot be certain that it will be able to
realize funding from the sale of equity or that shareholders will continue to provide loans. Accordingly,
we will require continued financial support from our shareholders and creditors until the Company is able
to generate sufficient cash flow to maintain operations on a sustained basis. There is substantial doubt that
the Company will be successful in maintaining operations unless it completes the acquisition of CaiE.
Results of Operations
During the nine months ended September 30, 2016, the Company (i) entered into a non-binding MOU
with CaiE; and (ii) satisfied continuous public disclosure requirements.
Our operations for the three and nine months ended September 30, 2016 and 2015 are summarized below.
Three months
Three months
Nine months
Nine months
Ended
Ended
Ended
Ended
September 30,
September 30,
September 30,
September 30,
2016
2015
2016
2015
Expenses:
General and administration
($3,976)
($2,926)
($12,510)
($9,302)
Professional fees
(3,380)
(5,066)
(12,257)
(13,052)
Interest
(12,132)
(12,084)
(36,409)
(36,151)
Foreign exchange gain (loss)
278
47,581
(54,426)
144,616
Net income (loss) and
comprehensive income (loss) for
the period
($19,210)
$27,505
($115,602)
$86,111
Net Income (Losses)
Net loss for the three months ended September 30, 2016 was $19,210 as compared to net income of
$27,505 for the three months ended September 30, 2015. The recognition of a net loss over the three
month period ended September 30, 2016, compared to the three month period ended September 30, 2015,
can be attributed to a decrease in foreign exchange gain, relative consistency in general and administrative
expenses, professional fees, and interest expense over the comparable three month periods.
Net loss for the nine months ended September 30, 2016 was $115,602 as compared to net income of
$86,111 for the nine months ended September 30, 2015. The transition to net losses over the nine month
period ended September 30, 2016, can be primarily attributed to the loss on foreign exchange in the
current nine month period as compared to a foreign exchange gain in the comparable nine month period.
The loss on foreign exchange in the current nine month period is due to an increase in the value of foreign
currencies against the US dollar, which increase has negatively impacted the cost of those expenses that
are payable in 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 prior annual period presented here or until such time as we are able to
conclude the acquisition or development of a new business opportunity that produces net income.
15
Capital Expenditures
The Company expended no amounts on capital expenditures for the nine month period ended September
30, 2016.
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
Since inception, the Company has experienced significant changes in liquidity, capital resources, and
stockholders’ deficiency.
The Company had current and total assets of $10,456 as of September 30, 2016, consisting solely of cash
and a working capital deficit of $2,364,679, as compared to current and total assets of $53, consisting
solely of cash and a working capital deficit of $2,249,077 as of December 31, 2015. Net stockholders'
deficiency in the Company was $2,364,679 at September 30, 2016, as compared to a net stockholder’s
deficiency in the Company of $2,249,077 at December 31, 2015.
Cash Used in Operating Activities
Net cash flow used in operating activities for the nine month period ended September 30, 2016 was
$39,597 as compared to $9,711 for the nine month period ended September 30, 2015, which differences
reflect the comparative changes in unrealized foreign exchange and changes in working capital in the
current period. Net cash flow used in operating activities in the prior period can also be primarily
attributed to general and administrative expenses, and changes in working capital. General and
administrative expenses include but are not limited to, personnel costs, accounting fees and consulting
expenses while changes in working capital include accounts payable and amounts due to related parties.
We expect to continue to use net cash flow in operating activities over the next twelve months or until
such time as the Company can generate revenue to offset expenses in order to transition to providing net
cash flow from operations.
Cash Used in Investing Activities
We do expect to use net cash flow in investing activities in connection with the prospective acquisition of
CaiE. However, until such time as such transaction is concluded, we do not expect to use net cash flows
in investing activities.
Cash Flows from Financing Activities
Cash flow provided by financing activities for the three months ended September 30, 2016, increased to
$50,000 as compared to $10,000 for the nine months ended September 30, 2016. The increase in cash
flow provided from financing activities over the comparative nine month periods can be attributed to a
convertible loan received from CaiE.
16
We expect to continue to use cash flow provided by financing activities to procure sufficient funds to
maintain operations, acquire CaiE and alternatively, in the event that our shareholders do not approve the
acquisition of CaiE, to seek out suitable business opportunities.
The Company’s current assets are insufficient to conduct its plan of operation over the next twelve (12)
months as we will need at least $50,000 to maintain operations. The Company has secured a non-binding
commitment from CaiE in the form of a convertible loan of $50,000 to maintain operations and undertake
the acquisition detailed in the MOU. The Company has no alternative commitments or arrangements with
respect to, or immediate sources of funding. The Company’s shareholders remain 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 plan of operation.
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, 2016.
The Company had no commitments for future capital expenditures that were material at September 30,
2016.
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, 2016, 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 consolidated financial statements for the years ended December 31, 2015 and
2014, 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.
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The preparation of consolidated 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
Management of the Company has expressed an opinion as to the Company’s ability to continue as a going
concern as a result of an accumulated deficit of $23,528,847 since inception and negative cash flows
from operating activities as of September 30, 2016. The Company’s ability to continue as a going
concern is subject to the ability of the Company to obtain funding from outside sources. Management’s
plan to address the Company’s ability to continue as a going concern includes obtaining funding from the
private placement of equity or through debt financing. 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.
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.
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.
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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 for smaller reporting companies.
Item 4.
Controls and Procedures
Disclosure Controls and Procedures
In connection with the preparation of this quarterly report, an evaluation was carried out by the
Company’s management, with the participation of the chief executive officer and the acting 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”)) as of
September 30, 2016. Disclosure controls and procedures are designed to ensure that information required
to be disclosed in reports filed or submitted 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
the 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, and such information was not accumulated and
communicated to management, including the chief executive officer and the chief financial officer, to
allow timely decisions regarding required disclosures.
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 quarter ended September 30, 2016, that materially affected, or are
reasonably likely to materially affect, the Company’s internal control over financial reporting.
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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
22 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/ Ruairidh Campbell
Ruairidh Campbell, Chief Executive Officer,
Chief Financial Officer and Principal
Accounting Officer
Date: November 16, 2016
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INDEX TO EXHIBITS
Regulation
S-K
Exhibit
Number
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)
14.1
Code of Ethics (5)
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-
14(a) of the Exchange Act (6)
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-
14(d) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 (6)
101.INS
XBRL Instance Document(7)
101.PRE
XBRL Taxonomy Extension Presentation Linkbase(7)
101.LAB
XBRL Taxonomy Extension Label Linkbase(7)
101.DEF
XBRL Taxonomy Extension Label Linkbase(7)
101.CAL
XBRL Taxonomy Extension Label Linkbase(7)
101.SCH
XB RL Taxonomy Extension Label Linkbase(7)
(1) Previously filed with the SEC as an exhibit to the Company’s Current Report on Form 8-K filed
with the SEC on August 19, 2005.
(2) Previously filed with the SEC as an exhibit to the Company’s registration statement on Form 10- SB
filed with the SEC on May 24, 2000.
(3) Previously filed with the SEC as an exhibit to the Company’s registration statement on Form 8-K
filed with the SEC on October 12, 2010.
(4) Previously filed with the SEC as an exhibit to the Company’s Quarterly Report on Form 8-K filed
with the SEC on June 7, 2006.
(5) Previously filed with the SEC as an exhibit to the Company’s Annual Report on Form 10-KSB filed
with the SEC on April 16, 2007.
(6) Filed as an exhibit to this Annual Report on Form 10-K.
(7) 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