UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
| [X] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2018
OR
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____________ to ___________
Commission File Number 000-54557
ARGENTUM 47, INC.
(Exact name of registrant as specified in its charter)
| Nevada | 27-3986073 | |
| (State of Incorporation) | (I.R.S. Employer Identification No.) |
Capital House, Main Street, Lelley, HU12 8SN Hull, United Kingdom.
(Address of principal executive offices)
X3 Jumeirah Bay, Office 3305, Jumeirah Lake Towers, Dubai UAE
(Former address of principal executive offices)
Registrant’s telephone number, including area code: +(1) 321 200 0142 / +(44) 1482 891 591
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
Common Stock, $.001 par value
Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant: (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that he registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit or post such files). Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
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 definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer [ ] | Accelerated filer [ ] | |
| Non-accelerated filer [ ] | Smaller reporting company [X] | |
| (Do not check if a smaller reporting company) | Emerging growth company [X] |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [X]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the Registrant’s most recently completed second fiscal quarter (June 30, 2018) was approximately $2,013,063.
As of March 31, 2019, there were 552,034,409 shares of our common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: None
TABLE OF CONTENTS
| 2 |
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (“Annual Report”), in particular, the Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing in Item 7 herein (“MD&A”) contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements give expectations or forecasts of future events. The reader can identify these forward-looking statements by the fact that they do not relate strictly to historical or current facts. They use words such as “believe(s),” “goal(s),” “target(s),” “estimate(s),” “anticipate(s),” “forecast(s),” “project(s),” plan(s),” “intend(s),” “expect(s),” “might,” may” and other words and terms of similar meaning in connection with a discussion of future operations, financial performance or financial condition. Forward-looking statements, in particular, include statements relating to future actions, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, trends of operations and financial results.
Any or all forward-looking statements may turn out to be wrong, and, accordingly, readers are cautioned not to place undue reliance on such statements, which speak only as of the date of this Annual Report. These statements are based on current expectations and the current economic environment. They involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance. Actual results could differ materially from those expressed or implied in the forward-looking statements. Forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining the Company’s actual results and financial condition. The reader should consider the following list of general factors that could affect the Company’s future results and financial condition.
Among the general factors that could cause actual results and financial condition to differ materially from estimated results and financial condition are:
| ● | the success or failure of management’s efforts to implement their business strategy; | |
| ● | the ability of the Company to raise sufficient capital to meet operating requirements; | |
| ● | the uncertainty of consumer demand for our products and services; | |
| ● | the ability of the Company to compete with major established companies; | |
| ● | heightened competition, including, with respect to pricing, entry of new competitors and the development of new products or services by new and existing competitors; | |
| ● | absolute and relative performance of our products or services; | |
| ● | the effect of changing economic conditions; | |
| ● | the ability of the Company to attract and retain quality employees and management; | |
| ● | the current global recession and financial uncertainty; and | |
| ● | other risks which may be described in our future filings with the U.S. Securities and Exchange Commission (“SEC”). |
No assurances can be given that the results contemplated in any forward-looking statements will be achieved or will be achieved in any particular timetable. We assume no obligation to publicly correct or update any forward-looking statements as a result of events or developments subsequent to the date of this Annual Report. The reader is advised, however, to consult any further disclosures we make on related subjects in our filings with the SEC.
| 3 |
| ITEM 1. | BUSINESS. |
BUSINESS DEVELOPMENT
BACKGROUND
Argentum 47, Inc., formerly known as Global Equity International Inc. (“Company” or “ARG”), was incorporated on October 1, 2010, as a Nevada corporation, for the express purpose of acquiring Global Equity Partners Plc, a corporation formed under the laws of the Republic of Seychelles (“GEP”) on September 2, 2009. On August 22, 2014, GE Professionals DMCC was incorporated in Dubai as a wholly-owned subsidiary of Global Equity Partners Plc. On June 10, 2016, ARG incorporated its wholly-owned subsidiary, called GEP Equity Holdings Limited, under the laws of the Republic of Seychelles.
On March 24, 2017, the Board of Directors of Global Equity Partners Plc. approved the assignment and transfer of GE Professionals DMMC to GEP Equity Holdings Limited. On March 18, 2019, GE Professionals DMCC commenced a formal liquidation process in Dubai.
On June 5, 2017, the Company sold 100% of the common stock of Global Equity Partners Plc. to a citizen of the Kingdom of Thailand. The consideration for the purchase of Global Equity Partners Plc. was the assumption by the purchaser of all liabilities and indebtedness of Global Equity Partners Plc.
On December 12, 2017, we incorporated a United Kingdom company under the name of Argentum 47 Financial Management Limited (“Argentum FM”). Argentum FM is a wholly-owned subsidiary of the Company. Argentum FM was formed to serve as a holding company for the acquisition of United Kingdom based advisory firms.
On March, 29, 2018, the Secretary of State of Nevada approved the Company name change from Global Equity International, Inc. to Argentum 47, Inc.
On April 2, 2018, our trading symbol was changed from GEQU to ARGQ.
On August 1, 2018, Argentum FM consummated a Share Purchase Agreement with Mr. Rodney Leonard and Equilibrium Pensions Limited (Trustees of The Leonard R. Personal Pension), pursuant to which Argentum FM would acquire 100% of the ordinary shares (equity) of Cheshire Trafford (U.K.) Limited of Hull, United Kingdom (“Cheshire Trafford”) from Mr. Leonard and Equilibrium Pensions Limited (Trustees of The Leonard R. Personal Pension).
| 4 |
Cheshire Trafford (www.cheshire-trafford.co.uk) was incorporated under the laws of the United Kingdom on January 26, 1976, as a limited liability company. Cheshire Trafford is a very well established Independent Financial Advisory Firm that offers a fully computerized investment management service, including advising on investments in Unit Trusts, Investment Bonds, Shares, Investment Trusts, Government Bonds and Individual Savings Accounts. In addition, Cheshire Trafford advises investors on various types of Pension contracts, including Personal Pensions, Executive Pensions, Small Self-Administered Plans, Pension Mortgages and many more.
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.
Cheshire Trafford currently has three full time employees, in excess of 700 clients and administers funds of approximately US$39,000,000.
Cheshire Trafford currently invests the funds it has under administration with well-known and reputable Investment Houses such as:
| ● | AJ Bell | |
| ● | Canada Life International | |
| ● | Fidelity International | |
| ● | Old Mutual International | |
| ● | Old Mutual Wealth Life | |
| ● | Royal London | |
| ● | Aviva | |
| ● | Prudential Assurance |
Cheshire Trafford’s primary customer base resides in the United Kingdom. Cheshire Trafford is licensed (Register Number 115194) and regulated by the Financial Conduct Authority (“FCA”) of the United Kingdom. Confirmation of Cheshire Trafford’s license can be made by visiting the FCA’s website: www.fca.gov.uk/register.
The purchase consideration for the acquisition of Cheshire Trafford is based on a formula of 2.7 times Cheshire Trafford’s projected annualized 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 U.S.$516,795 (389,300 Great Britain Pounds or “GBP”).
The purchase consideration is payable in up to three tranches. The first tranche of U.S. $175,710 (132,362 GBP) was paid upon closing of the transaction. The second tranche of U.S. $170,542 (128,469 GBP) is due 18 months after the closing. The third tranche of U.S. $170,542 (128,469 GBP) is due 36 months after the closing. The third tranche could be reduced (but not increased) in the event that Cheshire Trafford’s trailing or recurring revenues are less than the 2018 annualized gross recurring revenues.
The funds for the first tranche were obtained via a June 8, 2018 loan in the amount of U.S. $735,000 from the Xantis Aion Securitisation Fund, as previously reported in the Company’s Form 8-K Current Report filed with the Securities and Exchange Commission on June 11, 2018.
GEP Equity Holdings Limited provides consulting services, such as corporate restructuring, advice on management buy outs and development for corporate marketing, investor and public relations, regulatory compliance and introductions to financiers, to companies desiring to be listed on stock exchanges in various parts of the world.
Our authorized capital consists of 950,000,000 shares of common stock, $0.001 par value, and 50,000,000 shares of preferred stock, $0.001 par value. As of December 31, 2018, we had 525,534,409 shares of common stock issued and outstanding. As of March 31, 2019, we had 552,034,409 shares of common stock issued and outstanding. We also have two series of preferred stock designated and authorized: Series “B” Preferred Stock and Series “C” Preferred Stock. As of December 31, 2018, and March 31, 2019, we had 45,000,000 shares of Series “B” Preferred Stock authorized, issued and outstanding. As of December 31, 2018, and March 31, 2019, we had designated and authorized 5,000,000 shares of Series “C” Preferred Stock, 3,200,000 shares of which were issued and outstanding. We do not have any Series “A” Preferred Stock authorized, issued or outstanding. We have 1,800,000 shares of Series “C” Preferred Stock designated and authorized, which could be issued in the future.
| 5 |
As of January 12, 2018, in accordance with two funding agreements, our management agreed to lock-up all outstanding shares of Series “B” and “C” Preferred Stock, so that those shares may not be sold or converted into common stock prior to September 27, 2020.
We provide corporate advisory services to companies desiring to have their shares listed on stock exchanges or quoted on quotation bureaus in various parts of the world. We currently have offices in the United Kingdom only as our Dubai office was formally closed on March 31, 2019. We have affiliations with firms located in some of the world’s leading financial centers such as London, New York and Frankfurt. These affiliations are informal and are comprised of personal relationships with groups of people or people and institutions with whom our Company or our management has done, or attempted to do, business in the past. We do not have any contractual arrangements, written or otherwise, with our affiliations.
Argentum 47 Financial Management Limited is a United Kingdom based holding company that will acquire, in due course, more financial advisory firms with funds under administration around the world. These financial advisory firms act as intermediaries between their clients and the insurance companies. In effect, the advisory firms sell insurance policies to their clients. These types of financial advisory firms receive recurring and non-recurring trail fees for each insurance policy that is sold. Cheshire Trafford U.K. Limited is the first acquisition of Argentum 47 Financial Management Limited and it provides corporate and retail independent financial advisory services and generates our revenues 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.
GEP Equity Holdings Limited looks for companies that require capital funding for growth and acquisition, and ultimately a listing of their shares on a recognized stock exchange or quotation on the OTC Markets quotation boards. The Company introduces these clients to private and institutional investors in our network of over 100 “financial introducers” around the world. These financial introducers are groups of people or institutions that are presently introducing new clients to us or who have introduced new clients to our management in the past. We do not have any contractual arrangements, written or otherwise, with these financial introducers.
Presently, GEP Equity Holdings Limited, Argentum 47 Financial Management Limited and Cheshire Trafford (U.K.) Limited are our only operating businesses. ARG´s present operations are limited to ensuring compliance with regional, state and national securities regulatory agencies and organizations. In addition, ARG, as the parent company, is charged with (i) handling our periodic reporting obligations under the Securities Exchange Act of 1934; (ii) managing our investor relations; and (iii) raising debt and equity capital necessary to fund our operations in order to enhance and grow our business. ARG does not offer or conduct any consulting or advisory services, as such services are now performed solely by GEP Equity Holdings Limited. As stated above, Argentum 47 Financial Management Limited will serve as a holding company for the financial advisory firms to be acquired. Cheshire Trafford (U.K.) Limited is a financial advisory firm with funds under administration.
We currently offer the following services to our clients:
| ● | General business consulting | |
| ● | Corporate restructuring | |
| ● | Fund administration | |
| ● | Exchange listings and quotations on OTC Markets quotation boards |
| 6 |
IMPLICATIONS OF BEING AN EMERGING GROWTH COMPANY
As a Company with less than $1 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (also known as the “JOBS Act”). As an emerging growth company, we are entitled to take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:
| ● | Only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure; | |
| ● | Reduced disclosure about our executive compensation arrangements; | |
| ● | Not having to obtain non-binding advisory votes on executive compensation or golden parachute arrangements; and | |
| ● | Exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting. |
We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1 billion in annual revenues, if we have more than $700 million in market value of our stock held by non-affiliates, or if we issue more than $1 billion of non-convertible debt over a three-year period. We may take advantage of these exemptions until the last day of the fiscal year of the Company following the fifth anniversary of the date of the first sale of our common equity securities in an effective registration statement under the Securities Act of 1933, as amended. Note: To date, we have not sold or issued any of our common equity securities under an effective Form S-1, Form S-3, Form S-4 or Form S-8 or other form of registration statement under the Securities Act of 1933, as amended. We may choose to take advantage of some but not all of these reduced burdens in the future. We have irrevocably elected to opt out of the extended transition period for complying with new or revised accounting standards pursuant Section 107(b) of the JOBS Act.
FUND MANAGEMENT
In common with the overall financial services sector, the micro fund management market is undergoing significant changes. We intend to take advantage of these changes and acquire a significant selection of international and United Kingdom based financial advisory firms with funds under administration. These acquisitions will form part of Argentum 47 Financial Management Limited, which is under one efficient and cost effective umbrella. Argentum 47 Financial Management Limited’s wholly-owned subsidiary, Cheshire Trafford (U.K.) Limited currently has approximately US $39 million in funds under administration.
EXCHANGE LISTINGS
We also assist our clients with the selection of stock exchanges and over the counter quotation boards and markets that may be suitable to our clients. Various exchanges have listing requirements and standards that vary from one exchange to another. Typical listing requirements and standards relate to a number of things, such as pre-tax income, cash flows, revenue, net tangible assets, market value of a company’s listed securities, minimum trading prices of a company’s securities, minimum shareholders’ equity, operating history, number of shareholders, number of market makers, and corporate governance. We will try to identify appropriate exchanges for our clients based on the particular client’s operating history, pre-tax income, cash flow, revenue, net tangible assets, shareholder base and other factors described above.
We will assist our clients with retention of attorneys and accountants having experience with publicly held companies and stock exchanges in various countries. We will also assist our clients in locating market makers, investment bankers and broker-dealers to assist them with accessing capital markets.
INTRODUCTIONS TO FINANCIERS
After reviewing the business plans, prospects and problems that are unique to each of our clients, we will use our best efforts to introduce our clients to various third party financial resources around the world who may be able to assist them with their capital funding requirements.
| 7 |
Special Note: As used throughout this Annual Report, references to “Argentum 47, Inc.”, “ARG”, “Company”, “we”, “our”, “ours”, and “us” refer to Argentum 47, Inc. and our subsidiaries, unless the context otherwise requires. In addition, references to “financial statements” are to our consolidated financial statements contained herein, except as the context otherwise requires. References to “fiscal year” are to our fiscal year which ends on December 31 of each calendar year. Unless otherwise indicated, the terms “Common Stock,” “common stock” and “shares” refer to our shares of $0.001 par value, common stock.
HISTORICAL BUSINESS TRANSACTED
BUSINESS TRANSACTED IN 2016
During 2016, we provided our consultancy services to the following 9 clients:
| 1. | Granite Power Limited | |
| 2. | Deutsche Oel and Gas SA | |
| 3. | Majestic Wealth Limited | |
| 4. | Unite Global AS | |
| 5. | Teralight FZ LLC | |
| 6. | The Stakis Collections Limited | |
| 7. | Ali Group MENA FZ LLC | |
| 8. | Veolia Middle East | |
| 9. | Emaar, The Economic City |
BUSINESS TRANSACTED IN 2017
During 2017, we provided our consultancy services to the following 8 clients:
| 1. | Blackstone Natural Resources S.A. | |
| 2. | Graphite Resources (DEP) Limited | |
| 3. | OCS ROH | |
| 4. | Fly-A-Deal | |
| 5. | Falcon Eye Technology | |
| 6. | Ali Group MENA FZ LLC | |
| 7. | Veolia Middle East | |
| 8. | Emaar, The Economic City |
| 8 |
BUSINESS TRANSACTED IN 2018
During 2018, we provided our consultancy services to the following 4 clients:
| 1. | Emaar, The Economic City. | |
| 2. | OCS ROH. | |
| 3. | Blackstone Natural Resources S.A. | |
| 4. | Creditum Limited. |
After the acquisition of Cheshire Trafford U.K. Limited on August 1, 2018, the Company also gained access to the Cheshire Trafford U.K. Limited’s clients database, comprised of more than 700 individual clients, which are now part of our insurance brokerage business segment.
OUR BUSINESS IN 2018
Since August 1, 2018, 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. |
Both business segments are managed separately based on the fundamental differences in their operations and locations.
Under the consultancy segment, we have three distinct divisions (none of which will be treated as a segment for financial reporting purposes):
| 1. | Introducers Network. We have developed and continue to develop a number of finance professionals, accountants, attorneys and financial advisers who will introduce us to their clients. We will review businesses introduced to us through these introducers and we will compensate them in manners “to be determined” based on the event that we are engaged to assist the companies they introduce to us. | |
| 2. | Project Review. Our management team and advisors will carefully review and vet each business plan and opportunity submitted to us. Our management team and advisors will determine which services we can offer these clients and assess the potential propositions to best assist our clients in achieving their goals. | |
| 3. | Placing. Working with our business associates in Dubai, Europe and the United States, we will use our best efforts to assist our clients with listings on stock exchanges in these cities and countries in order to maximize their exposure to capital markets and to access funding via debt and equity offerings. |
FUTURE PLANS
Our specific plan of operations and milestones from April 2019 through March 2020 are as follows:
| 1. | CAPITAL MARKETS |
The Company intends to continue its mandate to assist its client, Creditum Limited, with the listing of the company´s shares on a recognized European Stock Exchange.
| 2. | ACQUIRE CERTAIN INDEPENDENT FINANCIAL ADVISORY FIRMS WITH MONEY UNDER ADMINISTRATION: |
The Company intends to acquire more advisory firms with funds under administration during the next 12 months. Management has already targeted several of these firms for acquisition in the United Kingdom and also in South East Asia and is currently analyzing the firms on an individual basis to identify the best possible value proposition for the Company. Twelve individual companies are being thoroughly examined as of March 2019.
| 9 |
As the Company acquires more Financial Advisory firms, each book of business will be analyzed to achieve the maximum return and revenue from the client bank without affecting the client offering. In addition, certain cost savings will be managed into the budgets by using technology for the administration, looking for duplication of services and by managing the client and the funds under administration in a better more efficient way.
The acquisition of these entities will open up a new network for the services of:
| o | New capital markets clients. | |
| o | Distribution of new funds / products. | |
| o | Maximizing the current books of business being bought. | |
| o | Expand and thus increase business via more financial advisors. | |
| o | Seek products that offer both a minimum of 1% trail (recurring) income and a secure risk averse home for clients’ funds. | |
| o | Seek cost savings, where possible, due to elimination of duplicate services. | |
| o | Implement rapid and efficient systems in order to allow information to flow to the clients and to management more effectively. | |
| o | Acquiring smaller, active client banks into our licenses and procedures for cost effective growth. |
| 3. | SEEK FURTHER FUNDING FOR FURTHER INORGANIC GROWTH VIA ACQUISITION |
We intend to continue to seek further funding under similar or better terms than the funding that we secured during 2018. We are currently negotiating terms with a new European based Regulated Fund for long term funding in excess of US $10 million to accelerate our inorganic growth and acquisition plan with a view to consolidate our Company in the market place. However, we do not currently have a written agreement for this additional funding, but we do expect to finalize terms in the near future.
| 4. | CONTINUE TO DEVELOP AND GROW ALREADY ACQUIRED IFA BUSINESSES |
By leveraging the licenses that we now own, we can significantly increase our business and revenues at very little extra cost and improve profitability. We intend to market the Company as a United Kingdom licensed entity for various Appointed Representatives (“AR”) and also Introducer Appointed Representatives “(IAR”). In 2018, Aurum Wealth Management Limited was approved by the UK Financial Authority “(FCA”) as an AR of Cheshire Trafford UK Limited and in early 2019, Global Alternative Administration (The Pension Admin Team) was appointed as an IAR to Cheshire Trafford UK Limited.
| 5. | EXPLORE A FULLY COMPLIANT EUROPEAN UNION (EU) MIFID II LICENSE |
Having a European Union (EU) license will allow the Company to act in a role similar to an Appointed Representative (AR) for European Union wide brokerages. On October 1, 2018, the rules regarding financial services changed in Europe. There are over 10,000 entities and also individuals offering advice in Europe who now require a new license and we, through our subsidiary, Cheshire Trafford UK Limited, intend to thoroughly explore these new business opportunities.
| 6. | COMMENCE A TARGETED MARKETING PLAN |
In the second quarter of our 2019 fiscal year, our United Kingdom regulated business, Cheshire Trafford UK Limited, will commence a direct marketing campaign within the region using traditional print media, radio advertising, social media and editorial pieces. In conjunction with this campaign, the website and marketing of the Company will be refocused with a complete new image based around “50 years of serving the community”. Two days per month in our office in the United Kingdom, we will offer free consultation to prospective clients that come and visit us, thus enabling us to potentially recruit them as new clients.
| 10 |
| 7. | FURTHER EXPAND OUR RANGE OF SERVICES TO OUR FINANCIAL SERVICES CLIENTS |
We will bring additional products to the client bank in order to maximize the potential returns per client with complementary products such as mortgages, trusts and more attractive funds.
COMPETITION
We face intense competition in every aspect of our business, and particularly from other firms that offer management, compliance and other consulting services to private and public companies. We would prefer to accept a relatively low cash component as our fee for management consulting and regulatory compliance services and take a greater portion of our fee in the form of restricted shares of our private clients’ common stock. We also face competition from a large number of consulting firms, investment banks, venture capitalists, merchant banks, financial advisors and other management consulting and regulatory compliance services firms similar to ours. Many of our competitors have greater financial and management resources and some have greater market recognition than we do. There are many institutions around the globe that are executing a roll-up strategy by acquiring Financial Advisory firms around the world; hence, we will face completion, but we believe that there is plenty of room for our Company to compete within the Financial Advisory world.
REGULATORY REQUIREMENTS.
We are not required to obtain any special licenses, nor meet any special regulatory requirements before establishing our business, other than a simple business license. If new government regulations, laws, or licensing requirements are passed that would restrict or eliminate delivery of any of our intended products, then our business may suffer. Presently, to the best of our knowledge, no such regulations, laws, or licensing requirements exist or are likely to be implemented in the near future that would reasonably be expected to have a material impact on our sales, revenues, or income from our business operations.
We are not a broker-dealer. We are not an investment adviser or an investment company. We are not a hedge fund or a mutual fund or any similar type of fund. We are primarily an operating business that offers and performs corporate consultancy services.
EFFECT OF EXISTING OR PROBABLE GOVERNMENTAL REGULATIONS.
The Company’s common stock is registered pursuant to Section 12(g) of the Securities Exchange Act of 1934 (“1934 Act”). As a result of such registration, the Company is subject to Regulation 14A of the “1934 Act,” which regulates proxy solicitations. Section 14(a) requires all companies with securities registered pursuant to Section 12(g) thereof to comply with the rules and regulations of the Commission regarding proxy solicitations, as outlined in Regulation 14A. Matters submitted to stockholders of the Company at a special or annual meeting thereof or pursuant to a written consent will require the Company to provide its stockholders with the information outlined in Schedules 14A or 14C of Regulation 14; preliminary copies of this information must be submitted to the Securities and Exchange Commission (“Commission”) at least 10 days prior to the date that definitive copies of this information are forwarded to stockholders.
The Company is also required to file annual reports on Form 10-K and quarterly reports on Form 10-Q with the Commission on a regular basis, and will be required to disclose certain events in a timely manner (e.g., changes in corporate control; acquisitions or dispositions of a significant amount of assets other than in the ordinary course of business, etc.) in Current Reports on Form 8-K.
WE ARE SUBJECT TO THE REQUIREMENTS OF SECTION 404 OF THE SARBANES-OXLEY ACT OF 2002. IF WE ARE UNABLE TO TIMELY COMPLY WITH SECTION 404 OR IF THE COSTS RELATED TO COMPLIANCE ARE SIGNIFICANT, OUR PROFITABILITY, STOCK PRICE AND RESULTS OF OPERATIONS AND FINANCIAL CONDITION COULD BE MATERIALLY ADVERSELY AFFECTED.
The Company is required to comply with the provisions of Section 404 of the Sarbanes-Oxley Act of 2002, which requires that we document and test our internal controls and certify that we are responsible for maintaining an adequate system of internal control procedures for the 2019 and 2020 fiscal years. We are currently evaluating our existing controls against the standards adopted by the Committee of Sponsoring Organizations of the Treadway Commission. During the course of our ongoing evaluation and integration of the internal controls of our business, we may identify areas requiring improvement, and we may have to design enhanced processes and controls to address issues identified through this review (see Item 9A., below, for a discussion of our internal controls and procedures).
| 11 |
We believe that the out-of-pocket costs, the diversion of management’s attention from running the day-to-day operations and operational changes caused by the need to comply with the requirement of Section 404 of the Sarbanes-Oxley Act could be significant. If the time and costs associated with such compliance exceed our current expectations, our results of operations and the future filings of our Company could be materially adversely affected.
DEPENDENCE ON KEY EMPLOYEES.
The Company is heavily dependent on the abilities of our President, Peter Smith and our Chief Financial Officer, Enzo Taddei. The loss of the services of Mr. Smith and/or Mr. Taddei would seriously undermine our ability to carry out our business plan.
In the event of future growth in administration, advisory, marketing and customer support functions, the Company may have to increase the depth and experience of its management team by adding new members. The Company’s success will depend to a large degree upon the active participation of our key officers and employees, as well as the continued service of our key management personnel and our ability to identify, hire, and retain additional qualified personnel. There can be no assurance that we will be able to recruit such qualified personnel to enable us to conduct our proposed business successfully.
REPORTS TO SECURITY HOLDERS.
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith, we file annual, quarterly and current reports, proxy and information statements and other information with the Securities and Exchange Commission. Such reports, proxy statements and other information can be read and copied at the Securities and Exchange Commission’s public reference facilities at 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates. Please call the Securities and Exchange Commission at 1-800-732-0330 for further information on the operation of the public reference facilities. In addition, the Securities and Exchange Commission maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Securities and Exchange Commission. The address of the Securities and Exchange Commission’s website is www.sec.gov.
We make available free of charge on or through our website at www.arg47.com, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with or otherwise furnish it to the Securities and Exchange Commission. Information on our website is not incorporated by reference in this Annual Report and is not a part of this Annual Report.
An investment in our Common Stock involves a high degree of risk. Prospective investors should carefully consider the following risk factors and the other information in this Annual Report and in our other filings with the Securities and Exchange Commission (sometimes referred to herein as the “SEC”) before investing in our Common Stock. Our business and results of operations could be seriously harmed by any of the following risks. You should carefully consider the risks described below, the other information in this Annual Report and the documents incorporated by reference herein when evaluating our Company and our business. If any of the following risks actually occurs, our business could be harmed. In such case, the trading price of our Common Stock could decline and investors could lose all or a part of the money paid for our Common Stock.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. IF ANY OF THE FOLLOWING RISKS ACTUALLY MATERIALIZES, OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS WOULD SUFFER AND OUR SHAREHOLDERS COULD LOSE ALL OR PART OF THEIR INVESTMENT IN OUR SHARES.
| 12 |
RISKS ASSOCIATED WITH OUR COMPANY
THERE IS SUBSTANTIAL UNCERTAINTY THAT WE WILL CONTINUE OPERATIONS. IN THAT CASE, INVESTORS COULD LOSE THEIR INVESTMENTS IN OUR COMMON STOCK.
Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an ongoing business for the next twelve months. The financial statements do not include any adjustments that might result from the uncertainty about our ability to continue in business. As such, we may have to cease operations and you could lose your investment.
WE ARE AN “EMERGING GROWTH COMPANY” AND WE CANNOT BE CERTAIN IF WE WILL BE ABLE TO MAINTAIN SUCH STATUS OR IF THE REDUCED DISCLOSURE REQUIREMENTS APPLICABLE TO EMERGING GROWTH COMPANIES WILL MAKE OUR COMMON STOCK LESS ATTRACTIVE TO INVESTORS.
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 or “JOBS Act,” and we may adopt certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirement of holding a nonbinding advisory vote on executive and stockholder approval of any golden parachute payments not previously approved. We may remain an “emerging growth company” for up to five full fiscal years following our initial public offering of our common equity securities. Note: To date, we have not sold or issued any of our common equity securities under an effective Form S-1, Form S-3, Form S-4 or Form S-8 or other form of registration statement under the Securities Act of 1933, as amended. We would cease to be an emerging growth company, and, therefore, ineligible to rely on the above exemptions, if we have more than $1 billion in annual revenue in a fiscal year, if we issue more than $1 billion of non-convertible debt over a three-year period, or if we have more than $700 million in market value of our common stock held by non-affiliates as of June 30 in the fiscal year before the end of the five full fiscal years. Additionally, we cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result of our reduced disclosures, there may be less active trading in our common stock and our stock price may be more volatile.
AS A RESULT OF OUR INTENSELY COMPETITIVE INDUSTRY, WE MAY NOT GAIN ENOUGH MARKET SHARE TO BE PROFITABLE.
The corporate consulting and funds management businesses are intensely competitive and due to our small size and limited resources, we may be at a competitive disadvantage, especially as a public company. There are several firms offering similar services. Many of our competitors have proven track records and substantial human and financial resources, as opposed to our Company who has limited human resources and little cash. Also, the financial burden of being a public company, which will cost us approximately $75,000 per year in auditing fees and legal fees to comply with our reporting obligations under the Securities Exchange Act of 1934 and compliance with the Sarbanes-Oxley Act of 2002, will strain our finances and stretch our human resources to the extent that we may have to price our consultancy service fees higher than our non-publicly held competitors just to cover the costs of being a public company.
WE ARE VULNERABLE TO THE CATASTROPHIC EVENTS WHICH MAY NEGATIVELY AFFECT OUR PROFITABILITY AND ABILITY TO CARRY OUT OUR BUSINESS PLAN.
We are potentially vulnerable to catastrophic events that could affect our profitability and our ability to carry out our business plan. For example, sudden disruptions in business conditions may result from terrorist attacks similar to the events of September 11, 2001 in the United States, many other terrorist attacks in Europe and the United States in the past three years, including further attacks, retaliation and the threat of further attacks or retaliation, war, civil unrest in the Middle East, chaotic immigration problems in Europe, adverse weather conditions or other natural disasters, such as hurricanes and tsunamis, pandemic situations, interruptions to the Internet or large scale power outages can have a short term or, sometimes, long term impact on spending.
| 13 |
BECAUSE OUR BUSINESS MODEL ANTICIPATES OUR RECEIVING EQUITY STAKES IN OUR CLIENTS, MOST OF WHOM WILL BE DEVELOPMENT STAGE COMPANIES, WE MAY NOT BE ABLE TO RESELL SUCH EQUITY AT SUITABLE PRICES, IF AT ALL, WHICH COULD MATERIALLY IMPACT OUR EARNINGS AND ABILITY TO REMAIN IN BUSINESS.
Our business model anticipates that we will receive, as partial compensation for our consulting services, equity stakes in our clients, many of whom will be development stage companies. We will have to value those equity stakes at the time we receive them. Investments in development stage companies are risky because many of such companies’ securities are illiquid, thinly traded (if at all) and the value of such securities will be subject to adjustments should the value of such securities decline, should such securities be delisted from an exchange or cease being quoted on a stock quotation medium or should such businesses fail, which could cause us to write-down or write-off the value of such securities and result in a negative impact to our earnings and possibly cause us to cease or curtail our operations.
WE MAY BE SUBJECT TO FURTHER GOVERNMENTAL REGULATION, INCLUDING THE INVESTMENT COMPANY ACT OF 1940, WHICH COULD ADVERSELY AFFECT OUR OPERATIONS.
As part of our business model, GEP Equity Holdings Limited accepts equity securities in our clients as partial compensation for our services. In 2017, none of our income was derived from receipt of equity securities. As of December 31, 2017, 97.6% of our assets were comprised of equity securities. In 2017, we did not receive any new equity or shares in any of our clients; hence, none of our operating income in 2017 was derived from equity securities albeit we did sell 98,900 shares of equity that we received from a client in prior years. As of December 31, 2018, 68% of our assets were comprised of equity securities. In 2018, we received a common stock dividend of 1,187,059 common shares of one of our clients based on the stock split ratio of 4:5. There was no net accounting effect of the receipt of these shares; hence, none of our operating income in 2018 was derived from equity securities albeit we did sell 99,900 shares of equity that we received from a client in prior years.
Although we do not believe we are engaged in the business of investing, reinvesting or trading in securities, and we do not currently hold ourselves out to the public as being engaged in those activities, it is possible that we may be deemed to be an “inadvertent investment company” under section 3(a)(1)(C) of the Investment Company Act of 1940, as amended (“ICA”), if more than 40% of our future income and/or more than 40% of our assets are derived from “investment securities” (as defined in the ICA), and if we are deemed to be, or perceived to be, primarily engaged in the business of investing, reinvesting or trading in securities.
If we were deemed or found to be an investment company by the Securities and Exchange Commission or a court of law, then we would face dire consequences and a maze of additional regulatory obligations. For example, registered investment companies are subject to extensive, restrictive and potentially adverse regulation relating to, among other things, operating methods, management, capital structure, dividends and transactions with affiliates. If it were established that we are an unregistered investment company, there would be a risk, among other material adverse consequences, that we could become subject to monetary penalties or injunctive relief, or both, in an action by the SEC, that we would be unable to enforce contracts with third parties or that third parties with whom we have contracts could seek to obtain rescission of transactions with us undertaken during the period it was established that we were an unregistered investment company.
WE COULD BE SUBJECT TO THE INVESTMENT ADVISERS ACT OF 1940, WHICH WOULD BE DETRIMENTAL TO OUR BUSINESS.
Although we do not believe we are engaged in the investment advisory business and we do not hold ourselves out to be investment advisers, it is possible that the SEC could deem or find us to be an unregistered investment adviser due to the types of consulting services offered by us. If we were deemed or found to be an investment adviser by the Securities and Exchange Commission or a court of law, then we would face dire consequences and a maze of additional regulatory obligations. For example, registered investment advisers are subject to extensive, restrictive and potentially adverse regulation relating to, among other things, operating methods, fees, management, capital structure, dividends and transactions with affiliates. If it were established that we are an unregistered investment adviser, there would be a risk, among other material adverse consequences, that we could be become subject to monetary penalties or injunctive relief, or both, in an action by the SEC, that we would be unable to enforce contracts with third parties or that third parties with whom we have contracts could seek to obtain rescission of transactions with us undertaken during the period it was established that we were an unregistered investment adviser.
| 14 |
OUR SHAREHOLDERS MAY BE DILUTED THROUGH OUR EFFORTS TO OBTAIN FINANCING, FUND OUR OPERATIONS AND SATISFY OUR OBLIGATIONS THROUGH ISSUANCE OF ADDITIONAL SHARES OF OUR COMMON STOCK.
We will likely have to issue additional shares of our common Stock to fund our operations and to implement our plan of operation. Wherever possible, our board of directors will attempt to use non-cash consideration to satisfy obligations. In many instances, we believe that the non-cash consideration will consist of restricted shares of our common stock issued in lieu of cash. Our board of directors has authority, without action or vote of the shareholders, to issue all or part of the 397,965,591 authorized, but unissued, shares of our common stock. Future issuances of shares of our common stock will result in dilution of the ownership interests of existing shareholders, may further dilute common stock book value and that dilution may be material.
FINRA SALES PRACTICE REQUIREMENTS MAY LIMIT A STOCKHOLDER’S ABILITY TO BUY AND SELL OUR STOCK.
The FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may have the effect of reducing the level of trading activity and liquidity of our common stock. Further, many brokers charge higher transactional fees for penny stock transactions. As a result, fewer broker-dealers may be willing to make a market in our common stock, which may limit your ability to buy and sell our stock.
OUR ARTICLES OF INCORPORATION AUTHORIZE THE ISSUANCE OF PREFERRED STOCK.
Our Articles of Incorporation authorize the issuance of up to 50,000,000 shares of preferred stock with designations, rights and preferences determined from time to time by its Board of Directors. Accordingly, our Board of Directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting, or other rights which could adversely affect the voting power or other rights of the holders of the common stock.
We have 45,000,000 shares of Series “B” Preferred Stock outstanding at this time, which shares are owned by our management. We have 3,200,000 shares of Series “C” Preferred Stock outstanding at this time, 2,800.000 of which shares are owned by our management. All shares of our Series “B” and “C” Preferred Stock are contractually locked-up until September 27, 2020; hence, such shares cannot be sold or converted into common stock on any prior date.
We have an additional 1,800,000 shares of Series “C” Preferred Stock authorized and designated, but not issued or outstanding.
We no longer have any shares of Series “A” Preferred Stock authorized, designated or outstanding.
| 15 |
THIS ANNUAL REPORT CONTAINS FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO US, OUR INDUSTRY AND TO OTHER BUSINESSES.
These forward-looking statements in this Annual Report are based on the beliefs of our management, as well as assumptions made by and information currently available to our management. When used in this Annual Report, the words “estimate,” “project,” “believe,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are subject to risks and uncertainties that may cause our actual results to differ materially from those contemplated in our forward-looking statements. We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report. We do not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Annual Report or to reflect the occurrence of unanticipated events.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not applicable.
The Company does not own any property. Our executive offices are located at Capital House, Main Street, Lelley, HU12 8SN Hull, United Kingdom; we pay a monthly rent of U.S. $2,890 (GBP 2,000) for this office. Peter J. Smith, our President and Chief Executive Officer, is now based in the United Kingdom, and Enzo Taddei, our Chief Financial Officer, is based in Europe.
We are not subject to any other pending or threatened litigation.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
| 16 |
| ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. |
As of December 31, 2018, the Company’s Common Stock was quoted on the Over-the-Counter Bulletin Board under the symbol ARGQ. The market for the Company’s Common Stock is limited, volatile and sporadic and the price of the Company’s Common Stock could be subject to wide fluctuations in response to quarterly variations in operating results, news announcements, trading volume, sales of Common Stock by officers, directors and principal shareholders of the Company, general market trends, changes in the supply and demand for the Company’s shares, and other factors. The following table sets forth the high and low sales prices for each quarter relating to the Company’s Common Stock for the last two fiscal years. These quotations reflect inter-dealer prices without retail mark-up, markdown, or commissions, and may not reflect actual transactions.
| Fiscal 2017 | High | Low | ||||||
| First Quarter(1) | $ | 0.0200 | $ | 0.0120 | ||||
| Second Quarter (1) | $ | 0.0141 | $ | 0.0050 | ||||
| Third Quarter(1) | $ | 0.0053 | $ | 0.0028 | ||||
| Fourth Quarter (1) | $ | 0.0094 | $ | 0.0019 | ||||
| Fiscal 2018 | High | Low | ||||||
| First Quarter(1) | $ | 0.0071 | $ | 0.0035 | ||||
| Second Quarter(1) | $ | 0.0070 | $ | 0.0038 | ||||
| Third Quarter(1) | $ | 0.0084 | $ | 0.0040 | ||||
| Fourth Quarter (1) | $ | 0.0061 | $ | 0.0022 | ||||
| (1) | This represents the closing bid information for the stock on the OTC Bulletin Board. The bid and ask quotations represent prices between dealers and do not include retail markup, markdown or commission. They do not represent actual transactions and have not been adjusted for stock dividends or splits. |
The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a “Penny Stock,” for purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (i) that a broker or dealer approve a person’s account for transactions in penny stocks and (ii) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person’s account for transactions in penny stocks, the broker or dealer must (i) obtain financial information and investment experience and objectives of the person; and (ii) make a reasonable determination that the transactions in penny stocks are suitable for that person and that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, which, in highlight form, (i) sets forth the basis on which the broker or dealer made the suitability determination and (ii) that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading, and about commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
Shareholders should be aware that, according to SEC Release No. 34-29093 dated April 17, 1991, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker dealers; and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. The occurrence of these patterns or practices could increase the volatility of our share price.
| 17 |
Our management is aware of the abuses that have occurred historically in the penny stock market.
HOLDERS.
As of the date of this filing, there were 79 record holders of the shares of the Company’s issued and outstanding Common Stock.
DIVIDENDS.
The Company has not paid any cash dividends to date and does not anticipate or contemplate paying dividends in the foreseeable future. It is the present intention of management to utilize all available funds for the development of the Company’s business.
RECENT ISSUANCES OF UNREGISTERED SECURITIES
SECURITIES ISSUED IN 2019
On January 14, 2019, the Company issued 21,200,000 common shares valued at a contractually agreed value of $0.02 per share or $400,000 to Xantis Aion Securitisation Fund (at Xantis Private Equity Fund´s request) upon conversion of a convertible promissory note.
On January 24, 2019, the Company issued 5,300,000 common shares valued at a contractually agreed value of $0.02 per share or $100,000 to William Marshal Plc. upon conversion of a convertible promissory note.
All of the foregoing stock was issued in reliance on the exemption from registration requirements of the 33 Act provided by Section 4.(a)(2) of the 33 Act and/or the exclusion from registration requirements of the 33 Act provided by Regulation S promulgated under the 33 Act.
SECURITIES ISSUED IN 2018
We did not issue any shares of our Common Stock in 2018.
We issued 800,000 shares of Series “C” Preferred stock in 2018 to two of our officers in lieu of accrued salaries. These preferred shares are contractually locked up until September 27, 2020.
SECURITIES ISSUED IN 2017
On February 2, 2017, the Company issued 5,000,000 common shares valued at an agreed value of $0.01 per share or $50,000 to Mammoth Corporation upon conversion of a portion of a convertible promissory note.
On March 28, 2017, the Company issued 6,178,560 common shares valued at an agreed value of $0.0080925 per share or $50,000 to Mammoth Corporation upon conversion of a portion of a convertible promissory note.
On April 13, 2017, the Company issued 10,224,676 common shares valued at an agreed value of $0.006565 per share or $67,125, with the common shares valued at their fair value of $133,652 based on the quoted trading price, to Mammoth Corporation upon conversion of a portion of a convertible promissory note.
On May 12, 2017, the Company issued 7,823,310 common shares valued at an agreed value of $0.00429 per share or $33,562, with the common shares valued at their fair value of $88,543 based on the quoted trading price, to Mammoth Corporation upon conversion of a portion of a convertible promissory note.
| 18 |
On June 2, 2017, the Company issued 9,388,252 common shares valued at an agreed value of $0.003575 per share or $33,563, with the common shares valued at their fair value of $92,133 based on the quoted trading price, to Mammoth Corporation upon conversion of remaining portion of a convertible promissory note.
On July 10, 2017, the Company issued 10,000,000 common shares valued at an agreed value of $0.00234 per share or $23,400, with the common shares valued at their fair value of $54,795 based on the quoted trading price, to Mammoth Corporation upon conversion of a portion of a convertible promissory note.
On August 2, 2017, the Company issued 10,000,000 common shares valued at an agreed value of $0.00204 per share or $20,400, with the common shares valued at their fair value of $51,940 based on the quoted trading price, to Mammoth Corporation upon conversion of a portion of a convertible promissory note.
On September 11, 2017, the Company issued 20,000,000 common shares valued at an agreed value of $0.00169 per share or $33,800, with the common shares valued at their fair value of $102,533 based on the quoted trading price, to Mammoth Corporation upon conversion of a portion of a convertible promissory note.
On October 25, 2017, the Company issued 20,000,000 common shares valued at an agreed value of $0.00108 per share or $21,600, with the common shares valued at their fair value of $59,820 based on the quoted trading price, to Mammoth Corporation upon conversion of a portion of a convertible promissory note.
On December 4, 2017, the Company issued 47,000,000 common shares valued at an agreed value of $0.0013362 per share or $62,800, with the common shares valued at their fair value of $313,400 based on the quoted trading price, to Mammoth Corporation upon conversion of final portion of a convertible promissory note.
On December 27, 2017, the Company issued 5,443,836 common shares valued at an agreed value of $0.012 per share or $65,326, with the common shares valued at their fair value of $27,764 based on the quoted trading price, to private investor based in Malta upon conversion of a convertible promissory note.
All of the foregoing stock was issued in reliance on the exemption from registration requirements of the 33 Act provided by Section 4.(a)(2) of the 33 Act and/or the exclusion from registration requirements of the 33 Act provided by Regulation S promulgated under the 33 Act.
ISSUER REPURCHASES OF EQUITY SECURITIES
None.
ITEM 6. SELECTED FINANCIAL DATA.
Not applicable.
| ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. |
CAUTIONARY FORWARD - LOOKING STATEMENT
The following discussion and analysis of the results of operations and financial condition of Argentum 47, Inc. should be read in conjunction with our financial statements and related notes. References to “we”, “our,” or “us” in this section refers to the Company and its subsidiaries. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. We use words such as “anticipate”, “estimate”, “plan”, “project”, “continuing”, “ongoing”, “expect”, “believe”, “intend”, “may”, “will”, “should”, “could”, and similar expressions to identify forward-looking statements.
| 19 |
Certain matters discussed herein may contain forward-looking statements that are subject to risks and uncertainties. Such risks and uncertainties include, but are not limited to, the following:
| ● | the volatile and competitive nature of our industry, | |
| ● | the uncertainties surrounding the rapidly evolving markets in which we compete, | |
| ● | the uncertainties surrounding technological change of the industry, | |
| ● | our dependence on our intellectual property rights, | |
| ● | the success of marketing efforts by third parties, | |
| ● | the changing demands of customers, and | |
| ● | the arrangements with present and future customers and third parties. |
Should one or more of these risks or uncertainties materialize or should any of the underlying assumptions prove incorrect, actual results of current and future operations may vary materially from those anticipated.
Our MD&A is comprised of the following sections:
| A. | Critical accounting estimates and policies. | |
| B. | Business overview. | |
| C. | Results of operations for the years ended December 31, 2018 and 2017. | |
| D. | Financial condition as at December 31, 2018 and 2017. | |
| E. | Liquidity and capital reserves. | |
| F. | Business development. |
| A. | Critical Accounting Estimates and Policies: |
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”), which requires management to make estimates and assumptions that affect reported and disclosed amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period.
We believe that the critical accounting policies set forth in the accompanying consolidated financial statements describe the more significant judgments and estimates used in the preparation of our consolidated financial statements. These critical accounting policies pertain to revenues recognition, valuation of investments, convertible notes and derivatives and; stock based compensation.
If actual events differ significantly from the underlying judgments or estimates used by management in the application of these accounting policies, there could be a material effect on our results of operations and financial condition.
| B. | Business overview: |
Argentum 47, Inc. (“Company” or “ARG”) was incorporated on October 1, 2010, as a Nevada corporation under our prior name of Global Equity International, Inc., for the express purpose of acquiring Global Equity Partners Plc., a company incorporated under the Laws of the Republic of Seychelles (“GEP”) on September 2, 2009. On August 22, 2014, GE Professionals DMCC was incorporated in Dubai as a wholly-owned subsidiary of Global Equity Partners Plc. On June 10, 2016, ARG incorporated its wholly-owned subsidiary, called GEP Equity Holdings Limited, under the laws of the Republic of Seychelles.
On March 24, 2017, the Board of Directors of Global Equity Partners Plc. approved the assignment and transfer of GE Professionals DMMC to GEP Equity Holdings Limited. On March 18, 2019, the Board of Directors of GEP Equity Holdings Limited decided to commence the formal liquidation (with an effective date of March 31, 2019) of its Dubai based subsidiary, GE Professionals DMCC. As a result of this decision to liquidate the subsidiary, the Board of Directors also decided to discontinue its Human Resources and Placement business in Dubai.
| 20 |
On June 5, 2017, the Company sold 100% of the common stock of Global Equity Partners Plc. to a private citizen of the Kingdom of Thailand. The consideration for the purchase of Global Equity Partners Plc. was the assumption by the purchaser of all liabilities and indebtedness of Global Equity Partners Plc. in the approximate amount of $626,000. At the time of this sale, Global Equity Partners Plc. had assets consisting of common shares of other companies having a book value of approximately $603,000.
GEP Equity Holdings Limited provides consulting services, such as corporate restructuring, Exchange Listings and development for corporate marketing, investor and public relations, regulatory compliance and introductions to financiers, to companies desiring to be listed on stock exchanges in various parts of the world.
On December 12, 2017, we incorporated a United Kingdom company under the name of Argentum 47 Financial Management Limited (“Argentum FM”). Argentum FM is a wholly-owned subsidiary of the Company. Argentum FM was formed to serve as a holding company for the acquisition of United Kingdom based advisory firms. During 2019, the Company intends to acquire more licensed financial advisory firms.
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 U.S. $2,680,000) carrying an interest at the rate of 6% per annum. The Company has a right to pay this note on the maturity date by issuing shares of common stock at a conversion price equal to the greater of $0.02 or the average closing price of the Company’s common stock on the OTCBB for the prior 60 trading days. To date, the Company received $400,000 under this loan, which was converted into 21,200,000 shares of the Company’s common stock on January 14, 2019.
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 U.S. $2,680,000) carrying an interest at the rate of 6% per annum. The Company has a right to pay this note on the maturity date, by issuing shares of common stock at a conversion price equal to the greater of $0.02 or the average closing price of the Company’s common stock on the OTCBB for the prior 60 trading days. To date, the Company received $100,000 under this loan which was converted to 5,300,000 common shares of the Company on January 14, 2019.
On March, 29, 2018, we changed our corporate name to Argentum 47, Inc.
On April 2, 2018, our trading symbol was changed from GEQU to ARGQ.
On May 30, 2018, the Isle of Man Financial Services Authority (FSA) approved the eventual change of control of an Isle of man based financial advisory firm albeit Management has not yet decided if it will acquire this financial advisory firm as better and cheaper business propositions are currently in Management´s sights.
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 on earlier than 366 days’ post investment of each tranche of funding, by issuing common shares at a conversion price equal to the 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. To date, the Company has received $1,388,040 under this loan.
On August 1, 2018, Argentum FM consummated a Share Purchase Agreement with Mr. Rodney Leonard and Equilibrium Pensions Limited (trustees of The Leonard R. Personal Pension), pursuant to which Argentum FM would acquire 100% of the ordinary shares (equity) of Cheshire Trafford (U.K.) Limited of Hull, United Kingdom (“Cheshire Trafford”) from Mr. Leonard and Equilibrium Pensions Limited (trustees of The Leonard R. Personal Pension).
Cheshire Trafford (www.cheshire-trafford.co.uk) was incorporated under the laws of the United Kingdom on January 26, 1976, as a limited liability company. Cheshire Trafford is a very well established and UK FCA regulated Independent Financial Advisory firm that offers a fully computerized investment management service, including advising on investments in Unit Trusts, Investment Bonds, Shares, Investment Trusts, Government Bonds and Individual Savings Accounts. In addition, Cheshire Trafford advises investors on various types of Pension contracts, including Personal Pensions, Executive Pensions, Small Self-Administered Plans, Pension Mortgages and many more.
| 21 |
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.
Cheshire Trafford currently has three full time employees, in excess of 700 clients and administers funds of approximately US$39 million.
Cheshire Trafford has in excess of 700 individual clients and currently invests the funds it has under administration with well-known and reputable Investment Houses such as:
| ● | AJ Bell | |
| ● | Canada Life International | |
| ● | Fidelity International | |
| ● | Old Mutual International | |
| ● | Old Mutual Wealth Life | |
| ● | Royal London | |
| ● | Aviva | |
| ● | Prudential Assurance |
Cheshire Trafford’s primary customer base resides in the United Kingdom. Cheshire Trafford is licensed (Register Number 115194) and regulated by the Financial Conduct Authority (“FCA”) of the United Kingdom. Confirmation of Cheshire Trafford’s license can be made by visiting the FCA’s website: www.fca.gov.uk/register.
The purchase consideration for the acquisition of Cheshire Trafford is based on a formula of 2.7 times Cheshire Trafford’s projected annualized 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 U.S.$516,795 (389,300 Great Britain Pounds or “GBP”).
The purchase consideration is payable in up to three tranches. The first tranche of U.S.$175,710 (132,362 GBP) was paid upon closing of the transaction. The second tranche of U.S.$170,542 (128,469 GBP) is due 18 months after the closing. The third tranche of U.S. $170,542 (128,469 GBP) is due 36 months after the closing. The third tranche could be reduced (but not increased) in the event that Cheshire Trafford’s trailing or recurring revenues are less than the 2018 annualized gross recurring revenues.
The funds for the first tranche were obtained via a June 8, 2018 loan in the amount of U.S. $735,000 from the Xantis Aion Securitisation Fund, as previously reported in the Company’s Form 8-K Current Report filed with the Securities and Exchange Commission on June 11, 2018.
Our authorized capital consists of 950,000,000 shares of common stock having a par value of $0.001 per share and 50,000,000 shares of preferred stock having a par value of $0.001. As of December 31, 2018, we had 525,534,409 shares of common stock issued and outstanding. As of March 31, 2019, we had 552,034,409 shares of common stock issued and outstanding. We also have two series of preferred stock designated and authorized: Series “B” Preferred Stock and Series “C” Preferred Stock. As of December 31, 2018, and March 31, 2019, we had 45,000,000 shares of Series “B” Preferred Stock authorized, issued and outstanding. As of December 31, 2018, and March 31, 2019, we had designated and authorized 5,000,000 shares of Series “C” Preferred Stock, 3,200,000 shares of which were issued and outstanding. We do not have any Series “A” Preferred Stock authorized, issued or outstanding. We have 1,800,000 shares of Series “C” Preferred Stock designated and authorized, which could be issued in the future. All shares of our Series “B” and Series “C” Preferred Stock are contractually locked-up until September 27, 2020; hence, they cannot be sold or converted into common stock at any time prior to that date.
We provide corporate advisory services to companies desiring to have their shares listed on stock exchanges or quoted on quotation bureaus in various parts of the world. We had an office in Dubai until March 31, 2019. Our current and sole offices are situated in London. We have affiliations with firms located in some of the world’s leading financial centers such as London, New York, Frankfurt and Dubai. These affiliations are informal and are comprised of personal relationships with groups of people or people with whom our Company or our management has done, or attempted to do, business in the past. We do not have any contractual arrangements, written or otherwise, with our affiliations.
| 22 |
| C. | Results of operations for the years ended December 31, 2018 and 2017: |
The Company had revenues amounting to $143,947 and $224,526, respectively, for the years ended December 31, 2018 and 2017.
| December 31, 2018 | December 31, 2017 | Changes | ||||||||||
| Revenue | $ | 143,947 | $ | 224,526 | $ | (80,579 | ) | |||||
| $ | 143,947 | $ | 224,526 | $ | (80,579 | ) | ||||||
During the year ended December 31, 2018, $143,947 was recognized as revenue for services rendered to different clients. The total revenue was reduced by $80,579 when compared to the revenue recorded during the year ended December 31, 2017. This reduction was mainly due to the fact that the Company did not take on any new clients during the year ended December 31, 2018 because management has been concentrating on growing Cheshire Trafford, its IFA business, and also concentrating on its inorganic growth plan to acquire more financial advisory firms with funds under administration.
The following is a breakdown of total revenue for the year ended December 31, 2018, which amounted to $143,947:
| a) | $100,268 was received in cash for services performed to different clients. | |
| b) | $13,679 was recognized as revenue for services rendered to different clients, which amount was receivable as at December 31, 2018. | |
| c) | $30,000 was recognized as revenue for services rendered to different clients, which amount was written off as a bed debt during the year ended December 31, 2018. | |
The total revenue for the year ended December 31, 2017 amounted to $224,526. The breakdown of this amount was as follows:
| a) | $83,638 was received in cash for services performed to different clients. | |
| b) | $30,888 was recognized as revenue for services rendered to different clients, which amount was receivable as at December 31, 2018. | |
| c) | $10,000 was recognized as revenue for services rendered to different clients, which amount was written off as a bed debt during the year ended December 31, 2018. | |
| d) | $100,000 was recognized as revenue from deferred revenue as we performed related services to the clients against payments received in prior years. |
| 23 |
For the years ended December 31, 2018 and 2017, the Company had the following concentrations of revenues with customers:
| Customer | Location | December 31, 2018 | December 31, 2017 | |||||||
| SCL | United Kingdom | 0 | % | 4.45 | % | |||||
| TLF | United Arab Emirates | 0 | % | 5.73 | % | |||||
| VME | Oman | 0 | % | 1.92 | % | |||||
| AGL | United Arab Emirates | 0 | % | 1.82 | % | |||||
| SAC | United Kingdom / Norway | 0 | % | 44.54 | % | |||||
| FAD | Saudi Arabia | 0 | % | 10.10 | % | |||||
| FAT | United Arab Emirates | 0 | % | 1.89 | % | |||||
| DUO | Sri Lanka | 1.39 | % | 1.69 | % | |||||
| EEC | United Arab Emirates | 20.35 | % | 24.80 | % | |||||
| OCS | Saudi Arabia / Thailand | 11.15 | % | 3.06 | % | |||||
| GRL | United Kingdom | 20.84 | % | 0 | % | |||||
| CT clients (see below) | United Kingdom | 46.27 | % | 0 | % | |||||
| 100.00 | % | 100.00 | % | |||||||
For the post acquisition five months ended December 31, 2018, the Company had following concentrations of revenues regarding insurance brokerage business, which was 46.27% of the consolidated revenues of the Company:
Five months ended December 31, 2018 | ||||
| Initial advisory fees | 30.06 | % | ||
| Ongoing advisory fees | 10.57 | % | ||
| Renewal commissions | 17.57 | % | ||
| Trail or recurring commissions | 39.85 | % | ||
| Other revenue | 1.95 | % | ||
| 100.00 | % | |||
The total operating expenditures amounted to $1,303,412 and $1,451,284, respectively, for the years ended December 31, 2018 and 2017. The following table sets forth the Company’s operating expenditure analysis for both years:
| December 31, 2018 | December 31, 2017 | Change | ||||||||||
| General and administrative expenses | $ | 190,801 | $ | 165,624 | $ | 25,177 | ||||||
| Compensation | 759,815 | 1,125,582 | (365,767 | ) | ||||||||
| Professional services | 311,009 | 120,729 | 190,280 | |||||||||
| Depreciation | 2,282 | 9,349 | (7,067 | ) | ||||||||
| Amortization of intangibles | 9,505 | - | 9,505 | |||||||||
| Bad debt expense | 30,000 | 30,000 | - | |||||||||
| Total operating expenses | $ | 1,303,412 | $ | 1,451,284 | $ | (147,872 | ) | |||||
| 24 |
During the year ended December 31, 2018, total operating expenses decreased by $147,872 from the previous year ended December 31, 2017. This decrease was mainly due to a decrease in the compensation expense because during the comparative year ended December 31, 2017, all of the officers and directors received additional stock based compensation of $432,000 in the form of Series “C” preferred shares. While during the year ended December 31, 2018, this stock based compensation totaled $160,000. On the other hand, during the year ended December 31, 2018, professional services were increased by $190,280 when compared to the year ended December 31, 2017. This increase was mainly due to an increase in the professional services related to introduction of new business and acquisition targets. There were no such professional services received during the comparative year ended December 31, 2017. We also recorded an amortization of intangibles amounting to $9,505 during the year ended December 31, 2018 regarding the customer list intangible asset. There was no such amortization recorded during the comparative year ended December 31, 2017.
Loss from operations for the years ended December 31, 2018 and 2017 were $(1,159,465) and $(1,226,758), respectively.
The Company´s other income / (expenses), net for the years ended December 31, 2018 and 2017 were $(461,034) and $(2,481,583), respectively. The following table sets forth the Company’s other income and (expenses) analysis for both periods:
| December 31, 2018 | December 31, 2017 | Change | ||||||||||
| Interest expense | $ | (76,098 | ) | $ | (39,952 | ) | $ | (36,146 | ) | |||
| Amortization of debt discount | (120,505 | ) | (125,512 | ) | 5,007 | |||||||
| Loss on conversion of notes into common stock | - | (642,542 | ) | 642,542 | ||||||||
| Gain on sale of subsidiary | - | 23,052 | (23,052 | ) | ||||||||
| (Loss) / gain on available for sale marketable securities, net | (501,334 | ) | 18,851 | (520,185 | ) | |||||||
| Impairment loss on investments at cost | - | (1,601,336 | ) | 1,601,336 | ||||||||
| Gain / (loss) on extinguishment of debt and other liabilities | 243,364 | (113,148 | ) | 356,512 | ||||||||
| Other income | 317 | - | 317 | |||||||||
| Exchange rate loss | (6,778 | ) | (996 | ) | (5,782 | ) | ||||||
| Total other expenses | $ | (461,034 | ) | $ | (2,481,583 | ) | $ | 2,020,549 | ||||
During the year ended December 31, 2018, our total other expenses substantially decreased by $2,020,549 when compared to our total other expenses year ended December 31, 2017, this decrease was mainly due to the fact that during 2017, the Company, out of prudence, fully impaired, $1,601,336, two of its investments.
In addition, there were various partial conversions of fixed price convertible debt into common stock that resulted in loss on conversion of notes into common stock of $642,542 during the year ended December 31, 2017. There were no such losses on conversion recorded during the year ended December 31, 2018.
On January 1, 2018, the Company adopted ASU 2016-01 which required the Company to recognize unrealized gains and losses on available for sale marketable securities in the statement of operations, hence the Company recorded a net loss on available for sale marketable securities amounting to $501,334 during the year ended December 31, 2018 but recorded an $18,851 gain during the year ended December 31, 2017.
During the year ended December 31, 2017, the Company also recorded a gain on the sale of a subsidiary, Global Equity Partners Plc., amounting to $23,052.
Also, there was an increase in gain on debt extinguishment as the Company renegotiated loan terms with one of the lenders, which resulted in a gain on debt extinguishment of $193,358 during the year ended December 31, 2018. The Company also reversed a premium on a convertible debt that was settled in cash during the year ended December 31, 2018, resulting in a gain on debt extinguishment of $28,538. The Company further recorded a gain on extinguishment of $19,317 payable to two employees in Dubai and $2,151 was recorded as gain on extinguishment of accrued liabilities during the year ended December 31, 2018.
The loss before tax for the years ended December 31, 2018 and 2017 amounted to $1,620,499 and $3,708,341, respectively.
The income tax expense for the years ended December 31, 2018 and 2017 amounted to $0 and $2,832, respectively.
The net loss for the years ended December 31, 2018 and 2017 amounted to $1,620,499 and $3,711,173, respectively.
| 25 |
The comprehensive loss for the years ended December 31, 2018 and 2017 amounted to $1,607,027 and $2,529,378, respectively. The Company’s other comprehensive income includes an unrealized fair value gain on available for sale marketable securities amounting to $1,181,675 which was recognized during the year ended December 31, 2017 while revaluing the existing common stock of a reporting entity held by the Company as at December 31, 2017.
| December 31, 2018 | December 31, 2017 | |||||||
| Comprehensive income (loss): | ||||||||
| Net loss | $ | (1,620,499 | ) | $ | (3,711,173 | ) | ||
| Unrealized fair value gain on available for sale marketable securities | - | 1,181,675 | ||||||
| Gain on foreign currency translation | 13,472 | 120 | ||||||
| Comprehensive (loss) / income | $ | (1,607,027 | ) | $ | (2,529,378 | ) | ||
At December 31, 2018 and December 31, 2017, the Company had 525,534,409 common shares issued and outstanding. The weighted average number of common shares outstanding for the years ended December 31, 2018 and 2017 was 525,534,409 and 423,709,805 common shares, respectively. Hence, the net loss per share at December 31, 2018 and 2017 was $(0.00) and $(0.01), respectively.
| D. | Financial condition as at December 31, 2018 and 2017: |
Assets:
The Company reported total assets of $2,156,054 and $2,080,144 as of December 31, 2018 and December 31, 2017, respectively. These mainly included our investments in securities of our clients that we received as part of our consulting fees in previous years. We had marketable securities at fair value of $1,458,848 and $2,029,340 as at December 31, 2018 and December 31, 2017, respectively.
At December 31, 2018, our non-current assets included fixed assets, intangibles and goodwill. Fixed assets were comprised of office equipment having a net book value of $5,180 and $2,067 as at December 31, 2018 and December 31, 2017, respectively. Intangibles of $332,689 included fair value of customer list that was recognized as part of the business combination. We also recorded a goodwill of $142,924 as the excess of the fair value of the consideration paid over the fair value of the identified net assets acquired at the date of acquisition. Furthermore, our current assets at December 31, 2017 amounted to $2,077,941, and at December 31, 2018, these current assets amounted to $1,675,261 comprised of cash of $193,807, accounts receivable of $13,679, prepaid and other current assets of $8,927, and marketable securities valued at fair value of $1,458,848.
Liabilities:
Our current liabilities at December 31, 2017 totaled $1,370,944. At December 31, 2018, the Company reported its current liabilities amounting to $2,450,149, which represents an increase of 79%. This increase was due to the fact that the Company received an initial tranche of funding from Xantis Private Equity Fund, Xantis AION Securitization Fund and William Marshal Plc., amounting to an aggregate of $1,888,040 during the year ended December 31, 2018. All of our current liabilities reported at December 31, 2018 mainly include third party debt which is due to various lenders, trade creditors and payables to related parties on account of accrued salaries and expenses.
| 26 |
Following is the summary of all third party notes, net of debt discount, including the accrued interest as at December 31, 2017:
| Date of Note | Total Debt | Remarks | ||||
| October 17, 2013 | $ | 480,000 | Non-convertible and non-collateralized | |||
| November 26, 2013 | 37,971 | Non-convertible and non-collateralized | ||||
| June 5, 2017 | 248,737 | Fixed price convertible and non-collateralized | ||||
| August 9, 2017 | 73,386 | Fixed price convertible and non-collateralized | ||||
| November 6, 2017 | 26,344 | Non-convertible and non-collateralized | ||||
| November 15, 2017 | 79,857 | Convertible and non-collateralized | ||||
| Balance, December 31, 2017 | $ | 946,295 | ||||
Following is the summary of all third party notes, net of debt discount and debt issue costs, including the accrued interest as at December 31, 2018:
| Date of Note | Total Debt | Remarks | ||||
| October 17, 2013 | $ | 277,642 | Non-convertible and non-collateralized | |||
| November 26, 2013 | 37,971 | Non-convertible and non-collateralized | ||||
| January 17, 2018 | 421,777 | Fixed price convertible and non-collateralized | ||||
| January 23, 2018 | 105,819 | Fixed price convertible and non-collateralized | ||||
| June 8, 2018 | 709,186 | Fixed price convertible and non-collateralized | ||||
| October 10, 2018 | 578,269 | Fixed price convertible and non-collateralized | ||||
| Balance, December 31, 2018 | $ | 2,130,664 | ||||
The Company reported a long term liability of $283,732 at December 31, 2018 on account of fair value of the contingent purchase consideration for the acquisition of Cheshire Trafford. There were no long term liabilities as at December 31, 2017.
Stockholders’ Equity / (Deficit):
At December 31, 2017, the Company had Stockholders´ Equity of $709,200. At December 31, 2018, the Company had Stockholders´ Deficit of $(577,827). We reported accumulated other comprehensive income of $13,592 and $1,181,795 as at December 31, 2018 and December 31, 2017, respectively. This reduction was due to the adoption of ASC 2016-01 whereby the management reversed $1,181,675 from accumulated other comprehensive income to opening retained earnings as a cumulative effect adjustment on January 1, 2018.
The Company had 525,534,409 shares of common stock issued and outstanding at December 31, 2018 and December 31, 2017. The Company also had issued and outstanding 45,000,000 shares of Series “B” Convertible Preferred Stock as at December 31, 2018 and December 31, 2017. The Company further had issued and outstanding 3,200,000 and 2,400,000 shares of Series “C” Convertible Preferred Stock as at December 31, 2018 and December 31, 2017, respectively.
| E. | Liquidity and Capital reserves: |
The accompanying 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 consolidated financial statements, the Company had a net loss of $1,620,499 and net cash used in operations of $960,917 for the year ended December 31, 2018; working capital deficit, stockholder’s deficit and accumulated deficit of $774,888, $577,827 and $11,353,215 as of December 31, 2018. 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.
| 27 |
The ability for the Company to continue its operations is primarily dependent on management’s plans as follows:
| a) | Continually engaging with new clients. | |
| b) | Consummating and executing current engagements. | |
| c) | Maximizing the acquired financial advisory revenues. | |
| d) | Continuing to receive fixed funding, via equity or debt, for acquisition and growth. | |
| e) | Acquiring and managing more financial advisory firms with funds under administration located around the globe. |
The Company secured two funding agreements in January of 2018, one with Xantis Private Equity Fund (Luxembourg) for a minimum of 2,000,000 Great Britain Pounds (approximately $2.68 million) and another with William Marshal Plc., a United Kingdom Public Limited Company listed on the Cyprus Public Exchange Emerging Companies Market, for up to a further 2,000,000 Great Britain Pounds (approximately $2.68 million). The Company has a right to pay each note, by issuing common shares, 366 days after each tranche of funding is received, at a conversion price equal to the greater of $0.02 or the average closing price of the Company’s common stock on the OTCBB for the prior 60 trading days. To date, the Company has received an aggregate of $500,000 from Xantis Private Equity Fund and William Marshal Plc.
The Company secured another funding agreement in June 2018 with Xantis AION Securitisation Fund (Luxembourg) for a minimum of 1,700,000 Great Britain Pounds (equivalent to approximately U.S. $1.94 million). The Company has a right to pay each note, by issuing common shares, 366 days after each tranche of funding is received, at a conversion price equal to the greater of $0.02 or the average closing price of the Company’s common stock on the OTCBB for the prior 60 trading days. To date, the Company has received an aggregate of $1,388,040 from this agreement.
During mid to late 2017, the Company´s management decided to implement its inorganic growth plan hence targeted the acquisition of various licensed financial advisory firms with funds under administration.
On May 30, 2018, Isle of Man Financial Services Authority (FSA) approved the eventual change of control of a financial advisory firm that will be acquired by the Company in Isle of Man. To date, Management has not yet decided if the Company will acquire this particular financial advisory firm
On August 1, 2018, the Company entered into a Share Purchase Agreement with a third party, pursuant to which the Company acquired 100% of the ordinary shares of Cheshire Trafford (UK) 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. As of December 31, 2018, this advisory firm manages approximately US$39 million of funds.
Due to various delays beyond Management´s control, the Company decided not to acquire the two Malaysia advisory firms.
The Company´s growth plan by way of acquisition of various advisory firms with funds under administration is, in essence, the acquisition of stable and long-term recurring and non-recurring revenue coupled with a strong client base and a distribution force.
Now that the Company has acquired one financial advisory firm, it intends to continue growing in 2019 by acquiring more financial advisory firms when the correct opportunities arise.
Any short fall in our projected operating revenues will be covered by:
| ● | The cash fees and commissions received by our subsidiary Cheshire Trafford UK Limited. | |
| ● | Receiving short term loans from one or more of our directors even though at the present time, we do not have verbal or written commitments from any of our directors to lend us money. | |
| ● | Continuing to receive capital funding from Xantis Aion Securitisation Fund and William Marshal Plc. | |
| ● | Liquidating (selling), when necessary, part or all of our investments and/or Marketable Securities. |
| 28 |
| F. | Business Development: |
MILESTONES FOR 2019-2020:
Our specific plan of operations and milestones from April 2019 through March 2020 are as follows:
| 1. | CAPITAL MARKETS |
The Company intends to continue its mandate to assist its client, Creditum Limited, with the listing of the company´s shares on a recognized European Stock Exchange.
| 2. | ACQUIRE CERTAIN INDEPENDENT FINANCIAL ADVISORY FIRMS WITH MONEY UNDER ADMINISTRATION: |
The Company intends to acquire more advisory firms with funds under administration during the next 12 months. Management has already targeted several of these firms for acquisition in the United Kingdom and also in South East Asia and is currently analyzing the firms on an individual basis to identify the best possible value proposition for the Company. Twelve individual companies are being thoroughly examined as of March 2019.
As the Company acquires more Financial Advisory firms, each book of business will be analyzed to achieve the maximum return and revenue from the client bank without affecting the client offering. In addition, certain cost savings will be managed into the budgets by using technology for the administration, looking for duplication of services and by managing the client and the funds under administration in a better more efficient way.
The acquisition of these entities will open up a new network for the services of:
| ○ | New capital markets clients. | |
| ○ | Distribution of new funds / products. | |
| ○ | Maximizing the current books of business being bought. | |
| ○ | Expand and thus increase business via more financial advisors. | |
| ○ | Seek products that offer both a minimum of 1% trail (recurring) income and a secure risk averse home for clients’ funds. | |
| ○ | Seek cost savings, where possible, due to elimination of duplicate services. | |
| ○ | Implement rapid and efficient systems in order to allow information to flow to the clients and to management more effectively. | |
| ○ | Acquiring smaller, active client banks into our licenses and procedures for cost effective growth. |
| 3. | SEEK FURTHER FUNDING FOR FURTHER INORGANIC GROWTH VIA ACQUISITION |
We intend to continue to seek further funding under similar or better terms than the funding that we secured during 2018. We are currently negotiating terms with a new European based Regulated Fund for long term funding in excess of US $10 million to accelerate our inorganic growth and acquisition plan with a view to consolidate our Company in the market place. However, we do not currently have a written agreement for this additional funding, but we do expect to finalize terms in the near future.
| 4. | CONTINUE TO DEVELOP AND GROW ALREADY ACQUIRED IFA BUSINESSES |
By leveraging the licenses that we now own, we can significantly increase our business and revenues at very little extra cost and improve profitability. We intend to market the Company as a United Kingdom licensed entity for various Appointed Representatives (“AR”) and also Introducer Appointed Representatives “(IAR”). In 2018, Aurum Wealth Management Limited was approved by the UK Financial Authority “(FCA”) as an AR of Cheshire Trafford UK Limited and in early 2019, Global Alternative Administration (The Pension Admin Team) was appointed as an IAR to Cheshire Trafford UK Limited.
| 29 |
| 5. | EXPLORE A FULLY COMPLIANT EUROPEAN UNION (EU) MIFID II LICENSE |
Having a European Union (EU) license will allow the Company to act in a role similar to an Appointed Representative (AR) for European Union wide brokerages. On October 1, 2018, the rules regarding financial services changed in Europe. There are over 10,000 entities and also individuals offering advice in Europe who now require a new license and we, through our subsidiary, Cheshire Trafford UK Limited, intend to thoroughly explore these new business opportunities.
| 6. | COMMENCE A TARGETED MARKETING PLAN |
In the second quarter of our 2019 fiscal year, our United Kingdom regulated business, Cheshire Trafford UK Limited, will commence a direct marketing campaign within the region using traditional print media, radio advertising, social media and editorial pieces. In conjunction with this campaign, the website and marketing of the Company will be refocused with a complete new image based around “50 years of serving the community”. Two days per month in our office in the United Kingdom, we will offer free consultation to prospective clients that come and visit us, thus enabling us to potentially recruit them as new clients.
| 7. | FURTHER EXPAND OUR RANGE OF SERVICES TO OUR FINANCIAL SERVICES CLIENTS |
We will bring additional products to the client bank in order to maximize the potential returns per client with complementary products such as mortgages, trusts and more attractive funds.
| ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK. |
Not applicable.
| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. |
Our financial statements and supplementary data may be found beginning at page F-1.
| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. |
Not applicable.
| ITEM 9A. | CONTROLS AND PROCEDURES. |
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934) were effective.
| 30 |
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:
| (1) | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; | |
| (2) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and | |
| (3) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2018. In making this assessment, management used the framework set forth in the report entitled Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO (2013). The COSO framework summarizes each of the components of a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permits us to provide only management’s report in this Annual Report.
IDENTIFIED MATERIAL WEAKNESSES AND SIGNIFICANT DEFICIENCIES
A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected. During our assessment of our internal control over financial reporting as of December 31, 2018, no material weaknesses were found.
CONCLUSION
Our management concluded that the Company´s internal controls over financial reporting were effective.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING.
We did not change our internal control over financial reporting during our last fiscal quarter that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
| ITEM 9B. | OTHER INFORMATION. |
Not applicable.
| 31 |
| ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. |
OFFICERS AND DIRECTORS
Our directors will serve until their successors are elected and qualified. Our officers are elected by the board of directors to a term of one year and serve until their successors are duly elected and qualified, or until they are removed from office. Our board of directors has no nominating, auditing or compensation committees.
The names, addresses, ages and positions of our current officers, directors and key employees are set forth below:
| First Year | ||||||
| Name | Age | as Director | Position | |||
| Peter James Smith | 50 | 2010 | President, Chief Executive Officer and Director | |||
| Enzo Taddei | 46 | 2011 | Chief Financial Officer, Secretary and Director |
The persons named above were elected to hold their offices until the next annual meeting of our stockholders.
PETER JAMES SMITH - PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR
Mr. Smith has served as the President, Chief Executive Officer and Director of the Company since December 31, 2010. In 1993, he created an international financial services company in the Middle East and Asia, named Belgravia Financial Management, and served as the Chief Executive Officer of that firm until he resigned in May 2006. Between 1993 and May 2005, he built Belgravia Financial Management to 23 global offices, 5 country licenses, a Company with $2.2 billion under financial management. Mr. Smith has extensive experience with over 13 years dealing with financial advisory and financial management entities and has previously performed 11 acquisitions in this space and successfully amalgamated these acquisitions into one highly profitable company, ultimately vending into an OTCBB company called Tally Ho Ventures. In 2006, Mr. Smith resigned from his position as Chief Executive Officer of Tally Ho Ventures, Inc. Tally Ho Ventures, Inc. subsequently changed its name to Premier Wealth Management, Inc. on September 26, 2007. Mr. Smith first qualified as a stockbroker in London in 1986 with Rensburg and Co. He then moved on to the London Traded Options Market where he passed his LTOM open outcry examinations to become an options trader for a subsidiary of ABN Amro bank
ENZO TADDEI - CHIEF FINANCIAL OFFICER, SECRETARY AND DIRECTOR
Mr. Taddei was appointed as our Chief Financial Officer and a member of our Board of Directors on September 1, 2011. In addition to being a qualified accountant and tax consultant by profession, Mr. Taddei is proficient in three languages: English, Spanish and Italian. He obtained a Degree in Economics from EADE University in Malaga (Spain) in 1998 and also a Bachelor in Business Administration (BBA) from the University of Wales in 1996. He also holds a Masters´ Degree in Spanish and International Taxation granted to him by EADE University in Malaga (Spain) in 2000.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
Except as described below, during the past ten years, no present director, executive officer or person nominated to become a director or an executive officer of the Company:
| (1) | had a petition under the federal bankruptcy laws or any state insolvency law filed by or against, or a receiver, fiscal agent or similar officer appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing; |
| 32 |
| (2) | was convicted in a criminal proceeding or subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); | |
| (3) | was subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any of the following activities: |
| (i) | acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; | |
| (ii) | engaging in any type of business practice; or | |
| (iii) | engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities laws; or |
| (4) | was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of an federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (3) (i), above, or to be associated with persons engaged in any such activity; | |
| (5) | was found by a court of competent jurisdiction in a civil action, the Securities and Exchange Commission to have violated a federal or state securities law, and the judgment in such civil action or finding by the Securities and Exchange Commission has not been subsequently reversed, suspended or vacated; | |
| (6) | was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated; | |
| (7) | was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to any alleged violation of: |
| i. | Any Federal or State securities or commodities law or regulation; or | |
| ii. | Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or | |
| iii. | Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
| (8) | was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26)), and registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C.1(a)(29)), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
| 33 |
ABSENCE OF INDEPENDENT DIRECTORS
We do not have any independent directors and are unlikely to be able to recruit and retain any independent directors due to our small size and limited financial resources.
DIRECTOR QUALIFICATIONS
We do not have a formal policy regarding director qualifications. In the opinion of Peter J. Smith, our President and majority shareholder, Mr. Taddei and he have sufficient business experience and integrity to carry out the Company’s plan of operations. Messrs. Smith and Taddei recognize that the Company will have to rely on professional advisors, such as attorneys and accountants with public company experience to assist with compliance with Exchange Act reporting and corporate governance matters.
DIRECTORSHIPS
Not applicable.
AUDIT COMMITTEE; AUDIT COMMITTEE FINANCIAL EXPERT
Although we have not established an Audit Committee, the functions of the Audit Committee are currently carried out by our Board of Directors.
FAMILY RELATIONSHIPS
There are no family relationships between or among or officers and directors.
CODE OF BUSINESS CONDUCT AND ETHICS
On September 2, 2011, we adopted a Code of Business Conduct and Ethics applicable to our officers, including our principal executive officer, principal financial officer, principal accounting officer or controller and any other persons performing similar functions. Our Code of Business Conduct and Ethics was designed to deter wrongdoing and promote honest and ethical conduct, full, fair and accurate disclosure, compliance with laws, prompt internal reporting and accountability to adherence to our Code of Business Conduct and Ethics. Our Code of Business Conduct and Ethics is posted on our website at http://www.arg47.com in the “Governance” section. We also intend to disclose any future amendments to, and any waivers from (though none are anticipated), the Code of Business Conduct and Ethics in the “Governance” section of our website.
| 34 |
| ITEM 11. | EXECUTIVE COMPENSATION. |
The following table sets forth the aggregate compensation paid by the Company and/or its subsidiaries to our executive officers and directors of the Company for services rendered during the periods indicated below. We have included Patrick Dolan’s compensation numbers in prior years; however, he resigned from his Directorship effective March 29, 2018 hence his compensation is not included in the table below.
SUMMARY COMPENSATION TABLE
| Name and Principal Position | Year | Salary ($) | Note | Bonus / Other compensation ($) | Note | Stock Awards ($) | Note | All other stock compensation (s) | Note | Total ($) | ||||||||||||||||||||||||||||||
| Peter J. Smith | 2018 | $ | 210,000 | (1 | ) | $ | - | $ | - | $ | 80,000 | $ | 290,000 | |||||||||||||||||||||||||||
| President, Chief | 2017 | $ | 210,000 | (2 | ) | $ | - | $ | - | $ | 180,000 | $ | 390,000 | |||||||||||||||||||||||||||
| Executive Officer & | 2016 | $ | 210,000 | (3 | ) | $ | 26,233 | (4 | ) | $ | - | $ | - | $ | 236,233 | |||||||||||||||||||||||||
| Director | ||||||||||||||||||||||||||||||||||||||||
| Enzo Taddei | 2018 | $ | 210,000 | (5 | ) | $ | - | $ | - | $ | 80,000 | $ | 290,000 | |||||||||||||||||||||||||||
| Chief Financial | 2017 | $ | 210,000 | (6 | ) | $ | - | $ | - | $ | 180,000 | $ | 390,000 | |||||||||||||||||||||||||||
| Officer, Secretary & | 2016 | $ | 210,000 | (7 | ) | $ | 25,200 | (8 | ) | $ | - | $ | - | $ | 235,200 | |||||||||||||||||||||||||
| Director | ||||||||||||||||||||||||||||||||||||||||
| (1) | Represents $109,020 paid in cash, $71,588 was accrued, but unpaid, at December 31, 2018, and $29,392 of the 2018 salary and $50,608 of the 2017 accrued salary was converted into 400,000 shares of the Company’s series “C” preferred stock. | |
| (2) | Represents $32,054 paid in cash, $96,497 was accrued, but unpaid, at December 31, 2017, and $81,449 of the 2017 salary and $18,551 of the 2016 accrued salary was converted into 1,000,000 shares of the Company’s series “C” preferred stock. | |
| (3) | Represents $77,841 paid in cash, $18,551 was accrued, but unpaid, at December 31, 2016, and $113,608 of the 2016 salary and $58,294 of the 2015 accrued salary was converted into 8,220,120 shares of the Company’s common stock (restricted). | |
| (4) | This $26,333 represents personal rent on Mr. Smith’s Dubai apartment, which was paid in cash by the Company. This obligation ended on September 30, 2016. | |
| (5) | Represents $109,020 paid in cash, $71,588 was accrued, but unpaid, at December 31, 2018, and $29,392 of the 2018 salary and $50,608 of the 2017 accrued salary was converted into 400,000 shares of the Company’s series “C” preferred stock. | |
| (6) | Represents $29,197 paid in cash, $98,303 was accrued, but unpaid, at December 31, 2017, and $82,500 of the 2017 salary and $17,500 of the 2016 accrued salary was converted into 1,000,000 shares of the Company’s series “C” preferred stock. | |
| (7) | Represents $86,272 paid in cash and $17,500 was accrued, but unpaid, at December 31, 2016. $106,228 of the 2016 salary and $59,206 of the accrued 2015 salary was converted into 7,896,697 shares of the Company’s common stock (restricted). | |
| (8) | Represents $25,200 that was converted into 1,260,000 shares of the company’s common stock (restricted). |
EMPLOYMENT AGREEMENTS SUMMARY
PETER JAMES SMITH:
Mr. Smith’s employment agreement with the Company’s wholly-owned subsidiary, GEP Equity Holdings Limited, was renewed on September 1, 2016, and the basic terms were as follows:
| 1. | DUTIES - ASSIGNMENT: Chief Executive Officer (CEO) and Director on Board of Directors. | |
| 2. | COMPENSATION: | |
| $210,000 per annum, subject to annual review and adjustment of no less than a 5% percentage increase. The salary will be paid on a monthly basis. It was also agreed that the company would pay a bonus of up to 12% of the annual salary in June of each year. | ||
| 3. | EMPLOYMENT: |
| (a) | Employment will continue for 36 months. |
| 35 |
| 4. | SEVERANCE PAYMENTS |
| (a) | If Employer terminates this Agreement for any reason other than Disability, Death, Employee shall be entitled to receive, and Employer shall make, the following severance payments: |
| (i) | continue to pay a sum equivalent to twelve months salary. |
| 5. | COMISSION INCENTIVES | |
| The Company agreed to pay a cash bonus equivalent to 6% of all of the gross cash success fees that the Company receives during the term of the employment agreement. |
ENZO TADDEI:
Mr. Taddei’s employment agreement with the Company’s wholly-owned subsidiary, GEP Equity Holdings Limited, was renewed on September 1, 2016 and the basic terms were as follows:
| 1. | DUTIES - ASSIGNMENT: Chief Financial Officer (CFO) and Director on Board of Directors | |
| 2. | COMPENSATION: | |
| $210,000 per annum, subject to annual review and adjustment of no less than a 5% percentage increase. The salary will be paid on a monthly basis. It was also agreed that the company would pay a bonus of up to 12% of the annual salary in June of each year. |
| 3. | EMPLOYMENT: |
| (a) | Employment will continue for 36 months. |
| 4. | SEVERANCE PAYMENTS |
| (a) | If Employer terminates this Agreement for any reason other than Disability, Death, Employee shall be entitled to receive, and Employer shall make, the following severance payments: |
| (i) | continue to pay a sum equivalent to twelve months. |
| 5. | COMMISSION INCENTIVES | |
| The company agreed to pay a cash bonus equivalent to 6% of the gross cash success fees that the Company receives during the term of the employment agreement |
STOCK OPTION AND OTHER COMPENSATION PLANS.
Aside from the employment agreements with Messrs., Smith and Taddei, the Company currently does not have a stock option or any other compensation plan and we do not have any plans to adopt one in the near future.
COMPENSATION OF DIRECTORS
Our directors do not receive any compensation for serving as a member of our board of directors, as they are compensated pursuant to their employment agreements as officers of the Company.
No retirement, pension, profit sharing, stock option or insurance programs or other similar programs have been adopted by the Company for the benefit of its directors.
| 36 |
There are no understandings or agreements regarding compensation our management will receive after a business combination that is required to be included in this table, or otherwise.
INDEMNIFICATION.
Article VII, Section 7 of the Company’s Bylaws provide that the Company shall indemnify its officers, directors, employees and agents to the fullest extent permitted by the laws of Nevada.
The Nevada Revised Statutes allow us to indemnify our officers, directors, employees, and agents from any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, except under certain circumstances. Indemnification may only occur if a determination has been made that the officer, director, employee, or agent acted in good faith and in a manner, which such person believed to be in the best interests of the corporation. A determination may be made by the shareholders; by a majority of the directors who were not parties to the action, suit, or proceeding confirmed by opinion of independent legal counsel; or by opinion of independent legal counsel in the event a quorum of directors who were not a party to such action, suit, or proceeding does not exist.
The expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by us as they are incurred and in advance of the final disposition of the action, suit or proceeding, if and only if the officer or director undertakes to repay said expenses to us if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by us.
The indemnification and advancement of expenses may not be made to or on behalf of any officer or director if a final adjudication establishes that the officer’s or director’s acts or omission involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action.
SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the company, we have been advised by our special securities counsel that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy and is, therefore, unenforceable.
| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. |
The following tables set forth, as of the date of this Annual Report, the ownership of our common stock and preferred stock by (a) each person known by us to be the beneficial owner of more than 5% of our outstanding common stock and preferred stock; and (b) by all of named officers and our directors and by all of our named executive officers and directors as a group. To the best of our knowledge, the persons named have sole voting and investment power with respect to such shares and are beneficial owners of the shares indicated in the tables, except as otherwise noted by footnote.
The information presented below regarding beneficial ownership of our voting securities has been presented in accordance with the rules of the U.S. Securities and Exchange Commission and is not necessarily indicative of ownership for any other purpose. Under these rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares the power to vote or direct the voting of the security or the power to dispose or direct the disposition of the security. A person is deemed to own beneficially any security as to which such person has the right to acquire sole or shared voting or investment power within 60 days through the conversion or exercise of any convertible security, warrant, option or other right. More than one person may be deemed to be a beneficial owner of the same securities. The percentage of beneficial ownership by any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person, which includes the number of shares as to which such person has the right to acquire voting or investment power within 60 days, by the sum of the number of shares outstanding as of such date plus the number of shares as to which such person has the right to acquire voting or investment power within 60 days. Consequently, the denominator used for calculating such percentage may be different for each beneficial owner. Except as otherwise indicated below, we believe that the beneficial owners of our common stock listed below have sole voting and investment power with respect to the shares shown.
| 37 |
(a) Security ownership of certain beneficial owners:
| Title of Class | Name
and Address of Beneficial Owner |
Amount and Nature of Beneficial Ownership |
Notes | Percent of Class | ||||||||||
| Common Stock | Peter J. Smith, | 419,380,145 | 1,2 | 43.17 | % | |||||||||
| London, United Kingdom. | ||||||||||||||
| Common Stock | Enzo Taddei, | 375,325,000 | 1,3 | 40.47 | % | |||||||||
| Dubai, UAE. | ||||||||||||||
| Common Stock | Patrick V. Dolan | 92,608,267 | 1,4 | 14.42 | % | |||||||||
| Liverpool, United Kingdom. | ||||||||||||||
| (1) | The numbers and percentages set forth in these columns are based on 552,034,409 shares of Common Stock outstanding on March 31, 2019, and the shareholder’s respective beneficial ownership of 45,000,000 shares of Series “B” Preferred Stock and 3,200,000 shares of Series “C” Preferred Stock outstanding. The number and percentage of shares beneficially owned is determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rule, beneficial ownership includes any shares as to which the security holder has sole or shared voting power or investment power and also any shares, which the security holder has the right to acquire within 60 days. On the date of this Annual Report, each share of Series B Preferred Stock has 10 votes on all matters brought before meetings of shareholders and each share of Series C Preferred Stock has 100 votes on all matters brought before meetings of shareholders. | |
| (2) | Mr. Smith is the direct beneficial owner of, and has sole dispositive or voting power over, these shares. Mr. Smith is the direct beneficial owner of 114,705,145 shares of Common Stock. Mr. Smith owns 16,467,500 shares of Series “B” Preferred Stock, each share of which has 10 votes on all matters brought before meetings of shareholders. In addition, Mr. Smith owns 1,400,000 shares of Series “C” Preferred Stock, each share of which has 100 votes on all matters brought before meetings of shareholders. | |
| (3) | Mr. Taddei is the direct beneficial owner of, and has sole dispositive or voting power over, these shares. Mr. Taddei owns 23,532,500 shares of Series “B” Preferred Stock, each share of which has 10 votes on all matters brought before meetings of shareholders. In addition, Mr. Taddei owns 1,400,000 shares of Series “C” Preferred Stock, each share of which has 100 votes on all matters brought before meetings of shareholders. Mr. Taddei does not own any shares of Common Stock. | |
| (4) | Mr. Dolan is the direct beneficial owner of, and has sole dispositive and voting power over, these shares. Mr. Dolan is the direct beneficial owner of 2,608,267 shares of Common Stock. Mr. Dolan owns 5,000,000 shares of Series “B” Preferred Stock, each share of which has 10 votes on all matters brought before meetings of shareholders. In addition, Mr. Dolan owns 400,000 shares of Series “C” Preferred Stock, each share of which has 100 votes on all matters brought before meetings of shareholders. |
| 38 |
(b) Security ownership of management:
| Title of Class | Name of Beneficial Owner |
Amount and Nature of Beneficial Ownership | Percent of Class | |||||||
| Common Stock | Peter J. Smith | 419,380,145 | (1) | 43.17 | % | |||||
| Common Stock | Enzo Taddei | 375,325,000 | (2) | 40.47 | % | |||||
| (1) | See footnote 2 under table in (a), above. |
| (2) | See footnote 3 under table in (a), above. |
Security ownership of certain beneficial owners of our Series “B” Preferred Stock by our named executive officers and all other persons who own our Series “B” Preferred Stock:
| Name of Beneficial Owner | Number
of Shares (1) |
Percentage of Ownership (1) | ||||||
| Peter J. Smith | ||||||||
| (President, Director and 5% or more beneficial owner) | 16,467,500 | (2) | 36.59 | % | ||||
| Enzo Taddei | 23,532,500 | (3) | 52.29 | % | ||||
| (Chief Financial Officer, Director and 5% or more beneficial owner) | ||||||||
| Patrick V. Dolan | 5,000,000 | (4) | 11.12 | % | ||||
| All officers and directors as a group (two persons) | 40,000,000 | 88.88 | % | |||||
| (1) | The numbers and percentages set forth in these columns are based on 45,000,000 shares of Series “B” Preferred Stock outstanding and the shareholder’s respective beneficial ownership of shares of Series “B” Preferred Stock outstanding. | |
| (2) | Mr. Smith is the direct beneficial owner of, and has sole dispositive and voting power over, these shares. | |
| (3) | Mr. Taddei is the direct beneficial owner of, and has sole dispositive and voting power over, these shares. | |
| (4) | Mr. Dolan is the direct beneficial owner of, and has sole dispositive and voting power over, these shares. Mr. Dolan resigned his Directorship effective March 29, 2018. |
| 39 |
Security ownership of certain beneficial owners of our Series “C” Preferred Stock by our named executive officers and all other persons who own our Series “C” Preferred Stock:
| Name of Beneficial Owner | Number of Shares (1) | Percentage of Ownership (1) | ||||||
| Peter J. Smith | ||||||||
| (President, Director and 5% or more beneficial owner) | 1,400,000 | (2) | 43.75 | % | ||||
| Enzo Taddei | 1,400,000 | (3) | 43.75 | % | ||||
(Chief Financial Officer, Director and 5% or more beneficial owner) | ||||||||
| Patrick V. Dolan | 400,000 | (4) | 12.50 | % | ||||
| All officers and directors as a group (two persons) | 2,800,000 | 87.50 | % | |||||
| (1) | The numbers and percentages set forth in these columns are based on 3,200,000 shares of Series “C” Preferred Stock outstanding and the shareholder’s respective beneficial ownership of shares of Series “C” Preferred Stock outstanding. | |
| (2) | Mr. Smith is the direct beneficial owner of, and has sole dispositive and voting power over, these shares. | |
| (3) | Mr. Taddei is the direct beneficial owner of, and has sole dispositive and voting power over, these shares. | |
| (4) | Mr. Dolan is the direct beneficial owner of, and has sole dispositive and voting power over, these shares. Mr. Dolan formally resigned his Directorship effective March 29, 2018. |
Changes in Control:
We are not aware of any arrangements, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change in control of the Company.
| ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE. |
Although we have not adopted formal procedures for the review, approval or ratification of transactions with related persons, we adhere to a general policy that such transactions should only be entered into if they are on terms that, on the whole, are no more favorable, or no less favorable, than those available from unaffiliated third parties and their approval is in accordance with applicable law. Such transactions require the approval of our board of directors.
| ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES. |
INDEPENDENT PUBLIC ACCOUNTANTS
The following table sets forth the fees incurred by the Company for the year ended December 31, 2018 and 2017 for professional services rendered by the independent registered public accounting firm:
| Fees | 2018 | 2017 | ||||||
| Audit Fees | $ | 42,000 | $ | 29,000 | ||||
| Audit-Related Fees | 73,000 | - | ||||||
| Tax Fees | - | - | ||||||
| Other Fees | - | - | ||||||
| Total Fees | $ | 115,000 | $ | 29,000 | ||||
| 40 |
Audit Fees
Audit fees were professional services rendered for the audits of our financial statements and for review of our quarterly financial statements during the 2018 and 2017 fiscal years.
Audit-Related Fees
This category consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees”.
Tax Fees
As our independent registered public accountants did not provide any services to us for tax compliance, tax advice and tax planning during the fiscal years ended December 31, 2018 and 2017, no tax fees were billed or paid during those fiscal years.
All Other Fees
Our independent registered public accounting firm did not provide any products and services not disclosed in the table above during the 2018 and 2017 fiscal years. As a result, there were no other fees billed or paid during those fiscal years.
Audit Committee’s Pre-Approval Policies and Procedures.
Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before Principal Accountants are engaged by us to render any auditing or permitted non-audit related service, the engagement be:
| ● | approved by our audit committee (which consists of our entire board of directors); or | |
| ● | entered into pursuant to pre-approval policies and procedures established by the board of directors, provided the policies and procedures are detailed as to the particular service, the board of directors is informed of each service, and such policies and procedures do not include delegation of the board of directors’ responsibilities to management. |
Our Board of Directors pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by our Board of Directors either before or after the respective services were rendered.
Our Board of Directors has considered the nature and amount of fees billed by our principal accountants and believes that the provision of services for activities unrelated to the audit is compatible with maintaining our principal accountants’ independence.
During the 2018 and 2017 fiscal years, the Company used the following pre-approval procedures related to the selection of our independent auditors and the services they provide: unanimous consent of all directors via a board resolution.
| ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES. |
| (a) (1) Financial Statements | ||
| Financial statements for Argentum 47, Inc. listed in the Index to Financial Statements on page F-1 are filed as part of this Annual Report. | ||
| (a) (2) Financial Statement Schedule | ||
| Financial Statement Schedule for Argentum 47, Inc. listed in the Index to Financial Statements on page F-1 are filed as part of this Annual Report. | ||
| (a) (3) See the “Index to Exhibits” set forth below. | ||
| (b) See Exhibit Index below for exhibits required by Item 601 of Regulation S-K. | ||
| 41 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Consolidated Financial Statements
December 31, 2018 and 2017
CONTENTS
| F-2 |
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of:
Argentum 47, Inc. (Formerly known as Global Equity International, Inc.)
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Argentum 47, Inc. (Formerly known as Global Equity International, Inc.) and Subsidiaries (the “Company”) as of December 31, 2018 and 2017, the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity/(deficit) and cash flows for each of the two years in the period ended December 31, 2018, and the related notes (collectively referred to as the “ consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has a net loss and cash used in operations of $1,620,499 and $960,917, respectively, in 2018 and has a working capital deficit, stockholders’ deficit and accumulated deficit of $774,888, $577,827 and $11,353,215, respectively, at December 31, 2018. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s Plan in regards to these matters is also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Salberg & Company, P.A.
SALBERG & COMPANY, P.A.
We have served as the Company’s auditor since 2015.
Boca Raton, Florida
April 1, 2019
2295 NW Corporate Blvd., Suite 240 ● Boca Raton, FL 33431-7328
Phone: (561) 995-8270 ● Toll Free: (866) CPA-8500 ● Fax: (561) 995-1920
www.salbergco.com ● info@salbergco.com
Member National Association of Certified Valuation Analysts ● Registered with the PCAOB
Member CPAConnect with Affiliated Offices Worldwide ● Member AICPA Center for Audit Quality
| F-3 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Consolidated Balance Sheets
| December 31, 2018 | December 31, 2017 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash & cash equivalents | $ | 193,807 | $ | 5,084 | ||||
| Accounts receivable | 13,679 | 30,888 | ||||||
| Marketable securities at fair value | 1,458,848 | 2,029,340 | ||||||
| Prepaids | 4,195 | 5,256 | ||||||
| Other current assets | 4,732 | 7,373 | ||||||
| Total current assets | 1,675,261 | 2,077,941 | ||||||
| Non-Current Assets | ||||||||
| Investments at cost | - | 136 | ||||||
| Intangibles, net | 332,689 | - | ||||||
| Goodwill | 142,924 | - | ||||||
| Fixed assets, net | 5,180 | 2,067 | ||||||
| Total non-current assets | 480,793 | 2,203 | ||||||
| Total assets | $ | 2,156,054 | $ | 2,080,144 | ||||
| Liabilities and Stockholders’ (Deficit) / Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | 149,269 | $ | 177,852 | ||||
| Accrued contingencies and penalties | - | 5,000 | ||||||
| Accounts payable and accrued liabilities - related parties | 170,216 | 238,965 | ||||||
| Income tax payable | - | 2,832 | ||||||
| Accrued interest | 112,463 | 204,461 | ||||||
| Notes payable | 260,584 | 340,673 | ||||||
| Fixed price convertible notes payable - net of discount of $130,423 and $5,389, respectively | 1,757,617 | 401,161 | ||||||
| Total current liabilities | 2,450,149 | 1,370,944 | ||||||
| Non-Current Liabilities | ||||||||
| Payable for acquisition | 283,732 | - | ||||||
| Total non-current liabilities | 283,732 | - | ||||||
| Total liabilities | $ | 2,733,881 | $ | 1,370,944 | ||||
| Commitments and contingencies (Note 15) | ||||||||
| Stockholders’ (Deficit) / Equity | ||||||||
| Preferred stock, 50,000,000 shares authorized, $.001 par value Preferred stock series “B” convertible, 45,000,000 designated, 45,000,000 and 45,000,000 shares issued and outstanding, respectively. | $ | 45,000 | $ | 45,000 | ||||
| Preferred stock series “C” convertible, 5,000,000 designated, 3,200,000 and 2,400,000 shares issued and outstanding, respectively. | 3,200 | 2,400 | ||||||
| Common stock: 950,000,000 shares authorized; $0.001 par value: 525,534,409 and 525,534,409 shares issued and outstanding, respectively. | 525,534 | 525,534 | ||||||
| Additional paid in capital | 10,188,062 | 9,868,862 | ||||||
| Accumulated deficit | (11,353,215 | ) | (10,914,391 | ) | ||||
| Accumulated other comprehensive income | 13,592 | 1,181,795 | ||||||
| Total stockholders’ (deficit) / equity | (577,827 | ) | 709,200 | |||||
| Total liabilities and stockholders’ (deficit) / equity | $ | 2,156,054 | $ | 2,080,144 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Consolidated Statements of Operations and Comprehensive Income (Loss)
| For the years ended, | ||||||||
| December 31, 2018 | December 31, 2017 | |||||||
| Revenue | $ | 143,947 | $ | 224,526 | ||||
| General and administrative expenses | 190,801 | 165,624 | ||||||
| Compensation | 759,815 | 1,125,582 | ||||||
| Professional services | 311,009 | 120,729 | ||||||
| Depreciation | 2,282 | 9,349 | ||||||
| Amortization of intangibles | 9,505 | - | ||||||
| Bad debt expense | 30,000 | 30,000 | ||||||
| Total operating expenses | 1,303,412 | 1,451,284 | ||||||
| Loss from operations | $ | (1,159,465 | ) | $ | (1,226,758 | ) | ||
| Other income (expenses): | ||||||||
| Interest expense | $ | (76,098 | ) | $ | (39,952 | ) | ||
| Amortization of debt discount | (120,505 | ) | (125,512 | ) | ||||
| Gain on sale of subsidiary | - | 23,052 | ||||||
| (Loss) / gain on available for sale marketable securities, net | (501,334 | ) | 18,851 | |||||
| Impairment loss on investments at cost | - | (1,601,336 | ) | |||||
| Loss on conversion of notes into common stock | - | (642,542 | ) | |||||
| Gain / (loss) on extinguishment of debt and other liabilities | 243,364 | (113,148 | ) | |||||
| Other income | 317 | - | ||||||
| Exchange rate loss | (6,778 | ) | (996 | ) | ||||
| Total other income (expenses) | (461,034 | ) | (2,481,583 | ) | ||||
| Loss before income tax | $ | (1,620,499 | ) | $ | (3,708,341 | ) | ||
| Income tax expense | - | 2,832 | ||||||
| Net loss | $ | (1,620,499 | ) | $ | (3,711,173 | ) | ||
| Net loss per common share - basic & diluted | $ | (0.00 | ) | $ | (0.01 | ) | ||
| Weighted average number of common shares outstanding - basic & diluted | 525,534,409 | 423,709,805 | ||||||
| Comprehensive income / (loss): | ||||||||
| Net loss | $ | (1,620,499 | ) | $ | (3,711,173 | ) | ||
| Unrealized fair value gain on available for sale marketable securities | - | 1,181,675 | ||||||
| Gain on foreign currency translation | 13,472 | 120 | ||||||
| Comprehensive loss | $ | (1,607,027 | ) | $ | (2,529,378 | ) | ||
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
‘Consolidated Statements of Changes in Stockholders’ Equity / (Deficit)
For the years ended December 31, 2018 and 2017
| Series “B” | Series “C” | Additional | Accumulated Other | Total Stockholders’ | ||||||||||||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Common Stock | Paid-in | Accumulated | Comprehensive | Equity / | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Income | (Deficit) | |||||||||||||||||||||||||||||||
| Balance - December 31, 2016 | 45,000,000 | $ | 45,000 | - | $ | - | 374,475,775 | $ | 374,476 | $ | 8,197,449 | $ | (7,203,218 | ) | $ | - | $ | 1,413,707 | ||||||||||||||||||||||
| Series “C” convertible preferred stock issued as partial conversion of accrued salaries | - | - | 2,400,000 | 2,400 | - | - | 669,600 | - | - | 672,000 | ||||||||||||||||||||||||||||||
| Common stock issued as partial conversion of loan notes | - | - | - | - | 151,058,634 | 151,058 | 953,059 | - | - | 1,104,117 | ||||||||||||||||||||||||||||||
| Beneficial conversion feature recorded on loan notes | - | - | - | - | - | - | 48,754 | - | - | 48,754 | ||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | (3,711,173 | ) | - | (3,711,173 | ) | ||||||||||||||||||||||||||||
| Unrealized fair value gain on available for sale marketable securities | - | - | - | - | - | - | - | - | 1,181,675 | 1,181,675 | ||||||||||||||||||||||||||||||
| Gain on foreign currency translation | - | - | - | - | - | - | - | - | 120 | 120 | ||||||||||||||||||||||||||||||
| Balance - December 31, 2017 | 45,000,000 | $ | 45,000 | 2,400,000 | $ | 2,400 | 525,534,409 | $ | 525,534 | $ | 9,868,862 | $ | (10,914,391 | ) | $ | 1,181,795 | $ | 709,200 | ||||||||||||||||||||||
| Series “C” convertible preferred stock issued as partial conversion of accrued salaries | - | - | 800,000 | 800 | - | - | 319,200 | - | - | 320,000 | ||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | (1,620,499 | ) | - | (1,620,499 | ) | ||||||||||||||||||||||||||||
| Cumulative effect adjustment | - | - | - | - | - | - | - | 1,181,675 | (1,181,675 | ) | - | |||||||||||||||||||||||||||||
| Gain on foreign currency translation | - | - | - | - | - | - | - | - | 13,472 | 13,472 | ||||||||||||||||||||||||||||||
| Balance - December 31, 2018 | 45,000,000 | $ | 45,000 | 3,200,000 | $ | 3,200 | 525,534,409 | $ | 525,534 | $ | 10,188,062 | $ | (11,353,215 | ) | $ | 13,592 | $ | (577,827 | ) | |||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-6 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Consolidated Statements of Cash Flows
| December 31, 2018 | December 31, 2017 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | (1,620,499 | ) | $ | (3,711,173 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 2,282 | 9,349 | ||||||
| Amortization of intangibles | 9,505 | - | ||||||
| Stock compensation | 160,000 | 432,000 | ||||||
| Amortization of debt discount | 120,505 | 125,512 | ||||||
| Loss / (gain) on available for sale marketable securities, net | 501,334 | (18,851 | ) | |||||
| (Gain) / loss on extinguishment of debt and other liabilities | (243,364 | ) | 113,148 | |||||
| Other income | (317 | ) | - | |||||
| Loss on conversion of notes into common stock | - | 642,541 | ||||||
| Gain on sale of subsidiary | - | (23,052 | ) | |||||
| Impairment loss on investments at cost | - | 1,601,336 | ||||||
| Bad debt expense | 30,000 | 30,000 | ||||||
| Premium on stock settled debt | - | 28,538 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (6,236 | ) | (39,088 | ) | ||||
| Prepaids | 1,061 | 30,532 | ||||||
| Other current assets | 2,641 | 870 | ||||||
| Accounts payable and accrued liabilities | (43,594 | ) | 146,717 | |||||
| Accrued contingencies and penalties | (5,000 | ) | (1,361 | ) | ||||
| Accounts payable and accrued liabilities - related parties | 91,251 | 425,217 | ||||||
| Income tax payable | (2,832 | ) | 2,832 | |||||
| Deferred revenue | - | (100,000 | ) | |||||
| Accrued interest | 42,346 | 11,414 | ||||||
| Net cash used in operating activities: | $ | (960,917 | ) | $ | (293,519 | ) | ||
| Cash Flows used in investing activities: | ||||||||
| Purchase of office furniture and equipment | (4,798 | ) | (1,201 | ) | ||||
| Payment for business acquisition | (175,710 | ) | - | |||||
| Cash acquired in acquisition | 4,743 | - | ||||||
| Proceeds from sale of marketable securities | 69,294 | 52,036 | ||||||
| Net cash (used in) / provided by investing activities | $ | (106,471 | ) | $ | 50,835 | |||
| Cash flows from financing activities: | ||||||||
| Proceeds from loans - related parties | 12,663 | 49,130 | ||||||
| Repayment of loans - related parties | (12,663 | ) | (49,130 | ) | ||||
| Proceeds from notes payable, net of debt issue cost | 1,642,501 | 181,125 | ||||||
| Repayment of notes payable | (399,087 | ) | - | |||||
| Net cash provided by financing activities | $ | 1,243,414 | $ | 181,125 | ||||
| Net increase / (decrease) in cash | $ | 176,026 | $ | (61,559 | ) | |||
| Effect of Exchange Rates on Cash | 12,697 | 120 | ||||||
| Cash at Beginning of Period | $ | 5,084 | $ | 66,523 | ||||
| Cash at End of Period | $ | 193,807 | $ | 5,084 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | 26,191 | $ | - | ||||
| Cash paid for income taxes | $ | - | $ | - | ||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Notes payable and interest converted into common stock | $ | - | $ | 461,576 | ||||
| Debt discount and issuance costs recorded on notes payable | $ | - | $ | 58,254 | ||||
| Accounts payable and accrued salaries settled in series “C” preferred stock | $ | 160,000 | $ | 240,000 | ||||
| Transfer of investment from long term to short term | $ | 136 | $ | - | ||||
| Liabilities transferred, net of assets sold in subsidiary sale | $ | - | $ | 23,052 | ||||
| Non-cash assets acquired in acquisition | $ | 7,169 | $ | - | ||||
| Non-cash portion allocated to intangibles acquired | $ | 314,151 | $ | - | ||||
| Contingent consideration related to acquisition | $ | 284,298 | $ | - | ||||
| Non-cash liabilities assumed in acquisition | $ | 37,022 | $ | - | ||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-7 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
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 with an effective date of March 31, 2019.
The Company´s consolidated revenues are generated from business consulting services, employment placement 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 consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All amounts in the consolidated financial statements are stated in U.S. dollars.
Note 3 - Going Concern
The accompanying 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 consolidated financial statements, the Company had a net loss of $1,620,499 and net cash used in operations of $960,917 for the year ended December 31, 2018; working capital deficit, stockholder’s deficit and accumulated deficit of $774,888, $577,827 and $11,353,215 as of December 31, 2018. 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.
| F-8 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
The ability for the Company to continue its operations is primarily dependent on management’s plans as follows:
| a) | Continually engaging with new clients. | |
| b) | Consummating and executing current engagements. | |
| c) | Maximizing the acquired financial advisory revenues. | |
| d) | Continuing to receive fixed funding, via equity or debt, for acquisition and growth. | |
| e) | Acquiring and managing various 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”). Up to June 5, 2017, ARG also owned 100% shareholding of a subsidiary called Global Equity Partners Plc., which was sold on June 5, 2017 pursuant to a stock purchase and debt assumption agreement. GEP EH is the parent company of its 100% owned subsidiary, GE Professionals DMCC (Dubai). Argentum FM is the parent company of its 100% owned subsidiary, Cheshire Trafford U.K. Limited (UK) 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.
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 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. The risk of social and governmental factors is also a concern since the Company is headquartered in Dubai and also has a presence in the United Kingdom.
| F-9 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
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 December 31, 2018 and 2017, 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 December 31, 2018 and 2017. However, there were direct write offs of $30,000 and $30,000 during the year ended December 31, 2018 and 2017, respectively.
Foreign currency policy
The Company’s accounting policies related to the consolidation and accounting for foreign operations are as follows: The accompanying consolidated financial statements are presented in U.S. dollars. The functional currency of the Company’s Dubai subsidiary is the Arab Emirates Dirham (“AED”) and the functional currency of the Company’s UK subsidiaries is Great Britain Pounds (“GBP”). All foreign currency balances and transactions are translated into United States dollars (“$” 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.
| F-10 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
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, our 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 recorded a permanent impairment of $1,601,336 during the year ended December 31, 2017. The Company did not record any such impairment during the year ended December 31, 2018.
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.
| F-11 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
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.
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 profit or loss.
| F-12 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
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.
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, Human Resources / Employment Placements 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. |
| F-13 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
The Company has generated its revenue by providing following services:
| a) | Business consulting services including advisory services to various clients. | |
| b) | Employment placement services. | |
| c) | Earning commissions from insurance companies on insurance policy sales and renewals, which are based on a percentage of the insurance products sold. |
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. Our employment placement contracts are based on fixed fee arrangements only. 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.
| F-14 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
All revenues are generated from clients whose operations are based outside of the United States. For the years ended December 31, 2018 and 2017, the Company had the following concentrations of revenues with customers:
| Customer | Location | December 31, 2018 | December 31, 2017 | |||||||||
| SCL | United Kingdom | 0 | % | 4.45 | % | |||||||
| TLF | United Arab Emirates | 0 | % | 5.73 | % | |||||||
| VME | Oman | 0 | % | 1.92 | % | |||||||
| AGL | United Arab Emirates | 0 | % | 1.82 | % | |||||||
| SAC | United Kingdom / Norway | 0 | % | 44.54 | % | |||||||
| FAD | Saudi Arabia | 0 | % | 10.10 | % | |||||||
| FAT | United Arab Emirates | 0 | % | 1.89 | % | |||||||
| DUO | Sri Lanka | 1.39 | % | 1.69 | % | |||||||
| EEC | United Arab Emirates | 20.35 | % | 24.80 | % | |||||||
| OCS | Saudi Arabia / Thailand | 11.15 | % | 3.06 | % | |||||||
| GRL | United Kingdom | 20.84 | % | 0 | % | |||||||
| CT clients (see below) | United Kingdom | 46.27 | % | 0 | % | |||||||
| 100.00 | % | 100.00 | % | |||||||||
For the post acquisition five months ended December 31, 2018, the Company had following concentrations of revenues regarding insurance brokerage business, which is 46.27% of the consolidated revenues of the Company:
| Five
months ended December 31, 2018 | ||||
| Initial advisory fees | 30.06 | % | ||
| Ongoing advisory fees | 10.57 | % | ||
| Renewal commissions | 17.57 | % | ||
| Trail or recurring commissions | 39.85 | % | ||
| Other revenue | 1.95 | % | ||
| 100.00 | % | |||
At December 31, 2018 and 2017, the Company had the following concentrations of accounts receivables with customers:
| Customer | December 31, 2018 | December 31, 2017 | ||||||
| EEC | 0 | % | 94.82 | % | ||||
| DUO | 0 | % | 5.18 | % | ||||
| OMI IRE | 30.94 | % | 0 | % | ||||
| CLI | 16.62 | % | 0 | % | ||||
| OMW | 16.55 | % | 0 | % | ||||
| AJB | 6.02 | % | 0 | % | ||||
| SW | 5.41 | % | 0 | % | ||||
| OMI IOM | 4.51 | % | 0 | % | ||||
| LIA | 4.36 | % | 0 | % | ||||
| RL | 3.36 | % | 0 | % | ||||
| Others | 12.23 | % | 0 | % | ||||
| 100.00 | % | 100.00 | % | |||||
| F-15 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
Deferred Revenue
Deferred revenue represents fees that have been received by the Company for requested services that have not been completed. Following table illustrates the movement in deferred revenue during the year ended December 31, 2018 and 2017:
| Balance, December 31, 2016 | $ | 200,000 | ||
| New payments received during the year | - | |||
| Cash deferred revenue recognized as revenue during the year | (100,000 | ) | ||
| Deferred revenue eliminated due to the stock purchase and debt assumption agreement (See Note 5) | (100,000 | ) | ||
| Balance, December 31, 2017 | $ | - | ||
| New payments received during the year | - | |||
| Cash deferred revenue recognized as revenue during the year | - | |||
| Balance, December 31, 2018 | $ | - |
Share-based payments
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.
Share based payment awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable as of the measurement date. Amounts recorded prior to the measurement date are adjusted to fair value at each reporting period until a measurement date is achieved. The grants are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period.
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. |
| F-16 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss carry-forwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided to reduce the carrying amount of deferred income tax assets if it is considered more likely than not that some portion, or all, of the deferred income tax assets will not be realized.
On November 15, 2010, the date of the reverse recapitalization, the Company became subject to U.S. federal and the state of Nevada income taxes. The Company files an unconsolidated income tax return to the tax authorities in U.S.
On December 22, 2017, the United States signed into law the Tax Cuts and Jobs Act (the “Act”), a tax reform bill, which, among other items, reduces the current federal income tax rate to 21% from 34%. The rate reduction is effective January 1, 2018, and is permanent. The Act has caused the Company’s deferred income taxes to be revalued as of December 31, 2017. As changes in tax laws are enacted, deferred tax assets and liabilities are adjusted through income tax expense. Pursuant to the guidance within SEC Staff Accounting Bulletin No. 118 (“SAB 118”), as of December 31, 2018, the Company recognized the provisional effects of the enactment of the Act for which measurement could be reasonably estimated. The ultimate impact of the Act may differ from these estimates due to the Company’s continued analysis or further regulatory guidance that may be issued as a result of the Act.
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50 percent likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company will record interest and penalties related to unrecognized tax benefits in income tax expense. There were no penalties or interest related to income tax positions for the years ended December 31, 2018 and 2017. However, during the year ended December 31, 2017, we accrued $5,000 as a provision for late filing fee for 2014 IRS Form 5472 Tax Return. (See Note 9(B))
The Company may be subject to examination by the Internal Revenue Service (“IRS”) and state taxing authorities for the 2016, 2017 and 2018 tax years.
The Company’s two subsidiaries, Global Equity Partners Plc. (sold and ceased to be a subsidiary on June 5, 2017) and GEP Equity Holdings Limited, were incorporated under the laws of the Republic of Seychelles (“Seychelles”). A company is only subject to Seychelles income tax if it does business in Seychelles. A company that is incorporated in Seychelles, but that does not do business in Seychelles, is not subject to income tax there. None of these two subsidiaries did business in Seychelles for the years ended December 31, 2018 and 2017, and do not intend to do business in Seychelles in the future. Accordingly, the Company is not subject to income tax in Seychelles for the years ended December 31, 2018 and 2017. All business activities were performed by GEP Equity Holdings Limited in Dubai for the years ended December 31, 2018 and 2017. Dubai does not have an income tax. Regarding UK subsidiaries, Argentum 47 Financial Management Limited, was incorporated under the laws of England and Wales on December 12, 2017. There was no business transacted from this subsidiary during the year ended December 31, 2018 and 2017 as it is just a holding company for UK subsidiaries, hence there is no income tax impact during the year ended December 31, 2018 and 2017. Cheshire Trafford UK Limited was acquired, through Argentum 47 Financial Management Limited, on August 1, 2018 and is subject to the laws of the United Kingdom. Under the Corporation Tax Act, 2010 as applicable in the United Kingdom, income tax is to be calculated based on 19% of the taxable income.
| F-17 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
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 December 31, 2018 and 2017, the Company had common stock equivalents of 94,401,975 and 45,828,807 common shares respectively, in the form of convertible notes, which, if converted, may be dilutive. See Note 9(F).
As at December 31, 2018 and 2017, the Company had common stock equivalents of 770,000,000 and 690,000,000 common shares respectively, in the form of convertible preferred stock, which, if converted, may be dilutive. See Note 11(A).
| Number of Common Shares | ||||||||
| December 31, 2018 | December 31, 2017 | |||||||
| Potential dilutive common stock | ||||||||
| Convertible notes | 94,401,975 | 45,828,807 | ||||||
| Series “B” preferred stock | 450,000,000 | 450,000,000 | ||||||
| Series “C” preferred stock | 320,000,000 | 240,000,000 | ||||||
| Total potential dilutive common stock | 864,401,475 | 735,828,807 | ||||||
| Weighted average number of common shares – Basic | 525,534,409 | |||||||
| Weighted average number of common shares – Dilutive | 1,389,936,384 | |||||||
As of 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 / (Loss)
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 December 31, 2018, includes only foreign currency translation gain, and is presented in the Company’s consolidated statements of operations and comprehensive income (loss). 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.
| F-18 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
Changes in Accumulated Other Comprehensive Income (Loss) by Component during the year ended December 31, 2018 and 2017 were as follows:
| Foreign Currency Translation Adjustment | Unrealized gain on available for sale marketable securities | Total | ||||||||||
| Balance, December 31, 2016 | $ | - | $ | - | $ | - | ||||||
| Net current-period other comprehensive income | 120 | 1,181,675 | 1,181,795 | |||||||||
| Balance, December 31, 2017 | $ | 120 | $ | 1,181,675 | $ | 1,181,795 | ||||||
| Other comprehensive loss before reclassification | 13,472 | - | 13,472 | |||||||||
| Amounts reclassified from accumulated other comprehensive income as a cumulative effect adjustment | - | (1,181,675 | ) | (1,181,675 | ) | |||||||
| Net current-period other comprehensive income | 13,472 | (1,181,675 | ) | (1,168,203 | ) | |||||||
| Balance, December 31, 2018 | $ | 13,592 | $ | - | $ | 13,592 | ||||||
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 and accrued liabilities, accounts payable and accrued liabilities to related parties and loans payable to related parties, approximate fair value are based on the short-term nature of these instruments.
The Company measures its derivative liabilities 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.
| F-19 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
The following are the Company’s assets and liabilities measured at fair value on a recurring and nonrecurring basis at December 31, 2018 and December 31, 2017, using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3):
| December 31, 2018 | December 31, 2017 | |||||||
| Level 1 – Marketable Securities – Recurring | $ | - | $ | 2,029,340 | ||||
| Level 2 – Marketable Securities – Recurring | $ | 1,458,848 | $ | - | ||||
| Level 3 – Non-Marketable Securities – Non-Recurring | $ | - | $ | 136 | ||||
Management analyzed the historical volume and also the variation in the price that the marketable securities were bought and sold at during the year 2018 and has concluded that the level 2 valuation regarding the fair value of the marketable securities should be $0.25 per share.
Marketable Securities — The Level 1 or Level 2 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 the defined parameters above.
Changes in Level 1 or Level 2 marketable securities measured at fair value for the years ended December 31, 2018 and 2017 were as follows:
| Balance, December 31, 2016 | $- | |||
| Securities transferred from long term investments valued at cost | 880,850 | |||
| Unrealized gains (losses) recorded during the year | 1,181,675 | |||
| Sales and settlements during the year | (33,185 | ) | ||
| Balance, December 31, 2017 | $ | 2,029,340 | ||
| Securities transferred from long term investments valued at cost | 136 | |||
| Sales and settlements during the year | (69,294 | ) | ||
| Loss on available for sale marketable securities, net | (501,334 | ) | ||
| Balance, December 31, 2018 | $ | 1,458,848 | ||
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 consists 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. |
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.
| F-20 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
Changes in Level 3 assets measured at fair value for the years ended December 31, 2018 and 2017 were as follows:
| Balance, December 31, 2016 | $ | 3,085,322 | ||
| Securities received for services during the year | - | |||
| Sales as part of stock purchase agreement (See Note 5) | (603,000 | ) | ||
| Securities transferred to marketable securities | (880,850 | ) | ||
| Impairment loss | (1,601,336 | ) | ||
| Balance, December 31, 2017 | 136 | |||
| Securities received for services during the period | - | |||
| Securities transferred to marketable securities | (136 | ) | ||
| Impairment loss | - | |||
| Balance, December 31, 2018 | $ | - |
Recent Accounting Pronouncements
There are no new accounting pronouncements that we expect to have an impact on the Company’s financial statements except as follows:
In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718). This update is intended to reduce cost and complexity and to improve financial reporting for share-based payments issued to non-employees (for example, service providers, external legal counsel, suppliers, etc.). The ASU expands the scope of Topic 718, Compensation—Stock Compensation, which currently only includes share-based payments issued to employees, to also include share-based payments issued to non-employees for goods and services. Consequently, the accounting for share-based payments to non-employees and employees will be substantially aligned. This standard will be effective for financial statements issued by public companies for the annual and interim periods beginning after December 15, 2018. Early adoption of the standard is permitted. The standard must be applied using a modified retrospective approach for each period presented resulting potentially in a cumulative effect adjustment. Management currently does not plan to early adopt this guidance and is evaluating the potential impact of this guidance on the consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842)” (“ASU 2016-02”). The FASB issued ASU 2016-02 to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Under ASU 2016-02, a lessee will recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-to-use asset representing its right to use the underlying asset for the lease term. The amendments of this ASU are effective for reporting periods beginning after December 15, 2018, with early adoption permitted. An entity will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Management currently does not plan to early adopt this guidance and is evaluating the potential impact of this guidance on the consolidated financial statements as well as transition methods.
| F-21 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
Note 5 – Sale of Subsidiary
On June 5, 2017, the Company completed a corporate divestiture by entering into a Stock Purchase and Debt Assumption Agreement with a non-affiliate individual, pursuant to which the Company sold 100% of the issued and outstanding common stock of its wholly-owned subsidiary, Global Equity Partners Plc. (“GEP”), to a citizen of the Republic of Thailand (acquirer). The consideration for the purchase of GEP by the acquirer was his assumption of all liabilities and indebtedness of GEP in the approximate amount of $626,052. No cash consideration was paid to the Company by the acquirer. Under the terms of the agreement, the acquirer also acquired portfolio of following investments in common shares of various companies owned by GEP:
| Company | No. of Shares | Book value | Status | |||||||||
| M1 Lux AG | 2,000,000 | $ | - | Private Company | ||||||||
| Monkey Rock Group Inc. | 1,500,000 | - | Reporting Company – OTC | |||||||||
| Voz Mobile Cloud Limited | 3,200,000 | - | Private Company | |||||||||
| Arrow Cars International Inc. | 3,000,000 | 3,000 | Private Company | |||||||||
| Direct Security Integration Inc. | 400,000 | - | Private Company | |||||||||
| Primesite Developments Inc. | 600,000 | 600,000 | Private Company | |||||||||
| 10,700,000 | $ | 603,000 | ||||||||||
The Company recorded a gain of $23,052 in connection with this transaction which is included in other income (expenses) in the Consolidated Statement of Operations for the year ended December 31, 2017. The book values of assets sold and liabilities transferred are presented below:
| Liabilities assumed by the purchaser | ||||
| Accounts payable | $ | 114,780 | ||
| Deferred revenue | 100,000 | |||
| Accrued liabilities | 184,656 | |||
| Accrued interest | 106,196 | |||
| Note Payable | 120,420 | |||
| $ | 626,052 | |||
| Less: Assets transferred to the acquirer (as stated above) | $ | 603,000 | ||
| Net gain on sale of subsidiary | $ | 23,052 | ||
Note 6 – Acquisition of Cheshire Trafford U.K. 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 Company acquired Cheshire Trafford to enter into the advisory business and meaningfully enhance the Company’s position in this industry. The Company has included the financial results of Cheshire Trafford in the consolidated financial statements from the date of acquisition. These results include approximately $66,613 in revenue and $30,242 in net loss.
| F-22 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
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 | ||
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:
| Assets acquired | Fair Value | |||
| 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.
| F-23 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
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 | ||
The Company shall record acquisition and transaction related expenses in the period in which they are incurred. During the year ended December 31, 2018, acquisition and transaction related expenses primarily consisted of accountant fees of approximately $23,000 on account of acquisition audits and legal fees of $8,456 paid to attorneys in UK for finalization of share purchase agreements. These expenses are included in the Company’s consolidated statements of operations as professional services.
The following unaudited pro forma consolidated results of operations have been prepared as if the acquisition of Cheshire Trafford had occurred as of the beginning of the following periods:
| Twelve Months Ended December 31, 2018 | Twelve Months Ended December 31, 2017 | |||||||
| Net revenues | $ | 240,153 | $ | 418,057 | ||||
| Net loss | $ | (1,633,243 | ) | $ | (3,741,573 | ) | ||
| Net loss per share | $ | (0.00 | ) | $ | (0.01 | ) | ||
Unaudited pro forma data does not purport to be indicative of the results that would have been obtained had these events actually occurred at the beginning of the periods presented and is not intended to be a projection of future results.
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 December 31, 2018 and December 31, 2017:
| December 31, 2018 | December 31, 2017 | |||||||||||||||
| Company | No. of Shares | Book value | No. of Shares | Book value | ||||||||||||
| Duo World Inc. (DUUO) | 5,835,392 | $ | 1,458,848 | 3,382,233 | $ | 2,029,340 | ||||||||||
| 5,835,392 | $ | 1,458,848 | 3,382,233 | $ | 2,029,340 | |||||||||||
| F-24 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
During the year ended December 31, 2017, one of the Company’s investments commenced trading on OTC Markets; hence, we reclassified this investment of 3,481,133 common shares amounting to $880,850 to marketable securities. During the year ended December 31, 2017, the Company sold 98,900 common shares of this particular investment at various fair values recognizing a gain on sale of investment of $18,851. At December 31, 2017, the Company revalued the remaining 3,382,233 common shares at their quoted market price of $0.60 per share, $2,029,340; hence, recording an unrealized gain of $1,181,675 into accumulated other comprehensive income, a component of equity.
On January 12, 2018, the Company converted its investment in 136,600 preferred shares of Duo World Inc. valued at cost of $0.001 per share or $136 to 1,366,000 common shares of Duo World Inc. having the same cost basis of $136; no gain or loss was recorded on this conversion. (See Note 7(B))
On May 31, 2018, the Company received common stock dividend of 1,187,059 common shares of Duo World Inc. based on the stock split ratio of 4:5. There was no net accounting effect of the receipt of these shares.
On June 28, 2018, the Company sold 200 common shares of Duo World Inc. at $0.60 per share or $120.
During the quarter ended September 30, 2018, the Company sold 99,700 common shares of Duo World Inc. at various selling prices totaling to $69,174. At December 31, 2018, the Company revalued 5,835,392 common shares to their fair value of $0.25 per share, totaling $1,458,848. As a result of year end revaluation at December 31, 2018 and sale of common stock during the year ended December 31, 2018, the Company recorded a net loss on available for sale marketable securities of $501,334 into the consolidated statement of operations.
B. Investments at Cost
The Company, through its subsidiary GEP Equity Holdings Limited, holds following common equity securities in private and reporting companies as at December 31, 2018 and 2017:
| December 31, 2018 | December 31, 2017 | |||||||||||||||||
| Company | No. of Shares | Book value | No. of Shares | Book value | Status | |||||||||||||
| Primesite Developments Inc. | 5,006,521 | $ | - | 5,006,521 | $ | - | Private Company | |||||||||||
| Quartal Financial Solutions AG | 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 December 31, 2018 and 2017:
| December 31, 2018 | December 31, 2017 | |||||||||||||||||
| Company | No. of Shares | Book value | No. of Shares | Book value | Status | |||||||||||||
| Duo World Inc. | - | $ | - | 136,600 | $ | 136 | Reporting Company – OTC | |||||||||||
| Primesite Developments Inc. | 450,000 | - | 450,000 | - | Private Company | |||||||||||||
| 450,000 | $ | - | 586,600 | $ | 136 | |||||||||||||
On June 5, 2017, the Company sold 10,700,000 common securities of different companies having a book value of $603,000 pursuant to the stock purchase and debt assumption agreement. (See Note 5). During the year ended December 31, 2017, the Company also reclassified one of its investments in common shares to marketable securities, a current asset, valued at fair value. (See Note 7 (A))
| F-25 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
At December 31, 2017, out of prudence, management decided to fully impair the investment in common & preferred stock of Primesite Developments Inc. and common stock of Quartal Financial Solutions Inc. amounting to $1,181,971 and $419,365 respectively, because management of both companies has proven non-responsive during the entire third and fourth quarters of 2017.
On January 12, 2018, the Company converted its investment in 136,600 preferred shares of Duo valued at cost of $0.001 per share or $136 to 1,366,000 common shares of Duo World Inc., having the same cost basis of $136; no gain or loss was recorded on this conversion.
Note 8 – Fixed Assets
Following table reflects net book value of fixed assets as of December 31, 2018 and 2017:
| December 31, 2018 | December 31, 2017 | Useful Life | ||||||||
| Furniture and Equipment | $ | 44,813 | $ | 40,016 | 3 to 5 years | |||||
| Accumulated depreciation | (40,159 | ) | (37,949 | ) | ||||||
| Net book value of CT fixed assets (see below) | 526 | - | 3 to 10 years | |||||||
| Net fixed assets | $ | 5,180 | $ | 2,067 | ||||||
Depreciation expense for the years ended December 31, 2018 and 2017 was $2,282 and $9,349, respectively.
The following table reflects net book value of Cheshire Trafford’s fixed assets as of December 31, 2018:
| Furniture and fixtures | Computer equipment | Total | ||||||||||
| Cost | ||||||||||||
| Balance as at August 1, 2018 | $ | 22,137 | $ | 16,107 | $ | 38,244 | ||||||
| Translation rate differences | (607 | ) | (441 | ) | (1,048 | ) | ||||||
| Balance as at December 31, 2018 | $ | 21,530 | $ | 15,666 | $ | 37,196 | ||||||
| Accumulated depreciation | ||||||||||||
| Balance as at August 1, 2018 | $ | 21,522 | $ | 16,107 | $ | 37,629 | ||||||
| Depreciation charge for the period | 72 | - | 72 | |||||||||
| Translation rate differences | (590 | ) | (441 | ) | (1,031 | ) | ||||||
| Balance as at December 31, 2018 | 21,004 | 15,666 | 36,670 | |||||||||
| Net book value as at December 31, 2018 | $ | 526 | $ | - | 526 | |||||||
| F-26 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
Note 9 – Debt, Accounts Payable and Accrued Liabilities
(A) Accounts Payable and Other Accrued Liabilities
The following table represents breakdown of accounts payable and accrued liabilities as of December 31, 2018 and 2017, respectively:
| December 31, 2018 | December 31, 2017 | |||||||
| Accrued salaries and benefits | $ | 86,418 | $ | 113,770 | ||||
| Accounts payable and other accrued liabilities | 62,851 | 64,082 | ||||||
| $ | 149,269 | $ | 177,852 | |||||
(B) Accrued Contingencies and Penalties
At December 31, 2017, the Company accrued $5,000 as a provision for late filing fee for 2014 IRS Form 5472 Tax Return. On January 19, 2018, the Company paid the entire outstanding penalty of $5,000 and the interest amounting to $390 to the IRS.
(C) Accounts Payable and Accrued Liabilities – Related Parties
The following table represents the accounts payable and accrued expenses to related parties as of December 31, 2018 and 2017, respectively:
| December 31, 2018 | December 31, 2017 | |||||||
| Accrued salaries and benefits | $ | 161,823 | $ | 233,869 | ||||
| Expenses payable | 8,393 | 5,096 | ||||||
| $ | 170,216 | $ | 238,965 | |||||
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. Each of the preferred C preferred stock is convertible to 100 common shares, resulting in an equivalent 240,000,000 common stock having a fair value of $672,000, thereby recognizing additional stock based compensation of $432,000. (See Note 11 (A)). As a result of this conversion, the Company issued following series “C” preferred stock to its officers and directors:
| ● | 1,000,000 series “C” preferred shares to the Company´s CEO, having a par value of $0.001 per share or $1,000 for his accrued salary balance of $100,000. The equivalent common stock issued would be 100,000,000 having a fair value of $0.0028 per share or $280,000 at the date of issuance of preferred stock, thereby recognizing a stock based compensation of $180,000. | |
| ● | 1,000,000 series “C” preferred shares to the Company´s CFO, having a par value of $0.001 per share or $1,000 for his accrued salary balance of $100,000. The equivalent common stock issued would be 100,000,000 having a fair value of $0.0028 per share or $280,000 at the date of issuance of preferred stock, thereby recognizing a stock based compensation of $180,000, and | |
| ● | 400,000 series “C” preferred shares to the Company´s managing director, having a par value of $0.001 per share or $400 for his accrued salary balance of $40,000. Equivalent common stock issued would be 40,000,000 having a fair value of $0.0028 per share or $112,000 at the date of issuance of preferred stock, thereby recognizing a stock based compensation of $72,000. |
| F-27 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
On June 5, 2018, all of the officers and directors of the Company decided to convert their partial accrued salaries balance amounting to $160,000 to 800,000 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 preferred stock. Each share of the Series “C” preferred stock is convertible into 100 common shares, resulting in an equivalent 80,000,000 shares of common stock having a fair value of $320,000, thereby recognizing additional stock based compensation of $160,000. (See Note 11 (A)). As a result of this conversion, the Company issued following shares of Series “C” preferred stock to its officers and directors:
| ● | 400,000 shares of Series “C” preferred stock to the Company´s CEO, having a par value of $0.001 per share or $400 for his accrued salary balance of $80,000. The equivalent common stock issued would be 40,000,000 having a fair value of $0.004 per share or $160,000 at the date of issuance of preferred stock, thereby recognizing a stock based compensation of $80,000, and | |
| ● | 400,000 shares of Series “C” preferred stock to the Company´s CFO, having a par value of $0.001 per share or $400 for his accrued salary balance of $80,000. The equivalent common stock issued would be 40,000,000 having a fair value of $0.004 per share or $160,000 at the date of issuance of preferred stock, thereby recognizing a stock based compensation of $80,000. |
(D) Loans Payable – Related Parties
The Company received short-term loans from one of 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 as of December 31, 2018 and 2017:
| Balance, December 31, 2016 | $ | - | ||
| Proceeds from loans | 49,130 | |||
| Repayments | (49,130 | ) | ||
| Balance, December 31, 2017 | $ | - | ||
| Proceeds from loans | 12,663 | |||
| Repayments | (12,663 | ) | ||
| Balance, December 31, 2018 | $ | - |
(E) Notes Payable
Following is the summary of all non-convertible notes, net of debt discount, including the accrued interest as at December 31, 2017:
| Date of Note | Principal | Accrued Interest | Total | |||||||||
| October 17, 2013 – EDEN | $ | 319,598 | $ | 160,402 | $ | 480,000 | ||||||
| November 26, 2013 – JSP | - | 37,971 | 37,971 | |||||||||
| November 3, 2017 – MPD | 21,075 | 5,269 | 26,344 | |||||||||
| Balance – December 31, 2017 | $ | 340,673 | $ | 203,642 | $ | 544,315 | ||||||
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 | $ | 5,029 | $ | 315,613 | ||||||
| F-28 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
| ● | On October 9, 2013, the Company secured a two-month loan for GBP 75,000 (equivalent to $120,420) with the understanding that the Company will issue 10,000 common restricted shares, issued to the lender 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 common restricted shares and for this the lender agreed to a five-month extension. This stock compensation was issued to the lender also on December 12, 2013. Total accrued interest as at December 31, 2016 was $106,196. The Company also accrued $184,656 provision for potential damages due to the litigation in the Dubai Courts as of December 31, 2016. |
| On June 5, 2017, a citizen of Republic of Thailand assumed the above principal loan amount of $120,420, accrued interest of $106,196 and accrued damages of $184,656 by way of a stock purchase and debt assumption agreement. Hence the Company’s liabilities in respect of this loan were transferred to the acquiring individual. (See Note 5) | |
| ● | 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. and the note holder is currently trying to sell these shares. 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 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. | |
| ● | On August 25, 2016, the Company secured a six-month non-convertible loan for $167,500 carrying an original issue discount of $37,500. In addition, the company agreed to pay $5,000 to the note holder to cover their legal costs and the interest will not be accrued on the outstanding principal balance unless an event of default occurs. |
| F-29 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
| On February 23, 2017, after receipt of $167,500 from Mammoth Corporation (New Lender), St. George (Previous Lender) assigned and transferred to the Mammoth Corporation all of its rights, title and interest in and to the promissory note initially issued by the Company to St. George Investments LLC for $167,500 dated August 25, 2016. See Note 9 (F). | |
| During the year ended December 31, 2017, $1,667 of the debt issuance costs and $12,500 of the debt discount balance was amortized to income statement, leaving an unamortized issue cost and discount balance of $0. |
| Balance at December 31, 2016 | $ | 153,333 | ||
| Amortization of OID and issuance costs during the year | 14,167 | |||
| Exchange of Note dated February 23, 2017 (See Note 9 (F)) | (167,500 | ) | ||
| Balance at December 31, 2017 | $ | - |
| ● | On October 13, 2016, the Company secured a six-month non-convertible loan for $135,000 carrying an original issue discount of $30,000. In addition, the company agreed to pay $5,000 to the note holder to cover their legal costs and the interest will not be accrued on the outstanding principal balance unless an event of default occurs. |
| On April 13, 2017, after receipt of $135,000 from Mammoth Corporation (New Lender), St. George (Previous Lender) assigned and transferred to the Mammoth Corporation all of its rights, title and interest in a promissory note, initially issued by the Company to St. George Investments LLC amounting to $135,000 on October 13, 2016. See Note 9 (F) | |
| During the year ended December 31, 2017, $2,917 of the debt issuance costs and $17,500 of the debt discount balance was amortized to income statement, leaving an unamortized issue cost and discount balance of $0. |
| Balance at December 31, 2016 | $ | 114,584 | ||
| Amortization of OID and issuance costs during the year | 20,416 | |||
| Exchange of Note dated April 13, 2017 (See Note 9 (F)) | (135,000 | ) | ||
| Balance at December 31, 2017 | $ | - |
| ● | On December 6, 2016, the Company secured a six-month non-convertible loan for $167,500 carrying an original issue discount of $37,500. In addition, the company agreed to pay $5,000 to the note holder to cover their legal costs and the interest will not be accrued on the outstanding principal balance unless an event of default occurs. |
| On June 5, 2017, after receipt of $167,500 from Mammoth Corporation (New Lender), St. George (Previous Lender) assigned and transferred to the Mammoth Corporation all of its rights, title and interest in and to the promissory note initially issued by the Company to St. George Investments LLC for $167,500 dated December 6, 2016. See Note 9 (F). | |
| During the year ended December 31, 2017, $4,167 of the debt issuance costs and $31,250 of the debt discount balance was amortized to income statement, leaving an unamortized issue cost and discount balance of $0. |
| F-30 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
| Balance at December 31, 2016 | $ | 132,083 | ||
| Amortization of OID and issuance costs during the year | 35,417 | |||
| Exchange of Note dated June 5, 2017 (See Note 9 (F)) | (167,500 | ) | ||
| Balance at December 31, 2017 | $ | - |
| ● | On November 3, 2017, the Company secured from a private individual, a two-month non-convertible loan amounting to $16,000 GBP (equivalent to $21,075). The Company agreed to pay one-off interest amounting to GBP 4,000 (equivalent to $5,269) upon maturity of the loan. |
| During the year ended December 31, 2017, the Company recorded $5,269 as interest expense. Due to default in payment on due date, the Company recorded additional interest of $1,689 during the year ended December 31, 2018, making the total accrued interest balance of $6,958. | |
| On January 19, 2018, the Company fully repaid principal loan amount of $21,075 and accrued interest of $6,958. |
(F) Fixed Price Convertible Notes Payable
Following is the summary of all fixed price convertible notes, net of debt discount, including the accrued interest as at December 31, 2017:
| Date of Note | Principal
and premium | Discount | Principal,
net of discount and premium | Accrued Interest | Total | ||||||||||||||||
| July 1, 2016 - Mammoth Corp. | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
| February 6, 2017 – MPD | - | - | - | - | - | ||||||||||||||||
| February 23, 2017 - Mammoth Corp. | - | - | - | - | - | ||||||||||||||||
| April 13, 2017 - Mammoth Corp. | - | - | - | - | - | ||||||||||||||||
| June 5, 2017 - Mammoth Corp. | 248,737 | - | 248,737 | - | 248,737 | ||||||||||||||||
| August 9, 2017 - Mammoth Corp. | 76,275 | 2,889 | 73,386 | - | 73,386 | ||||||||||||||||
| November 15, 2017 – Power up Lending | 81,538 | 2,500 | 79,038 | 819 | 79,857 | ||||||||||||||||
| Balance, December 31, 2017 | $ | 406,550 | $ | 5,389 | 401,161 | $ | 819 | $ | 401,980 | ||||||||||||
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 | ||||||||||
| F-31 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
| ● | On July 1, 2016, after receipt of $148,500 from Mammoth Corporation (New Lender), St. George (Previous Lender) assigned and transferred to the Mammoth Corporation all of its rights, title and interest in and to the promissory note initially issued by the Company to St. George Investments LLC for $148,500 dated April 28, 2016. The Company re-negotiated the loan terms with new lender (Mammoth Corporation) after the above assignment and issued a restated 9-month convertible promissory note amounting to $163,350 dated July 1, 2016. The terms of this exchanged note were a one-time 10% increase in the principal loan of $14,850, increasing the principal sum from $148,500 to $163,350. The new lender also has a right, at any time after the issue date of revised note until the outstanding balance has been paid in full, to convert all or any part of the outstanding balance into common shares of the Company at a fixed conversion price of $0.017. The fair value of stock as on the date of exchange was $0.0197. This indicated a beneficial conversion feature (BCF) of the Note as the conversion price is lower than the fair value of the Company´s stock as on July 1, 2016. The Company accounted for the difference arising due to BCF amounting to $25,944 as a debt discount with a corresponding effect to additional paid in capital. Interest on unpaid principal balance shall not accrue during the term of the note unless an event of default occurs. The Company accounted for this exchange as a debt extinguishment of previous note dated April 28, 2016 and $14,850 was further recognized as loss on debt extinguishment. |
| On September 16, 2016, the note holder partially converted $59,500 of the note to the common shares of the Company at an agreed fixed price of $0.017 per share. As a result of this conversion, the Company issued 3,500,000 common shares to Mammoth Corporation. | |
| On December 1, 2016, the note holder partially converted $53,850 of the note to the common shares of the Company at an agreed fixed price of $0.017 per share. As a result of this conversion, the Company issued 3,167,647 common shares to Mammoth Corporation. | |
| On February 2, 2017, the Company issued 5,000,000 common shares to Mammoth Corporation in order to settle remaining payable balance in full amounting to $50,000. The Company verbally agreed to a conversion price of $0.01 per share other than the contractual fixed price of $0.017 per share, in order to fully settle this obligation; thereby $39,324 was recognized as a loss on conversion of this note and remaining debt discount balance arising due to BCF amounting to $2,647 was fully amortized on the date of final conversion. |
| ● | On February 6, 2017, the Company secured from a private individual, a nine-month fixed price convertible loan amounting to $60,000 having an interest at 10% per annum and an agreed fixed conversion price of $0.012 per share. Fair value of the Company´s stock as on the date of the note was $0.0198. This indicated a beneficial conversion feature (BCF) of the Note as the conversion price is lower than the fair value of the Company´s stock as on February 6, 2017. The Company accounted for the difference arising due to BCF amounting to $39,000 as a debt discount with a corresponding effect to additional paid in capital. |
| During the year ended December 31, 2017, the company fully amortized $39,000 of debt discount balance arising due to BCF. The company further recorded an interest expense of $5,326 during the year ended December 31, 2017. On December 27, 2017, the noteholder decided to exercise his right of conversion of debt into common stock, hence the Company issued 5,443,836 common shares at an agreed conversion price of $0.012 per share amounting to $65,326. Fair value of the 5,443,836 common stock issued on the conversion date was $0.0051 per share or $27,764. Therefore, the company recognized $37,562 as a gain on conversion of this note. |
| F-32 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
| ● | On February 23, 2017, St. George (Previous Lender) assigned and transferred to the Mammoth Corporation all of its rights, title and interest in and to the promissory note initially issued by the Company to St. George Investments LLC in the amount of $167,500 dated August 25, 2016. See Note 9 (E). The Company re-negotiated the loan terms with new lender (Mammoth Corporation) after the above assignment and issued a restated 9 months fixed price convertible promissory note amounting to $184,250 dated February 23, 2017. The terms of this exchanged note were a one-time 10% increase in the principal loan of $16,750, increasing the principal sum from $167,500 to $184,250. The new lender also has a right, at any time after the issue date of revised note until the outstanding balance has been paid in full, to convert all or any part of the outstanding balance into common shares of the Company at a fixed conversion price of $0.017. Fair value of the Company stock as on the date of the note was $0.0179. This indicated a beneficial conversion feature (BCF) of the Note as the conversion price is lower than the fair value of the Company stock as on February 23, 2017. The Company accounted for the difference arising due to BCF amounting to $9,754 as a debt discount with a corresponding effect to additional paid in capital. Interest on unpaid principal balance shall not accrue during the term of the note unless an event of default occurs. The Company accounted for this exchange as a debt extinguishment of previous note dated August 25, 2016 and $16,750 was recognized as loss on debt extinguishment. |
| On March 28, 2017, the note holder partially converted $50,000 of the note to the common shares of the Company at a conversion price of $0.0080925 per share, this particular conversion price was less than the agreed fixed price of $0.017, due to the note entering into temporary default. As per the agreement, an event of default occurs when the closing bid price of the Company stock falls below the agreed level of $0.0135. This default clause can be remedied by trading over $0.0135 for 4 consecutive trading days. As a result of this conversion, the Company issued 6,178,560 common shares to Mammoth Corporation and $40,305 was recognized as a loss on conversion of this note. | |
| On April 13, 2017, the note holder partially converted $67,125 of the note to the common shares of the Company at a conversion price of $0.006565 per share. This conversion price was less than the agreed fixed price of $0.017, due to the note entering into temporary default. As a result of this conversion, the Company issued 10,224,676 common shares to Mammoth Corporation and $66,527 was recognized as a loss on conversion of this note based on the fair value of the common shares totaling to $133,652. | |
| On May 12, 2017, the note holder partially converted $33,562 of the note to the common shares of the Company at a conversion price of $0.00429 per share. This conversion price was less than the agreed fixed price of $0.017, due to the note entering into temporary default. As a result of this conversion, the Company issued 7,823,310 common shares to Mammoth Corporation and $54,981 was recognized as a loss on conversion of this note based on the fair value of the common shares totaling to $88,543. | |
| On June 2, 2017, the note holder converted remaining balance of the note amounting to $33,563 to the common shares of the Company at a conversion price of $0.003575 per share. This conversion price was less than the agreed fixed price of $0.017, due to the note entering into temporary default. As a result of this conversion, the Company issued 9,388,252 common shares to Mammoth Corporation and $58,570 was recognized as a loss on conversion of this note based on the fair value of the common shares totaling to $92,133. | |
| During the year ended December 31, 2017, the company fully amortized $9,754 of debt discount balance arising due to BCF, leaving un-amortized debt discount balance of $0 as of December 31, 2017. |
| F-33 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
| ● | On April 13, 2017, after receipt of $135,000 from Mammoth Corporation (New Lender), St. George (Previous Lender) assigned and transferred to the Mammoth Corporation all of its rights, title and interest in and to the promissory note initially issued by the Company to St. George Investments LLC for $135,000 dated October 13, 2016. See Note 9 (E). The Company re-negotiated the loan terms with new lender (Mammoth Corporation) after the above assignment and issued a restated 9 months fixed price convertible promissory note amounting to $162,000 dated April 13, 2017. The terms of this exchanged note were a one-time 20% increase in the principal loan of $27,000, increasing the principal sum from $135,000 to $162,000. The new lender also has a right, at any time after the issue date of the revised note until the outstanding balance has been paid in full, to convert all or any part of the outstanding balance into common shares of the Company at a fixed conversion price of $0.012. Fair value of the Company´s stock as on the date of exchange was $0.0106. Hence, there was no beneficial conversion feature (BCF) of the Note, as the agreed conversion price is higher than the fair value of the Company´s stock as on April 13, 2017. The Company accounted for this exchange as a debt extinguishment of previous note dated October 13, 2016 and $27,000 was recognized as loss on debt extinguishment. |
| On July 10, 2017, the note holder partially converted $23,400 of the note to the common shares of the Company at a conversion price of $0.00234 per share. This conversion price was less than the agreed fixed price of $0.012, due to the note entering into temporary default. As a result of this conversion, the Company issued 10,000,000 common shares to Mammoth Corporation and $31,395 was recognized as a loss on conversion of this note based on the 0.0039 per share fair value of the 8,050,000 excess common shares issued. | |
| On August 2, 2017, the note holder partially converted $20,400 of the note to the common shares of the Company at a conversion price of $0.00204 per share. This conversion price was less than the agreed fixed price of $0.012, due to the note entering into temporary default. As a result of this conversion, the Company issued 10,000,000 common shares to Mammoth Corporation and $31,540 was recognized as a loss on conversion of this note based on the 0.0038 per share fair value of the 8,300,000 excess common shares issued. | |
| On September 11, 2017, the note holder partially converted $33,800 of the note to the common shares of the Company at a conversion price of $0.00169 per share. This conversion price was less than the agreed fixed price of $0.012, due to the note entering into temporary default. As a result of this conversion, the Company issued 20,000,000 common shares to Mammoth Corporation and $68,733 was recognized as a loss on conversion of this note based on the 0.004 per share fair value of the 17,183,333 excess common shares issued. | |
| On October 25, 2017, the note holder partially converted $21,600 of the note to the common shares of the Company at a conversion price of $0.00108 per share. This conversion price was less than the agreed fixed price of $0.012, due to the note entering into temporary default. As a result of this conversion, the Company issued 20,000,000 common shares to Mammoth Corporation and $38,220 was recognized as a loss on conversion of this note based on the 0.0021 per share fair value of the 18,200,000 excess common shares issued. | |
| On December 4, 2017, the note holder converted remaining note balance amounting to $62,800 to the common shares of the Company at a conversion price of $0.0013362 per share. This conversion price was less than the agreed fixed price of $0.012, due to the note entering into temporary default. As a result of this conversion, the Company issued 47,000,000 common shares to Mammoth Corporation and $250,600 was recognized as a loss on conversion of this note based on the 0.006 per share fair value of the 41,766,667 excess common shares issued. After this final conversion pertaining to this note, the outstanding convertible note balance amounted to $0 as of December 31, 2017. |
| F-34 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
| ● | On June 5, 2017, after receipt of $167,500 from Mammoth Corporation (New Lender), St. George (Previous Lender) assigned and transferred to the Mammoth Corporation all of its rights, title and interest in and to the promissory note initially issued by the Company to St. George Investments LLC for $167,500 dated December 6, 2016. See Note 9 (E). The Company re-negotiated the loan terms with new lender (Mammoth Corporation) after the above assignment and issued a restated 9 months fixed price convertible promissory note amounting to $184,250 dated June 5, 2017. The terms of this exchanged note were a one-time 10% increase in the principal loan of $16,750, increasing the principal sum from $167,500 to $184,250. The new lender also has a right, at any time after the issue date of the revised note until the outstanding balance has been paid in full, to convert all or any part of the outstanding balance into common shares of the Company at a fixed conversion price of $0.012. Fair value of the Company´s stock as on the date of the note was $0.0071. Hence, there was no beneficial conversion feature (BCF) of the Note, as the agreed conversion price is higher than the fair value of the Company´s stock as on June 5, 2017. The Company accounted for this exchange as a debt extinguishment of previous note dated December 6, 2016 and $16,750 was recognized as loss on debt extinguishment. |
| On December 4, 2017, the Company re-negotiated the loan terms and entered into a rider agreement with the noteholder. The terms of this rider agreement were a one-time 35% increase in the principal loan of $64,487, increasing the principal sum from $184,250 to $248,737. In addition, both parties also agreed to re-negotiate the loan terms of another note dated August 9, 2017 with a one-time 35% increase in the principal loan of $19,775, increasing the principal sum from $56,500 to $76,275. This rider agreement further consolidated the revised principal note balances of the two notes into a single payable of $325,012. The Company agreed a repayment plan of six monthly installments of $54,168 commencing from January 15, 2018 and ending on June 15, 2018. The noteholder agreed to suspend the conversion of the notes if the company continue to repay all six installments as per the revised payment plan. The Company accounted for this one-time increase on both notes amounting to $64,487 and $19,775 as a loss on debt extinguishment. As of December 31, 2017, the outstanding balance amounted to $248,737 and $73,386, net of $2,889 discount, against the two notes dated June 5, 2017 and August 9, 2017, respectively. | |
| During the year ended December 31, 2018, the Company fully repaid the six installments of $54,168 each, thereby leaving an outstanding principal loan balance of $0 as on December 31, 2018. | |
| ● | On August 9, 2017, the Company secured a 9 months fixed price convertible loan for $56,500 (see amendment discussed in above paragraph) carrying an original issue discount of $6,500. Interest will not be accrued on the outstanding principal balance unless an event of default occurs. The lender has a right, at any time after the issue date of the note until the outstanding balance has been paid in full, to convert all or any part of the outstanding balance into common shares of the Company at a fixed conversion price of $0.012 subject to change based on certain default provisions as defined in the Note. Fair value of the Company´s stock as on the date of issuance of this note was $0.0045. Hence, there was no beneficial conversion feature (BCF) of the Note, as the agreed conversion price is higher than the fair value of the Company´s stock as on August 9, 2017. |
| During the year ended December 31, 2017, $3,611 of the debt discount balance was amortized to income statement. During the year ended December 31, 2018, $2,889 of the debt discount balance was amortized to income statement, leaving an unamortized discount balance of $0. | |
| With the payments of all six installments of $54,168 each as per the amendment discussed in above paragraph, the Company first settled these payments against this convertible note in full amounting to $76,275, thereby leaving an outstanding principal loan balance of $0 as on December 31, 2018. |
| F-35 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
| ● | On November 15, 2017, the Company secured a 9-month convertible loan for $53,000 carrying an original issue discount of $3,000 and an interest at the rate of 12% accrued on the outstanding principal balance. The lender has a right, at any time after the issue date of the note until the outstanding balance has been paid in full, to convert all or any part of the outstanding balance into common shares of the Company at a conversion price of 65% of the average of the lowest 2 trading prices during the ten trading days’ period ending on the latest trading day prior to the conversion date, subject to change based on certain default provisions as defined in the Note. The Company recorded this fixed discount of 35% as a premium on stock settled debt amounting to $28,538. |
| During the year ended December 31, 2017, $500 of the debt discount balance was amortized to income statement, leaving an unamortized discount balance of $2,500. The Company also recorded an accrued interest expense of $819 during the year ended December 31, 2017. The outstanding convertible note balance amounted to $53,000 and the premium on stock settled debt amounted to $28,538 as of December 31, 2017. | |
| On January 17, 2018, the Company opted for the prepayment of this note by paying 117% of the outstanding note balance. This early settlement of this note in cash resulted in a prepayment charge of $9,188. Hence, the Company paid $53,000 of principal, $1,045 of accrued interest and $9,188 of prepayment charge in cash totaling to $63,233 as a full and final settlement of this convertible note. | |
| ● | 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 will mature 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. | |
| Subsequent to the year ended December 31, 2018, on the maturity date of this note, $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 Xantis Private Equity 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 January 14, 2019. As the note was converted at the contractual rate, no gain on conversion was recorded upon conversion of this note and accrued interest. |
| F-36 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
| ● | 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. will mature 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. | |
| Subsequent to the year ended December 31, 2018, on the maturity date of this note, 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 January 24, 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. | |
| ● | 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. |
| F-37 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
Note 10 - Income Taxes
The income tax provision differs from the amount of tax determined by applying the US federal statutory rate of 35% in 2017 and 21% in 2018 as follows:
| 2018 | 2017 | |||||||
| Income Tax (benefit) provision at statutory rate: | $ | (338,309 | ) | $ | (1,298,911 | ) | ||
| Increase (decrease) in income tax due to: | ||||||||
| Non-Taxable foreign earnings / losses | 208,797 | 596,027 | ||||||
| Amortization of debt discount | 25,306 | 43,929 | ||||||
| Impairment loss on investments at cost | - | 560,468 | ||||||
| Loss on conversion of notes | - | 224,890 | ||||||
| Gain on sale of subsidiary | - | (8,068 | ) | |||||
| Gain on sale of marketable securities | - | (6,598 | ) | |||||
| Unrealized loss on marketable securities | 107,248 | - | ||||||
| Other | (3,042 | ) | - | |||||
| Change in valuation allowance | - | (108,904 | ) | |||||
| Total | $ | - | $ | 2,832 | ||||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income taxes.
Net deferred tax assets and liabilities are comprised of the following:
| 2018 | 2017 | |||||||
| Deferred tax assets (liabilities), current | $ | - | $ | - | ||||
| Deferred tax assets (liabilities), non-current | ||||||||
| Net operating loss carry-forward | $ | - | $ | - | ||||
| Valuation allowance | - | - | ||||||
| $ | - | $ | - | |||||
| Net deferred tax assets (liabilities) | $ | - | $ | - | ||||
| Non-current assets (liabilities) | $ | - | $ | - | ||||
| $ | - | $ | - | |||||
The US parent entity´s expenses are funded by the foreign subsidiaries through a management fee, which is, included in the US parent´s unconsolidated US annual income tax return as taxable revenues.
The Company has not recorded deferred income taxes applicable to undistributed earnings of the foreign subsidiaries because there are cumulative losses in those subsidiaries through December 31, 2018. In the future, the Company does not intend to record deferred income taxes applicable to undistributed future earnings of the foreign subsidiaries because it is the present intention of management to reinvest the undistributed earnings indefinitely in those foreign subsidiaries.
| F-38 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
In assessing the realizability of deferred tax assets, management considers that whether it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. As of December 31, 2017, all of the valuation allowance provided as of December 31, 2016 amounting to $(108,904) was applied to the income tax computation for the year ended December 31, 2017 amounting to $111,736; thereby a provision for income tax of approximately $2,832 was provided in the accompanying consolidated financial statements as of December 31, 2017. There was no income tax liability for 2018 and no additional net operating loss carry-forwards.
At December 31, 2018, the Company had no net operating loss carry-forwards.
The Company has not incurred any foreign income taxes for the years ended December 31, 2018 and 2017. The Company may be subject to examination by the Internal Revenue Service (“IRS”) and state taxing authorities for the 2016, 2017 and 2018 tax years.
Note 11 - Stockholders’ Equity
(A) Preferred Stock
● 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.
● 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 2018, the management contractually agreed to not convert or sell any of these preferred shares until September 27, 2020; |
| F-39 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
| ● | 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. (See Note 9(C))
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. See Note 9(C).
(B) Common Stock
As at December 31, 2018 and 2017, the Company had 950,000,000 authorized shares of common stock having a par value of $0.001. As at December 31, 2018 and 2017, the Company had 525,534,409 shares of common stock issued and outstanding.
During the year ended December 31, 2018, the Company did not issue any new shares of common stock.
| F-40 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
During the year ended December 31, 2017, the Company issued 151,058,634 common shares because of conversions of three convertible notes in following manner:
| ● | 5,000,000 common shares were issued to Mammoth Corporation at a verbally agreed conversion price of $0.01 per share as a result of a partial conversion of a convertible note no. 1 amounting to $50,000 with the common shares valued at their fair value of $89,324 based on the quoted trading price. See Note 9(F) | |
| ● | 6,178,560 common shares were issued to Mammoth Corporation at an agreed conversion price of $0.0080925 per share as a result of a partial conversion of a convertible note no. 2 amounting to $50,000 with the common shares valued at their fair value of $90,305 based on the quoted trading price. See Note 9(F) | |
| ● | 10,224,676 common shares were issued to Mammoth Corporation at an agreed conversion price of $0.006565 per share as a result of a partial conversion of a convertible note no. 2 amounting to $67,125 with the common shares valued at their fair value of $133,652 based on the quoted trading price. See Note 9(F) | |
| ● | 7,823,310 common shares were issued to Mammoth Corporation at an agreed conversion price of $0.00429 per share as a result of a partial conversion of a convertible note no. 2 amounting to $33,562 with the common shares valued at their fair value of $88,543 based on the quoted trading price. See Note 9(F) | |
| ● | 9,388,252 common shares were issued to Mammoth Corporation at an agreed conversion price of $0.003575 per share as a result of a partial conversion of a convertible note no. 2 amounting to $33,563 with the common shares valued at their fair value of $92,133 based on the quoted trading price. See Note 9(F) | |
| ● | 10,000,000 common shares were issued to Mammoth Corporation at an agreed conversion price of $0.00234 per share as a result of a partial conversion of a convertible note no. 3 amounting to $23,400 with the common shares valued at their fair value of $54,795 based on the quoted trading price. See Note 9(F) | |
| ● | 10,000,000 common shares were issued to Mammoth Corporation at an agreed conversion price of $0.00204 per share as a result of a partial conversion of a convertible note no. 3 amounting to $20,400 with the common shares valued at their fair value of $51,940 based on the quoted trading price. See Note 9(F) | |
| ● | 20,000,000 common shares were issued to Mammoth Corporation at an agreed conversion price of $0.00169 per share as a result of a partial conversion of a convertible note no. 3 amounting to $33,800 with the common shares valued at their fair value of $102,533 based on the quoted trading price. See Note 9(F) | |
| ● | 20,000,000 common shares were issued to Mammoth Corporation at an agreed conversion price of $0.00108 per share as a result of a partial conversion of a convertible note no. 3 amounting to $21,600 with the common shares valued at their fair value of $59,820 based on the quoted trading price. See Note 9(F) | |
| ● | 47,000,000 common shares were issued to Mammoth Corporation at an agreed conversion price of $0.0013362 per share as a result of a final conversion of a convertible note no. 3 amounting to $62,800 with the common shares valued at their fair value of $313,400 based on the quoted trading price. See Note 9(F) | |
| ● | 5,443,836 common shares were issued to private lender at an agreed conversion price of $0.012 per share as a result of a conversion of a convertible note amounting to $65,326 with the common shares valued at their fair value of $27,764 based on the quoted trading price. See Note 9(F) |
| F-41 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
Note 12 – Revenue
For the years ended December 31, 2018 and 2017, the Company recognized total revenues amounting to $143,947 and $224,526, respectively. After the implementation of the ASC 606, the Company´s management believes that the estimated transaction price has not changed based on a re-assessment of the expected probability of achieving the agreed-upon outcome for the Company´s performance based and contingent arrangements. Hence, during the year ended December 31, 2018, there were no revenues recorded related to the catch-up adjustment due to a change in the transaction price in the current period.
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 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 December 31, 2018 and 2017.
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 December 31, 2018 and 2017.
Note 13 – 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 $2,069 to this pension plan during the post-acquisition five months’ period ended December 31, 2018.
Note 14 – Related Party Transactions
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. This resulted in a stock based compensation expense of $432,000. (See Note 9(C))
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. See Note 9(C).
| F-42 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
At December 31, 2018 and 2017, there were accounts payable and accrued expenses due to related parties. (See Note 9(C & D)).
Note 15 – 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 (See Note 9(E)). | |
| 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 (See Note 5). | |
| 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. | |
| Aside from the above matter, we are not subject to any other pending or threatened litigation. |
| F-43 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
| ● | 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. As of March 31, 2017, the Company was in dispute with a former client regarding certain payments that we made on behalf of this former client. On June 5, 2017, the underlying deferred revenue liability was transferred to the acquiring individual as part of the stock purchase and debt assumption agreement. See Note 5 |
| 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 post acquisition five months ended December 31, 2018 was $14,448. |
| Total rent expense for the year ended December 31, 2018 for the Company including the above $14,448 was $37,041. |
Note 16 – Segment information
During the year ended December 31, 2017, and for the period from January 1, 2018 to August 1, 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. Since August 1, 2018, 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 consolidated balance sheets is assigned to the “Insurance Brokerage” segment.
Information with respect to these reportable business segments for the year ended December 31, 2018 and 2017 was as follows:
| For the year ended December 31, | ||||||||
| 2018 | 2017 | |||||||
| Revenues: | ||||||||
| Consultancy | $ | 77,334 | $ | 224,526 | ||||
| Insurance brokerage | 66,613 | - | ||||||
| $ | 143,947 | $ | 224,526 | |||||
| Depreciation and amortization: | ||||||||
| Consultancy | $ | 2,210 | $ | 9,349 | ||||
| Insurance brokerage | 9,577 | - | ||||||
| $ | 11,787 | $ | 9,349 | |||||
| Net loss: | ||||||||
| Consultancy | $ | (1,590,257 | ) | $ | (3,711,173 | ) | ||
| Insurance brokerage | (30,242 | ) | - | |||||
| $ | (1,620,499 | ) | $ | (3,711,173 | ) | |||
| December 31, 2018 | December 31, 2017 | |||||||
| Identifiable long-lived tangible assets at December 31, 2018 and 2017 by segment: | ||||||||
| Consultancy | $ | 4,654 | $ | 2,067 | ||||
| Insurance brokerage | 526 | - | ||||||
| $ | 5,180 | $ | 2,067 | |||||
| F-44 |
Argentum 47, Inc. and Subsidiaries
(Formerly known as Global Equity International, Inc.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
Note 17 – Subsequent events
| ● | On January 14, 2019, the Company issued 21,200,000 common shares to Xantis Private Equity 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 January 14, 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 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 January 24, 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 March 6, 2019, the Company entered into agreement to appoint Global Alternative Administration SL (“GAA”) as an “Introducer Appointed Representative” of its subsidiary, Cheshire Trafford UK Limited (“CT”). The basic terms of the agreement were as follows: a) CT would be paid a standard fee of 1,200 GBP (1,531 USD) for all new clients introduced, b) CT would retain 50% of all net initial commissions, c) CT would retain 66.67% of all on-going trail or recurring commissions, d) GAA agreed to endeavor to write / introduce at least 2,000,000 GBP (2,552,042 USD) of new business per month and finally, e) the term of the agreement with GAA would be initially for 24 months and would be renewable. |
| ● | 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 with an effective date of March 31, 2019. This decision was made due to the fact that our operations are now almost entirely based in the United Kingdom. |
| ● | On March 18, 2019, as a result of deciding to liquidate GE Professionals DMCC, the Company also decided to discontinue its Human Resources and Placement business in Dubai. |
| F-45 |
| Item 16. | Form 10-K Summary |
The Company has opted out of including a summary of the information required by Form 10-K.
| 42 |
EXHIBIT INDEX
List of Exhibits attached or incorporated by reference pursuant to Item 601 of Regulation S-B
| 43 |
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Argentum 47, Inc. | ||
| Dated: April 1, 2019 | By: | /s/ Peter J. Smith |
| Peter J. Smith | ||
| Its: | President and Chief Executive Officer | |
In accordance with the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| Dated: April 1, 2019 | By: | /s/ Peter J. Smith |
| Peter J. Smith | ||
| Its: | President and Chief Executive Officer and Director | |
| (Principal Executive Officer) | ||
| Dated: April 1, 2019 | By: | /s/ Enzo Taddei |
| Enzo Taddei | ||
| Its: | Chief Financial Officer, Secretary and Director | |
| (Principal Financial Officer and Principal Accounting Officer) |
| 44 |
