AVNI 10-Q
Arvana Inc (AVNI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
Commission
file number:
(Exact name of registrant as specified in its charter)
| (State
or other jurisdiction of incorporation or organization) |
(I.R.S.
Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(
(Registrant’s telephone number, including area code)
n/a
(Former name, former address and former fiscal year, if changed since last report)
Securities registered under Section 12(b) of the Act: None.
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large, accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company |
|
| Emerging growth company |
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 to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
☐ No
The number of shares outstanding of the issuer’s common stock, par value $0.001 (the only class of voting stock) on August 20, 2024 was .
| 1 |
TABLE OF CONTENTS
| PART I | FINANCIAL INFORMATION | PAGE |
| Item 1. | Financial Statements | 3 |
| Consolidated Balance Sheets | 4 | |
| Consolidated Statements of Operations (unaudited) | 5 | |
| Consolidated Statements of Stockholders’ Equity (Deficit) (unaudited) | 6 | |
| Consolidated Statements of Cash Flows (unaudited) | 7 | |
| Condensed Notes to Consolidated Financial Statements (unaudited) | 8 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 |
| Item 3. | Quantitative and Qualitative Disclosure About Market Risk | 22 |
| Item 4. | Controls and Procedures | 22 |
| PART II | OTHER INFORMATION | |
| Item 1. | Legal Proceedings | 23 |
| Item 1A. | Risk Factors | 23 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 23 |
| Item 3. | Defaults Upon Senior Securities | 23 |
| Item 4. | Mine Safety Disclosures | 23 |
| Item 5. | Cyber security | 23 |
| Item 6. | Other Information | 24 |
| Item 7. | Exhibits | 24 |
| Signatures | 25 | |
| Index to Exhibits | 26 |
| 2 |
PART I
ITEM 1. FINANCIAL STATEMENTS
As used herein, the terms “Arvana,” “we,” “our,” and “us” refer to Arvana Inc., its subsidiary, and its predecessor, unless context indicates otherwise. Any distinct references to Down2Fish, refer to Down 2 Fish Charters, LLC., a wholly owned subsidiary of Arvana. In the opinion of management, the accompanying unaudited condensed financial statements included in this Form 10-Q reflect all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of operations for the periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.
| 3 |
ARVANA INC.
CONSOLIDATED BALANCE SHEETS
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Related-party payables (Note 8) | ||||||||
| Current portion of notes payable (Note 10) | ||||||||
| Current portion of related-party notes payable | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities: | ||||||||
| Notes payable, net of current portion | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Stockholders’ equity (deficit): | ||||||||
| Common stock, $ par value, shares authorized, issued and outstanding at June 30, 2024, and December 31, 2023 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity (deficit) before treasury stock | ( | ) | ( | ) | ||||
| Less treasury stock - common shares at June 30, 2024 and December 31, 2023, respectively | ( | ) | ( | ) | ||||
| Total stockholders’ equity (deficit) | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ equity (deficit) | $ | $ | ||||||
The accompanying condensed notes are an integral part of these interim unaudited consolidated financial statements.
| 4 |
ARVANA INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three months ended | Six months ended | |||||||||||||||
| June 30 | June 30 | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue: | ||||||||||||||||
| Charter income | $ | $ | $ | $ | ||||||||||||
| Other income | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Cost of sales | ||||||||||||||||
| Depreciation | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Lease income | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss on asset purchase | ( | ) | ||||||||||||||
| Total other expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Per common share information - basic and diluted: | ||||||||||||||||
| Weighted average shares outstanding - basic | ||||||||||||||||
| Net loss per common share - basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average shares outstanding - diluted | ||||||||||||||||
| Net loss per common share - diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The accompanying condensed notes are an integral part of these interim unaudited consolidated financial statements.
| 5 |
ARVANA INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
Three and Six Months Ended June 30, 2024 and 2023
(Unaudited)
| Common Stock | Treasury Stock | |||||||||||||||||||||||||||
| Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Shares | Amount | Total Stockholders’ Equity (Deficit) | ||||||||||||||||||||||
| Three months ended June 30, 2023: | ||||||||||||||||||||||||||||
| Balance March 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||
| Share-based compensation | — | — | ||||||||||||||||||||||||||
| Net loss | — | ( | ) | — | ( | ) | ||||||||||||||||||||||
| Balance June 30, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||
| Three months ended June 30, 2024: | ||||||||||||||||||||||||||||
| Balance March 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||
| Share-based compensation | — | — | ||||||||||||||||||||||||||
| Net loss | — | ( | ) | — | ( | ) | ||||||||||||||||||||||
| Balance June 30, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||
| Six months ended June 30, 2023: | ||||||||||||||||||||||||||||
| Balance December 31, 2022 | $ | $ | $ | ( | ) | ( | ) | $ | ( | ) | $ | |||||||||||||||||
| Share-based compensation | — | — | ||||||||||||||||||||||||||
| Net loss | — | ( | ) | — | ( | ) | ||||||||||||||||||||||
| Balance June 30, 2023 | $ | $ | $ | ( | ) | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Six months ended June 30, 2024: | ||||||||||||||||||||||||||||
| Balance December 31, 2023 | $ | $ | $ | ( | ) | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Share-based compensation | — | — | ||||||||||||||||||||||||||
| Net loss | — | ( | ) | — | ( | ) | ||||||||||||||||||||||
| Balance June 30, 2024 | $ | $ | $ | ( | ) | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||
The accompanying condensed notes are an integral part of these interim unaudited consolidated financial statements.
| 6 |
ARVANA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six-Months Ended June 30, 2024, and 2023
(Unaudited)
| 2024 | 2023 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation expense | ||||||||
| Share-based compensation | ||||||||
| Loss on asset purchase | ||||||||
| Increase (decrease) in: | ||||||||
| Accounts payable and accrued liabilities | ( | ) | ||||||
| Related-party payables | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Cash paid for asset acquisition | ( | ) | ||||||
| Cash acquired from asset acquisition | ||||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from loans payable | ||||||||
| Payments on loans payable | ( | ) | ( | ) | ||||
| Proceeds from related-party notes payable | ( | ) | ||||||
| Payments on related-party notes payable | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash | ( | ) | ( | ) | ||||
| Cash and cash equivalents, beginning of year | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Note payable issued for asset acquisition (Note 3) | $ | $ | ||||||
| Liabilities assumed in asset acquisition (Note 3) | $ | $ | ||||||
The accompanying condensed notes are an integral part of these interim unaudited consolidated financial statements.
| 7 |
ARVANA INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
(unaudited)
Note 1 – Organization and Summary of Significant Accounting Policies
Organization
Arvana Inc. (the “Company”) was incorporated in the State of Nevada on June 16, 1977, as “Turinco, Inc.”, and on July 24, 2006, changed its name to Arvana Inc. to reflect the acquisition of a telecommunications business. We discontinued efforts related to our telecommunications business as of December 31, 2009. The Company acquired Down 2 Fish Charters, LLC on February 3, 2023 (D2F). D2F was organized under the laws of the State of Florida on April 1, 2019.
D2F operates a Florida based fishing charter business that offers a range of curated maritime adventures that include inshore, offshore, and custom charters for fishing enthusiasts, nature lovers and tourists. The business is operated from a private dock in Palmetto, Florida that services the Tampa Bay area in addition to St Petersburg, Sarasota, Venice, Port Charlotte, and Clearwater. D2F generates its revenue from the sale and provision of fishing charter services.
Basis of Presentation
The Company’s fiscal year end is December 31. The accompanying consolidated financial statements of the Company for the six-month periods ended June 30, 2024, and 2023, have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) for financial information with the instructions to Form 10-Q and Regulation S-K. The consolidated interim financial statements and notes appearing in this report should be read in conjunction with our audited consolidated financial statements and related notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the Securities and Exchange Commission (“Commission”) on April 5, 2024. Results are not necessarily indicative of those which may be achieved in future periods.
Use of Estimates
The preparation of unaudited consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These estimates include the recognition of deferred tax assets based on the change in unrecognized deductible temporary tax differences.
Stock split
On February 21, 2023, stockholders approved a forward-split of the Company’s common shares on a 3-1 basis. The forward-split was filed with the Nevada Secretary of State effective March 31, 2023, and the Financial Industry Regulatory Authority (FINRA) rolled the stock forward on April 19, 2023. All changes in the capital structure have been given retroactive effect in these financial statements.
| 8 |
ARVANA INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
(unaudited)
Note 1 – Organization and Summary of Significant Accounting Policies – (continued)
Financial Instruments
The Company uses the following methods and assumptions to estimate the fair value of each class of financial instruments for which it is practicable to estimate such values:
Cash—the carrying amount approximates fair value.
Accounts payable and accrued liabilities, loans payable to stockholders, and amounts due to related parties—the carrying amount approximates fair value due to the short-term nature of the obligations.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash. The Company maintains cash in bank accounts that, at times, may exceed federally insured limits. At June 30, 2024 and December 31, 2023 respectively, the Company did not have any cash in excess of the insured FDIC limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks on its cash in bank account.
Income taxes
A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry-forwards. Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Stock-based compensation
The Company accounts for all share-based payments to employees and non-employees under ASC 718 “Stock Compensation,” which requires that the value of the award is established at the date of grant and is expensed over the vesting period of the grant. The method of determining the fair value of share-based payments depends on the type of award. Share-based awards that vest over a certain service period with no market conditions are valued at the closing market price on the grant date. Options grants are valued using the Black-Scholes-Merton model using inputs that are determined on the date of the grant. Once the per-share fair value on the date of grant is established, the aggregate expense of the grant is recognized as earned over the vesting period of the grant. The cost of share-based payments to non employees, if fully vested and non-forfeitable at the grant date, is measured and recognized at that date.
| 9 |
ARVANA INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
(unaudited)
Note 1 – Organization and Summary of Significant Accounting Policies (continued)
Basic earnings (loss) per share are computed using the weighted average number of common shares outstanding during the year. Diluted earnings (loss) per share are computed using the weighted average number of common shares and potentially dilutive common stock equivalents, including stock options and warrants. The Company had outstanding stock options at June 30, 2024, and at June 30, 2023, which have been excluded from the calculation of diluted loss per share because their effects would be anti-dilutive.
Recently Issued Accounting Pronouncements Adopted by the Company
In June 2016, the FASB issued ASU 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 is intended to provide financial statement users with more decision-useful information about expected credit losses on financial instruments and other commitments and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for the Company beginning January 1, 2023. The Company adopted ASU 2016-13, effective January 1, 2023, which adoption has not had a material effect on its financial statements.
Note 2 – Going Concern
For the six-month periods ended June 30, 2024 and June 30, 2023 the Company recognized a net loss of
$
Failure to obtain the ongoing support of stockholders and creditors may indicate that the preparation of these consolidated financial statements on a going concern basis is inappropriate, in which case our assets and liabilities would need to be recognized at their liquidation values. The Company’s consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and liabilities that might arise from this uncertainty.
| 10 |
ARVANA INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
(unaudited)
Note 3 – Asset Acquisition
On February 3, 2023 (Closing Date), the company acquired the assets and assumed the liabilities of Down
2 Fish Charters, LLC (D2F), a limited liability company organized under the laws of Florida, which
operates a charter fishing business. On the Closing Date, the Company paid $
Assets acquired and liabilities assumed were recorded at their estimated fair values as of the Closing Date under the acquisition method of accounting. The estimated fair values of certain assets and liabilities including long-lived assets require judgment and assumptions. Adjustments may be made to these estimates during the measurement period and those adjustments could be material.
Assets acquired and liabilities assumed are based on their fair values as of the Closing Date, with the
excess of cost over fair value of $
| Assets | ||||
| Cash | $ | |||
| Trade and other receivables | ||||
| Marine operating equipment | ||||
| Commercial fishing license | ||||
| Total assets | ||||
| Liabilities | ||||
| Accounts payable | ||||
| Deposits | ||||
| Payable to affiliates | ||||
| Notes payable | ||||
| Total liabilities | ||||
| Purchase price | ||||
| Loss on asset acquisition | $ | |||
The Company did not incur any acquisition related costs during the period.
Property and equipment acquired consisted primarily of offshore support vessels. The Company recorded
property and equipment acquired at an estimated fair value of $
The charter fishing license acquired is a perpetual federal fishing license, which grants the Company access to fish in federally regulated waters off the coast of Florida. This asset is not amortized and is tested for impairment at least annually.
| 11 |
ARVANA INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
(unaudited)
Note 4 – Property and Equipment
Property and equipment consist of the following:
June 30, 2024 (unaudited) | December 31, 2023 | |||||||
| Marine Equipment | $ | $ | ||||||
| Furniture and fixtures | ||||||||
| Total | ||||||||
| Less – accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation
expense is $
Marine equipment is subject to an operating lease agreement that ends on December 31, 2025 (Note 6).
Note 5 – Intangible Assets
The
Company acquired a perpetual federal fishing license, from the acquisition of assets (see Note 3), which grants the Company access to
fish in federally regulated waters off the coast of Florida. This asset is not amortized and is tested for impairment at least annually.
As of June 30, 2024, and 2023,
Note 6 – Leases
The
Company leases marine equipment in an operating arrangement. The agreement began on January 1, 2023 and ends December 31, 2025. The agreement
provides for minimum monthly lease payments of $
The
amount of lease income recognized in Other Income is $
| Year | Lease amount | ||||
| Remainder of 2024 | $ | ||||
| 2025 | |||||
| Total | $ | ||||
| 12 |
ARVANA INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
(unaudited)
Note 7 – Common Stock
The Company has authorized shares of common stock. Total shares were shares issued and shares outstanding as of June 30, 2024, and shares issued and shares outstanding as of December 31, 2023.
Stockholders approved a forward stock split of the Company’s common shares on a 3-for-1 basis that was effected on April 19, 2023 to stockholders of record on March 31, 2023. All changes in the capital structure have been given retroactive effect in these financial statements.
No common stock was issued during the year ended December 31, 2023.
During the six-month period ended June 30, 2024 the Company issued shares of restricted common stock at an approximate price of $ per share as part of executing a consulting services agreement with the majority stockholder. The Company accounts for share-based compensation awards in accordance with the provisions of ASC 718, which addresses the accounting for equity-based compensation arrangements and requires that the cost of all equity-based compensation arrangements be reflected in the financial statements over the vesting period based on the estimated fair value of the awards. Subsequent to the end of the reporting period the Board of Directors approved the decision to exercise the claw-back provision included in the consulting services agreement for all shares of restricted common stock. In accordance with ASC 718 compensation would be recorded if it is probable the performance condition will be met. Given that the Company plans to claw back the shares, the performance condition will not be met and hence the Company did not record any compensation expense related to this agreement.
Note 8 - Related-Party Transactions and Loans Payable to Stockholders
Effective
September 1, 2022 the Company signed an employment agreement with its chief executive officer for $
During
the year ended December 31, 2022 the Company issued shares of common stock at the price of $ with a fair value of $
At
June 30, 2024 and December 31, 2023 the Company accrued $
At
June 30, 2024 and December 31, 2023 the Company owed $
During the six-month period ended June 30, 2024 and the year ended December 31, 2023 the Company recorded share-based compensation of $ and $, respectively, from the grant of stock options to its chief executive officer and board members.
| 13 |
ARVANA INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
(unaudited)
Note 8 - Related-Party Transactions and Loans Payable to Stockholders – (continued)
During the six-month period
ended June 30, 2024 and the year ended December 31, 2023 the Company has repaid non-interest-bearing notes payable to related
parties totaling $
The
Company has an interest bearing note payable to a related party totaling $
The
Company has a non-interest bearing note payable to a related party totaling $
Note 9 – Stock Options
The Company adopted the 2022 Stock Incentive Plan (“the Plan”) effective September 30, 2022. The Plan provides for awards of stock options and restricted stock to officers, directors, key employees, and consultants. Under the Plan option prices are set by the Compensation Committee and may not be less than the fair market value of the stock on the grant date. The Company accounts for share-based compensation awards in accordance with the provisions of ASC 718, which addresses the accounting for employee stock options and requires that the cost of all employee stock options, as well as other equity based compensation arrangements, be reflected in the financial statements over the vesting period based on the estimated fair value of the awards.
At December 31, 2022 the Company had options outstanding with vesting periods of - years and exercise prices of approximately $ per share. During the six-month period ended June 30, 2024 there have been no changes in the number of options outstanding. Total share-based compensation is $ for the six-month period ended June 30, 2024 and $ for the year ended December 31, 2023. The remaining share-based compensation of $ will be recognized as follows:
| Year | Amount | ||||
| Remainder of 2024 | $ | ||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| Total | $ | ||||
| 14 |
ARVANA INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
(unaudited)
Note 10 – Notes Payable
Notes payable at June 30, 2024 and December 31, 2023 are as follows:
June 30, 2024 | December 31, 2023 | |||||||
| Note payable to a bank, interest at | $ | $ | ||||||
| Note payable to a bank, interest at | ||||||||
| Note payable to seller, interest at | ||||||||
| Note payable to majority shareholder, interest at %, matures , unsecured. | ||||||||
| Note payable to majority shareholder, bearing interest, matures , unsecured. | ||||||||
| Note payable to majority shareholder, bearing interest, with various maturities, unsecured | ||||||||
| Note payable to a third party, bearing | ||||||||
| Note payable to a third party, bearing | ||||||||
| Past due note payable to a third party, bearing | ||||||||
| Total notes payable | ||||||||
| Less – current portion of notes payable | ( | ) | ( | ) | ||||
| Less – current portion of related-party notes payable | ( | ) | ( | ) | ||||
| Total long-term portion | $ | $ | ||||||
Principal maturities of notes payable are as follows:
| Year | Amount | ||||
| Remainder of 2024 | $ | ||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| Thereafter | |||||
| Total | $ | ||||
| 15 |
ARVANA INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
(unaudited)
Note 11 - Subsequent Events
The Company evaluated its June 30, 2024 financial statements for subsequent events through the date the financial statements were issued.
On July 17, 2024 the Board of Directors removed Ruairidh Campbell and Shawn Teigen from their positions as Directors and terminated the employment of Ruairidh Campbell as CEO, CFO, and CAO. All unvested stock options were forfeited upon termination for cause in accordance with the terms of the 2022 Stock Incentive Plan. According to the terms of the Plan any vested stock options must be exercised within 30 days of termination for cause. As of August 19, 2024, the first business day after the passage of the 30-day period, neither Ruairidh Campbell nor Shawn Teigen had exercised their options. Therefore, both parties forfeited all previously vested stock options.
On July 17, 2024 the Board of Directors elected James Kim to serve as a Director and appointed James Kim to serve as the CEO and interim CFO.
On August 15, 2024 the Board of Directors approved the decision to exercise the claw-back provision included in the consulting services agreement previously executed with the majority shareholder for the shares of restricted common stock issued.
| 16 |
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As used herein the terms “Arvana,” “we,” “our,” and “us” refer to Arvana Inc., its subsidiary, and its predecessor, unless context indicates otherwise. Any distinct references to Down2Fish refer to Down 2 Fish Charters, LLC, a wholly owned subsidiary of Arvana.
FORWARD LOOKING STATEMENTS
The information in this Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties, including our capital needs, business plans and expectations. Forward-looking statements also involve risks and uncertainties regarding our business, capital, government regulations, stock price, operating costs, capital costs, and other factors. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. You can identify forward-looking statements by terminology such as "may", "will", "should", "expect", "plan", "intend", "anticipate", "believe", "estimate", "predict", "potential" or "continue", the negative of such terms, or other comparable terminology. Forward-looking statements are based on assumptions and analyses made by management considering their experience and perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances. Actual events or results may differ materially. We disclaim any obligation to publicly update forward-looking statements or disclose any difference between actual results and those reflected in these statements. Given these uncertainties, readers are cautioned not to place undue reliance on forward-looking statements.
Our fiscal year end is December 31. All information presented herein is based on the three-month and six-month periods ended June 30, 2024 and June 30, 2023.
Arvana
Arvana was incorporated in the State of Nevada on June 16, 1977, as “Turinco, Inc.” to engage in any legal undertaking. On July 24, 2006, Arvana changed its name from Turinco, Inc. to Arvana Inc. on the acquisition of Arvana Networks, Inc., a telecommunications business. We discontinued efforts related to that business as of December 31, 2009. Arvana acquired Down 2 Fish Charters, LLC on February 3, 2023. Down2Fish was organized under the laws of the State of Florida on April 1, 2019.
Down2Fish operates a Florida based fishing charter business that offers a range of curated maritime adventures that include inshore, offshore, and custom charters for fishing enthusiasts, nature lovers and tourists. The business is operated from a private dock in Palmetto, Florida that services the Tampa Bay area in addition to St Petersburg, Sarasota, Venice, Port Charlotte, and Clearwater. Down2Fish generates its revenue from the sale and provision of fishing charter services.
Arvana acquired the assets and assumed the liabilities of Down2Fish on February 3, 2023, from LCF Salons, LLC, in exchange for fifty thousand dollars ($50,000) and a promissory note in the amount of seven hundred thousand dollars ($700,000) payable twenty-four (24) months after the closing date that bears interest of seven and one quarter percent (7¼%) per annum. Interest on the promissory note is payable on an annual basis.
Stockholders approved a forward stock split of Arvana’s common shares on a 3-for-1 basis that was effected on April 19, 2023, to stockholders of record on March 31, 2023. All changes in the capital structure have been given retroactive effect in this periodic report.
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Arvana’s office is located at 299 Main Street, 13th Floor, Salt Lake City, Utah 84111 and our telephone number is (702) 899-1072.
AA Registered Agents—located at 4869 Nightwood Court, Las Vegas, Nevada 89149—is our registered agent in the State of Nevada.
Arvana is traded on the OTC Markets Group, Inc.’s Pink Sheets Current Information market platform under the symbol “AVNI.”
While Arvana operates its fishing charter business it has continued to seek business opportunities in real estate development. On December 12, 2023, Arvana announced a non-binding memorandum of understanding to acquire a Nevada-based company intent on expanding its specialty use concept to acquire and repurpose vacant shopping malls, outlet locations, and big box stores to attract new tenants from targeted industries that offer goods or services that are not available online. The parties have ended their discussions of the proposed transaction, and management is evaluating alternative options for pursuing this business model.
Plan of Operation
Our plan of operation is to support the development of our business, and to build on its existing business model. We believe that an expansion of marketing efforts around Tampa Bay, to offer a wider range of services, such as dolphin tours, will help establish the Down2Fish brand, attract more customers and increase revenues. Expansion into new service offerings will however require capital sufficient to finance the purchase of another vessel and additional boating equipment. We believe that dolphin tours can return net revenue on a consistent basis if we are able to attract sufficient customers to each excursion. We are currently licensed and equipped to carry no more than six (6) customers on each fishing charter. A vessel designed primarily for dolphin tours can carry from fifty (50) to one hundred (100) customers. Our primary impediment for equipment procurement and installation is cost. We are presently considering financing options that might become available to us in the near term but have no assurance that financing options will become available or that if such did become available, that the financing terms would be tenable for our business. Unless or until we can offer excursions that cater to a greater number of customers on each excursion, we will continue to focus on offering more fishing charter excursions to build revenue and improve our results of operations.
Results of Operations
During the six-month period ended June 30, 2024 Arvana raised capital to sustain operations, maintained its charter fishing business, and evaluated other business opportunities.
Our results of operations for the three-month and six-month periods ended June 30, 2024, as compared to the three-month and six-month periods ended June 30, 2023, were as follows below:
| Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | $ | 13,830 | $ | 13,579 | $ | 13,830 | $ | 13,579 | ||||||||
| Operating expenses | 152,239 | 123,326 | 277,278 | 278,078 | ||||||||||||
| Loss from Operations | (138,409 | ) | (109,747 | ) | (263,448 | ) | (264,499 | ) | ||||||||
| Other Income (Expense) | (7,414 | ) | (4,522 | ) | (11,812 | ) | (778,170 | ) | ||||||||
| Net Losses | $ | (145,823 | ) | $ | (114,269 | ) | $ | (275,260 | ) | $ | (1,042,669 | ) | ||||
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Revenue
Charter revenue from operations for the three-month period ended June 30, 2024 is $13,830 as compared to $13,054 for the comparable three-month period ended June 30, 2023, an increase of 5.9%, and as compared to $0 for the three-month period ended March 31, 2024. Charter revenue from operations for the six-month period ended June 30, 2024 is $13,830 as compared to $13,054 for the comparable six month period ended June 30, 2023, an increase of 5.9%, and as compared to $0 for the three-month period ended March 31, 2024. Revenue is comprised of fishing charter services.
We expect charter revenue to increase in the third quarter of 2024 as the charter fishing season is in full swing and then to taper off in the final quarter of 2024 as the fishing season comes to an end.
Operating Expenses
Operating expenses for the three-month period ended June 30, 2024 are $152,239 as compared to $123,326 for the three-month period ended June 30, 2023, an increase of 23.4%, and as compared to $125,039 for the three-month period ended March 31, 2024, an increase of 21.8%. Operating expenses for the six-month period ended June 30, 2024 are $277,278 as compared to $278,078 for the six-month period ended June 30, 2023, an decrease of 0.3%. The changes in operating expenses over the comparative periods are attributed to reductions in general and administrative expenses including share based compensation, executive payroll, and auditing expenses.
We expect operating expenses to increase in future periods as our business development strategies are implemented while auditing and accounting professional fees are expected to increase over the next twelve months.
Other Expense
Other expense for the three-month period ended June 30, 2024 is $7,414 as compared to other expense of $4,522 for the three-month period ended June 30, 2023, and as compared to other expense of $4,398 for the three-month period ended March 31, 2024. Other expense for the six-month period ended June 30, 2024 is $11,812 as compared to other expense of $778,170 for the six-month period ended June 30, 2023. The decrease in other expense over the comparative periods can be primarily attributed to the loss recognized with the acquisition of Down2Fish and interest expense offset by lease income realized in the current period.
We expect to continue to recognize other expense in future periods as debt instruments tied to the fishing charter vessels continue to incur interest and depreciation of our vessels continues.
Net Loss
Net loss for the three-month period ended June 30, 2024 is $145,823 as compared to a net loss of $114,269 for the three-month period ended June 30, 2023, an increase of 27.6%. Net loss for the six month period ended June 30, 2024 is $275,260 as compared to net loss of $1,042,669 for the six-month period ended June 30, 2023, a decrease of 73.6%. The change in net loss over the comparative periods can be primarily attributed to a decrease in losses from operating expenses and the loss recognized on the asset purchase of Down2Fish, offset by the realization of revenue from charter boat services and other income that is generated through a lease of the charter vessels.
We expect to continue to realize net losses from operations over the next twelve months as management works to implement its business model.
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Capital Expenditures
We expended no amounts on capital expenditures during the three-month or six-month periods ended June 30, 2024 and June 30, 2023.
Liquidity and Capital Resources
Since inception we have experienced significant changes in liquidity, capital resources, and stockholders’ deficit.
We had current assets of $21,326 as of June 30, 2024 consisting of cash and a bond as compared to current assets of $23,751 as of June 30, 2023 consisting of cash and a bond, and as compared to current assets of $27,171 as of December 31, 2023 consisting of cash and a bond. Total assets were $197,282 as of June 30, 2024 consisting of current assets, property, equipment, and intangible assets as compared to total assets of $216,756 as of June 30, 2023 consisting of current assets, property, equipment, and intangible assets, and as compared to $216,549 as of December 31, 2023 consisting of current assets, property, equipment, and intangible assets.
We had current liabilities of $1,203,632 as of June 30, 2024 consisting of accounts payable, related-party payables, and the current portion of long-term debt as compared to current liabilities of $130,363 as of June 30, 2023 consisting of accounts payable, related-party payables, and the current portion of long-term debt, and as compared to current liabilities of $338,487 as of December 31, 2023 consisting of accounts payable, related-party payables, and the current portion of long-term debt. Total liabilities were $1,329,384 as of June 30, 2024 consisting of current liabilities and notes payable net of current portion as compared to total liabilities of $1,018,008 as of June 30, 2023 consisting of current liabilities and notes payable net of current portion, and as compared to total liabilities of $1,178,675 as of December 31, 2023 consisting of current liabilities and notes payable net of current portion. The increase in current liabilities in the six-month period ended June 30, 2024 is attributed to the transition of long-term debt due in connection with the acquisition of Down2Fish to current liabilities from the year ended December 31, 2023 in which it was classified as a long-term liability.
We had a working capital deficit of $1,182,306 as of June 30, 2024 as compared to a working capital deficit of $106,612 as of June 30, 2023, and as compared to a working capital deficit of $311,316 as of December 31, 2023. The increase in these deficits is primarily attributed to the transition of long-term debt due in connection with the acquisition of Down2Fish to current liabilities from the year ended December 31, 2023 in which it was classified as a long-term liability.
Net stockholders' deficit in Arvana is $1,132,102 as of June 30, 2024 as compared to a net stockholders' deficit of $801,252 as of June 30, 2023, and as compared to a net stockholders' deficit of $962,126 as of December 31, 2023.
Cash Flows From Operating Activities
Net cash used in operating activities for the six-month period ended June 30, 2024 is $231,256 as compared to net cash used in operating activities of $99,290 for the six-month period ended June 30, 2023. Net cash used in operating activities can be attributed to book expense items that do not affect the total amount relative to actual cash used such as depreciation expense, share-based compensation, and loss on asset purchase. Balance sheet accounts that affect cash but are not income statement related items that are added or deducted to arrive at net cash used in operating activities include current assets, accounts payable, and related-party payables.
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We expect to continue to have net cash flow used in operating activities over the next twelve months or until such time as Arvana generates sufficient revenue from operations to sustain the costs of operations.
Cash Flows From Investing Activities
Net cash used in investing activities for the six-month period ended June 30, 2024 is $0 as compared to net cash used in investing activities of $45,911 for the six-month period ended June 30, 2023.
We expect to use net cash in investing activities in the near term as investment will be required of us in connection with the expansion our fishing charter business.
Cash Flows From Financing Activities
Net cash provided by financing activities for the six-month period ended June 30, 2024 is $225,411 as compared to net cash provided by financing activities of $21,487 for the six-month period ended June 30, 2023. Net cash provided by financing activities in the six-month period ended June 30, 2024 is attributed to proceeds from related-party loans payable offset by payments on loans payable. Net cash provided by financing activities in the six-month period ended June 30, 2023 is attributed to the proceeds of loans payable offset by payments on loans payable.
We expect to continue to use net cash provided by financing activities over the next twelve months generated through additional private equity placements, public offerings, or private debt to fund continued expansion of our business.
Arvana’s assets are insufficient as of June 30, 2024 to implement its plan of operation to expand its business operations. We anticipate conducting another private equity offering to meet our objectives and may seek additional loans in the short term to sustain operations. Management is confident that its efforts to realize additional funding will be successful.
Arvana does not intend to pay cash dividends in the foreseeable future.
Arvana had no lines of credit or other bank financing arrangements as of June 30, 2024.
Arvana had no commitments for future capital expenditures at June 30, 2024.
Arvana has adopted the Arvana Inc. 2022 Stock Incentive Plan and had an employment agreement with its executive officer whose employment was terminated effective July 17, 2024. The former executive officer has 30 days to exercise his vested options or they will be forfeited. Two members of the Board of Directors were removed effective July 17, 2024. These former members have 30 days to exercise their vested options or they will be forfeited.
Arvana has no current plans for the purchase or sale of any plant or equipment.
Arvana has no current plans to make any additional changes in the number of employees.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities.”
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Critical Accounting Policies
The preparation of financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions affecting the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net revenues and expenses in the reporting period. We base our estimates and assumptions on current facts, historical experience, and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. We continually review the estimates and underlying assumptions to ensure they are appropriate for the circumstances. Accounting assumptions and estimates are inherently uncertain and actual results may differ materially from our estimates. A summary of our critical accounting policies is provided in Note 1 to the audited financial statements for the years ended December 31, 2023 and 2022 which are included in our most recent Form 10-K. In the notes we discuss accounting policies that are significant in determining the Company’s results of operations and financial position.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
In connection with the preparation of this quarterly report an evaluation was carried out by Arvana’s management, with the participation of the chief executive officer and the acting chief financial officer, of the effectiveness of Arvana’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d 15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)) as of June 30, 2024. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to management, including its chief executive officer and the chief financial officer, to allow timely decisions regarding required disclosures.
Based on that evaluation, Arvana’s management concluded, as of the end of the period covered by this report, that Arvana’s disclosure controls and procedures were effective in recording, processing, summarizing, and reporting information required to be disclosed within the time periods specified in the Commission’s rules and forms, and such information was accumulated and communicated to management, including its chief executive officer and chief financial officer, to allow timely decisions regarding required disclosures.
Changes in Internal Control over Financial Reporting
There have been no changes in internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended June 30, 2024, that materially affected, or are reasonably likely to materially affect, Arvana’s internal control over financial reporting.
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PART II
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 1A. RISK FACTORS
Not required of smaller reporting companies.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. CYBERSECURITY
Limited Risk Management Strategy for Handling Sensitive Data
Arvana is committed to the integrity and security of the sensitive data that it collects, maintains, and transmits across its computer systems. Over the ordinary course of our business, Arvana and its third party service providers (such as charter booking services) collect, maintain, and transmit sensitive data including proprietary or confidential business information (such as operational data and personal information). The secure maintenance of this information is critical to our business and reputation.
Despite our efforts to implement robust security measures in reliance on administrative, technical, and physical safeguards, our risk management strategies and practices for protecting sensitive data are subject to certain limitations. A variety of factors give rise to these limitations including the evolving nature of cyber threats, resource constraints, and the inherent risks associated with the technologies we and third party service providers employ. Arvana relies on third parties including cloud vendors and consultants for various business functions. Many of our third-party service providers have access to our information systems and data, and we rely on such third parties for the operation of our business. We oversee third party service providers by conducting vendor diligence. Vendors are generally assessed for risk based on the nature of their service, access to data, and systems and supply chain risk.
Arvana’s current risk management strategy may not fully account for or mitigate the risks posed by emerging technologies or the potential impact of these limitations on our business. Financial liabilities, damage to our reputation, and erosion of customer trust could negatively affect our business operations and financial condition.
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We have adopted a cybersecurity governance structure to identify, assess, and manage material risks from cybersecurity threats that include a framework to respond to and assess internal and external threats to the security, confidentiality, and integrity of Arvana’s data and information systems. Under which framework management is responsible for assessing and managing material risks that arise from cybersecurity threats. We have not engaged third-party qualified contractors or claim any management expertise from which to draw in the event of cybersecurity threats.
Governance of Cybersecurity Issues
When identified by management cybersecurity threats are to be immediately reported to Arvana’s Audit Committee. The Audit Committee has primary responsibility for oversight of cybersecurity threats once a cybersecurity threat has been reported to it by management. Matters to be considered by the Audit Committee include management risks relating to data privacy, technology, and information security. The Audit Committee must also consider Arvana’s cyber security measures and the back-up of information systems, along with what steps Arvana has taken to monitor and control cyber security exposure. Further, the Audit Committee is tasked with the responsibility for conferring with management and Arvana’s auditors as to the adequacy and effectiveness of information safeguards, cybersecurity policies, and internal controls that impact information security. The Audit Committee will be briefed on any material cybersecurity incidents that might adversely affect our business at least once each year, and such brief will include topics such as risk assessment, risk management, control decisions, service provider arrangements, the occurrence of security incidents, and the responses to security incidents with recommendations for changes or updates to policies and procedures.
While Arvana has not experienced cybersecurity incidents in the past, it cannot guarantee that our cybersecurity safeguards will prevent breaches or breakdowns of our third-party service providers’ information technology systems, particularly in the face of continually evolving cybersecurity threats and increasingly sophisticated threat actors.
A cybersecurity incident could materially affect our business, results of operations, financial condition, and reputation, in addition to potentially subjecting us to government investigations, litigation, fines, or other damages.
ITEM 6. OTHER INFORMATION
During the three months ended June 30, 2024 no director or officer, as defined in Rule 16a-1(f) under the
Securities Exchange Act of 1934, as amended, of Arvana has
ITEM 7. EXHIBITS
Exhibits required to be attached by Item 601 of Regulation S-K are listed in the Index to Exhibits on page 25 of this Form 10-Q and are incorporated herein by this reference.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ARVANA INC.
By: |
/s/ James Kim | |
| James Kim, Chief Executive Officer and acting Chief Financial Officer | ||
| Date: | August 20, 2024 |
INDEX TO EXHIBITS
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