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 September 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)

 

Nevada   27-3986073

(State or other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

34 St. Augustine´s Gate, Hedon, HU12 8EX, 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]

  Emerging growth 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 November 13, 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 15 
   
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

September 30, 2019

(Unaudited)

 

CONTENTS

 

  Page(s)
   
Consolidated Balance Sheets – September 30, 2019 (unaudited) and December 31, 2018 F-2
   
Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2019 and September 30, 2018 (unaudited) F-3
   
Consolidated Statements of Changes in Equity / (Deficit) for the three and nine months ended September 30, 2019 and September 30, 2018 (unaudited) F-4
   
Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and September 30, 2018 (unaudited) F-5
   
Notes to the Consolidated Financial Statements (unaudited) F-6 – F-33

 

 F-1 
 

 

Argentum 47, Inc. and Subsidiaries

Consolidated Balance Sheets

 

   September 30, 2019   December 31, 2018 
   (Unaudited)     
Assets          
           
Current Assets          
Cash & cash equivalents  $2,703   $183,588 
Accounts receivable   7,278    13,679 
Marketable securities at fair value   933,663    1,458,848 
Prepaids   5,216    2,221 
    948,860    1,658,336 
Assets of discontinued operations   1,972    16,925 
Total current assets   950,832    1,675,261 
           
Non-Current Assets          
Intangibles, net   315,579    332,689 
Goodwill   142,924    142,924 
Right-of-use leased asset   73,365    - 
Fixed assets, net   4,256    5,180 
Total non-current assets   536,124    480,793 
           
Total assets  $1,486,956   $2,156,054 
           
Liabilities and Stockholders’ Deficit          
           
Current Liabilities          
Accounts payable and accrued liabilities  $172,647   $69,735 
Accounts payable and accrued liabilities - related parties   417,598    164,568 
Loans payable - related parties   66,678    - 
Short term payable for acquisition   149,041    - 
Current portion of operating lease liability   12,400    - 
Accrued interest   78,663    112,463 
Notes payable   260,584    260,584 
Fixed price convertible notes payable - net of discount of $4,111 and $130,423, respectively   648,929    1,757,617 
    1,806,540    2,364,967 
Liabilities relating to discontinued operations   -    85,182 
Total current liabilities   1,806,540    2,450,149 
           
Non-Current Liabilities          
Long term payable for acquisition   137,018    283,732 
Long term operating lease liability   60,965    - 
Total non-current liabilities   197,983    283,732 
           
Total liabilities  $2,004,523   $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   (12,621,450)   (11,353,215)
Accumulated other comprehensive income   32,987    13,592 
Total stockholders’ deficit   (517,567)   (577,827)
           
Total liabilities and stockholders’ deficit  $1,486,956   $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 nine months ended September 30, 2019 and September 30, 2018 (Unaudited)

 

   For the three months ended   For the nine months ended 
   September 30, 2019   September 30, 2018   September 30, 2019   September 30, 2018 
                 
Revenue  $23,549   $29,531   $86,582   $61,531 
                     
General and administrative expenses   60,946    38,053    153,255    85,185 
Compensation   93,834    126,458    347,538    508,458 
Professional services   8,071    94,833    77,999    254,458 
Depreciation   656    579    1,930    1,234 
Amortization of intangibles   5,704    5,390    17,110    5,390 
Bad debt expense   -    30,000    -    30,000 
Total operating expenses   169,211    295,313    597,832    884,725 
                     
Loss from continuing operations  $(145,662)  $(265,782)  $(511,250)  $(823,194)
                     
Other income (expenses):                    
Interest expense  $(13,886)  $(18,677)  $(62,100)  $(46,532)
Amortization of debt discount   (24,663)   (36,722)   (126,312)   (63,231)
(Loss) / gain on available for sale marketable securities, net   466,832    884,663    (525,185)   2,416,362 
Gain on extinguishment of debt and other liabilities   -    193,858    -    222,396 
Exchange rate gain / (loss)   (7,325)   (1,303)   (8,383)   (1,000)
Total other (expenses) / other income   420,958    1,021,819    (721,980)   2,527,995 
                     
Net (loss) / income from continuing operations  $275,296   $756,037   $(1,233,230)  $1,704,801 
                     
Discontinued operations (Note 6)                    
Net loss from operations of discontinued subsidiary (including loss due to fixed assets write off of $164 in the nine months ended September 30, 2019)  $(132)  $(13,336)  $(35,005)  $(74,967)
                     
Net (loss) / income  $275,164   $742,701   $(1,268,235)  $1,629,834 
                     
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   590,989,409    525,534,409    567,176,296    525,534,409 
Weighted average number of common shares outstanding - diluted   1,393,641,384    1,357,284,409    567,176,296    1,357,284,409 
                     
Comprehensive (loss) / income:                    
Net (loss) / income  $275,164   $742,701   $(1,268,235)  $1,629,834 
Gain on foreign currency translation   16,593    3,189    19,395    2,887 
Comprehensive (loss) / income  $291,757   $745,890   $(1,248,840)  $1,632,721 

 

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 nine months ended September 30, 2019 and September 30, 2018 (Unaudited)

 

For the Three Months Ended September 30, 2018:

 

   Series “B” Preferred Stock   Series “C” Preferred Stock   Common Stock   Additional      Accumulated Other   Total Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Paid-in Capital  

Accumulated

 Deficit

   Comprehensive Income   Equity 
                                         
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 
                                                   
Net income   -    -    -    -    -    -    -    742,701    -    742,701 
                                                   
Gain on foreign currency translation   -    -    -    -    -    -    1    -    3,189    3,190 
                                                   
Balance - September 30, 2018   45,000,000   $45,000    3,200,000   $3,200    525,534,409   $525,534   $10,188,062   $(8,102,882)  $3,007   $2,661,921 

 

For the Three Months Ended September 30, 2019:

 

   Series “B” Preferred Stock   Series “C” Preferred Stock   Common Stock   Additional      Accumulated Other   Total Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount  

Paid-in

Capital

  

Accumulated

Deficit

   Comprehensive Income   Equity 
                                         
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)
                                                   
Net loss   -    -    -    -    -    -    -    275,164    -    275,164 
                                                   
(Loss) / gain on foreign currency translation   -    -    -    -    -    -    -    -    16,593    16,593 
                                                   
Balance - September 30, 2019   45,000,000   $45,000    3,200,000   $3,200    590,989,409   $590,989   $11,431,707   $(12,621,450)  $32,987   $(517,567)

 

For the Nine Months Ended September 30, 2018:

 

   Series “B” Preferred Stock   Series “C” Preferred Stock   Common Stock   Additional      Accumulated Other   Total Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Paid-in Capital  

Accumulated

Deficit

   Comprehensive 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    -    -    319,200    -    -    320,000 
                                                   
Net income   -    -    -    -    -    -    -    1,629,834    -    1,629,834 
                                                   
Cumulative effect adjustment   -    -    -    -    -    -    -    1,181,675    (1,181,675)   - 
                                                   
Gain on foreign currency translation   -    -    -    -    -    -    -    -    2,887    2,887 
                                                   
Balance - September 30, 2018   45,000,000   $45,000    3,200,000   $3,200    525,534,409   $525,534   $10,188,062   $(8,102,882)  $3,007   $2,661,921 

 

For the Nine Months Ended September 30, 2019:

 

   Series “B” Preferred Stock   Series “C” Preferred Stock   Common Stock   Additional      Accumulated Other   Total Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Paid-in Capital  

Accumulated

Deficit

   Comprehensive Income   Equity / (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   -    -    -    -    -    -    -    (1,268,235)   -    (1,268,235)
                                                   
(Loss) / gain on foreign currency translation   -    -    -    -    -    -    -    -    19,395    19,395 
                                                   
Balance - September 30, 2019   45,000,000   $45,000    3,200,000   $3,200    590,989,409   $590,989   $11,431,707   $(12,621,450)  $32,987   $(517,567)

 

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 nine months ended September 30, 2019 and September 30, 2018 (Unaudited)

 

   September 30, 2019   September 30, 2018 
         
Cash flows from operating activities          
Net (loss) / income  $(1,268,235)  $1,629,834 
           
Adjustments to reconcile net (loss) / income from operations to net cash used in operating activities:          
Depreciation   2,007    1,593 
Amortization of intangibles   17,110    5,390 
Amortization of debt discount   126,312    63,231 
Loss / (gain) on available for sale marketable securities, net   525,185    (2,416,362)
Gain on extinguishment of debt and other liabilities   -    (241,713)
Loss due to fixed assets write off   164    - 
Bad debt expense   -    30,000 
           
Changes in operating assets and liabilities:          
Accounts receivable   6,401    (10,328)
Prepaids   (1,021)   183 
Other current assets   4,732    1,049 
Assets of discontinued operations   (1,972)   - 
Accounts payable and accrued liabilities   23,378    36,396 
Accrued contingencies and penalties   -    (5,000)
Accounts payable and accrued liabilities - related parties   247,382    294,255 
Accrued interest   42,627    29,341 
           
Net cash used in operating activities:  $(275,930)  $(582,131)
           
Cash Flows used in investing activities:          
Purchase of office furniture and equipment  $(1,282)  $(4,798)
Payment for business acquisition   -    (175,710)
Cash acquired in acquisition   -    4,743 
Proceeds from sale of marketable securities   -    69,294 
           
Net cash used in investing activities  $(1,282)  $(106,471)
           
Cash flows from financing activities:          
Proceeds from loans - related parties  $96,678   $12,663 
Repayment of loans - related parties   (30,000)   (12,663)
Proceeds from notes payable, net of debt issue cost   -    1,088,112 
Repayment of notes payable   -    (399,087)
           
Net cash provided by financing activities  $66,678   $689,025 
           
Net (decrease) / increase in cash  $(210,534)  $423 
           
Effect of Exchange Rates on Cash   19,430    703 
           
Cash at Beginning of Period  $193,807   $5,084 
           
Cash at End of Period  $2,703   $6,209 
           
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:          
           
Notes payable and accrued interest converted into common stock  $1,309,100   $- 
Debt discount and issuance costs recorded on notes payable  $-   $146,888 
Accounts payable and accrued salaries settled in series “C” preferred stock  $-   $160,000 
Liabilities assumed in acquisition  $-   $37,022 
Less: Assets acquired in acquisition   -    11,912 
Net liabilities assumed   -    25,110 
Fair value of purchase price   -    460,008 
Increase in intangible  $-   $485,118 

 

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

 

 F-5 
 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 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 September 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

September 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 $1,268,235 and net cash used in operations of $275,930 for the nine months ended September 30, 2019; working capital deficit, stockholder’s deficit and accumulated deficit of $855,708, $517,567 and $12,621,450 as of September 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 September 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

September 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 September 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 September 30, 2019 and December 31, 2018.

 

 F-8 
 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 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.

 

 F-9 
 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2019

(Unaudited)

 

(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 nine months ended September 30, 2019 or September 30, 2018.

 

Fixed Assets

 

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

 

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

September 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

September 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

September 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 nine months ended September 30, 2019 and 2018, the Company had following concentrations of revenues from continuing operations:

 

Customer  September 30, 2019   September 30, 2018 
         
DUO   0%   1.87%
EEC   0%   27.41%
GRL   0%   28.08%
OCS   0%   15.01%
CT clients (see below)   100%   27.63%
    100%   100%

 

 F-13 
 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2019

(Unaudited)

 

During the nine months ended September 30, 2019 and post-acquisition two months ended September 30, 2018, the Company had following concentrations of revenues regarding insurance brokerage business, which was 100% and 27.63% of the consolidated revenues of the Company, respectively:

 

  

Nine months ended

September 30, 2019

  

Two months ended

September 30, 2018

 
         
Initial advisory fees   4.87%   8.03%
Ongoing advisory fees   30.57%   29.73%
Renewal commissions   6.51%   25.24%
Trail or recurring commissions   57.30%   15.37%
Other revenue   0.75%   21.63%
    100%   100%

 

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

 

Customer  September 30, 2019   December 31, 2018 
         
OMI IRE   0%   30.94%
CLI   25.35%   16.62%
OMW   19.70%   16.55%
RL   14.05%   0.00%
Others having a concentration of less than 10%   40.90%   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.

 

 F-14 
 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2019

(Unaudited)

 

  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.

 

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 September 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 September 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 
   September 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   590,989,409    525,534,409 
Weighted average number of common shares – Dilutive   1,393,641,384    1,389,936,384 

 

As of September 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 September 30, 2018 and from January 1, 2019 through September 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

September 30, 2019

(Unaudited)

 

Changes in Accumulated Other Comprehensive Income (Loss) by Component during the nine months ended September 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   2,887    -    2,887 
Amounts reclassified from accumulated other comprehensive income as a cumulative effect adjustment   -    (1,181,675)   (1,181,675)
Net current-period other comprehensive loss   2,887    (1,181,675)   (1,178,788)
Balance, September 30, 2018  $3,007   $-   $3,007 

 

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

 

Balance, December 31, 2018  $13,592 
Foreign currency translation adjustment for the period   19,395 
Balance, September 30, 2019  $32,987 

 

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.

 

 F-16 
 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2019

(Unaudited)

 

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.

 

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 September 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):

 

   September 30, 2019   December 31, 2018 
Level 1 – Marketable Securities – Recurring  $933,663   $- 
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 nine months ended September 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 $0.16 per share as at September 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 nine months ended September 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   (525,185)
Balance, September 30, 2018  $933,663 

 

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.

 

 F-17 
 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2019

(Unaudited)

 

Management believes that the fair value of its investment has been correctly measured, as the length of time that the stock has been less than cost is nominal.

 

Recent Accounting Pronouncements

 

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

 

Note 5 – Acquisition of Cheshire Trafford (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

September 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:

 

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

 

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

 

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   (17,110)
Net Book Value at September 30, 2019  $315,579 

 

 F-19 
 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2019

(Unaudited)

 

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 nine months ended September 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.

 

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

 

  September 30, 2019   December 31, 2018 
Assets        
Cash  $-   $10,219 
Prepaids   -    1,974 
Other current assets   1,972    4,732 
Total Assets  $1,972   $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 September 30, 2019 and 2018 was as follows:

 

   September 30, 2019   September 30, 2018 
Revenue  $-   $7,067 
           
General and administrative expenses  $132   $10,926 
Compensation expense   -    23,327 
Depreciation   -    97 
Loss from discontinued operations  $(132)  $(27,283)
Other income (expenses)          
Gain on extinguishment of debt and other liabilities  $-   $14,302 
Exchange rate loss   -    (85)
Total other (expenses) / income  $-   $13,947 
Net loss from discontinued operations  $(132)  $(13,336)

 

 F-20 
 

 

Argentum 47, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2019

(Unaudited)

 

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

 

   September 30, 2019   September 30, 2018 
Revenue  $-   $45,334 
           
General and administrative expenses  $9,452   $47,911 
Compensation expense   22,743    90,719 
Professional services   2,382    - 
Depreciation   77    359 
Loss from discontinued operations  $(34,654)  $(93,655)
Other income (expenses)          
Loss due to fixed assets write off  $(164)  $- 
Gain on extinguishment of debt and other liabilities   -    19,317 
Exchange rate loss   (187)   (629)
Total other (expenses) / income  $(351)  $18,688 
Net loss from discontinued operations  $(35,005)  $(74,967)

 

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 September 30, 2019 and December 31, 2018:

 

  September 30, 2019   December 31, 2018 
Company  No. of Shares   Book value   No. of Shares   Book value 
DUO   5,835,392   $ 933,663    5,835,392   $1,458,848 
    5,835,392   $933,663    5,835,392   $1,458,848 

 

At September 30, 2019, the Company revalued 5,835,392 common shares at their quoted market price of $0.16 per share, to $933,663; hence, recording a net loss on available for sale marketable securities of $525,185 into the statement of operations for the nine months ended September 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 September 30, 2019 and December 31, 2018:

 

   September 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 September 30, 2019 and December 31, 2018:

 

   September 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

September 30, 2019

(Unaudited)

 

Note 8 – Fixed Assets

 

Following table reflects net book value of furniture and equipment as of September 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   1,282