10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2019

 

or

 

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE TRANSITION FROM ______ TO ______.

 

Commission File Number: 0-54557

 

 

 

ARGENTUM 47, INC.

(Exact name of registrant as specified in its charter)

 

GLOBAL EQUITY INTERNATIONAL, INC.

(Former name of registrant until March 29, 2018)

 

Nevada   27-3986073

(State or other Jurisdiction of
Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

Capital House, Main Street, Lelley, HU12 8SN
Hull, United Kingdom.
   
(Address of principal executive offices)   (Zip code)

 

Registrant’s telephone number: +(44) 1482 891 591/ +1 (321) 200-0142

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its 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 and post such files). Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ] Smaller reporting company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes [  ] No [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. [  ]

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS

 

Indicate by check mark whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes [  ] No [  ]

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of August 12, 2019, there were 590,989,409 outstanding shares of the Registrant’s Common Stock, $0.001 par value.

 

 

 

 
 

 

INDEX

 

  Page
   
PART I – FINANCIAL INFORMATION  
   
Item 1. Financial Statements. F-1
   
Notes to Financial Statements (Unaudited) F-6
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 3
   
Item 3. Quantitative and Qualitative Disclosures about Market Risk 14
   
Item 4. Controls and Procedures 14
   
PART II – OTHER INFORMATION  
   
Item 1. Legal Proceedings. 15
   
Item 1A. Risk Factors 15
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 15
   
Item 3. Defaults Upon Senior Securities 15
   
Item 4. Mine Safety Disclosure 15
   
Item 5. Other Information. 15
   
Item 6. Exhibits 15
   
SIGNATURES 16

 

2
 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

Argentum 47, Inc. and Subsidiaries

Consolidated Financial Statements

June 30, 2019

(Unaudited)

 

CONTENTS

 

  Page(s)
   
Consolidated Balance Sheets – June 30, 2019 (unaudited) and December 31, 2018 F-2
Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended June 30, 2019 and June 30, 2018 (unaudited) F-3
Consolidated Statements of Changes in Equity / (Deficit) for the three and six months ended June 30, 2019 and June 30, 2018 (unaudited) F-4
Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and June 30, 2018 (unaudited) F-5
Notes to the Consolidated Financial Statements (unaudited) F-6 – F-31

 

 F-1 

 

   

Argentum 47, Inc. and Subsidiaries

Consolidated Balance Sheets

 

   June 30, 2019   December 31, 2018 
    (Unaudited)       
Assets          
           
Current Assets          
Cash & cash equivalents  $7,203   $183,588 
Accounts receivable   7,925    13,679 
Marketable securities at fair value   466,831    1,458,848 
Prepaids   833    2,221 
    482,792    1,658,336 
Assets of discontinued operations   2,103    16,925 
Total current assets   484,895    1,675,261 
           
Non-Current Assets          
Intangibles, net   321,283    332,689 
Goodwill   142,924    142,924 
Fixed assets, net   4,383    5,180 
Total non-current assets   468,590    480,793 
           
Total assets  $953,485   $2,156,054 
           
Liabilities and Stockholders’ Deficit          
           
Current Liabilities          
Accounts payable and accrued liabilities  $147,343   $69,735 
Accounts payable and accrued liabilities - related parties   323,946    164,568 
Loans payable - related parties   46,878    - 
Accrued interest   68,787    112,463 
Notes payable   260,584    260,584 
Fixed price convertible notes payable - net of discount of $28,774 and $130,423, respectively   624,266    1,757,617 
    1,471,804    2,364,967 
Liabilities relating to discontinued operations   -    85,182 
Total current liabilities   1,471,804    2,450,149 
           
Non-Current Liabilities          
Payable for acquisition   291,005    283,732 
Total non-current liabilities   291,005    283,732 
           
Total liabilities  $1,762,809   $2,733,881 
           
Commitments and contingencies (Note 14)          
           
Stockholders’ Deficit          
           
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 3,200,000 shares issued and outstanding, respectively.   3,200    3,200 
Common stock: 950,000,000 shares authorized; $0.001 par value: 590,989,409 and 525,534,409 shares issued and outstanding, respectively.   590,989    525,534 
Additional paid in capital   11,431,707    10,188,062 
Accumulated deficit   (12,896,614)   (11,353,215)
Accumulated other comprehensive income   16,394    13,592 
Total stockholders’ deficit   (809,324)   (577,827)
           
Total liabilities and stockholders’ deficit  $953,485   $2,156,054 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 F-2 

 

 

Argentum 47, Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income (Loss)

For the three and six months ended June 30, 2019 and June 30, 2018 (Unaudited)

 

   For the three months ended   For the six months ended 
   June 30, 2019   June 30, 2018   June 30, 2019   June 30, 2018 
                 
Revenue  $28,844   $1,200   $63,033   $32,000 
                     
General and administrative expenses   40,192    18,707    92,309    47,131 
Compensation   132,513    265,000    253,704    382,000 
Professional services   19,909    46,791    69,928    159,625 
Depreciation   648    503    1,274    655 
Amortization of intangibles   5,703    -    11,406    - 
Total operating expenses   198,965    331,001    428,621    589,411 
                     
Loss from continuing operations  $(170,121)  $(329,801)  $(365,588)  $(557,411)
                     
Other income (expenses):                    
Interest expense  $(22,351)  $(10,258)  $(48,214)  $(27,855)
Amortization of debt discount   (47,764)   (13,620)   (101,649)   (26,509)
(Loss) / gain on available for sale marketable securities, net   (320,947)   1,139,576    (992,017)   1,531,699 
Gain on extinguishment of debt and other liabilities   -    -    -    28,538 
Exchange rate gain / (loss)   (5,495)   829    (1,058)   303 
Total other (expenses) / other income   (396,557)   1,116,527    (1,142,938)   1,506,176 
                     
Net (loss) / income from continuing operations  $(566,678)  $786,726   $(1,508,526)  $948,765 
                     
Discontinued operations (Note 6)                    
Net loss from operations of discontinued subsidiary (including loss due to fixed assets write off of $164 in the six months ended June 30, 2019)  $(1,235)  $(21,545)  $(34,873)  $(61,632)
                     
Net (loss) / income  $(567,913)  $765,181   $(1,543,399)  $887,133 
                     
Net (loss) / income per common share from continuing operations - basic  $(0.00)  $0.00   $(0.00)  $0.00 
Net (loss) / income per common share from continuing operations - diluted  $(0.00)  $0.00   $(0.00)  $0.00 
                     
Net loss per common share from discontinued operations - basic  $(0.00)  $(0.00)  $(0.00)  $(0.00)
Net loss per common share from discontinued operations - diluted  $(0.00)  $(0.00)  $(0.00)  $(0.00)
                     
Weighted average number of common shares outstanding - basic   562,736,333    525,534,409    555,072,393    525,534,409 
Weighted average number of common shares outstanding - diluted   562,736,333    1,357,284,409    555,072,393    1,357,284,409 
                     
Comprehensive (loss) / income:                    
Net (loss) / income  $(567,913)  $765,181   $(1,543,399)  $887,133 
Gain / (loss) on foreign currency translation   13,903    (829)   2,802    (302)
Comprehensive (loss) / income  $(554,010)  $764,352   $(1,540,597)  $886,831 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 F-3 

 

 

Argentum 47, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity / (Deficit)

For the three and six months ended June 30, 2019 and June 30, 2018 (Unaudited)

 

For the Three Months Ended June 30, 2018:

   Series “B” Preferred Stock   Series “C” Preferred Stock   Common Stock   Additional Paid-in   Accumulated   Accumulated Other Comprehensive  

Total

Stockholders’

 
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Income   Equity 
                                         
Balance - March 31, 2018   45,000,000   $45,000    2,400,000   $2,400    525,534,409   $525,534   $9,868,862   $(9,610,767)  $647   $831,676 
                                                   
Series “C” convertible preferred stock issued as partial conversion of accrued salaries   -    -    800,000    800    -    -    319,199    -    -    319,999 
                                                   
Net income   -    -    -    -    -    -    -    765,181    -    765,181 
                                                   
Gain on foreign currency translation   -    -    -    -    -    -    -    3    (829)   (826)
                                                   
Balance - June 30, 2018   45,000,000   $45,000    3,200,000   $3,200    525,534,409   $525,534   $10,188,061   $(8,845,583)  $(182)  $1,916,030 
                                                   
For the Three Months Ended June 30, 2019:                                    
    Series “B” Preferred Stock    Series “C” Preferred Stock   Common Stock    Additional Paid-in    Accumulated     Accumulated Other Comprehensive    

Total

Stockholders’

 
    Shares     Amount    Shares     Amount    Shares     Amount    Capital    Deficit    Income    Equity 
                                                   
Balance - March 31, 2019   45,000,000   $45,000    3,200,000   $3,200    552,034,409   $552,034   $10,691,562   $(12,328,701)  $2,491   $(1,034,414)
                                                   
Common stock issued as conversion of loan notes and accrued interest   -    -    -    -    38,955,000    38,955    740,145    -    -    779,100 
                                                   
Net loss   -    -    -    -    -    -    -    (567,913)   -    (567,913)
                                                   
Gain on foreign currency translation   -    -    -    -    -    -    -    -    13,903    13,903 
                                                   
Balance - June 30, 2019   45,000,000   $45,000    3,200,000   $3,200    590,989,409   $590,989   $11,431,707   $(12,896,614)  $16,394   $(809,324)
                                                   
For the Six Months Ended June 30, 2018:                                    
    Series “B” Preferred Stock    Series “C” Preferred Stock    Common Stock    Additional Paid-in    Accumulated     Accumulated Other Comprehensive    

Total

Stockholders’

 
    Shares     Amount    Shares     Amount    Shares     Amount    Capital    Deficit    Income    Equity 
                                                   
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    -    -    319,199    -    -    319,999 
                                                   
Net income   -    -    -    -    -    -    -    887,133    -    887,133 
                                                   
Cumulative effect adjustment   -    -    -    -    -    -    -    1,181,675    (1,181,675)   - 
                                                   
Gain on foreign currency translation   -    -    -    -    -    -    -    -    (302)   (302)
                                                   
Balance - June 30, 2018   45,000,000   $45,000    3,200,000   $3,200    525,534,409   $525,534   $10,188,061   $(8,845,583)  $(182)  $1,916,030 
                                                   
For the Six Months Ended June 30, 2019:                                    
    Series “B” Preferred Stock    Series “C” Preferred Stock    Common Stock    Additional Paid-in    Accumulated     Accumulated Other Comprehensive    

Total

Stockholders’ Equity

 
    Shares     Amount    Shares     Amount    Shares     Amount    Capital    Deficit    Income    /(Deficit) 
                                                   
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)
                                                   
Common stock issued as conversion of loan notes and accrued interest   -    -    -    -    65,455,000    65,455    1,243,645    -    -    1,309,100 
                                                   
Net loss   -    -    -    -    -    -    -    (1,543,399)   -    (1,543,399)
                                                   
Loss on foreign currency translation   -    -    -    -    -    -    -    -    2,802    2,802 
                                                   
Balance - June 30, 2019   45,000,000   $45,000    3,200,000   $3,200    590,989,409   $590,989   $11,431,707   $(12,896,614)  $16,394   $(809,324)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 F-4 

 

 

Argentum 47, Inc. And Subsidiaries

Consolidated Statements of Cash Flows

For the six months ended June 30, 2019 and June 30, 2018 (Unaudited)

 

   June 30, 2019   June 30, 2018 
         
Cash flows from operating activities          
Net (loss) / income  $(1,543,399)  $887,133 
           
Adjustments to reconcile net (loss) / income from operations to net cash used in operating activities:          
Depreciation   1,351    918 
Amortization of intangibles   11,406    - 
Amortization of debt discount   101,649    26,509 
Loss / (gain) on available for sale marketable securities, net   992,017    (1,531,699)
Gain on extinguishment of debt and other liabilities   -    (33,823)
Loss due to fixed assets write off   164    - 
           
Changes in operating assets and liabilities:          
Accounts receivable   5,754    (30,400)
Prepaids   3,362    (1,016)
Other current assets   4,732    879 
Assets of discontinued operations   (2,103)   - 
Accounts payable and accrued liabilities   (1,926)   345,166 
Accrued contingencies and penalties   -    (5,000)
Accounts payable and accrued liabilities - related parties   153,730    (121,904)
Accrued interest   37,697    10,664 
           
Net cash used in operating activities:  $(235,566)  $(452,572)
           
Cash Flows used in investing activities:          
Purchase of office furniture and equipment  $(719)  $(4,798)
Proceeds from sale of marketable securities   -    120 
           
Net cash used in investing activities  $(719)  $(4,678)
           
Cash flows from financing activities:          
Proceeds from loans - related parties  $76,878   $1,663 
Repayment of loans - related parties   (30,000)   (1,663)
Proceeds from notes payable, net of debt issue cost   -    1,088,112 
Repayment of notes payable   -    (399,087)
           
Net cash provided by financing activities  $46,878   $689,025 
           
Net (decrease) / increase in cash  $(189,407)  $231,775 
           
Effect of Exchange Rates on Cash   2,803    (302)
           
Cash at Beginning of Period  $193,807   $5,084 
           
Cash at End of Period  $7,203   $236,557 
           
Supplemental disclosure of cash flow information:          
Cash paid for interest  $9,000   $17,191 
           
Cash paid for income taxes  $-   $- 
           
Supplemental disclosure of non-cash investing and financing activities:          
           
Debt discount and issuance costs recorded on notes payable  $-   $146,888 
Accounts payable and accrued salaries settled in series “C” preferred stock   -    160,000 
Notes payable and accrued interest converted into common stock  $1,309,100   $- 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 F-5 

 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2019

(Unaudited)

 

Note 1 - Organization and Nature of Operations

 

Argentum 47, Inc., formerly Global Equity International Inc. (the “Company” or “ARG”), a reporting company since June 21, 2012, was organized under the laws of the state of Nevada on October 1, 2010. Global Equity Partners, Plc. (“GEP”), a private company, was organized under the laws of the Republic of Seychelles on September 2, 2009. On November 15, 2010, GEP executed a reverse recapitalization with ARG. On August 22, 2014, we formed a Dubai subsidiary of GEP called GE Professionals DMCC. On June 10, 2016, ARG incorporated its wholly owned subsidiary, called GEP Equity Holdings Limited (“GEP EH”), under the laws of the Republic of Seychelles. On March 14, 2017, the Company´s board of directors unanimously voted to transfer the ownership of GE Professionals DMCC (Dubai) to GEP EH. On June 5, 2017, the Company sold 100% of the issued and outstanding common stock of GEP to a citizen of the Republic of Thailand by entering into a Stock Purchase and Debt Assumption Agreement. On December 12, 2017, ARG incorporated another wholly owned subsidiary, called Argentum 47 Financial Management Limited (“Argentum FM”), under the Companies Act 2006 of England and Wales as a private limited company. Argentum FM was formed to serve as a holding Company for the acquisition of various advisory firms.

 

On March 29, 2018, the Company formally changed its name from Global Equity International, Inc. to Argentum 47, Inc.

 

On August 1, 2018, Argentum FM entered into a Share Purchase Agreement with a third party, pursuant to which Argentum FM acquired 100% of the ordinary shares of Cheshire Trafford (U.K.) Limited of Hull, United Kingdom (“Cheshire Trafford”). Cheshire Trafford was incorporated under the laws of the United Kingdom on January 26, 1976, as a limited liability company.

 

On March 18, 2019, the Board of Directors of GEP Equity Holdings Limited decided to commence the process to formally and legally liquidate GE Professionals DMCC and its related employment placement services business with an effective date of March 31, 2019. This decision was made so to allow management of Argentum 47, Inc. to fully concentrate on the Company´s core businesses, Independent Financial Advisory and Business Consulting. Accordingly, GE Professionals DMCC has been presented as a discontinued operation for all periods presented in the accompanying unaudited consolidated financial statements and footnotes. (See Note 6)

 

The Company´s consolidated revenues from continuing operations, core businesses, are generated from business consulting services and by acting as broker for sale of Lump Sum or Single Premium Insurance Policies and/or the sale of Regular Premium Investment or Insurance Policies that are issued by third party insurance companies.

 

Note 2 - Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information and disclosures necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statements presentation.

 

The unaudited interim consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K, which contains the audited financial statements and notes thereto, together with the Management’s Discussion and Analysis, for the year ended December 31, 2018. The interim results for the period ended June 30, 2019 are not necessarily indicative of results for the full fiscal year.

 

 F-6 

 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2019

(Unaudited)

  

Note 3 - Going Concern

 

The accompanying unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

 

As reflected in the accompanying unaudited consolidated financial statements, the Company had a net loss of $1,543,399 and net cash used in operations of $235,566 for the six months ended June 30, 2019; working capital deficit, stockholder’s deficit and accumulated deficit of $986,909, $809,324 and $12,896,614 as of June 30, 2019. It is management’s opinion that these factors raise substantial doubt about the Company’s ability to continue as a going concern for twelve months from the issuance date of this report.

 

The ability for the Company to mitigate this risk and continue its operations is primarily dependent on management’s plans as follows:

 

  a) Consummating and executing all current engagements related to the business consulting division.
  b) Continually engaging with new clients via our business consulting division.
  c) Maximizing the already acquired Independent Financial Advisory firm´s revenues by way of servicing the current client base in the most professional manner possible.
  d) Organically growing the amount of funds under administration of the already acquired Independent Financial Advisory firm to new and higher levels.
  e) Continuing to receive fixed funding, via equity or debt, for acquisition, growth and working capital from parties that have already executed funding agreement with the Company.
  f) Continuing to negotiate new fixed funding via equity or debt, for further acquisitions, growth and working capital.
  g) Acquiring and managing more Independent Financial Advisory firms with funds under administration located around the globe.

 

Note 4 - Summary of Significant Accounting Policies

 

Principles of Consolidation

 

Argentum 47, Inc. (“ARG”) is the parent company of its two 100% owned subsidiaries called GEP Equity Holdings Limited (“GEP EH”) and Argentum 47 Financial Management Limited (“Argentum FM”). GEP EH is the parent company of its 100% owned subsidiary, GE Professionals DMCC (Dubai). GE Professionals DMCC has been presented as a discontinued operation as of June 30, 2019 as the liquidation proceedings are currently under process. Argentum FM is the parent company of its 100% owned subsidiary, Cheshire Trafford U.K. Limited (U.K.) from August 1, 2018 pursuant to a Share Purchase Agreement dated August 1, 2018. All significant inter-company accounts and transactions have been eliminated in consolidation.

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

 

 F-7 

 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2019

(Unaudited)

 

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation, or set of circumstances that existed at the date of the consolidated financial statements, which management considered in formulating its estimate could change in the near term due to one or more future non-confirming events. Accordingly, the actual results could differ from those estimates. Significant estimates in the accompanying unaudited consolidated financial statements include accounts receivable and related revenues for our subsidiary, Cheshire Trafford, allowance for doubtful accounts and loans, estimates of fair value of securities received for services, estimates of fair value of securities held, depreciation period of fixed assets, valuation of fair value of assets acquired and liabilities assumed of acquired businesses, fair value of business purchase consideration, valuation allowance on deferred tax assets, derivative valuations and equity valuations for non-cash equity grants.

 

Risks and Uncertainties

 

The Company’s operations are subject to significant risk and uncertainties including financial, operational, competition and potential risk of business failure.

 

Segment Reporting

 

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those of segments operating in other economic environments.

 

The Company uses “the management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s chief operating decision maker is the chief executive officer of the Company, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company.

 

Cash Equivalents

 

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At June 30, 2019 and December 31, 2018, the Company had no cash equivalents.

 

Accounts Receivable and Allowance for Doubtful Accounts

 

The Company recognizes accounts receivable in connection with the services provided. The Company recognizes an allowance for doubtful accounts based on an analysis of current receivables aging and expected future write-offs, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. There was no allowance for bad debt at June 30, 2019 and December 31, 2018.

 

 F-8 

 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2019

(Unaudited)

 

Foreign currency policy

 

The Company’s accounting policies related to the consolidation and accounting for foreign operations are as follows: The accompanying unaudited consolidated financial statements are presented in U.S. dollars. The functional currency of the Company’s discontinued Dubai subsidiary is the Arab Emirates Dirham (“AED”) and the functional currency of the Company’s U.K. subsidiaries is Great Britain Pounds (“GBP”). All foreign currency balances and transactions are translated into United States dollars (“$” and/or “USD”) as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Equity transactions are translated at each historical transaction date spot rate. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of our stockholders’ equity (deficit) as “Accumulated other comprehensive income (loss).” Gains and losses resulting from foreign currency transactions are included in the non-operating income or expenses of the statement of operations.

 

Investments

 

(A) Classification of Securities

 

Marketable Securities

 

As of January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2016-01, “Financial Instruments - Overall (Topic 825-10): “Recognition and Measurement of Financial Assets and Financial Liabilities.” which amends the guidance on the classification and measurement of financial instruments. Some of the amendments in ASU 2016-01 include the following: 1) requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. 2) It simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. 3) It requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. 4) It requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value; among others. After evaluating the potential impact of this guidance on our consolidated financial statements, the management has reversed $1,181,675 from accumulated other comprehensive income to opening retained earnings as a cumulative effect adjustment on January 1, 2018 using the modified retrospective method.

 

At the time of the acquisition, a marketable security is designated as held-to-maturity, available-for-sale or trading, which depends on the ability and intent to hold such security to maturity. Securities classified as trading and available-for-sale are reported at fair value, while securities classified as held-to-maturity are reported at amortized cost.

 

All changes in the fair value of the securities are reported in the earnings as they occur in a single line item “Gain (loss) on available for sale marketable securities, net.” Therefore, no gain/loss is recognized on the sale of securities.

 

Cost Method Investments

 

Securities that are not classified as marketable securities are accounted for under the cost method. These securities are recorded at their original cost basis and are subject to impairment testing.

 

(B) Other than Temporary Impairment

 

The Company reviews its equity investment portfolio for any unrealized losses that would be deemed other than temporary and require the recognition of an impairment loss in the statement of operations. If the cost of an investment exceeds its fair value, the Company evaluates, among other factors, general market conditions, the duration and extent to which the fair value is less than cost, and the Company’s intent and ability to hold the investments. Management also considers the type of security, related-industry and sector performance, as well as published investment ratings and analyst reports, to evaluate its portfolio. Once a decline in fair value is determined to be other than temporary, an impairment charge is recorded and a new cost basis in the investment is established. If market, industry, and/or investee conditions deteriorate, the Company may incur future impairments. The Company did not record any such impairment during the three and six months ended June 30, 2019 or June 30, 2018.

 

 F-9 

 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2019

(Unaudited)

 

Fixed Assets

 

Fixed assets are stated at cost of acquisition less accumulated depreciation. Depreciation is provided based on estimated useful lives of the assets. Cost of improvements that substantially extend the useful lives of assets are capitalized. Repairs and maintenance expenses are charged to expense when incurred. In case of sale or disposal of an asset, the cost and related accumulated depreciation are removed from the consolidated financial statements.

 

Leases

 

On January 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842) which requires a lessee to recognize on the balance sheet the assets and liabilities for the rights and obligations created by leases. Leases will continue to be classified as either financing or operating, with classification affecting the recognition, measurement and presentation of expenses and cash flows arising from a lease. We adopted this standard by applying the optional transition method on the adoption date and did not adjust comparative periods. In addition, the Company elected the practical expedient to not reassess whether any expired contracts contained leases. Furthermore, the Company has elected to not apply the recognition standards of ASU 2016-02 to operating leases with effective terms of twelve months or less (“Short-Term Leases”). For Short-Term Leases, the Company recognizes lease payments on a straight-line basis over the lease term in the period in which the obligation for those payments is incurred. On the adoption date, all of the Company’s contracts containing leases were expired or were Short Term Leases. Accordingly, upon the adoption of ASU 2016-02, there was no cumulative effect adjustment.

 

Beneficial Conversion Feature

 

For conventional convertible debt where the rate of conversion is below market value, the Company records any “beneficial conversion feature” (“BCF”) intrinsic value as additional paid in capital and related debt discount.

 

When the Company records a BCF, the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument. The discount is amortized over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.

 

Debt Issue Costs

 

The Company may pay debt issue costs in connection with raising funds through the issuance of debt whether convertible or not or with other consideration. These costs are recorded as debt discounts and are amortized over the life of the debt to the statement of operations as amortization of debt discount.

 

Original Issue Discount

 

If debt is issued with an original issue discount, the original issue discount is recorded to debt discount, reducing the face amount of the note and is amortized over the life of the debt to the statement of operations as amortization of debt discount. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.

 

 F-10 

 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2019

(Unaudited)

 

Valuation of Derivative Instruments

 

ASC 815 “Derivatives and Hedging” requires that embedded derivative instruments be bifurcated and assessed, along with free-standing derivative instruments such as warrants, on their issuance date and measured at their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option pricing formula. Upon conversion of a note where the embedded conversion option has been bifurcated and accounted for as a derivative liability, the Company records the shares at fair value, relieves all related notes, derivatives and debt discounts and recognizes a net gain or loss on debt extinguishment.

 

Business combinations

 

The Company accounts for its business acquisitions under the acquisition method of accounting as indicated in ASC No. 805, “Business Combinations”, which requires the acquiring entity in a business combination to recognize the fair value of all assets acquired, liabilities assumed and any non-controlling interest in the acquiree, and establishes the acquisition date as the fair value measurement point. Accordingly, the Company recognizes assets acquired and liabilities assumed in business combinations, including contingent assets and liabilities and non-controlling interest in the acquiree, based on fair value estimates as of the date of acquisition.

 

Where applicable, the consideration for the acquisition includes amounts resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments (see below). The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not re-measured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is re-measured at subsequent reporting dates at fair value, with changes in fair value recognized in statement of operations.

 

The measurement period is the period from the date of acquisition to the date the group obtains complete information about facts and circumstances that existed as of the acquisition date, resulting in a final valuation, and is subject to a maximum of one year from acquisition date.

 

Goodwill and Other Intangible Assets

 

In accordance with ASC No. 805, the Company recognizes and measures goodwill, if any, as of the acquisition date, as the excess of the fair value of the consideration paid over the fair value of the identified net assets acquired. Goodwill and intangible assets acquired in a business combination and determined to have an indefinite useful life are not amortized, but instead are reviewed for impairment annually or more frequently if impairment indicators arise. Intangible assets with estimable useful lives are amortized over such lives and reviewed for impairment if impairment indicators arise. For the purpose of impairment testing, goodwill is allocated to each of the group’s reporting units expected to benefit from the synergies of the combination. Reporting units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the fair value of a reporting unit is less than its carrying amount, an impairment loss calculated as the amount by which the carrying value exceeds the fair value is recorded to goodwill but cannot exceed the goodwill amount. An impairment loss recognized for goodwill is not reversed in a subsequent period. On disposal of a subsidiary or the relevant reporting unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

 

 F-11 

 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2019

(Unaudited)

 

Discontinued operations

 

Components of an entity divested or discontinued are recognized in the consolidated statements of operations until the date of divestment or discontinuation. For periods prior to the designation as discontinued operations, we reclassify the results of operations to discontinued operations. Gains or losses on divestment or winding up of subsidiaries are stated as the difference between the sales or disposal amount and the carrying amount of the net assets at the time of sale or winding up plus sales or winding up costs.

 

The assets and liabilities for business components meeting the criteria for discontinued operations are reclassified and presented separately as assets of discontinued operations and liabilities relating to discontinued operations in the accompanying consolidated balance sheet. The change in presentation for discontinued operations does not have any impact on our financial condition or results of operations. We combine the cash flows and assets and liabilities attributable to discontinued operations with the respective cash flows and assets and liabilities from continuing operations in the accompanying consolidated statement of cash flows.

 

Revenue Recognition

 

As of January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (“ASC 606”), that affects the timing of when certain types of revenue will be recognized.

 

Revenue is recognized when the Company satisfies a performance obligation by transferring services promised in a contract to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those services. A single contract could include one or multiple performance obligations. For those contracts that have multiple performance obligations, the Company allocates the total transaction price to each performance obligation based on its relative standalone selling price, which is determined based on the Company´s overall pricing objectives, taking into consideration market conditions and other factors. Performance obligations in the Company´s contracts generally include general due diligence, assistance in designing client’s capitalization strategy, introductions to potential capital funding sources and arranging third party insurance policies.

 

Revenue is recognized by evaluating our revenue contracts with customers based on the five-step model under ASC 606:

 

  1. Identify the contract with the customer;
  2. Identify the performance obligations in the contract;
  3. Determine the transaction price;
  4. Allocate the transaction price to separate performance obligations; and
  5. Recognize revenue when (or as) each performance obligation is satisfied.

 

The Company generates its revenue from continuing operations by providing following services:

 

  a) Business consulting services including advisory services to various clients.
  b) Earning commissions from insurance companies on insurance policy sales and renewals, which are based on a percentage of the insurance products sold.

 

 F-12 

 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2019

(Unaudited)

 

Most of the Company´s business consultancy and advisory services contracts are based on a combination of both fixed fee arrangements and performance based or contingent arrangement. In addition, the Company generates initial and trail commissions by acting as a broker of third party lump sum or single premium insurance policies and regular premium investment or insurance policies. Fees from clients for advisory and consulting services are dependent on the extent and value of the services provided. The Company recognizes revenue when the promised services are rendered to the customer in the amount that best reflects the consideration to which the Company expects to be entitled in exchange for those services.

 

In fixed-fee billing arrangements, the Company agrees to a pre-established fee in exchange for a predetermined set of professional services. The Company sets the fees based on its estimates of the costs and timing for completing the engagements. The Company generally recognizes revenues under fixed fee billing arrangements using the input method, which is based on work completed to date versus the Company´s estimates of the total services to be provided under the engagement.

 

Performance based or contingent arrangements represent forms of variable consideration. In these arrangements, the Company´s fees are linked to the attainment of contractually defined objectives with its clients. These arrangements include conditional payments, commonly referred to as cash success fees and/or equity success fees. The Company typically satisfies its performance obligations for these services over time as the related contractual objectives are met. The Company determines the transaction price based on the expected probability of achieving the agreed upon outcome and recognizes revenue earned to date by applying the input method.

 

Reimbursable expenses, including those relating to travel, out-of-pocket expenses, outside consultants and other outside service costs, are generally included in revenues, and an equivalent amount of reimbursable expenses is included in costs of services in the period in which the expense is incurred.

 

The payment terms and conditions in the Company´s customer contracts vary. Differences between the timing of billings and the recognition of revenue are recognized as either accrued accounts receivable, an asset or deferred revenues, a liability. Revenues recognized for services performed but not yet billed to clients are recorded as accrued accounts receivable. Client pre-payments and retainers are classified as deferred revenues and recognized over future periods as earned in accordance with the applicable engagement agreement.

 

We receive consideration in the form of cash and/or securities. We measure securities received at fair value on the date of receipt. If securities are received in advance of completion of our services, the fair value will be recorded as deferred revenue and recognized as revenue as the services are completed.

 

All revenues are generated from clients whose operations are based outside of the United States. For the six months ended June 30, 2019 and 2018, the Company had following concentrations of revenues from continuing operations:

 

Customer  June 30, 2019   June 30, 2018 
         
DUO   0%   6.25%
GRL   0%   93.75%
CT clients (see below)   100%   0%
    100%   100%

 

 F-13 

 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2019

(Unaudited)

 

During the six months ended June 30, 2019, the Company had following concentrations of revenues regarding insurance brokerage business, which was 100% of the consolidated revenues of the Company:

 

   June 30, 2019 
     
Initial advisory fees   6.87%
Ongoing advisory fees   31.70%
Renewal commissions   7.52%
Trail or recurring commissions   52.83%
Other revenue   1.08%
    100%

 

At June 30, 2019 and December 31, 2018, the Company had the following concentrations of accounts receivables with customers:

 

Customer  June 30, 2019   December 31, 2018 
         
OMI IRE   0%   30.94%
CLI   29.51%   16.62%
OMW   24.60%   16.55%
RL   11.80%   0.00%
Others having a concentration of less than 10%   34.09%   35.89%
    100%   100%

 

Share-based payments

 

Under ASC 718 “Compensation – Stock Compensation”, the Company recognizes all forms of share-based payments to employees, including stock option grants, warrants and restricted stock grants at their fair value on the grant date, which is based on the estimated number of awards that are ultimately expected to vest.

 

On January 1, 2019, the Company adopted ASU 2018-07 “Compensation – Stock Compensation” whereby share based payment awards issued to non-employees will be treated the same as for employees. The guidance has been applied using the modified prospective method which may result in a cumulative effect adjustment to retained earnings on the adoption date. The adoption of ASU 2018-07 did not result in a cumulative effect adjustment.

 

Share based payments, excluding restricted stock, are valued using a Black-Scholes pricing model.

 

When computing fair value, the Company considered the following variables:

 

  The risk-free interest rate assumption is based on the U.S. Treasury yield for a period consistent with the expected term of the share based payment in effect at the time of the grant.
  The expected term is developed by management estimate.
  The Company has not paid any dividends on common stock since inception and does not anticipate paying dividends on its common stock in the near future.
  The expected volatility is based on management estimates which are based upon our historical volatility.
  The forfeiture rate is based on historical experience.

 

 F-14 

 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2019

(Unaudited)

 

Earnings per Share

 

The basic net earnings (loss) per share are computed by dividing net income (loss) by weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of shares of common stock and common stock equivalents outstanding during the period.

 

As at June 30, 2019 and December 31, 2018, the Company had common stock equivalents of 32,651,975 and 94,401,975 common shares, respectively, in the form of convertible notes, which, if converted, may be dilutive. See Note 9(E).

 

As at June 30, 2019 and December 31, 2018, the Company had common stock equivalents of 770,000,000 common shares, in the form of convertible preferred stock, which, if converted, may be dilutive. See Note 10(A).

 

   Number of Common Shares 
   June 30, 2019   December 31, 2018 
Potential dilutive common stock          
Convertible notes   32,651,975    94,401,975 
Series “B” preferred stock   450,000,000    450,000,000 
Series “C” preferred stock   320,000,000    320,000,000 
Total potential dilutive common stock   802,651,975    864,401,475 
           
Weighted average number of common shares – Basic   550,072,393    525,534,409 
Weighted average number of common shares – Dilutive   1,357,724,368    1,389,936,384 

 

As of June 30, 2019 and December 31, 2018, diluted weighted average number of common shares exceeds total authorized common shares. However, 770,000,000 common shares would result from the conversion of the preferred “B” and preferred “C” stock into common stock. The option to convert the abovementioned preferred “B” and “C” stock into common stock could not be any earlier than September 27, 2020.

 

Comprehensive Income

 

The Comprehensive Income Topic of the FASB Accounting Standards Codification establishes standards for reporting and presentation of comprehensive income and its components in a full set of financial statements. Comprehensive income from January 1, 2018 through June 30, 2018 and from January 1, 2019 through June 30, 2019, includes only foreign currency translation gain / (loss), and is presented in the Company’s consolidated statements of comprehensive income. Pursuant to ASU 2016-01, the Company reclassified the opening balance of unrealized gain on available for sale marketable securities from other comprehensive income to retained earnings as a cumulative effect adjustment as at January 1, 2018.

 

 F-15 

 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2019

(Unaudited)

 

Changes in Accumulated Other Comprehensive Income (Loss) by Component during the six months ended June 30, 2018 were as follows:

 

  

Foreign

Currency

Translation

Adjustment

  

Unrealized gain

on available for

sale marketable

securities

   Total 
Balance, December 31, 2017  $120   $1,181,675   $1,181,795 
Other comprehensive loss before reclassification   (302)   -    (302)
Amounts reclassified from accumulated other comprehensive income as a cumulative effect adjustment   -    (1,181,675)   (1,181,675)
Net current-period other comprehensive loss   (302)   (1,181,675)   (1,181,977)
Balance, June 30, 2018  $(182)  $-   $(182)

 

Changes in Accumulated Other Comprehensive Income (Loss) by Component during the six months ended June 30, 2019 were as follows:

 

Balance, December 31, 2018  $13,592 
Foreign currency translation adjustment for the period   2,802 
Balance, June 30, 2019  $16,394 

 

Fair Value of Financial Assets and Liabilities

 

The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability.

 

The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value:

 

  Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
     
  Level 2: Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
     
  Level 3: Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

 

The carrying amounts reported in the balance sheet for prepaid expenses, accounts receivable, accounts payable, accounts payable to related parties and loans payable to related parties, approximate fair value are based on the short-term nature of these instruments.

 

 F-16 

 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2019

(Unaudited)

 

The Company measures its derivative liabilities and marketable securities at fair market value on a recurring basis and measures its non-marketable securities at fair value on a non-recurring basis. Consequently, the Company may have gains and losses reported in the statement of operations.

 

The following is the Company’s assets and liabilities measured at fair value on a recurring and nonrecurring basis at June 30, 2019 and December 31, 2018, using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3):

 

   June 30, 2019   December 31, 2018 
Level 1 – Marketable Securities – Recurring  $466,831   $- 
Level 2 – Marketable Securities – Recurring  $-   $1,458,848 

 

Management analyzed the historical volume and the variation in the price that the marketable securities were bought and sold at during the year 2018 and six months ended June 30, 2019 and has concluded that the level 2 and level 1 valuation respectively, regarding the fair value of the marketable securities should be $0.25 per share as at December 31, 2018 and $0.08 per share as at June 30, 2019.

 

Marketable Securities — The Level 1 position consists of the Company’s investment in equity securities of stock held in publicly traded companies. The valuation of these securities is based on quoted prices in active markets.

 

Changes in Level 1 or Level 2 marketable securities measured at fair value for the six months ended June 30, 2019 were as follows:

 

Balance, December 31, 2018  $1,458,848 
Sales and settlements during the period   - 
Loss on available for sale marketable securities, net   (992,017)
Balance, June 30, 2018  $466,831 

 

Non-Marketable Securities at Fair Value on a Non-Recurring Basis — Certain assets are measured at fair value on a nonrecurring basis. The level 3 position consist of investments accounted for under the cost method. The Level 3 position consists of investments in equity securities held in private companies.

 

Management believes that an “other-than-temporary impairment” would be justified, as according to ASC 320-10 an investment is considered impaired when the fair value of an investment is less than its amortized cost basis. The impairment is considered either temporary or other-than-temporary. The accounting literature does not define other-than-temporary. It does, however, state that other-than-temporary does not mean permanent, although, all permanent impairments are considered other-than-temporary. The literature does provide some examples of factors, which may be indicative of an “other-than-temporary impairment”, such as:

 

  the length of time and extent to which market value has been less than cost;
  the financial condition and near-term prospects of the issuer; and
  the intent and ability of the holder to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in market value.

 

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-17 

 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2019

(Unaudited)

 

Recent Accounting Pronouncements

 

There are no new accounting pronouncements that we expect to have an impact on the Company’s financial statements.

 

Note 5 – Acquisition of Cheshire Trafford (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 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 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 

 

 F-18 

 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2019

(Unaudited)

 

Below table depicts the allocation of fair value of the purchase consideration to the fair value of the net assets of Cheshire Trafford at the acquisition date:

 

  Fair Value 
Assets acquired    
Cash  $4,743 
Accounts receivable – net   6,555 
Intangibles – customer list   342,194 
Goodwill   142,924 
Property and equipment, net   614 
    497,030 
Liabilities assumed     
Accounts payable and accrued liabilities   4,012 
Due to director of Cheshire Trafford   33,010 
    (37,022)
Purchase consideration allocated  $460,008 

 

This acquisition was accounted for under the acquisition method of accounting. Accordingly, the Company recognized amounts for identifiable assets acquired and liabilities assumed at their initial estimated acquisition date fair values. During the purchase price measurement period, which may be one year from the business acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed based on completion of valuations.

 

The excess of the purchase consideration over the fair value of assets acquired, net of liabilities assumed was initially recognized as the fair value of customer list intangible asset totaling to $485,118. Upon finalizing the fair value of customer list intangible based on the Multi Period Excess Earnings Model, Management believed that fair value of the customer list intangible asset amounted to $342,194 and the remaining $142,924 is recognized as goodwill as at December 31, 2018. This intangible asset will be amortized on a straight line basis over a life of 15 years which is the average service duration of a customer that has invested with Cheshire Trafford.

 

Estimated life of intangibles  15 years 
     
Fair value of customer list intangible asset at date of acquisition  $485,118 
Fair value adjustment at December 31, 2018   (142,924)
Adjusted fair value of customer list intangible asset at December 31, 2018  $342,194 
Amortization charge for 5 months ended December 31, 2018   (9,505)
Net Book Value at December 31, 2018  $332,689 
Amortization charge for the period   (11,406)
Net Book Value at June 30, 2019   321,283 

 

Note 6 – Discontinued Operations

 

In March 2019, Management decided that it made overall economic sense for the Company to close its employment placement services business in Dubai; hence, in order to fully concentrate on its core business of Independent Financial Advisory services and consultancy business, the Board of Directors decided to initiate liquidation proceedings of the Dubai subsidiary “GE Professionals DMCC” and discontinue the related employment placement services business. As a result, Dubai subsidiary operations for the three and six months ended June 30, 2019 and the comparative periods presented are treated as discontinued operations in the accompanying unaudited consolidated financial statements. The consolidated statements of operations only comprise the continuing operations. Net income from the discontinued operations is presented on a single line after the net income from the continuing operations.

 

 F-19 

 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2019

(Unaudited)

 

Major classes of assets and liabilities from discontinued operations as at June 30, 2019 and December 31, 2018 were as follows:

 

  June 30, 2019   December 31, 2018 
Assets        
Cash  $-   $10,219 
Prepaids   -    1,974 
Other current assets   2,103    4,732 
Total Assets  $2,103   $16,925 
           
Liabilities          
Accounts payable and accrued liabilities  $-   $79,534 
Accounts payable and accrued liabilities - related parties   -    5,648 
Total Liabilities  $-   $85,182 

 

Statement of Operations from discontinued operations for the three months ended June 30, 2019 and 2018 was as follows:

 

   June 30, 2019   June 30, 2018 
Revenue  $-   $29,288 
           
General and administrative expenses  $1,235   $18,580 
Compensation expense   -    31,948 
Depreciation   -    95 
Loss from discontinued operations  $(1,235)  $(21,336)
Other income (expenses)          
Exchange rate loss  $-   $(209)
Total other (expenses) / income  $-   $(209)
Net loss from discontinued operations  $(1,235)  $(21,545)

 

Statement of Operations from discontinued operations for the six months ended June 30, 2019 and 2018 was as follows:

 

   June 30, 2019   June 30, 2018 
Revenue  $-   $38,267 
           
General and administrative expenses  $9,320   $36,986 
Compensation expense   22,743    67,391 
Professional services   2,382    - 
Depreciation   77    263 
Loss from discontinued operations  $(34,522)  $(66,374)
Other income (expenses)          
Loss due to fixed assets write off  $(164)  $- 
Gain on extinguishment of debt and other liabilities   -    5,286 
Exchange rate loss   (187)   (544)
Total other (expenses) / income  $(351)  $4,742 
Net loss from discontinued operations  $(34,873)  $(61,632)

 

 F-20 

 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2019

(Unaudited)

 

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 June 30, 2019 and December 31, 2018:

 

Company  June 30, 2019   December 31, 2018 
   No. of Shares   Book value   No. of Shares   Book value 
DUO   5,835,392   $466,831    5,835,392   $1,458,848 
    5,835,392   $466,831    5,835,392   $1,458,848 

 

At June 30, 2019, the Company revalued 5,835,392 common shares at their quoted market price of $0.08 per share, to $466,831; hence, recording a net loss on available for sale marketable securities of $992,017 into the statement of operations for the six months ended June 30, 2019.

 

B. Investments at Cost

 

The Company, through its subsidiary GEP Equity Holdings Limited, holds the following common equity securities in private and reporting companies as at June 30, 2019 and December 31, 2018:

 

   June 30, 2019   December 31, 2018     
Company  No. of Shares   Book value   No. of Shares   Book value   Status 
PDI   5,006,521   $-    5,006,521   $-    Private Company 
QFS   2,271    -    2,271    -    Private Company 
    5,008,792   $-    5,008,792   $-      

 

The Company, through its subsidiary, GEP Equity Holdings Limited, holds the following preferred equity securities in private and reporting companies as at June 30, 2019 and December 31, 2018:

 

   June 30, 2019   December 31, 2018     
Company  No. of Shares   Book value   No. of Shares   Book value   Status 
PDI   450,000   $-    450,000   $-    Private Company 
    450,000   $-    450,000   $-      

 

 F-21 

 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2019

(Unaudited)

 

Note 8 – Fixed Assets

 

Following table reflects net book value of furniture and equipment as of June 30, 2019 and December 31, 2018:

 

   Furniture and Equipment 
Useful Life  3 to 10 years 
     
Cost     
Balance as at December 31, 2018  $82,010 
Addition during the period   719 
Cost write off – discontinued operations   (38,348)
Translation rate differences   (177)
Balance as at June 30, 2019  $44,204 
      
Accumulated depreciation     
Balance as at December 31, 2018  $76,830 
Depreciation expense for the period – continuing operations   1,274 
Depreciation expense for the period - discontinued operations   77 
Accumulated depreciation write off – discontinued operations   (38,185)
Translation rate differences   (175)
Balance as at June 30, 2019  $39,821 
Net book value as at June 30, 2019  $4,383 
Net book value as at December 31, 2018  $5,180 

 

Note 9 – Debt, Accounts Payable and Accrued Liabilities

 

(A) Accounts Payable and Other Accrued Liabilities

 

The following table represents breakdown of accounts payable and other accrued liabilities as of June 30, 2019 and December 31, 2018, respectively:

 

   June 30, 2019   December 31,2018 
Accrued salaries and benefits  $73,087   $12,794 
Accounts payable and other accrued liabilities   74,256    56,941 
   $147,343   $69,735 

 

(B) Accounts Payable and Accrued Liabilities – Related Parties

 

The following table represents the accounts payable and accrued expenses to related parties as of June 30, 2019 and December 31, 2018, respectively:

 

   June 30, 2019   December 31, 2018 
Accrued salaries and benefits  $288,165   $156,175 
Expenses payable   35,781    8,393 
   $323,946   $164,568 

 

 F-22 

 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2019

(Unaudited)

 

(C) Loans Payable – Related Parties

 

The Company received short-term loans from its officers and directors. The loans were non-interest bearing, unsecured and due on demand. The following table represents the related parties’ loans payable activity during the six months ended June 30, 2019:

 

Balance, December 31, 2018  $- 
Proceeds from loans   76,878 
Repayments   (30,000)
Balance, June 30, 2019  $46,878 

 

(D) Notes Payable

 

Following is the summary of all non-convertible notes, net of debt discount, including the accrued interest as at December 31, 2018:

 

Date of Note  Principal   Accrued Interest   Total 
November 26, 2013 – JSP  $-   $37,971   $37,971 
September 30, 2018 – EDEN   260,584    17,058    277,642 
                
Balance – December 31, 2018  $260,584   $55,029   $315,613 

 

Following is the summary of all non-convertible notes, net of debt discount, including the accrued interest as at June 30, 2019:

 

Date of Note  Principal   Accrued Interest   Total 
November 26, 2013 – JSP  $-   $37,971   $37,971 
September 30, 2018 – EDEN   260,584    8,058    268,642 
                
Balance – June 30, 2019  $260,584   $46,029   $306,613 

 

  On November 26, 2013, the Company secured from a private individual, a twelve-month fixed price convertible loan amounting to $450,000 having an interest at 10% per annum and an agreed fixed conversion price of $0.5 per share. During the year ended December 31, 2014, the Company recorded a total accrued interest of $42,971 on this Note. On December 23, 2014, the Company fully repaid the principal note balance of $450,000 in cash and also paid $5,000 on account of accrued interest payment, thereby leaving an accrued and unchanged interest balance of $37,971 as of December 31, 2014.
     
  On October 17, 2013, the Company secured a non-convertible three-month bridge loan for 200,000 GBP (equivalent to $319,598) with the agreement to repay the principal plus 5% per month interest on or before January 18, 2014. The note holder received, as a form of guarantee, 1,600,000 shares of an investment we held then in a company called Direct Security Integration Inc. The shares used as a form of guarantee formed part of the assets of our Company at that time but are not considered an asset since the date we provided them to the lender as we were no longer in control of such shares.

 

On September 18, 2015, the Company and the note holder agreed to amend the previous terms of the agreement and both parties agreed on the new terms whereby the Company was now liable to pay $500,000 as full and final payment of the October 17, 2013 loan principal, accrued interest, and all other related penalties. This repayment will not accrue any further interest or penalties.

 

 F-23 

 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2019

(Unaudited)

 

On December 21, 2015, the Company repaid the first installment of the accrued interest amounting to $20,000, leaving the accrued interest balance of $160,402 and principal loan balance of $319,598 as on December 31, 2015.

 

On September 30, 2018, the Company and the lender agreed to amend the previous terms of the agreement and both parties agreed on the new terms whereby the Company is now liable to pay GBP 220,000 or $286,642 as full and final payment regarding this loan. This repayment will not accrue any further interest or penalties. Both parties also agreed on a repayment plan of $3,000 monthly payment commencing on the date of signature of this addendum and additional ad hoc interim payments will be made to fully settle this loan within 36 months of this addendum dated September 30, 2018.

 

During the year ended December 31, 2018, the Company repaid three monthly payments against accrued interest totaling to $9,000 as per the addendum dated September 30, 2018 and the outstanding note balance amounted to $260,584 and accrued interest balance amounted to $17,058 as of December 31, 2018.

 

During the six months ended June 30, 2019, the Company repaid three monthly payments against accrued interest totaling to $9,000 as per the addendum dated September 30, 2018 and the outstanding note balance amounted to $260,584 and accrued interest balance amounted to $8,058 as of June 30, 2019.

 

(E) Fixed Price Convertible Notes Payable

 

Following is the summary of all fixed price convertible notes, net of debt discount and debt issue cost, including the accrued interest as at December 31, 2018:

 

Date of Note  Principal   Discount  

Principal,

net of discount

   Accrued Interest   Total 
January 17, 2018 - Xantis PE Fund  $400,000   $1,500   $398,500   $23,277   $421,777 
January 23, 2018 - William Marshal Plc.   100,000    -    100,000    5,819    105,819 
June 8, 2018 - Xantis AION Sec Fund   735,000    50,824    684,176    25,010    709,186 
October 10, 2018 - Xantis AION Sec Fund   653,040    78,099    574,941    3,328    578,269 
                          
Balance, December 31, 2018  $1,888,040   $130,423   $1,757,617   $57,434   $1,815,051 

 

Following is the summary of all fixed price convertible notes, net of debt discount and debt issue cost, including the accrued interest as at June 30, 2019:

 

Date of Note  Principal   Discount  

Principal,

net of discount

   Accrued Interest   Total 
January 17, 2018 - Xantis PE Fund  $-   $-   $-   $-   $- 
January 23, 2018 - William Marshal Plc.   -    -    -    -    - 
June 8, 2018 - Xantis AION Sec Fund   -    -    -    -    - 
October 10, 2018 - Xantis AION Sec Fund   653,040    28,774    624,266    22,758    647,024 
                          
Balance, June 30, 2019  $653,040   $28,774   $624,266   $22,758   $647,024 

 

  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.

 

 F-24 

 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2019

(Unaudited)

 

On January 17, 2018, the Company received an initial tranche of funding from Xantis Private Equity Fund amounting to $400,000. There was no beneficial conversion feature since the conversion price exceeded the quoted trading price on the funding date. The Company paid a $36,000 cash commission, which is treated as debt issuance cost for this note. This particular Convertible Note issued to Xantis Private Equity Fund matured on January 13, 2019, as January 12, 2018 was the date that the funds were effectively wired to the Company.

 

During the year ended December 31, 2018, $34,500 of the debt issuance costs was amortized to income statement, leaving an unamortized debt issue cost balance of $1,500. The Company further recorded $23,277 as interest expense during the year ended December 31, 2018 and the outstanding note balance amounted to $400,000 as of December 31, 2018.

 

During the six months ended June 30, 2019, $1,500 of the debt issuance costs was amortized to income statement, leaving an unamortized debt issue cost balance of $0. The Company further recorded an interest expense of $723, making the total accrued interest balance to $24,000. On January 14, 2019, the Company issued 21,200,000 common shares to the lender at an agreed conversion price of $0.02 per share amounting to $424,000, thereby leaving an outstanding principal loan and accrued interest balance of $0 as on June 30, 2019. As the note was converted at the contractual rate, no gain on conversion was recorded upon conversion of this note and accrued interest.

 

  On January 12, 2018, the Company secured a 12-month fixed price convertible loan from William Marshal Plc., a United Kingdom Public Limited Company listed on the Cyprus Public Exchange Emerging Companies Market, for a maximum of 2,000,000 Great Britain Pounds (equivalent to approximately $2,680,000) carrying an interest at the rate of 6% per annum. The Company has a right to pay this note no earlier than 366 days’ post investment of each tranche of funding, by issuing common shares at greater of $0.02 or the average closing ask price of the Company’s common stock on the OTCBB for the prior 60 trading days.

 

On January 23, 2018, the Company received its first tranche of funding from William Marshal Plc. amounting to $100,000. There was no beneficial conversion feature since the conversion price exceeded the quoted trading price on the funding date. This particular Convertible Note issued to William Marshal Plc. matured on January 24, 2019.

 

During the year ended December 31, 2018, the company recorded $5,819 as interest expense and the outstanding note balance amounted to $100,000 as of December 31, 2018.

 

During the six months ended June 30, 2019, the company further recorded an interest expense of $181, making the total accrued interest balance to $6,000. On January 24, 2019, the Company issued 5,300,000 common shares to William Marshal Plc. at an agreed conversion price of $0.02 per share amounting to $106,000, thereby leaving an outstanding principal loan and accrued interest balance of $0 as on June 30, 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.

 

 F-25 

 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2019

(Unaudited)

 

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 $110,887 cash commission, which is treated as debt issuance costs for this note. This particular Convertible Note issued to Xantis AION Securitization Fund will mature on June 9, 2019.

 

During the year ended December 31, 2018, $60,064 of the debt issuance costs was amortized to income statement, leaving an unamortized debt issue cost balance of $50,824. The Company further recorded $25,010 as interest expense during the year ended December 31, 2018 and the outstanding note balance amounted to $735,000 as of December 31, 2018.

 

During the six months ended June 30, 2019, $50,824 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 $19,090, making the total accrued interest balance to $44,100. On June 5, 2019, the Company issued 38,955,000 common shares to the lender at an agreed conversion price of $0.02 per share amounting to $779,100, thereby leaving an outstanding principal loan and accrued interest balance of $0 as on June 30, 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 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 $98,651 cash commission, which is treated as debt issuance costs for this note. This particular Convertible Note issued to Xantis AION Securitization Fund will mature on October 11, 2019.

 

During the year ended December 31, 2018, $20,552 of the debt issuance costs was amortized to income statement, leaving an unamortized debt issue cost balance of $78,099. The Company further recorded $3,328 as interest expense during the year ended December 31, 2018 and the outstanding note balance amounted to $653,040 as of December 31, 2018.

 

During the six months ended June 30, 2019, $49,325 of the debt issuance costs was amortized to income statement, leaving an unamortized debt issue cost balance of $28,774. The Company further recorded $19,430 as interest expense during the six months ended June 30, 2019 and the outstanding note balance amounted to $653,040 as of June 30, 2019.

 

 F-26 

 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2019

(Unaudited)

 

Note 10 - Stockholders’ Equity (Deficit)

 

(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 January 2018, the management contractually agreed to not convert or sell any of these preferred shares until September 27, 2020;
  Dividend Rights: In the event the Board of Directors declares a dividend on the common stock, each Series “B” Preferred share will be entitled to receive an equivalent dividend as if the Series “B” Preferred share had been converted into common stock prior to the declaration of such dividend.
  Liquidation Rights: None

 

On November 11, 2016, certain Officers and Directors of the Company, offered to retire and exchange an aggregate 450,000,000 shares of Common Stock owned by them for 45,000,000 Series “B” Preferred Stock. The Company permitted Officers and Directors of the Company to exchange 200,000,000, 50,000,000 and 200,000,000 shares of Common Stock, respectively, for 20,000,000, 5,000,000 and 20,000,000 shares of Series “B” Preferred Stock, respectively.

 

  Series “C” Convertible Preferred Stock

 

On September 18, 2017, the Company designated 5,000,000 of its authorized preferred stock as Series “C” convertible preferred shares. The Certificate of Designation stated the following:

 

  Voting Rights: 100 votes per share (votes along with common stock);
  Conversion Rights: Each share of Series “C” Preferred is convertible at any time, and from time to time, into one hundred (100) shares of common stock 1 day after the third anniversary of issuance;
  Dividend Rights: In the event the Board of Directors declares a dividend on the common stock, each Series “C” Preferred share will be entitled to receive an equivalent dividend as if the Series “C” Preferred stock had been converted into common stock prior to the declaration of such dividend.
  Liquidation Rights: None

 

 F-27 

 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2019

(Unaudited)

 

On September 26, 2017, all of the officers and directors of the Company decided to convert their partial accrued salaries balance amounting to $240,000 to 2,400,000 series “C” preferred stock at par value of $0.001 per share having an equivalent common stock fair value of $0.0028 per share or $672,000 at the date of issuance of preferred stock.

 

On June 5, 2018, all of the officers and directors of the Company decided to convert their partial accrued salary balances amounting to $160,000 into 800,000 shares of Series “C” Preferred Stock at par value of $0.001 per share, having an equivalent common stock fair value of $0.004 per share or $320,000 at the date of issuance of such preferred stock.

 

During the six months ended June 30, 2019, the Company did not issue any new preferred shares.

 

(B) Common Stock

 

As at June 30, 2019 and December 31, 2018, the Company had 950,000,000 authorized shares of common stock having a par value of $0.001. As at June 30, 2019 and December 31, 2018, the Company had 590,989,409 and 525,534,409 shares of common stock issued and outstanding, respectively.

 

During the six months ended June 30, 2019, the Company issued 65,455,000 common shares because of conversions of three convertible notes and related accrued interest in following manner:

 

On January 14, 2019, the Company issued 21,200,000 common shares to Xantis Private Equity at an agreed contractual conversion price of $0.02 per share amounting to $424,000. See Note 9(E)
   
On January 24, 2019, the Company issued 5,300,000 common shares to William Marshal Plc. at an agreed contractual conversion price of $0.02 per share amounting to $106,000. See Note 9(E)
   
On June 5, 2019, the Company issued 38,955,000 common shares to Xantis AION Securitization Fund at an agreed contractual conversion price of $0.02 per share amounting to $779,100. See Note 9(E)

 

Note 11 – Revenue

 

For the six months ended June 30, 2019 and 2018, the Company recognized total revenues amounting to $63,033 and $32,000, respectively.

 

Unfulfilled performance obligations represent the remaining contract transaction prices allocated to the performance obligations that are unsatisfied, or partially unsatisfied, and therefore revenues have not yet been recorded. Unfulfilled performance obligations primarily consist of the remaining fees not yet recognized under the Company´s proportional performance method for both our fixed fee arrangements, and the portion of performance based and contingent arrangements, which we have deemed probable. As of June 30, 2019 and December 31, 2018, the Company´s management believes that all of the fixed fee, performance based and contingent arrangements have an original expected duration of one year or less; hence, the Company elected to utilize the optional exemption to exclude it from this disclosure.

 

Contract Assets and Liabilities

 

Contract assets are defined as assets for which we have recorded revenue because we determined that it is probable that we will earn a performance based or contingent fee, but we are not yet entitled to receive our fees, because certain events, such as completion of the measurement period or client approval, must occur. The contract asset balance was immaterial as of June 30, 2019 and December 31, 2018.

 

 F-28 

 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2019

(Unaudited)

 

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 June 30, 2019 and December 31, 2018.

 

Note 12 – Pension Plan

 

The Company operates a defined “contribution pension plan” for its subsidiary in the United Kingdom, Cheshire Trafford UK Limited. Each participant need to complete a probation period before being included in the pension plan. The contributions payable to the company’s pension plan are charged to the consolidated statement of operations in the period to which they relate. We contributed a total of $1,405 to this pension plan during the six months ended June 30, 2019.

 

Note 13 – Related Party Transactions

 

At June 30, 2019 and December 31, 2018, there were accounts payable, accrued liabilities and short-term loan due to related parties. (See Note 9(B & C)).

 

Note 14 – Commitments and Contingencies

 

Contingencies

 

On October 9, 2013, the Company secured a two-month loan for GBP 75,000 (equivalent to $120,420) and issued 10,000 restricted shares of common stock to the lender, The Able Foundation, on December 7, 2013, and also repay 35,000 GBP (equivalent to $56,196) in lieu of interest. As the principal and interest was not paid back to the lender on time, the Company compensated the lender with an additional 20,000 restricted shares of common stock in consideration for a for a five-month extension on the loan. This stock compensation was issued to the lender also on December 12, 2013.

 

The plaintiff, the Able Foundation, was requesting a settlement of $411,272, which was the $226,616 owed by the Company at that time, and an additional $184,656 accrued in 2015 as a provision for potential damages.

 

On June 1, 2015, the Company (the defendant) retained the legal services of a Dubai based law firm called Al Safar & Partners. At March 31, 2017, there was a judgment against the Company (the defendant) for the recovery of $411,272.

 

During 2015 and 2016, the Company’s Dubai lawyers, Al Safar & Partners, had appealed this judgment various times based on the fact that they believed from a legal stand point that:

 

  1) the Company (the defendant) has not been heard, which is a violation of the fundamental principle of law “Audi Alteram Partem”.
     
  2) there is no legal existence of Global Equity Partners Plc. in Dubai, as it is a Republic of Seychelles corporation; hence, the Courts of Dubai have no jurisdiction in the matter.

 

 F-29 

 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2019

(Unaudited)

 

All prior appeals were rejected by the Dubai Courts, however a new appeal against the formal execution of this judgement was filed in September 2016. At March 31, 2017, the Company was in litigation, in the courts of Dubai, regarding the Able Foundation loan.

 

On June 5, 2017, a citizen of Republic of Thailand assumed the above total amount of $411,272 by way of a stock purchase and debt assumption agreement; hence, the Company’s liability and respective litigation in respect of this loan was transferred to the acquiring individual.

 

On March 6, 2018, the Company provided the Dubai attorneys with a signed, stamped and apostilled Certificate of Incumbency issued by the Seychelles Authorities. This Certificate of Incumbency stated that as of June 5, 2017, the company, Global Equity Partners Plc., was sold to a citizen of the Republic of Thailand and that the new owner assumed his role as sole shareholder and sole director of Global Equity Partners Plc. as of the date of sale.

 

To date, the Dubai attorneys are in the process of transferring the entire court case to the new owner of Global Equity Partners Plc.

 

From time to time, the Company may be involved in litigation or disputes relating to claims arising out of its operations in the normal course of business. As of June 30, 2019, the Company is not involved in any such litigation or disputes other than as discussed above.

 

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 six months ended June 30, 2019 was $17,390. This rental agreement expired on July 31, 2019 and was not renewed. The Company has sourced a new office to rent in the city of Hull (United Kingdom).

 

Note 15 – Segment Information

 

During the three and six months ended June 30, 2018, the Company operated in one reportable business segment consisting of management consultancy and employment placement services such as assistance in designing client’s capitalization strategy, introductions to potential capital funding sources and human resources placements. During the three and six months ended June 30, 2019 excluding discontinued operations, the Company operated in two reportable business segments - (1) Management Consultancy Services (the “Consultancy” segment) and (2) a segment which concentrates on third party insurance policy sales and renewals (the “Insurance brokerage” segment). The Company’s reportable segments were strategic business units that offered different products. They were managed separately based on the fundamental differences in their operations and locations. All goodwill in the accompanying unaudited consolidated balance sheets is assigned to the Insurance brokerage segment.

 

 F-30 

 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2019

(Unaudited)

 

Information with respect to these reportable business segments for the three and six months ended June 30, 2019 and 2018 was as follows:

 

   For the three months ended June 30,   For the six months ended June 30, 
   2019   2018   2019   2018 
Revenues:                
Consultancy  $-   $1,200   $-   $32,000 
Insurance brokerage   28,844    -    63,033    - 
   $28,844   $1,200   $63,033   $32,000 
Depreciation and amortization:                    
Consultancy  $606   $503   $1,189   $655 
Insurance brokerage   5,745    -    11,491    - 
   $6,351   $503   $12,680   $655 
Net (loss) / income:                    
Consultancy  $(552,619)  $786,726   $(1,491,900)  $948,765 
Insurance brokerage   (14,059)   -    (16,626)   - 
   $(566,678)  $786,726   $(1,508,526)  $948,765 

 

   June 30, 2019   December 31, 2018 
Identifiable long-lived tangible assets at June 30, 2019 and December 31, 2018 by segment:          
Consultancy  $3,944   $4,654 
Insurance brokerage   439    526 
   $4,383   $5,180 

 

 F-31 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

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 the unaudited financial statements, and the 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.

 

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 its 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 three months ended June 30, 2019 and June 30, 2018
   
  D. Results of operations for the six months ended June 30, 2019 and June 30, 2018
   
  E. Financial condition as at June 30, 2019 and December 31, 2018
   
  F. Liquidity and capital reserves
   
  G. 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.

 

3
 

 

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, 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 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 24, 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 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, of which $735,000 and related accrued interest was converted into 38,955,000 shares of the Company’s common stock on June 5, 2019.

 

4
 

 

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).

 

In March 2019, Management decided that it made overall economic sense for the Company to close its employment placement services business in Dubai; hence, on March 18, 2019, in order to fully concentrate on its core business of Independent Financial Advisory services and Consultancy Business, the Board of Directors decided to initiate liquidation proceedings of the Dubai subsidiary “GE Professionals DMCC” (with an effective date of March 31, 2019). 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.

 

 

 

Cheshire Trafford (U.K.) Limited (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.

 

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 U.S.$44 million.

 

5
 

 

The funds that Cheshire Trafford currently has under administration are invested 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 June 30, 2019, we had 590,989,409 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 June 30, 2019, we had 45,000,000 shares of Series “B” Preferred Stock authorized, issued and outstanding. As of December 31, 2018, and June 30, 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 offices are located in the United Kingdom. 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.

 

C. Results of operations for the three months ended June 30, 2019 and June 30, 2018:

 

The Company had revenues from continuing operations amounting to $28,844 and $1,200, for the three months ended June 30, 2019 and 2018, respectively.

 

    June 30, 2019     June 30, 2018     Changes  
                   
Revenue from continuing operations   $ 28,844     $ 1,200     $ 27,644  
    $ 28,844     $ 1,200     $ 27,644  

 

6
 

 

During the three months ended June 30, 2018, $1,200 was recognized as revenue from continuing operations for services rendered to a client related to our consultancy business segment. During the three months ended June 30, 2019, we only generated our revenue from our insurance brokerage business segment amounting to $28,844.

 

For the three months ended June 30, 2019 and 2018, the Company had the following concentrations of revenues with customers from continuing operations:

 

Customer   Location   June 30, 2019     June 30, 2018  
                 
DUO   Sri Lanka     0 %     100 %
CT clients (see below)   United Kingdom     100 %     0 %
          100 %     100 %

 

During the three months ended June 30, 2019, the Company had the following concentrations of revenues regarding insurance brokerage business, which was 100% of the consolidated revenues of the Company:

 

   June 30, 2019 
     
Initial advisory fees   1.62%
Ongoing advisory fees   32.80%
Initial commissions   0.48%
Renewal commissions   8.62%
Trail or recurring commissions   56.48%
    100%

 

The total operating expenditures of continuing operations amounted to $198,965 and $331,101, for the three months ended June 30, 2019 and 2018, respectively. The following table sets forth the Company’s operating expenditure analysis for both periods:

 

    June 30, 2019     June 30, 2018     Changes  
                   
General and administrative expenses   $ 40,192     $ 18,707     $ 21,485  
Salaries and compensation     132,513       265,000       (132,487 )
Professional services     19,909       46,791       (26,882 )
Depreciation     648       503       145  
Amortization of intangibles     5,703       -       5,703  
Total operating expenses of continuing operations   $ 198,965     $ 331,101     $ (132,036 )

 

During the three months ended June 30, 2019, total operating expenses of continuing operations were reduced by $132,036 from the previous three months ending on June 30, 2018. This decrease is mainly due to the decrease in the compensation expenses during the three months ended June 30, 2018, all of the officers and directors received additional stock based compensation of $160,000 in the form of shares of Series “C: Preferred Stock in lieu of accrued salaries. There was no such stock based compensation given during the comparative period ended June 30, 2019.

 

The loss from continuing operations for the three months ended June 30, 2019 and 2018, was $170,121 and $329,801, respectively.

 

The Company´s other income and (expenses) of continuing operations for the three months ended June 30, 2019 and 2018, were $(396,557) and $1,116,527, respectively.

 

    June 30, 2019     June 30, 2018     Changes  
Interest expense   $ (22,351 )   $ (10,258 )   $ (12,093 )
Amortization of debt discount     (47,764 )     (13,620 )     (34,144 )
(Loss) / gain on available for sale marketable securities, net     (320,947 )     1,139,576       (1,460,523 )
Exchange rate (loss) / gain     (5,495 )     829       (6,324 )
Total other (expenses) / other income of continuing operations   $ (396,557 )   $ 1,116,527     $ (1,513,084 )

 

7
 

 

During the three months ended June 30, 2019, our total other expenses increased by $1,513,084 when compared to our total other income (expenses) for the three months ended June 30, 2018. This increase was mainly due to the fact that during the second quarter of 2019, the Company recorded a net loss on available for sale marketable securities amounting to $320,947, but recorded a gain of $1,139,576 during the three months ended June 30, 2018.

 

The net (loss) / income from continuing operations for the three months ended June 30, 2019 and 2018 were $(566,678) and $786,726, respectively.

 

Net loss from discontinued operations for the three months ended June 30, 2019 and 2018 amounted to $1,235 and $21,545, respectively.

 

The comprehensive (loss) / income for the three months ended June 30, 2019 and 2018 amounted to $(554,010) and $764,352, respectively. The Company’s other comprehensive (loss) / income includes gain / (loss) recorded on foreign currency translation of $13,903 and $(829) for the three months ended June 30, 2019 and 2018, respectively.

 

   June 30, 2019   June 30, 2018 
Comprehensive income (loss) / income:          
Net (loss) / income  $(567,913)  $765,181 
Gain/ (loss) on foreign currency translation   13,903    (829)
Comprehensive (loss) / income  $(554,010)  $764,352 

 

The Company had 590,989,409 and 525,534,409 shares of common stock issued and outstanding at June 30, 2019 and June 30, 2018, respectively. Basic weighted average number of common shares outstanding for the three months ended June 30, 2019 and 2018, was 562,736,333 and 525,534,409, respectively. Basic net (loss) / income per share from continuing operations for both periods was $(0.00) and $0.00, respectively. Diluted weighted average number of common shares outstanding for the three months ended June 30, 2018 was 1,357,284,409 and at June 30, 2019, there were 802,651,975 common stock equivalents that may dilute future earnings per share. Diluted net (loss) / income per share from continuing operations for both periods was $(0.00) and $0.00, respectively. Basic and diluted net loss per share from discontinuing operations for both periods was $(0.00) and $(0.00), respectively.

 

D. Results of operations for the six months ended June 30, 2019 and June 30, 2018:

 

The Company had revenues from continuing operations amounting to $63,033 and $32,000, for the six months ended June 30, 2019 and 2018, respectively.

 

   June 30, 2019   June 30, 2018   Changes 
             
Revenue from continuing operations  $63,033   $32,000   $31,033 
   $63,033   $32,000   $31,033 

 

During the six months ended June 30, 2018, $32,000 was recognized as revenue from continuing operations for services rendered to various clients related to our consultancy business segment. During the six months ended June 30, 2019, we only generated our revenue from our insurance brokerage business segment amounting to $63,033.

 

8
 

 

For the six months ended June 30, 2019 and 2018, the Company had the following concentrations of revenues with customers from continuing operations:

 

Customer   Location   June 30, 2019     June 30, 2018  
                 
DUO   Sri Lanka     0 %     6.25 %
GRL   United Kingdom     0 %     93.75 %
CT clients (see below)   United Kingdom     100 %     0 %
          100 %     100 %

 

During the six months ended June 30, 2019, the Company had the following concentrations of revenues regarding insurance brokerage business, which was 100% of the consolidated revenues of the Company:

 

   June 30, 2019 
     
Initial advisory fees   6.87%
Ongoing advisory fees   31.70%
Renewal commissions   7.52%
Trail or recurring commissions   52.83%
Other revenue   1.08%
    100%

 

The total operating expenditures of continuing operations amounted to $428,621 and $589,411, for the six months ending on June 30, 2019 and 2018, respectively. The following table sets forth the Company’s operating expenditure analysis for both periods:

 

    June 30, 2019     June 30, 2018     Changes  
                   
General and administrative expenses   $ 92,309     $ 47,131     $ 45,178  
Salaries and compensation     253,704       382,000       (128,296 )
Professional services     69,928       159,625       (89,697 )
Depreciation     1,274       655       619  
Amortization of intangibles     11,406       -       11,406  
Total operating expenses of continuing operations   $ 428,621     $ 589,411     $ (160,790 )

 

During the six months ended June 30, 2019, total operating expenses from continuing operations decreased by $160,790 from the comparative period ended June 30, 2018. The decrease is mainly due to a decrease in the compensation expense during the six months ended June 30, 2018 as all of the officers and directors received additional stock based compensation of $160,000 in the form of shares of Series “C” Preferred Stock in lieu of accrued salaries. There was no such stock based compensation given during the current period ended June 30, 2019.

 

The loss from continuing operations for the six months ended June 30, 2019 and 2018, was $365,588 and $557,411, respectively.

 

The Company´s other (expenses) and other income of continuing operations for the six months ended June 30, 2019 and 2018, were $(1,142,938) and $1,506,176, respectively.

 

    June 30, 2019     June 30, 2018     Changes  
Interest expense   $ (48,214 )   $ (27,855 )   $ (20,359 )
Amortization of debt discount     (101,649 )     (26,509 )     (75,140 )
Gain on available for sale marketable securities, net     (992,017 )     1,531,699       (2,523,716 )
Gain on extinguishment of debt and other liabilities     -       28,538       (28,538 )
Exchange rate (loss) / gain     (1,058 )     303       (1,361 )
Total other (expenses) / other income of continuing operations   $ (1,142,938 )   $ 1,506,176     $ (2,649,114 )

 

During the six months ended June 30, 2019, our total other expenses increased by $2,649,114 when compared to our total other income (expenses) for the six months ended June 30, 2018. This increase was mainly due to the fact that during the six months ended June 30, 2019, the Company recorded a net loss on available for sale marketable securities amounting to $992,017, but recorded a gain of $1.531.699 during the six months ended June 30, 2018.

 

9
 

 

The net (loss) / income from continuing operations for the six months ended June 30, 2019 and 2018 were $(1,508,526) and $948,765, respectively.

 

Net loss from discontinued operations for the six months ended June 30, 2019 and 2018 amounted to $34,873 and $61,632, respectively.

 

The comprehensive (loss) / income for the six months ended June 30, 2019 and 2018 amounted to $(1,540,597) and $886,831, respectively. The Company’s other comprehensive (loss) / income includes gain / (loss) recorded on foreign currency translation of $2,802 and $(302) for the six months ended June 30, 2019 and 2018, respectively.

 

    June 30, 2019     June 30, 2018  
Comprehensive income (loss) / income:                
Net (loss) / income   $ (1,543,399 )   $ 887,133  
Gain/ (loss) on foreign currency translation     2,802       (302)  
Comprehensive (loss) / income   $ (1,540,597 )   $ 886,831  

 

The Company had 590,989,409 and 525,534,409 shares of common stock issued and outstanding at June 30, 2019 and June 30, 2018, respectively. Basic weighted average number of common shares outstanding for the six months ended June 30, 2019 and 2018, was 555,072,393 and 525,534,409, respectively. Basic net (loss) / income per share from continuing operations for both periods was $(0.00) and $0.00, respectively. Diluted weighted average number of common shares outstanding for the six months ended June 30, 2018 was 1,357,284,409 and at June 30, 2019, there were 802,651,975 common stock equivalents that may dilute future earnings per share. Diluted net (loss) / income per share from continuing operations for both periods was $(0.00) and $0.00, respectively. Basic and diluted net loss per share from discontinuing operations for both periods was $(0.00) and $(0.00), respectively.

 

E. Financial condition as at June 30, 2019 and December 31, 2018:

 

Assets:

 

The Company reported total assets of $953,485 and $2,156,054 as of June 30, 2019 and December 31, 2018, 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 $466,831 and $1,458,848 as at June 30, 2019 and December 31, 2018, respectively.

 

At June 30, 2019 and 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 $4,383 and $5,180 as at June 30, 2019 and December 31, 2018, respectively. Intangibles of $321,283 included fair value of customer list that was recognized as part of the business combination. We also recorded 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, 2018 amounted to $1,675,261, and at June 30, 2019, these current assets amounted to $484,895 comprised of cash of $7,203, accounts receivable of $7,925, prepaid and other current assets of $833, assets of discontinued operations of $2,103 and marketable securities valued at fair value of $466,831.

 

Liabilities:

 

Our current liabilities at December 31, 2018 totaled $2,450,149. At June 30, 2019, the Company reported its current liabilities amounting to $1,471,804, which represents a decrease of 40%. This decrease was due to the fact that the Company converted three of its convertible debts into its common stock during the six months ended June 30, 2019. All of our current liabilities reported at June 30, 2019 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.

 

10
 

 

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
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
September 30, 2018 277,642   Non-convertible and non-collateralized
October 10, 2018     578,269     Fixed price convertible and non-collateralized
Balance, December 31, 2018   $ 2,130,664      

 

Following is the summary of all third party notes, net of debt discount, including the accrued interest as at June 30, 2019:

 

Date of Note   Total Debt     Remarks
November 26, 2013   $ 37,971     Non-convertible and non-collateralized
September 30, 2018 268,642   Non-convertible and non-collateralized
October 10, 2018     647,024     Fixed price convertible and non-collateralized
Balance, June 30, 2019   $ 953,637      

 

The Company reported a long term liability of $291,005 and $283,732 as at June 30, 2019 and December 31, 2018, respectively, on account of fair value of the contingent purchase consideration for the acquisition of Cheshire Trafford.

 

Stockholders’ Deficit:

 

At December 31, 2018, the Company had Stockholders´ Deficit of $577,827. At June 30, 2019, the Company had Stockholders´ Deficit of $809,324. We reported accumulated other comprehensive income of $16,394 and $13,592 as at June 30, 2019 and December 31, 2018, respectively.

 

The Company had 590,989,409 and 525,534,409 shares of common stock issued and outstanding at June 30, 2019 and December 31, 2018, respectively. The Company also had issued and outstanding 45,000,000 shares of Series “B” Convertible Preferred Stock as at June 30, 2019 and December 31, 2018. The Company further had issued and outstanding 3,200,000 shares of Series “C” Convertible Preferred Stock as at June 30, 2019 and December 31, 2018.

 

F. Liquidity and capital reserves:

 

The accompanying unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These unaudited consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

 

As reflected in the accompanying unaudited consolidated financial statements, the Company had a net loss of $1,543,399 and net cash used in operations of $235,566 for the six months ended June 30, 2019; working capital deficit, stockholder’s deficit and accumulated deficit of $986,909, $809,324 and $12,896,614, respectively, as of June 30, 2019. It is management’s opinion that these factors raise substantial doubt about the Company’s ability to continue as a going concern for twelve months from the issuance date of this report.

 

The ability for the Company to mitigate this risk and continue its operations is primarily dependent on management’s plans as follows:

 

  a) Consummating and executing all current engagements related to the business consulting division.
  b) Continually engaging with new clients via our business consulting division.
  c) Maximizing the already acquired Independent Financial Advisory firm´s revenues by way of servicing the current client base in the most professional manner possible.
  d) Organically growing the amount of funds under administration of the already acquired Independent Financial Advisory firm to new and higher levels.

 

11
 

 

  e) Continuing to receive fixed funding, via equity or debt, for acquisition, growth and working capital from parties that have already executed funding agreement with the Company.
  f) Continuing to negotiate new fixed funding via equity or debt, for further acquisitions, growth and working capital.
  g) Acquiring and managing more Independent Financial Advisory firms with funds under administration located around the globe.

 

In January of 2018, the Company secured two funding agreements, one with Xantis Private Equity Fund (Luxembourg) for a minimum of 2,000,000 Great Britain Pounds (approximately $2.68 million at the time) 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 at the time). The Company has a unilateral 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. During the six months ended June 30, 2019, these loans and accrued interest were converted into 26,500,000 shares of the Company’s common stock ($0.02 per shares as contractually agreed).

 

In June of 2018, the Company secured another funding agreement with Xantis AION Securitisation Fund (Luxembourg) for a minimum of 1,700,000 Great Britain Pounds (equivalent to approximately U.S. $1.94 million at the time). The Company has a unilateral 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 $1,388,040 under this loan, of which $735,000 and related accrued interest was converted into 38,955,000 shares of the Company’s common stock during the six months ended June 30, 2019.

 

The remaining funding received from Xantis Aion Securitisation Fund, $653,040, represents 44% of the Company’s current liabilities and it is important to note that this debt will be converted to shares of the Company’s common stock in October of 2019 as per the contractual agreements at a minimum of $0.02 per share.

 

The accounts payable and accrued liabilities due to related parties currently amount to $323,946. This particular debt represents a further 22% of the Company’s current liabilities and is primarily due to management. It is important to note that this related party debt can or may be condoned by management at any time, if required.

 

These obligatory conversions of debt into equity and the possibility of condoning the related party debt are both factors that will help towards mitigating the risks of not being able to continue operating as a Going Concern.

 

During 2018, the Company´s management decided to implement its inorganic growth plan hence commenced to target the acquisition of various licensed financial advisory firms with millions of U.S. Dollars of funds under administration.

 

On August 1, 2018, the Company acquired its first financial advisory firm that currently administrates approximately U.S. $44,000,000 and it intends to continue growing by way of acquiring more financial advisory firms when the correct opportunities arise.

 

During the latter part of 2018 and early 2019, the Company´s IFA business, Cheshire Trafford (U.K.) Limited, commenced leveraging its licenses in order to put in motion an aggressive marketing strategy with a view to significantly increase the business (funds under administration) and, by defect, the revenues. This was implemented at very little extra cost and will improve, over time, our current recurring and non-recurring revenues. The Company also started to market its IFA business as a United Kingdom fully licensed entity for various Appointed Representatives (“AR”) and also Introducer Appointed Representatives (“IAR”); hence, in late 2018, Aurum Wealth Management Limited was approved by the UK Financial Authority (“FCA”) as an AR of Cheshire Trafford and in early 2019, Global Alternative Administration (The Pension Admin Team) was appointed as an IAR to Cheshire Trafford. The Company has also completely revamped the website of our IFA business (www.ctifa.com) and started a UK radio campaign as part of the IFA Business´ marketing strategy.

 

12
 

 

Finally, 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 any of the lenders that have a contractual agreement in place with the Company.
  Liquidating (selling), when necessary, part or all of our investments and/or Marketable Securities.

 

G. Business Development:

 

Our specific plan of operations and milestones from August 2019 through July 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 Creditum Limited´s shares on the London Stock Exchange (“LSE”). Management believes that this particular public listing should be fully executed and finalized by the end of Q3 2019 or early Q4 of 2019.

 

  2. 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 U.S. $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.

 

  3. ACQUIRE CERTAIN INDEPENDENT FINANCIAL ADVISORY FIRMS WITH FUNDS UNDER ADMINISTRATION:

 

During the second quarter of 2019, management commenced certain negotiations to acquire 100% of an Independent Financial Advisory (IFA) firm based in London (United Kingdom). This particular targeted IFA currently has 136 Million GBP (approximately U.S.$169 Million) of Funds Under Administration and historical recurring revenues of a little more than One Million GBP (approximately U.S. $1.2 million). However, we do not currently have any written agreements as management is still in verbal negotiations with the owners of this IFA.

 

The Company intends to target and acquire more Independent Financial Advisory firms with funds under administration during the next 12 to 24 months.

 

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 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.

 

  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 U.K. Financial Authority (“FCA”) as an AR of Cheshire Trafford (U.K.) Limited and in early 2019, Global Alternative Administration (The Pension Admin Team) was appointed as an IAR to Cheshire Trafford (U.K.) Limited.

 

13
 

 

  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 (U.K.) Limited, intend to thoroughly explore these new business opportunities.

 

  6. COMMENCE A TARGETED MARKETING PLAN

 

During the third quarter of our 2019 fiscal year, our United Kingdom regulated business, Cheshire Trafford (U.K.) Limited, will continue with the direct marketing campaign that commenced in the second quarter of 2019, 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 “Over 40 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 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not applicable.

 

Item 4. 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.

 

Changes in internal control over financial reporting

 

There were no changes in 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.

 

14
 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not subject to any other pending or threatened litigation.

 

Item 1A. Risk Factors

 

Not applicable.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

Effective June 9, 2019, the Company issued 38,955,000 shares of common stock to a lender at a conversion price of $0.02 per share to pay off $735,000 of principal and $44,100 in accrued interest due to the lender.

 

The above securities were issued by the Company in reliance on the exemption from registration provided by Section 4.(a)(2) of the Securities Act of 19303, as amended and/or the exclusion from the registration requirements of the Securities Act of 1933, as amended, pursuant to Regulation S promulgated thereunder.

 

Item 3. Defaults upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.