Notes
to Consolidated Financial Statements
March
31, 2019
(Unaudited)
Note
1 - Organization and Nature of Operations
Argentum
47, Inc., formerly Global Equity International Inc. (the “Company” or “ARG”), a reporting company since
June 21, 2012, was organized under the laws of the state of Nevada on October 1, 2010. Global Equity Partners, Plc. (“GEP”),
a private company, was organized under the laws of the Republic of Seychelles on September 2, 2009. On November 15, 2010, GEP
executed a reverse recapitalization with ARG. On August 22, 2014, we formed a Dubai subsidiary of GEP called GE Professionals
DMCC. On June 10, 2016, ARG incorporated its wholly owned subsidiary, called GEP Equity Holdings Limited (“GEP EH”),
under the laws of the Republic of Seychelles. On March 14, 2017, the Company´s board of directors unanimously voted to transfer
the ownership of GE Professionals DMCC (Dubai) to GEP EH. On June 5, 2017, the Company sold 100% of the issued and outstanding
common stock of GEP to a citizen of the Republic of Thailand by entering into a Stock Purchase and Debt Assumption Agreement.
On December 12, 2017, ARG incorporated another wholly owned subsidiary, called Argentum 47 Financial Management Limited (“Argentum
FM”), under the Companies Act 2006 of England and Wales as a private limited company. Argentum FM was formed to serve as
a holding Company for the acquisition of various advisory firms.
On
March 29, 2018, the Company formally changed its name from Global Equity International, Inc. to Argentum 47, Inc.
On
August 1, 2018, Argentum FM entered into a Share Purchase Agreement with a third party, pursuant to which Argentum FM acquired
100% of the ordinary shares of Cheshire Trafford (U.K.) Limited of Hull, United Kingdom (“Cheshire Trafford”). Cheshire
Trafford was incorporated under the laws of the United Kingdom on January 26, 1976, as a limited liability company.
On March 18, 2019, the Board of Directors
of GEP Equity Holdings Limited decided to commence the process to formally and legally liquidate GE Professionals DMCC and
its related employment placement services business with an effective date of March 31, 2019. This decision was made so
to allow management of Argentum 47, Inc. to fully concentrate on the Company´s core businesses, Independent Financial Advisory
and Business Consulting. Accordingly, GE Professionals DMCC has been presented as a discontinued operation for all periods
presented in the accompanying unaudited consolidated financial statements and footnotes. (See Note 6)
The
Company´s consolidated revenues from continuing operations, core businesses, are generated from business consulting
services and by acting as broker for sale of Lump Sum or Single Premium Insurance Policies and/or the sale of Regular Premium
Investment or Insurance Policies that are issued by third party insurance companies.
Note
2 - Basis of Presentation
The
accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission
for interim financial information. Accordingly, they do not include all the information and disclosures necessary for a comprehensive
presentation of financial position, results of operations, or cash flows. It is management’s opinion, however, that all
material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statements
presentation.
The
unaudited interim consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form
10-K, which contains the audited financial statements and notes thereto, together with the Management’s Discussion and Analysis,
for the year ended December 31, 2018. The interim results for the period ended March 31, 2019 are not necessarily indicative of
results for the full fiscal year.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2019
(Unaudited)
Note
3 - Going Concern
The
accompanying unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business. These consolidated financial statements do not
include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be
necessary should the Company be unable to continue as a going concern.
As
reflected in the accompanying unaudited consolidated financial statements, the Company had a net loss of $975,487 and net cash
used in operations of $179,986 for the three months ended March 31, 2019; working capital deficit, stockholder’s deficit
and accumulated deficit of $1,214,930, $1,034,415 and $12,328,702 as of March 31, 2019. It is management’s opinion that
these factors raise substantial doubt about the Company’s ability to continue as a going concern for twelve months from
the issuance date of this report.
The
ability for the Company to mitigate this risk and continue its operations is primarily dependent on management’s plans as
follows:
|
|
a)
|
Consummating
and executing all current engagements related to the business consulting division.
|
|
|
b)
|
Continually
engaging with new clients via our business consulting division.
|
|
|
c)
|
Maximizing
the already acquired Independent Financial Advisory firm´s revenues
by way of servicing the current client base in the most professional manner possible.
|
|
|
d)
|
Organically
growing the amount of funds under administration of the already acquired Independent
Financial Advisory firm to new and higher levels.
|
|
|
e)
|
Continuing
to receive fixed funding, via equity or debt, for acquisition, growth and working capital
from parties that have already executed funding agreement with the Company.
|
|
|
f)
|
Continuing
to negotiate new fixed funding via equity or debt, for further acquisitions, growth and
working capital.
|
|
|
g)
|
Acquiring
and managing more Independent Financial Advisory firms with funds under
administration located around the globe.
|
Note
4 - Summary of Significant Accounting Policies
Principles
of Consolidation
Argentum
47, Inc. (“ARG”) is the parent company of its two 100% owned subsidiaries called GEP Equity Holdings Limited (“GEP
EH”) and Argentum 47 Financial Management Limited (“Argentum FM”). GEP EH is the parent company of its 100%
owned subsidiary, GE Professionals DMCC (Dubai). GE Professionals DMCC has been presented as a discontinued operation as of March
31, 2019 as the liquidation proceedings are currently under process. Argentum FM is the parent company of its 100% owned subsidiary,
Cheshire Trafford U.K. Limited (U.K.) from August 1, 2018 pursuant to a Share Purchase Agreement dated August 1,
2018. All significant inter-company accounts and transactions have been eliminated in consolidation.
Use
of Estimates
The
preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting
period.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2019
(Unaudited)
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect
of a condition, situation, or set of circumstances that existed at the date of the consolidated financial statements, which management
considered in formulating its estimate could change in the near term due to one or more future non-confirming events. Accordingly,
the actual results could differ from those estimates. Significant estimates in the accompanying unaudited consolidated financial
statements include accounts receivable and related revenues for our subsidiary, Cheshire Trafford, allowance for doubtful accounts
and loans, estimates of fair value of securities received for services, estimates of fair value of securities held, depreciation
period of fixed assets, valuation of fair value of assets acquired and liabilities assumed of acquired businesses, fair value
of business purchase consideration, valuation allowance on deferred tax assets, derivative valuations and equity valuations for
non-cash equity grants.
Risks
and Uncertainties
The
Company’s operations are subject to significant risk and uncertainties including financial, operational, competition and
potential risk of business failure.
Segment
Reporting
A
business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns
that are different from those of other business segments. A geographical segment is engaged in providing products or services
within a particular economic environment that is subject to risks and returns that are different from those of segments operating
in other economic environments.
The
Company uses “the management approach” in determining reportable operating segments. The management approach considers
the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions
and assessing performance as the source for determining the Company’s reportable segments. The Company’s chief operating
decision maker is the chief executive officer of the Company, who reviews operating results to make decisions about allocating
resources and assessing performance for the entire Company.
Cash
Equivalents
The
Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At March
31, 2019 and December 31, 2018, the Company had no cash equivalents.
Accounts
Receivable and Allowance for Doubtful Accounts
The
Company recognizes accounts receivable in connection with the services provided. The Company recognizes an allowance for doubtful
accounts based on an analysis of current receivables aging and expected future write-offs, as well as an assessment of specific
identifiable customer accounts considered at risk or uncollectible. There was no allowance for bad debt at March 31, 2019 and
December 31, 2018.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2019
(Unaudited)
Foreign
currency policy
The
Company’s accounting policies related to the consolidation and accounting for foreign operations are as follows: The accompanying
unaudited consolidated financial statements are presented in U.S. dollars. The functional currency of the Company’s discontinued
Dubai subsidiary is the Arab Emirates Dirham (“AED”) and the functional currency of the Company’s U.K.
subsidiaries is Great Britain Pounds (“GBP”). All foreign currency balances and transactions are translated into
United States dollars (“$” and/or “USD”) as the reporting currency. Assets and liabilities are translated
at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange
prevailing during the reporting period. Equity transactions are translated at each historical transaction date spot rate. Translation
adjustments arising from the use of different exchange rates from period to period are included as a component of our stockholders’
equity (deficit) as “Accumulated other comprehensive income (loss).” Gains and losses resulting from foreign currency
transactions are included in the non-operating income or expenses of the statement of operations.
Investments
|
|
(A)
|
Classification
of Securities
|
Marketable
Securities
As
of January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2016-01, “Financial Instruments
- Overall (Topic 825-10): “Recognition and Measurement of Financial Assets and Financial Liabilities.” which amends
the guidance on the classification and measurement of financial instruments. Some of the amendments in ASU 2016-01 include the
following: 1) requires equity investments (except those accounted for under the equity method of accounting or those that result
in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. 2) It simplifies
the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment
to identify impairment. 3) It requires public business entities to use the exit price notion when measuring the fair value of
financial instruments for disclosure purposes. 4) It requires an entity to present separately in other comprehensive income the
portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when
the entity has elected to measure the liability at fair value; among others. After evaluating the potential impact of this guidance
on our consolidated financial statements, the management has reversed $1,181,675 from accumulated other comprehensive income to
opening retained earnings as a cumulative effect adjustment on January 1, 2018 using the modified retrospective method.
At
the time of the acquisition, a marketable security is designated as held-to-maturity, available-for-sale or trading, which depends
on the ability and intent to hold such security to maturity. Securities classified as trading and available-for-sale are reported
at fair value, while securities classified as held-to-maturity are reported at amortized cost.
All
changes in the fair value of the securities are reported in the earnings as they occur in a single line item “Gain (loss)
on available for sale marketable securities, net.” Therefore, no gain/loss is recognized on the sale of securities.
Cost
Method Investments
Securities
that are not classified as marketable securities are accounted for under the cost method. These securities are recorded at their
original cost basis and are subject to impairment testing.
|
|
(B)
|
Other
than Temporary Impairment
|
The
Company reviews its equity investment portfolio for any unrealized losses that would be deemed other than temporary and require
the recognition of an impairment loss in the statement of operations. If the cost of an investment exceeds its fair value, the
Company evaluates, among other factors, general market conditions, the duration and extent to which the fair value is less than
cost, and the Company’s intent and ability to hold the investments. Management also considers the type of security, related-industry
and sector performance, as well as published investment ratings and analyst reports, to evaluate its portfolio. Once a decline
in fair value is determined to be other than temporary, an impairment charge is recorded and a new cost basis in the investment
is established. If market, industry, and/or investee conditions deteriorate, the Company may incur future impairments. The Company
did not record any such impairment during the three months ended March 31, 2019 or March 31, 2018.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2019
(Unaudited)
Fixed
Assets
Fixed
assets are stated at cost of acquisition less accumulated depreciation. Depreciation is provided based on estimated useful lives
of the assets. Cost of improvements that substantially extend the useful lives of assets are capitalized. Repairs and maintenance
expenses are charged to expense when incurred. In case of sale or disposal of an asset, the cost and related accumulated depreciation
are removed from the consolidated financial statements.
Leases
On January 1, 2019, the Company adopted
ASU 2016-02, Leases (Topic 842) which requires a lessee to recognize on the balance sheet the assets and liabilities for the rights
and obligations created by leases. Leases will continue to be classified as either financing or operating, with classification
affecting the recognition, measurement and presentation of expenses and cash flows arising from a lease. We adopted this standard
by applying the optional transition method on the adoption date and did not adjust comparative periods. In addition, the Company
elected the practical expedient to not reassess whether any expired contracts contained leases. Furthermore, the Company has elected
to not apply the recognition standards of ASU 2016-02 to operating leases with effective terms of twelve months or less (“Short-Term
Leases”). For Short-Term Leases, the Company recognizes lease payments on a straight-line basis over the lease term in the
period in which the obligation for those payments is incurred. On the adoption date, all of the Company’s contracts containing
leases were expired or were Short Term Leases. Accordingly, upon the adoption of ASU 2016-02, there was no cumulative
effect adjustment.
Beneficial
Conversion Feature
For
conventional convertible debt where the rate of conversion is below market value, the Company records any “beneficial conversion
feature” (“BCF”) intrinsic value as additional paid in capital and related debt discount.
When
the Company records a BCF, the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective
debt instrument. The discount is amortized over the life of the debt. If a conversion of the underlying debt occurs, a proportionate
share of the unamortized amounts is immediately expensed.
Debt
Issue Costs
The
Company may pay debt issue costs in connection with raising funds through the issuance of debt whether convertible or not or
with other consideration. These costs are recorded as debt discounts and are amortized over the life of the debt to the
statement of operations as amortization of debt discount.
Original
Issue Discount
If
debt is issued with an original issue discount, the original issue discount is recorded to debt discount, reducing the face amount
of the note and is amortized over the life of the debt to the statement of operations as amortization of debt discount. If a conversion
of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2019
(Unaudited)
Valuation
of Derivative Instruments
ASC
815 “Derivatives and Hedging” requires that embedded derivative instruments be bifurcated and assessed, along with
free-standing derivative instruments such as warrants, on their issuance date and measured at their fair value for accounting
purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option pricing formula. Upon conversion
of a note where the embedded conversion option has been bifurcated and accounted for as a derivative liability, the Company records
the shares at fair value, relieves all related notes, derivatives and debt discounts and recognizes a net gain or loss on debt
extinguishment.
Business
combinations
The
Company accounts for its business acquisitions under the acquisition method of accounting as indicated in ASC No. 805, “Business
Combinations”, which requires the acquiring entity in a business combination to recognize the fair value of all assets acquired,
liabilities assumed and any non-controlling interest in the acquiree, and establishes the acquisition date as the fair value measurement
point. Accordingly, the Company recognizes assets acquired and liabilities assumed in business combinations, including contingent
assets and liabilities and non-controlling interest in the acquiree, based on fair value estimates as of the date of acquisition.
Where
applicable, the consideration for the acquisition includes amounts resulting from a contingent consideration arrangement, measured
at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where
they qualify as measurement period adjustments (see below). The subsequent accounting for changes in the fair value of the contingent
consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified.
Contingent consideration that is classified as equity is not re-measured at subsequent reporting dates and its subsequent settlement
is accounted for within equity. Contingent consideration that is classified as an asset or a liability is re-measured at subsequent
reporting dates at fair value, with changes in fair value recognized in statement of operations.
The
measurement period is the period from the date of acquisition to the date the group obtains complete information about facts and
circumstances that existed as of the acquisition date, resulting in a final valuation, and is subject to a maximum of one year
from acquisition date.
Goodwill
and Other Intangible Assets
In
accordance with ASC No. 805, the Company recognizes and measures goodwill, if any, as of the acquisition date, as the excess of
the fair value of the consideration paid over the fair value of the identified net assets acquired. Goodwill and intangible assets
acquired in a business combination and determined to have an indefinite useful life are not amortized, but instead are reviewed
for impairment annually or more frequently if impairment indicators arise. Intangible assets with estimable useful lives are amortized
over such lives and reviewed for impairment if impairment indicators arise. For the purpose of impairment testing, goodwill is
allocated to each of the group’s reporting units expected to benefit from the synergies of the combination. Reporting units
to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the
unit may be impaired. If the fair value of a reporting unit is less than its carrying amount, an impairment loss calculated as
the amount by which the carrying value exceeds the fair value is recorded to goodwill but cannot exceed the goodwill amount. An
impairment loss recognized for goodwill is not reversed in a subsequent period. On disposal of a subsidiary or the relevant reporting
unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2019
(Unaudited)
Discontinued
operations
Components
of an entity divested or discontinued are recognized in the consolidated statements of operations until the date of divestment
or discontinuation. For periods prior to the designation as discontinued operations, we reclassify the results of operations to
discontinued operations. Gains or losses on divestment or winding up of subsidiaries are stated as the difference between the
sales or disposal amount and the carrying amount of the net assets at the time of sale or winding up plus sales or winding up
costs.
The
assets and liabilities for business components meeting the criteria for discontinued operations are reclassified and presented
separately as assets of discontinued operations and liabilities relating to discontinued operations in the accompanying consolidated
balance sheet. The change in presentation for discontinued operations does not have any impact on our financial condition or results
of operations. We combine the cash flows and assets and liabilities attributable to discontinued operations with the respective
cash flows and assets and liabilities from continuing operations in the accompanying consolidated statement of cash flows.
Revenue
Recognition
As
of January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers
(“ASC 606”), that affects the timing of when certain types of revenue will be recognized.
Revenue
is recognized when the Company satisfies a performance obligation by transferring services promised in a contract to a customer,
in an amount that reflects the consideration that the Company expects to receive in exchange for those services. A single contract
could include one or multiple performance obligations. For those contracts that have multiple performance obligations, the Company
allocates the total transaction price to each performance obligation based on its relative standalone selling price, which is
determined based on the Company´s overall pricing objectives, taking into consideration market conditions and other factors.
Performance obligations in the Company´s contracts generally include general due diligence, assistance in designing client’s
capitalization strategy, introductions to potential capital funding sources and arranging third party insurance policies.
Revenue
is recognized by evaluating our revenue contracts with customers based on the five-step model under ASC 606:
|
|
1.
|
Identify
the contract with the customer;
|
|
|
2.
|
Identify
the performance obligations in the contract;
|
|
|
3.
|
Determine
the transaction price;
|
|
|
4.
|
Allocate
the transaction price to separate performance obligations; and
|
|
|
5.
|
Recognize
revenue when (or as) each performance obligation is satisfied.
|
The
Company generates its revenue from continuing operations by providing following services:
|
|
a)
|
Business
consulting services including advisory services to various clients.
|
|
|
b)
|
Earning
commissions from insurance companies on insurance policy sales and renewals, which are
based on a percentage of the insurance products sold.
|
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2019
(Unaudited)
Most
of the Company´s business consultancy and advisory services contracts are based on a combination of both fixed fee arrangements
and performance based or contingent arrangement. In addition, the Company generates initial and trail commissions by acting as
a broker of third party lump sum or single premium insurance policies and regular premium investment or insurance policies. Fees
from clients for advisory and consulting services are dependent on the extent and value of the services provided. The Company
recognizes revenue when the promised services are rendered to the customer in the amount that best reflects the consideration
to which the Company expects to be entitled in exchange for those services.
In
fixed-fee billing arrangements, the Company agrees to a pre-established fee in exchange for a predetermined set of professional
services. The Company sets the fees based on its estimates of the costs and timing for completing the engagements. The Company
generally recognizes revenues under fixed fee billing arrangements using the input method, which is based on work completed to
date versus the Company´s estimates of the total services to be provided under the engagement.
Performance
based or contingent arrangements represent forms of variable consideration. In these arrangements, the Company´s fees are
linked to the attainment of contractually defined objectives with its clients. These arrangements include conditional payments,
commonly referred to as cash success fees and/or equity success fees. The Company typically satisfies its performance obligations
for these services over time as the related contractual objectives are met. The Company determines the transaction price based
on the expected probability of achieving the agreed upon outcome and recognizes revenue earned to date by applying the input method.
Reimbursable
expenses, including those relating to travel, out-of-pocket expenses, outside consultants and other outside service costs, are
generally included in revenues, and an equivalent amount of reimbursable expenses is included in costs of services in the period
in which the expense is incurred.
The
payment terms and conditions in the Company´s customer contracts vary. Differences between the timing of billings and the
recognition of revenue are recognized as either accrued accounts receivable, an asset or deferred revenues, a liability. Revenues
recognized for services performed but not yet billed to clients are recorded as accrued accounts receivable. Client pre-payments
and retainers are classified as deferred revenues and recognized over future periods as earned in accordance with the applicable
engagement agreement.
We
receive consideration in the form of cash and/or securities. We measure securities received at fair value on the date of receipt.
If securities are received in advance of completion of our services, the fair value will be recorded as deferred revenue and recognized
as revenue as the services are completed.
All
revenues are generated from clients whose operations are based outside of the United States. For the three months ended March
31, 2019 and 2018, the Company had following concentrations of revenues regarding insurance brokerage business:
|
Customer
|
|
March
31, 2019
|
|
|
March
31, 2018
|
|
|
DUO
|
|
|
0
|
%
|
|
|
2.01
|
%
|
|
GRL
|
|
|
0
|
%
|
|
|
75.42
|
%
|
|
OCS
|
|
|
0
|
%
|
|
|
22.57
|
%
|
|
CT
clients (see below)
|
|
|
100.00
|
%
|
|
|
0
|
%
|
|
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2019
(Unaudited)
During
the three months ended March 31, 2019, the Company had following concentrations of revenues regarding insurance brokerage business,
which was 100% of the consolidated revenues of the Company:
|
|
|
March
31, 2019
|
|
|
|
|
|
|
|
Initial
advisory fees
|
|
|
11.36
|
%
|
|
Ongoing
advisory fees
|
|
|
30.78
|
%
|
|
Initial
commissions
|
|
|
49.77
|
%
|
|
Renewal
commissions
|
|
|
0.58
|
%
|
|
Trail
or recurring commissions
|
|
|
6.58
|
%
|
|
Other
revenue
|
|
|
0.93
|
%
|
|
|
|
|
100.00
|
%
|
At
March 31, 2019 and December 31, 2018, the Company had the following concentrations of accounts receivables with customers:
|
Customer
|
|
March
31, 2019
|
|
|
December
31, 2018
|
|
|
OMI
IRE
|
|
|
0
|
%
|
|
|
30.94
|
%
|
|
CLI
|
|
|
31.79
|
%
|
|
|
16.62
|
%
|
|
OMW
|
|
|
11.95
|
%
|
|
|
16.55
|
%
|
|
Others
having a concentration of less than 10%
|
|
|
56.26
|
%
|
|
|
35.89
|
%
|
|
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
Share-based
payments
Under
ASC 718 “Compensation – Stock Compensation”, the Company recognizes all forms of share-based payments to employees,
including stock option grants, warrants and restricted stock grants at their fair value on the grant date, which is based on the
estimated number of awards that are ultimately expected to vest.
On
January 1, 2019, the Company adopted ASU 2018-07 “Compensation – Stock Compensation” whereby share based payment
awards issued to non-employees will be treated the same as for employees. The guidance has been applied using the modified prospective
method which may result in a cumulative effect adjustment to retained earnings on the adoption date. The adoption of ASU 2018-07
did not result in a cumulative effect adjustment.
Share
based payments, excluding restricted stock, are valued using a Black-Scholes pricing model.
When
computing fair value, the Company considered the following variables:
|
|
●
|
The
risk-free interest rate assumption is based on the U.S. Treasury yield for a period consistent
with the expected term of the share based payment in effect at the time of the grant.
|
|
|
●
|
The
expected term is developed by management estimate.
|
|
|
●
|
The
Company has not paid any dividends on common stock since inception and does not anticipate
paying dividends on its common stock in the near future.
|
|
|
●
|
The
expected volatility is based on management estimates which are based upon our historical
volatility.
|
|
|
●
|
The
forfeiture rate is based on historical experience.
|
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2019
(Unaudited)
Earnings
per Share
The
basic net earnings (loss) per share are computed by dividing net income (loss) by weighted average number of shares of common
stock outstanding during each period. Diluted earnings (loss) per share are computed by dividing net income (loss) by the weighted
average number of shares of common stock and common stock equivalents outstanding during the period.
As
at March 31, 2019 and December 31, 2018, the Company had common stock equivalents of 69,401,975 and 94,401,975 common shares respectively,
in the form of convertible notes, which, if converted, may be dilutive. See Note 9(E).
As
at March 31, 2019 and December 31, 2018, the Company had common stock equivalents of 770,000,000 common shares, in the form of
convertible preferred stock, which, if converted, may be dilutive. See Note 10(A).
|
|
|
Number
of Common Shares
|
|
|
|
|
March
31, 2019
|
|
|
December
31, 2018
|
|
|
Potential
dilutive common stock
|
|
|
|
|
|
|
|
|
|
Convertible
notes
|
|
|
69,401,975
|
|
|
|
94,401,975
|
|
|
Series
“B” preferred stock
|
|
|
450,000,000
|
|
|
|
450,000,000
|
|
|
Series
“C” preferred stock
|
|
|
320,000,000
|
|
|
|
320,000,000
|
|
|
Total
potential dilutive common stock
|
|
|
839,401,975
|
|
|
|
864,401,475
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares – Basic
|
|
|
547,323,298
|
|
|
|
525,534,409
|
|
|
Weighted
average number of common shares – Dilutive
|
|
|
1,386,725,273
|
|
|
|
1,389,936,384
|
|
As
of March 31, 2019 and December 31, 2018, diluted weighted average number of common shares exceeds total authorized common shares.
However, 770,000,000 common shares would result from the conversion of the preferred “B” and preferred “C”
stock into common stock. The option to convert the abovementioned preferred “B” and “C” stock into common
stock could not be any earlier than September 27, 2020.
Comprehensive
Income
The
Comprehensive Income Topic of the FASB Accounting Standards Codification establishes standards for reporting and presentation
of comprehensive income and its components in a full set of financial statements. Comprehensive income from January 1, 2018
through March 31, 2018 and from January 1, 2019 through March 31, 2019, includes only foreign currency translation gain /
(loss), and is presented in the Company’s consolidated statements of comprehensive income. Pursuant to ASU 2016-01, the
Company reclassified the opening balance of unrealized gain on available for sale marketable securities from other
comprehensive income to retained earnings as a cumulative effect adjustment as at January 1, 2018.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2019
(Unaudited)
Changes
in Accumulated Other Comprehensive Income (Loss) by Component during the three months ended March 31, 2018 were as follows:
|
|
|
Foreign
Currency
Translation Adjustment
|
|
|
Unrealized
gain on available for sale marketable securities
|
|
|
Total
|
|
|
Balance,
December 31, 2017
|
|
$
|
120
|
|
|
$
|
1,181,675
|
|
|
$
|
1,181,795
|
|
|
Other
comprehensive income before reclassification
|
|
|
527
|
|
|
|
-
|
|
|
|
527
|
|
|
Amounts
reclassified from accumulated other comprehensive income as a cumulative effect adjustment
|
|
|
-
|
|
|
|
(1,181,675
|
)
|
|
|
(1,181,675
|
)
|
|
Net
current-period other comprehensive income
|
|
|
527
|
|
|
|
(1,181,675
|
)
|
|
|
(1,181,148
|
)
|
|
Balance,
March 31, 2018
|
|
$
|
647
|
|
|
$
|
-
|
|
|
$
|
647
|
|
Changes
in Accumulated Other Comprehensive Income (Loss) by Component during the three months ended March 31, 2019 were as follows:
|
Balance,
December 31, 2018
|
|
$
|
13,592
|
|
|
Foreign
currency translation adjustment for the period
|
|
|
(11,101
|
)
|
|
Balance,
March 31, 2019
|
|
$
|
2,491
|
|
Fair
Value of Financial Assets and Liabilities
The
Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance
on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability,
as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that
market participants would use in pricing an asset or liability.
The
authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring
or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical
levels of inputs to measure fair value:
|
|
●
|
Level
1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or
liabilities in active markets.
|
|
|
|
|
|
|
●
|
Level
2: Inputs reflect quoted prices for identical assets or liabilities in markets that are
not active; quoted prices for similar assets or liabilities in active markets; inputs
other than quoted prices that are observable for the assets or liabilities; or inputs
that are derived principally from or corroborated by observable market data by correlation
or other means.
|
|
|
|
|
|
|
●
|
Level
3: Unobservable inputs reflecting the Company’s assumptions incorporated in valuation
techniques used to determine fair value. These assumptions are required to be consistent
with market participant assumptions that are reasonably available.
|
The
carrying amounts reported in the balance sheet for prepaid expenses, accounts receivable, accounts payable, accounts payable to
related parties and loans payable to related parties, approximate fair value are based on the short-term nature of these instruments.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2019
(Unaudited)
The
Company measures its derivative liabilities and marketable securities at fair market value on a recurring basis and measures its
non-marketable securities at fair value on a non-recurring basis. Consequently, the Company may have gains and losses reported
in the statement of operations.
The
following is the Company’s assets and liabilities measured at fair value on a recurring and nonrecurring basis at March
31, 2019 and December 31, 2018, using quoted prices in active markets for identical assets (Level 1), significant other observable
inputs (Level 2), and significant unobservable inputs (Level 3):
|
|
|
March
31, 2019
|
|
|
December
31, 2018
|
|
|
Level
1 – Marketable Securities – Recurring
|
|
$
|
787,778
|
|
|
$
|
-
|
|
|
Level
2 – Marketable Securities – Recurring
|
|
$
|
-
|
|
|
$
|
1,458,848
|
|
Management
analyzed the historical volume and the variation in the price that the marketable securities were bought and sold at during the
year 2018 and three months ended March 31, 2019 and has concluded that the level 2 and level 1 valuation respectively, regarding
the fair value of the marketable securities should be $0.25 per share as at December 31, 2018 and $0.135 per share as at March
31, 2019.
Marketable
Securities
— The Level 1 position consists of the Company’s investment in equity securities of stock held in publicly
traded companies. The valuation of these securities is based on quoted prices in active markets.
Changes
in Level 1 or Level 2 marketable securities measured at fair value for the three months ended March 31, 2019 were as follows:
|
Balance,
December 31, 2018
|
|
$
|
1,458,848
|
|
|
Sales
and settlements during the period
|
|
|
-
|
|
|
Loss
on available for sale marketable securities, net
|
|
|
(671,070
|
)
|
|
Balance,
March 31, 2018
|
|
$
|
787,778
|
|
Non-Marketable
Securities at Fair Value on a Non-Recurring Basis
— Certain assets are measured at fair value on a nonrecurring basis.
The level 3 position consist of investments accounted for under the cost method. The Level 3 position consists of investments
in equity securities held in private companies.
Management
believes that an “other-than-temporary impairment” would be justified, as according to ASC 320-10 an investment is
considered impaired when the fair value of an investment is less than its amortized cost basis. The impairment is considered either
temporary or other-than-temporary. The accounting literature does not define other-than-temporary. It does, however, state that
other-than-temporary does not mean permanent, although, all permanent impairments are considered other-than-temporary. The literature
does provide some examples of factors, which may be indicative of an “other-than-temporary impairment”, such as:
|
|
●
|
the
length of time and extent to which market value has been less than cost;
|
|
|
●
|
the
financial condition and near-term prospects of the issuer; and
|
|
|
●
|
the
intent and ability of the holder to retain its investment in the issuer for a period
of time sufficient to allow for any anticipated recovery in market value.
|
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2019
(Unaudited)
Management
believes that the fair value of its investment has been correctly measured, as the length of time that the stock has been less
than cost is nominal.
Recent
Accounting Pronouncements
There
are no new accounting pronouncements that we expect to have an impact on the Company’s financial statements.
Note
5 – Acquisition of Cheshire Trafford (UK) Limited
On
August 1, 2018, the Company completed the acquisition of Cheshire Trafford (UK) Limited (“Cheshire Trafford”) pursuant
to a Share Purchase Agreement dated as of August 1, 2018 and acquired 100% of the ordinary shares of Cheshire Trafford.
Cheshire
Trafford acts as a broker for the sale of Lump Sum or Single Premium Insurance Policies and Regular Premium Investment or Insurance
Policies that are issued by reputable third party insurance companies.
The
purchase consideration for the acquisition of Cheshire Trafford is based on a formula of 2.7 times Cheshire Trafford’s projected
annual recurring revenues for the calendar year ending December 31, 2018. We took the gross revenues of Cheshire Trafford for
the five months ended May 31, 2018, and annualized those recurring revenues and multiplied those revenues by 2.7 times in arriving
at the contractual purchase consideration of $516,795. The purchase consideration is payable in following three installments:
|
|
●
|
The
first installment of $175,710 has been paid upon closing of the transaction.
|
|
|
●
|
The
second installment of $170,542 is due 18 months after the acquisition date.
|
|
|
●
|
The
third installment of $170,542 is due 36 months after the acquisition date.
|
The
second and third installments could be reduced (but not increased) in the event that Cheshire Trafford’s trailing or recurring
revenues are less than agreed recurring income target of GBP 144,185 during the 12-month period commencing on the Acquisition
date, hence these two installments are treated as a contingent purchase consideration. Based on the historical data available
regarding the recurring/trail revenues of Cheshire Trafford, Management believes that there is a 95% probability that Cheshire
Trafford will achieve the recurring income target of GBP 144,185 during the 12-month period ending on July 31, 2019. Hence,
the contingent purchase consideration is adjusted to take into account this probability factor.
In
addition, to calculate the fair value of the contingent purchase consideration, our Management has discounted the remaining two
installments of $341,084 to be paid, at a discount rate of 6% (our borrowing rate for the purpose of acquisitions) to arrive at
the present value of $284,298 at the acquisition date. Total fair value of the purchase consideration is as follows:
|
|
|
Fair
Value
|
|
|
Cash
payment
|
|
$
|
175,710
|
|
|
Fair
value of contingent consideration
|
|
|
284,298
|
|
|
Total
Fair Value of Purchase Consideration
|
|
$
|
460,008
|
|
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2019
(Unaudited)
Below
table depicts the allocation of fair value of the purchase consideration to the fair value of the net assets of Cheshire Trafford
at the acquisition date:
|
|
|
Fair
Value
|
|
|
Assets
acquired
|
|
|
|
|
Cash
|
|
$
|
4,743
|
|
|
Accounts
receivable – net
|
|
|
6,555
|
|
|
Intangibles
– customer list
|
|
|
342,194
|
|
|
Goodwill
|
|
|
142,924
|
|
|
Property
and equipment, net
|
|
|
614
|
|
|
|
|
|
497,030
|
|
|
Liabilities
assumed
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
|
4,012
|
|
|
Due
to director of Cheshire Trafford
|
|
|
33,010
|
|
|
|
|
|
(37,022
|
)
|
|
Purchase
consideration allocated
|
|
$
|
460,008
|
|
This
acquisition was accounted for under the acquisition method of accounting. Accordingly, the Company recognized amounts for identifiable
assets acquired and liabilities assumed at their initial estimated acquisition date fair values. During the purchase price measurement
period, which may be one year from the business acquisition date, the Company may record adjustments to the assets acquired and
liabilities assumed based on completion of valuations.
The
excess of the purchase consideration over the fair value of assets acquired, net of liabilities assumed was initially recognized
as the fair value of customer list intangible asset totaling to $485,118. Upon finalizing the fair value of customer list intangible
based on the Multi Period Excess Earnings Model, Management believed that fair value of the customer list intangible asset amounted
to $342,194 and the remaining $142,924 is recognized as goodwill as at December 31, 2018. This intangible asset will be amortized
on a straight line basis over a life of 15 years which is the average service duration of a customer that has invested with Cheshire
Trafford.
|
Estimated
life of intangibles
|
|
15
years
|
|
|
|
|
|
|
|
Fair
value of customer list intangible asset at date of acquisition
|
|
$
|
485,118
|
|
|
Fair
value adjustment at December 31, 2018
|
|
|
(142,924
|
)
|
|
Adjusted
fair value of customer list intangible asset at December 31, 2018
|
|
$
|
342,194
|
|
|
Amortization
charge for 5 months ended December 31, 2018
|
|
|
(9,505
|
)
|
|
Net
Book Value at December 31, 2018
|
|
$
|
332,689
|
|
|
Amortization
charge for the period
|
|
|
(5,703
|
)
|
|
Net
Book Value at March 31, 2019
|
|
|
326,986
|
|
Note
6 – Discontinued Operations
In March 2019, Management decided that
it made overall economic sense for the Company to close its employment placement services business in Dubai; hence, in order to
fully concentrate on its core business of Independent Financial Advisory services and consultancy business, the Board of Directors
decided to initiate liquidation proceedings of the Dubai subsidiary “GE Professionals DMCC” and discontinue
the related employment placement services business. As a result, Dubai subsidiary operations for the three months ended March
31, 2019 and the comparative periods presented are treated as discontinued operations in the accompanying unaudited consolidated
financial statements. The consolidated statements of operations only comprise the continuing operations. Net income from the discontinued
operations is presented on a single line after the net income from the continuing operations.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2019
(Unaudited)
Major
classes of assets and liabilities from discontinued operations as at March 31, 2019 and December 31, 2018 were as follows:
|
|
|
March
31, 2019
|
|
|
December
31, 2018
|
|
|
Assets
|
|
|
|
|
|
|
|
Cash
|
|
$
|
1,348
|
|
|
$
|
10,219
|
|
|
Prepaids
|
|
|
-
|
|
|
|
1,974
|
|
|
Other
current assets
|
|
|
3,934
|
|
|
|
4,732
|
|
|
Total
Assets
|
|
$
|
5,282
|
|
|
$
|
16,925
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
-
|
|
|
$
|
79,534
|
|
|
Accounts
payable and accrued liabilities - related parties
|
|
|
|
|
|
|
5,648
|
|
|
Total
Liabilities
|
|
$
|
-
|
|
|
$
|
85,182
|
|
Statement
of Operations from discontinued operations for the three months ended March 31, 2019 and 2018 was as follows:
|
|
|
March
31, 2019
|
|
|
March
31, 2018
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
8,979
|
|
|
General
and administrative expenses
|
|
$
|
8,085
|
|
|
$
|
18,406
|
|
|
Compensation
expense
|
|
|
22,743
|
|
|
|
35,444
|
|
|
Professional
services
|
|
|
2,382
|
|
|
|
-
|
|
|
Depreciation
|
|
|
77
|
|
|
|
168
|
|
|
Loss
from discontinued operations
|
|
$
|
(33,287
|
)
|
|
$
|
(45,039
|
)
|
|
Other
income (expenses)
|
|
|
|
|
|
|
|
|
|
Loss
due to fixed assets write off
|
|
$
|
(164
|
)
|
|
$
|
-
|
|
|
Gain
on extinguishment of debt and other liabilities
|
|
|
-
|
|
|
|
5,285
|
|
|
Exchange
rate loss
|
|
|
(187
|
)
|
|
|
(335
|
)
|
|
Total
other (expenses) / income
|
|
$
|
(351
|
)
|
|
$
|
4,950
|
|
|
Net
loss from discontinued operations
|
|
$
|
(33,638
|
)
|
|
$
|
(40,089
|
)
|
Note
7 – Investments
|
|
A.
|
Marketable
Securities at Fair Value
|
Following
is the summary of Company’s investment in marketable securities at fair value as at March 31, 2019 and December 31, 2018:
|
|
|
March 31, 2019
|
|
|
December 31, 2018
|
|
|
Company
|
|
No. of Shares
|
|
|
Book value
|
|
|
No. of Shares
|
|
|
Book value
|
|
|
DUO
|
|
|
5,835,392
|
|
|
$
|
787,778
|
|
|
|
5,835,392
|
|
|
$
|
1,458,848
|
|
|
|
|
|
5,835,392
|
|
|
$
|
787,778
|
|
|
|
5,835,392
|
|
|
$
|
1,458,848
|
|
At
March 31, 2019, the Company revalued 5,835,392 common shares at their quoted market price of $0.135 per share, to $787,778; hence,
recording a net loss on available for sale marketable securities of $671,070 into the statement of operations.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2019
(Unaudited)
The
Company, through its subsidiary GEP Equity Holdings Limited, holds following common equity securities in private and reporting
companies as at March 31, 2019 and December 31, 2018:
|
|
|
March
31, 2019
|
|
|
December
31, 2018
|
|
|
|
|
|
Company
|
|
No.
of Shares
|
|
|
Book
value
|
|
|
No.
of Shares
|
|
|
Book
value
|
|
|
Status
|
|
|
PDI
|
|
|
5,006,521
|
|
|
$
|
-
|
|
|
|
5,006,521
|
|
|
$
|
-
|
|
|
|
Private
Company
|
|
|
QFS
|
|
|
2,271
|
|
|
|
-
|
|
|
|
2,271
|
|
|
|
-
|
|
|
|
Private
Company
|
|
|
|
|
|
5,008,792
|
|
|
$
|
-
|
|
|
|
5,008,792
|
|
|
$
|
-
|
|
|
|
|
|
The
Company, through its subsidiary GEP Equity Holdings Limited, holds the following preferred equity securities in private and reporting
companies as at March 31, 2019 and December 31, 2018:
|
|
|
March
31, 2019
|
|
|
December
31, 2018
|
|
|
|
|
|
Company
|
|
No.
of Shares
|
|
|
Book
value
|
|
|
No.
of Shares
|
|
|
Book
value
|
|
|
Status
|
|
|
PDI
|
|
|
450,000
|
|
|
$
|
-
|
|
|
|
450,000
|
|
|
$
|
-
|
|
|
|
Private
Company
|
|
|
|
|
|
450,000
|
|
|
$
|
-
|
|
|
|
450,000
|
|
|
$
|
-
|
|
|
|
|
|
Note
8 – Fixed Assets
Following
table reflects net book value of furniture and equipment as of March 31, 2019 and December 31, 2018:
|
|
|
Furniture and
Equipment
|
|
|
Useful
Life
|
|
3
to 10 years
|
|
|
Cost
|
|
|
|
|
|
Balance as at December 31, 2018
|
|
$
|
82,010
|
|
|
Addition during the period
|
|
|
719
|
|
|
Cost write off – discontinued
operations
|
|
|
(38,348
|
)
|
|
Translation rate
differences
|
|
|
824
|
|
|
Balance as at
March 31, 2019
|
|
$
|
45,205
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
|
|
|
Balance as at December 31, 2018
|
|
$
|
76,830
|
|
|
Depreciation expense for the period
– continuing operations
|
|
|
627
|
|
|
Depreciation expense for the period
- discontinued operations
|
|
|
77
|
|
|
Accumulated depreciation write off –
discontinued operations
|
|
|
(38,185
|
)
|
|
Translation rate
differences
|
|
|
812
|
|
|
Balance as at
March 31, 2019
|
|
$
|
40,161
|
|
|
Net book value
as at March 31, 2019
|
|
$
|
5,044
|
|
|
Net book value
as at December 31, 2018
|
|
$
|
5,180
|
|
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2019
(Unaudited)
Note
9 – Debt, Accounts Payable and Accrued Liabilities
|
(A)
|
Accounts
Payable and Other Accrued Liabilities
|
The
following table represents breakdown of accounts payable and other accrued liabilities as of March 31, 2019 and December 31, 2018,
respectively:
|
|
|
March
31, 2019
|
|
|
December
31, 2018
|
|
|
Accrued salaries and
benefits
|
|
$
|
72,826
|
|
|
$
|
12,794
|
|
|
Accounts payable and other accrued
liabilities
|
|
|
74,415
|
|
|
|
56,941
|
|
|
|
|
$
|
147,241
|
|
|
$
|
69,735
|
|
|
(B)
|
Accounts
Payable and Accrued Liabilities – Related Parties
|
The
following table represents the accounts payable and accrued expenses to related parties as of March 31, 2019 and December 31,
2018, respectively:
|
|
|
March
31, 2019
|
|
|
December
31, 2018
|
|
|
Accrued salaries and benefits
|
|
$
|
183,203
|
|
|
$
|
156,175
|
|
|
Expenses payable
|
|
|
19,240
|
|
|
|
8,393
|
|
|
|
|
$
|
202,443
|
|
|
$
|
164,568
|
|
|
(C)
|
Loans
Payable – Related Parties
|
The
Company received short-term loans from its officers and directors. The loans were non-interest bearing, unsecured and due on demand.
The following table represents the related parties’ loans payable activity during the three months ended March 31, 2019:
|
Balance, December
31, 2018
|
|
$
|
-
|
|
|
Proceeds from loans
|
|
|
40,000
|
|
|
Repayments
|
|
|
(30,000
|
)
|
|
Balance,
March 31, 2019
|
|
$
|
10,000
|
|
Following
is the summary of all non-convertible notes, net of debt discount, including the accrued interest as at December 31, 2018:
|
Date
of Note
|
|
Principal
|
|
|
Accrued
Interest
|
|
|
Total
|
|
|
November 26, 2013 – JSP
|
|
$
|
-
|
|
|
$
|
37,971
|
|
|
$
|
37,971
|
|
|
September 30, 2018 – EDEN
|
|
|
260,584
|
|
|
|
17,058
|
|
|
|
277,642
|
|
|
Balance –
December 31, 2018
|
|
$
|
260,584
|
|
|
$
|
55,029
|
|
|
$
|
315,613
|
|
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2019
(Unaudited)
Following
is the summary of all non-convertible notes, net of debt discount, including the accrued interest as at March 31, 2019:
|
Date
of Note
|
|
Principal
|
|
|
Accrued
Interest
|
|
|
Total
|
|
|
November 26, 2013 – JSP
|
|
$
|
-
|
|
|
$
|
37,971
|
|
|
$
|
37,971
|
|
|
September 30, 2018 – EDEN
|
|
|
260,584
|
|
|
|
11,058
|
|
|
|
271,642
|
|
|
Balance –
March 31, 2019
|
|
$
|
260,584
|
|
|
$
|
49,029
|
|
|
$
|
309,613
|
|
|
|
●
|
On
November 26, 2013, the Company secured from a private individual, a twelve-month fixed price convertible loan amounting to
$450,000 having an interest at 10% per annum and an agreed fixed conversion price of $0.5 per share. During the year ended
December 31, 2014, the Company recorded a total accrued interest of $42,971 on this Note. On December 23, 2014, the Company
fully repaid the principal note balance of $450,000 in cash and also paid $5,000 on account of accrued interest payment, thereby
leaving an accrued and unchanged interest balance of $37,971 as of December 31, 2014.
|
|
|
|
|
|
|
●
|
On
October 17, 2013, the Company secured a non-convertible three-month bridge loan for 200,000 GBP (equivalent to $319,598) with
the agreement to repay the principal plus 5% per month interest on or before January 18, 2014. The note holder received, as
a form of guarantee, 1,600,000 shares of an investment we held then in a company called Direct Security Integration Inc. The
shares used as a form of guarantee formed part of the assets of our Company at that time but are not considered an asset since
the date we provided them to the lender as we were no longer in control of such shares.
|
On
September 18, 2015, the Company and the note holder agreed to amend the previous terms of the agreement and both parties agreed
on the new terms whereby the Company was now liable to pay $500,000 as full and final payment of the October 17, 2013 loan principal,
accrued interest, and all other related penalties. This repayment will not accrue any further interest or penalties.
On
December 21, 2015, the Company repaid the first installment of the accrued interest amounting to $20,000; leaving the accrued
interest balance of $160,402 and principal loan balance of $319,598 as on December 31, 2015.
On
September 30, 2018, the Company and the lender agreed to amend the previous terms of the agreement and both parties agreed on
the new terms whereby the Company is now liable to pay GBP 220,000 or $286,642 as full and final payment regarding this loan.
This repayment will not accrue any further interest or penalties. Both parties also agreed on a repayment plan of $3,000 monthly
payment commencing on the date of signature of this addendum and additional ad hoc interim payments will be made to fully settle
this loan within 36 months of this addendum dated September 30, 2018.
During
the year ended December 31, 2018, the Company repaid three monthly payments against accrued interest totaling to $9,000 as per
the addendum dated September 30, 2018 and the outstanding note balance amounted to $260,584 and accrued interest balance amounted
to $17,058 as of December 31, 2018.
During
the three months ended March 31, 2019, the Company repaid two monthly payments against accrued interest totaling to $6,000 as
per the addendum dated September 30, 2018 and the outstanding note balance amounted to $260,584 and accrued interest balance amounted
to $11,058 as of March 31, 2019.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2019
(Unaudited)
|
(E)
|
Fixed
Price Convertible Notes Payable
|
Following
is the summary of all fixed price convertible notes, net of debt discount and debt issue cost, including the accrued interest
as at December 31, 2018:
|
Date
of Note
|
|
Principal
|
|
|
Discount
|
|
|
Principal,
net of discount
|
|
|
Accrued
Interest
|
|
|
Total
|
|
|
January 17, 2018 - Xantis PE Fund
|
|
$
|
400,000
|
|
|
$
|
1,500
|
|
|
$
|
398,500
|
|
|
$
|
23,277
|
|
|
$
|
421,777
|
|
|
January 23, 2018 - William Marshal Plc.
|
|
|
100,000
|
|
|
|
-
|
|
|
|
100,000
|
|
|
|
5,819
|
|
|
|
105,819
|
|
|
June 8, 2018 - Xantis AION Sec Fund
|
|
|
735,000
|
|
|
|
50,824
|
|
|
|
684,176
|
|
|
|
25,010
|
|
|
|
709,186
|
|
|
October 10, 2018 - Xantis AION
Sec Fund
|
|
|
653,040
|
|
|
|
78,099
|
|
|
|
574,941
|
|
|
|
3,328
|
|
|
|
578,269
|
|
|
Balance, December
31, 2018
|
|
$
|
1,888,040
|
|
|
$
|
130,423
|
|
|
$
|
1,757,617
|
|
|
$
|
57,434
|
|
|
$
|
1,815,051
|
|
Following
is the summary of all fixed price convertible notes, net of debt discount and debt issue cost, including the accrued interest
as at March 31, 2019:
|
Date
of Note
|
|
Principal
|
|
|
Discount
|
|
|
Principal,
net of discount
|
|
|
Accrued
Interest
|
|
|
Total
|
|
|
January 17, 2018 - Xantis PE Fund
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
January 23, 2018 - William Marshal Plc.
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
June 8, 2018 - Xantis AION Sec Fund
|
|
|
735,000
|
|
|
|
23,102
|
|
|
|
711,898
|
|
|
|
35,884
|
|
|
|
747,882
|
|
|
October 10, 2018 - Xantis AION
Sec Fund
|
|
|
653,040
|
|
|
|
53,436
|
|
|
|
599,604
|
|
|
|
12,990
|
|
|
|
612,594
|
|
|
Balance, March
31, 2019
|
|
$
|
1,388,040
|
|
|
$
|
76,538
|
|
|
$
|
1,311,502
|
|
|
$
|
48,874
|
|
|
$
|
1,360,376
|
|
|
|
●
|
On
January 12, 2018, the Company secured a 12-month fixed price convertible loan from Xantis Private Equity Fund (Luxembourg),
for a minimum of 2,000,000 Great Britain Pounds (equivalent to approximately $2,680,000) carrying an interest at the rate
of 6% per annum. The Company has a right to pay this note no earlier than 366 days’ post investment of each tranche
of funding, by issuing common shares at greater of $0.02 or the average closing ask price of the Company’s common stock
on the OTCBB for the prior 60 trading days.
|
On
January 17, 2018, the Company received an initial tranche of funding from Xantis Private Equity Fund amounting to $400,000. There
was no beneficial conversion feature since the conversion price exceeded the quoted trading price on the funding date. The Company
paid a $36,000 cash commission, which is treated as debt issuance cost for this note. This particular Convertible Note issued
to Xantis Private Equity Fund matured on January 13, 2019, as January 12, 2018 was the date that the funds were effectively
wired to the Company.
During
the year ended December 31, 2018, $34,500 of the debt issuance costs was amortized to income statement, leaving an unamortized
debt issue cost balance of $1,500. The Company further recorded $23,277 as interest expense during the year ended December 31,
2018 and the outstanding note balance amounted to $400,000 as of December 31, 2018.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2019
(Unaudited)
During
the three months ended March 31, 2019, $1,500 of the debt issuance costs was amortized to income statement, leaving an unamortized
debt issue cost balance of $0. The company further recorded an interest expense of $723, making the total accrued interest balance
to $24,000. On January 14, 2019, the Company issued 21,200,000 common shares to the lender at an agreed conversion price of $0.02
per share amounting to $424,000, thereby leaving an outstanding principal loan and accrued interest balance of $0 as on March
31, 2019. As the note was converted at the contractual rate, no gain on conversion was recorded upon conversion of this note and
accrued interest.
|
|
●
|
On
January 12, 2018, the Company secured a 12-month fixed price convertible loan from William Marshal Plc., a United Kingdom
Public Limited Company listed on the Cyprus Public Exchange Emerging Companies Market, for a maximum of 2,000,000 Great Britain
Pounds (equivalent to approximately $2,680,000) carrying an interest at the rate of 6% per annum. The Company has a right
to pay this note no earlier than 366 days’ post investment of each tranche of funding, by issuing common shares at greater
of $0.02 or the average closing ask price of the Company’s common stock on the OTCBB for the prior 60 trading days.
|
On
January 23, 2018, the Company received its first tranche of funding from William Marshal Plc. amounting to $100,000. There was
no beneficial conversion feature since the conversion price exceeded the quoted trading price on the funding date. This particular
Convertible Note issued to William Marshal Plc. matured on January 24, 2019.
During
the year ended December 31, 2018, the Company recorded $5,819 as interest expense and the outstanding note balance amounted
to $100,000 as of December 31, 2018.
During
the three months ended March 31, 2019, the Company further recorded an interest expense of $181, making the total accrued
interest balance to $6,000. On January 24, 2019, the Company issued 5,300,000 common shares to William Marshal Plc. at an agreed
conversion price of $0.02 per share amounting to $106,000, thereby leaving an outstanding principal loan and accrued interest
balance of $0 as on March 31, 2019. As the note was converted at the contractual rate, no gain on conversion was recorded upon
conversion of this note and accrued interest.
|
|
●
|
On
June 6, 2018, the Company secured a 12-month fixed price convertible loan, from Xantis AION Securitization Fund (Luxembourg),
for a minimum of 1,700,000 Great Britain Pounds (equivalent to approximately $1,940,000) carrying an interest at the rate
of 6% per annum. The Company has a right to pay this note no earlier than 366 days’ post investment of each tranche
of funding, by issuing common shares at greater of $0.02 or the average closing ask price of the Company’s common stock
on the OTCBB for the prior 60 trading days.
|
On
June 8, 2018, the Company received an initial tranche of funding from Xantis AION Securitization Fund amounting to $735,000. There
was no beneficial conversion feature since the conversion price exceeded the quoted trading price on the funding date. The Company
paid a $110,887 cash commission, which is treated as debt issuance costs for this note. This particular Convertible Note issued
to Xantis AION Securitization Fund will mature on June 9, 2019.
During
the year ended December 31, 2018, $60,064 of the debt issuance costs was amortized to income statement, leaving an unamortized
debt issue cost balance of $50,824. The Company further recorded $25,010 as interest expense during the year ended December 31,
2018 and the outstanding note balance amounted to $735,000 as of December 31, 2018.
During
the three months ended March 31, 2019, $27,722 of the debt issuance costs was amortized to income statement, leaving an unamortized
debt issue cost balance of $23,102. The Company further recorded $10,874 as interest expense during the three months ended March
31, 2019 and the outstanding note balance amounted to $735,000 as of March 31, 2019.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2019
(Unaudited)
|
|
●
|
On
October 10, 2018, the Company received second tranche of funding from Xantis AION Securitization Fund amounting to $653,040
pursuant to the funding agreement dated June 6, 2018. There was no beneficial conversion feature since the conversion price
exceeded the quoted trading price on the funding date. The Company paid a $98,651 cash commission, which is treated as debt
issuance costs for this note. This particular Convertible Note issued to Xantis AION Securitization Fund will mature on October
11, 2019.
|
During
the year ended December 31, 2018, $20,552 of the debt issuance costs was amortized to income statement, leaving an unamortized
debt issue cost balance of $78,099. The Company further recorded $3,328 as interest expense during the year ended December 31,
2018 and the outstanding note balance amounted to $653,040 as of December 31, 2018.
During
the three months ended March 31, 2019, $24,663 of the debt issuance costs was amortized to income statement, leaving an unamortized
debt issue cost balance of 53,436. The Company further recorded $9,662 as interest expense during the three months ended March
31, 2019 and the outstanding note balance amounted to $653,040 as of March 31, 2019.
Note
10 - Stockholders’ Equity (Deficit)
|
|
●
|
Series
“A” Convertible Preferred Stock
|
On
November 30, 2011, the Company designated 5,000,000 of its authorized preferred stock as Series “A” convertible preferred
shares. On November 13, 2012, the Company’s board of directors approved an amendment to the Certificate of Designation;
to amend the voting rights and conversion rights of the Company’s Series “A” preferred shares as follows:
|
|
|
●
|
Voting
Rights: 10 votes per share (votes along with common stock);
|
|
|
|
●
|
Conversion
Rights: Each share of Series “A” Preferred is convertible into ten (10) shares of common stock 1 day after the
second anniversary of issuance;
|
|
|
|
●
|
Dividend
Rights: None;
|
|
|
|
●
|
Liquidation
Rights: None
|
On
May 19, 2015, the board of directors agreed to the non-redemption of the redeemable Series “A” Preferred Shares and
the officers of the company that held these Preferred Shares, returned all 1,983,332 Shares of the Company to Treasury. Since
the preferred shares were vested upon issuance in prior years, the cancellation of these shares was considered a contribution
back to the Company at zero cost with no gain or loss recognized.
On
July 15, 2015 the designation of the 5,000,000 Series “A” preferred shares was withdrawn.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2019
(Unaudited)
|
|
●
|
Series
“B” Convertible Preferred Stock
|
On
November 10, 2016, the Company designated 45,000,000 of its authorized preferred stock as Series “B” convertible preferred
shares. The Certificate of Designation stated the following:
|
|
|
●
|
Voting
Rights: 10 votes per share (votes along with common stock);
|
|
|
|
●
|
Conversion
Rights: Each share of Series “B” Preferred is convertible at any time, and from time to time, into ten (10) shares
of common stock 1 day after the first anniversary of issuance. Pursuant to two funding agreements entered into in January
2018, the management contractually agreed to not convert or sell any of these preferred shares until September 27, 2020;
|
|
|
|
●
|
Dividend
Rights: In the event the Board of Directors declares a dividend on the common stock, each Series “B” Preferred
share will be entitled to receive an equivalent dividend as if the Series “B” Preferred share had been converted
into common stock prior to the declaration of such dividend.
|
|
|
|
●
|
Liquidation
Rights: None
|
On
November 11, 2016, certain Officers and Directors of the Company, offered to retire and exchange an aggregate 450,000,000 shares
of Common Stock owned by them for 45,000,000 Series “B” Preferred Stock. The Company permitted Officers and Directors
of the Company to exchange 200,000,000, 50,000,000 and 200,000,000 shares of Common Stock, respectively, for 20,000,000, 5,000,000
and 20,000,000 shares of Series “B” Preferred Stock, respectively.
|
|
●
|
Series
“C” Convertible Preferred Stock
|
On
September 18, 2017, the Company designated 5,000,000 of its authorized preferred stock as Series “C” convertible preferred
shares. The Certificate of Designation stated the following:
|
|
|
●
|
Voting
Rights: 100 votes per share (votes along with common stock);
|
|
|
|
●
|
Conversion
Rights: Each share of Series “C” Preferred is convertible at any time, and from time to time, into one hundred
(100) shares of common stock 1 day after the third anniversary of issuance;
|
|
|
|
●
|
Dividend
Rights: In the event the Board of Directors declares a dividend on the common stock, each Series “C” Preferred
share will be entitled to receive an equivalent dividend as if the Series “C” Preferred stock had been converted
into common stock prior to the declaration of such dividend.
|
|
|
|
●
|
Liquidation
Rights: None
|
On
September 26, 2017, all of the officers and directors of the Company decided to convert their partial accrued salaries balance
amounting to $240,000 to 2,400,000 series “C” preferred stock at par value of $0.001 per share having an equivalent
common stock fair value of $0.0028 per share or $672,000 at the date of issuance of preferred stock.
On
June 5, 2018, all of the officers and directors of the Company decided to convert their partial accrued salary balances amounting
to $160,000 into 800,000 shares of Series “C” Preferred Stock at par value of $0.001 per share, having an equivalent
common stock fair value of $0.004 per share or $320,000 at the date of issuance of such preferred stock.
During
the three months ended March 31, 2019, the Company did not issue any new preferred shares.
As
at March 31, 2019 and December 31, 2018, the Company had 950,000,000 authorized shares of common stock having a par value of $0.001.
As at March 31, 2019 and December 31, 2018, the Company had 552,034,409 and 525,534,409 shares of common stock issued and outstanding,
respectively.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2019
(Unaudited)
During
the three months ended March 31, 2019, the Company issued 26,500,000 common shares because of conversions of two convertible notes
in following manner:
|
●
|
On
January 14, 2019, the Company issued 21,200,000 common shares to Xantis Private Equity at an agreed contractual conversion
price of $0.02 per share amounting to $424,000. See Note 9(E)
|
|
●
|
On
January 24, 2019, the Company issued 5,300,000 common shares to William Marshal Plc. at an agreed contractual conversion price
of $0.02 per share amounting to $106,000. See Note 9(E)
|
Note
11 – Revenue
For
the three months ended March 31, 2019 and 2018, the Company recognized total revenues amounting to $34,189 and $39,779, respectively.
Unfulfilled
performance obligations represent the remaining contract transaction prices allocated to the performance obligations that are
unsatisfied, or partially unsatisfied, and therefore revenues have not yet been recorded. Unfulfilled performance obligations
primarily consist of the remaining fees not yet recognized under the Company´s proportional performance method for both
our fixed fee arrangements, and the portion of performance based and contingent arrangements, which we have deemed probable. As
of March 31, 2019 and December 31, 2018, the Company´s management believes that all of the fixed fee, performance based
and contingent arrangements have an original expected duration of one year or less; hence, the Company elected to utilize the
optional exemption to exclude it from this disclosure.
Contract
Assets and Liabilities
Contract
assets are defined as assets for which we have recorded revenue because we determined that it is probable that we will earn a
performance based or contingent fee, but we are not yet entitled to receive our fees, because certain events, such as completion
of the measurement period or client approval, must occur. The contract asset balance was immaterial as of March 31, 2019 and December
31, 2018.
Contract
liabilities are defined as liabilities incurred when we have received consideration from a client but have not yet performed the
agreed upon services. This may occur when we receive advance billings before delivery of services when clients pay us up-front
fees before we begin work for them. The contract liability balance was immaterial as of March 31, 2019 and December 31, 2018.
Note
12 – Pension Plan
The
Company operates a defined “contribution pension plan” for its subsidiary in the United Kingdom, Cheshire Trafford
UK Limited. Each participant need to complete a probation period before being included in the pension plan. The contributions
payable to the company’s pension plan are charged to the consolidated statement of operations in the period to which they
relate. We contributed a total of $706 to this pension plan during the three months ended March 31, 2019.
Note
13 – Related Party Transactions
At
March 31, 2019 and December 31, 2018, there were accounts payable, accrued liabilities and short-term loan due to related parties.
(See Note 9(B & C)).
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2019
(Unaudited)
Note
14 – Commitments and Contingencies
Contingencies
|
●
|
On
October 9, 2013, the Company secured a two-month loan for GBP 75,000 (equivalent to $120,420) and issued 10,000 restricted
shares of common stock to the lender, The Able Foundation, on December 7, 2013, and also repay 35,000 GBP (equivalent to $56,196)
in lieu of interest. As the principal and interest was not paid back to the lender on time, the Company compensated the lender
with an additional 20,000 restricted shares of common stock in consideration for a for a five-month extension on the loan.
This stock compensation was issued to the lender also on December 12, 2013.
|
The
plaintiff, the Able Foundation, was requesting a settlement of $411,272, which was the $226,616 owed by the Company at that time,
and an additional $184,656 accrued in 2015 as a provision for potential damages.
On
June 1, 2015, the Company (the defendant) retained the legal services of a Dubai based law firm called Al Safar & Partners.
At March 31, 2017, there was a judgment against the Company (the defendant) for the recovery of $411,272.
During
2015 and 2016, the Company’s Dubai lawyers, Al Safar & Partners, had appealed this judgment various times based on the
fact that they believed from a legal stand point that:
|
|
1)
|
the
Company (the defendant) has not been heard, which is a violation of the fundamental principle of law “
Audi Alteram
Partem
”.
|
|
|
|
|
|
|
2)
|
there
is no legal existence of Global Equity Partners Plc. in Dubai, as it is a Republic of Seychelles corporation; hence, the Courts
of Dubai have no jurisdiction in the matter.
|
All
prior appeals were rejected by the Dubai Courts, however a new appeal against the formal execution of this judgement was filed
in September 2016. At March 31, 2017, the Company was in litigation, in the courts of Dubai, regarding the Able Foundation loan.
On
June 5, 2017, a citizen of Republic of Thailand assumed the above total amount of $411,272 by way of a stock purchase and debt
assumption agreement; hence, the Company’s liability and respective litigation in respect of this loan was transferred to
the acquiring individual.
On
March 6, 2018, the Company provided the Dubai attorneys with a signed, stamped and apostilled Certificate of Incumbency issued
by the Seychelles Authorities. This Certificate of Incumbency stated that as of June 5, 2017, the company, Global Equity Partners
Plc., was sold to a citizen of the Republic of Thailand and that the new owner assumed his role as sole shareholder and sole director
of Global Equity Partners Plc. as of the date of sale.
To
date, the Dubai attorneys are in the process of transferring the entire court case to the new owner of Global Equity Partners
Plc.
|
●
|
From
time to time, the Company may be involved in litigation or disputes relating to claims arising out of its operations in the
normal course of business. Other than as discussed above as of March 31, 2019, the Company is not involved in any such litigation
or disputes
|
Commitments
|
●
|
On
August 1, 2018, the Company entered into a rent agreement for its UK office at Hull for a period of one year amounting to
a rental of GBP 2,000 or $2,890 per month (from August 2018 until July 2019). Rent expense for the three months ended March
31, 2019 was $8,670.
|
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2019
(Unaudited)
Note
15 – Segment Information
During
the three months ended March 31, 2018, the Company operated in one reportable business segment consisting of management consultancy
and employment placement services such as assistance in designing client’s capitalization strategy, introductions to potential
capital funding sources and human resources placements. During the three months ended March 31, 2019 excluding discontinued operations,
the Company operated in two reportable business segments - (1) Management Consultancy Services (the “Consultancy”
segment) and (2) a segment which concentrates on third party insurance policy sales and renewals (the “Insurance brokerage”
segment). The Company’s reportable segments were strategic business units that offered different products. They were managed
separately based on the fundamental differences in their operations and locations. All goodwill in the accompanying unaudited
consolidated balance sheets is assigned to the Insurance brokerage segment.
Information
with respect to these reportable business segments for the three months ended March 31, 2019 and 2018 was as follows:
|
|
|
For
the three months ended March 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
Revenues from continuing
operations:
|
|
|
|
|
|
|
|
|
|
Consultancy
|
|
$
|
-
|
|
|
$
|
30,800
|
|
|
Insurance
brokerage
|
|
|
34,189
|
|
|
|
-
|
|
|
|
|
$
|
34,189
|
|
|
$
|
30,800
|
|
|
Depreciation and
amortization:
|
|
|
|
|
|
|
|
|
|
Consultancy
|
|
$
|
585
|
|
|
$
|
152
|
|
|
Insurance
brokerage
|
|
|
5,745
|
|
|
|
-
|
|
|
|
|
$
|
6,330
|
|
|
$
|
152
|
|
|
Net (loss) / income
from continuing operations:
|
|
|
|
|
|
|
|
|
|
Consultancy
|
|
$
|
(939,282
|
)
|
|
$
|
162,038
|
|
|
Insurance
brokerage
|
|
|
(2,567
|
)
|
|
|
-
|
|
|
|
|
$
|
(941,849
|
)
|
|
$
|
162,038
|
|
|
|
|
March
31, 2019
|
|
|
December
31, 2018
|
|
|
Identifiable long-lived tangible assets
at March 31, 2019 and December 31, 2018 by segment:
|
|
|
|
|
|
|
|
|
|
Consultancy
|
|
$
|
4,549
|
|
|
$
|
4,654
|
|
|
Insurance brokerage
|
|
|
495
|
|
|
|
526
|
|
|
|
|
$
|
5,044
|
|
|
$
|
5,180
|
|