Notes
to Consolidated Financial Statements
June
30, 2020
(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).
On February 11, 2020, the liquidation proceedings of GE Professionals DMCC were completed and it is formally liquidated.
The
Company´s consolidated revenues from continuing operations 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, 2019. The interim results for the period ended June 30, 2020 are not necessarily indicative of
results for the full fiscal year.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
June
30, 2020
(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 unaudited consolidated financial statements
do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might
be necessary should the Company be unable to continue as a going concern.
As
reflected in the accompanying unaudited consolidated financial statements, the Company had a net income of $247,493 and net cash
used in operations of $227,347 for the six months ended June 30, 2020; working capital deficit, stockholder’s deficit and
accumulated deficit of $260,033, $846,461 and $12,975,695, respectively as of June 30, 2020. 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)
|
Maximizing
the revenues of Cheshire Trafford (U.K.) Limited, the Independent Financial Advisory firm we acquired on August 1, 2018, by
way of servicing the current client base in the most professional and efficient manner possible.
|
|
|
b)
|
Organically
growing the amount of Funds under Administration of Cheshire Trafford (U.K.) Limited to new and higher levels.
|
|
|
c)
|
Consummating
and executing all current engagements related to the business consulting division.
|
|
|
d)
|
Continually
engaging with new clients via our business consulting division.
|
|
|
e)
|
Continuing
to source funding, via equity or debt, for acquisition, growth and working capital from one or various European Funds. The
Company is currently negotiating terms for a $10 million funding agreement with a European regulated Fund.
|
|
|
f)
|
Acquiring
and managing more Independent Financial Advisory firms with funds under administration located around the globe.
|
|
|
g)
|
Sell
the Company´s marketable securities, when possible.
|
In
March 2020, the outbreak of the COVID-19 Coronavirus caused by a novel strain of the coronavirus was recognized as a Global Pandemic
by the World Health Organization, and the outbreak has become increasingly widespread all over the World, including the geographical
locations in which the Company and its subsidiaries operate. The COVID-19 Coronavirus Pandemic has and will continue affecting
economies and businesses around the Globe. The Company continues to monitor the impact of the COVID-19 Coronavirus outbreak closely.
The impacts of the Pandemic could be material, but due to the evolving nature of this situation, we are not able at this time
to estimate the impact on our current financial, operational or future financial results. Amongst the factors that could impact
our results are: effectiveness of COVID-19 Coronavirus mitigation measures, global economic conditions, reduced business and consumer
spending due to both job losses and reduced investing activity, and other factors. These factors could result in increased or
decreased demand for our products and services.
For the quarter ended June 30, 2020 and still
to date, most European countries are still slowly easing out of the mandated lock-down imposed by their respective Governments
due to the COVID-19 pandemic and its ramifications. Whilst the Company´s recurring revenues were not affected during the
quarter ended June 30, 2020, the Company´s ability to speed-up the process of writing new business was hindered to
a degree. This hindrance was mainly due to the fact that most of the Company´s new business clients that are seeking
financial advice are of a certain age whereby they prefer to meet in person with one of our independent financial advisers and
sign the paperwork in situ; and this has proven to be a slow process due to travel restrictions. However, the Company does believe
that from now onwards, its team of IFA´s will be able to start organizing and attending these “face to face”
meetings with these new business clients and will therefore be able to close most or all of the new business that was put in motion
during the quarter ended June 30, 2020.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
June
30, 2020
(Unaudited)
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”). Argentum FM is the parent company of its
100% owned subsidiary, Cheshire Trafford U.K. Limited (U.K.) since August 1, 2018 pursuant to a Share Purchase Agreement dated
August 1, 2018. GEP EH was the parent company of its liquidated GE Professionals DMCC (Dubai) until February 11, 2020. GE Professionals
DMCC has been presented as a discontinued operation for the three months ended June 30, 2019 and the six months ended June 30,
2020 and 2019 as the Company was liquidated on February 11, 2020. All significant inter-company accounts and transactions have
been eliminated in consolidation.
Reclassifications
Certain
amounts in the unaudited consolidated statements of operations for the three and six months ended June 30, 2019 have been reclassified
from Interest expense to Change in fair value of acquisition payable to conform to the presentation of three and six months ended
June 30, 2020. This reclassification increased Change in fair value of acquisition payable, in Other expenses of the unaudited
consolidated statements of operations for the three and six months ended June 30, 2019 by $4,366 and $8,790, respectively and
decreased Interest expense in Other expenses of the unaudited consolidated statements of operations for the three and six months
ended June 30, 2019 by the same amount.
Use
of Estimates
The
preparation of unaudited 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 unaudited consolidated financial statements and the reported amounts of revenue and
expenses during the reporting period.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect
of a condition, situation, or set of circumstances that existed at the date of the unaudited 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, fair value of the lease liabilities, valuation allowance on deferred tax assets
and equity valuations for non-cash equity grants.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
June
30, 2020
(Unaudited)
Risks
and Uncertainties
The
Company’s operations are subject to significant risk and uncertainties including financial, operational, competition and
potential risk of business failure.
Segment
Reporting
A
business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns
that are different from those of other business segments. A geographical segment is engaged in providing products or services
within a particular economic environment that is subject to risks and returns that are different from those of segments operating
in other economic environments.
The
Company uses “the management approach” in determining reportable operating segments. The management approach considers
the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions
and assessing performance as the source for determining the Company’s reportable segments. The Company’s chief operating
decision maker is the Chief Executive Officer of the Company, who reviews operating results to make decisions about allocating
resources and assessing performance for the entire Company.
Cash
Equivalents
The
Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At June
30, 2020 and December 31, 2019, the Company had no cash equivalents. At times balances may exceed federally insured limits of
$250,000. We have not experienced any losses related to these balances. At June 30, 2020 and December 31, 2019, balance in one
financial institution exceeded federally insured limits by $0 and $73,480, respectively.
Accounts
Receivable and Allowance for Doubtful Accounts
The
Company recognizes accounts receivable in connection with the services provided. The Company recognizes an allowance for doubtful
accounts based on an analysis of current receivables aging and expected future write-offs, as well as an assessment of specific
identifiable customer accounts considered at risk or uncollectible. There was no allowance for bad debt at June 30, 2020 and December
31, 2019.
Foreign
currency policy
The
Company’s accounting policies related to the consolidation and accounting for foreign operations are as follows: The accompanying
consolidated financial statements are presented in U.S. dollars. The functional currency of the Company’s discontinued Dubai
subsidiary is the Arab Emirates Dirham (“AED”) and the functional currency of the Company’s U.K. subsidiaries
is Great Britain Pounds (“GBP”). All foreign currency balances and transactions are translated into United States
dollars (“$” 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’
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.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
June
30, 2020
(Unaudited)
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.”
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 securities, net.” Therefore, no gain/loss is recognized on the sale of securities.
Cost
Method Investments
Securities
that are not classified as marketable securities are accounted for under the cost method. These securities are recorded at their
original cost basis and are subject to impairment testing.
(B)
Other than Temporary Impairment
The
Company reviews its equity investment portfolio for any unrealized losses that would be deemed other than temporary and require
the recognition of an impairment loss in the statement of operations. If the cost of an investment exceeds its fair value, the
Company evaluates, among other factors, general market conditions, the duration and extent to which the fair value is less than
cost, and the Company’s intent and ability to hold the investments. Management also considers the type of security, related-industry
and sector performance, as well as published investment ratings and analyst reports, to evaluate its portfolio. Once a decline
in fair value is determined to be other than temporary, an impairment charge is recorded and a new cost basis in the investment
is established. If market, industry, and/or investee conditions deteriorate, the Company may incur future impairments. The Company
did not record any such impairment during the three and six months ended June 30, 2020 or June 30, 2019.
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.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
June
30, 2020
(Unaudited)
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, intrinsic value of the BCF is recorded as a debt discount against the face amount of the respective
debt instrument. The discount is amortized over the life of the debt. If a conversion of the underlying debt occurs, a proportionate
share of the unamortized amounts is immediately expensed.
Debt
Issue Costs
The
Company may pay debt issue costs in connection with raising funds through the issuance of debt whether convertible or not or with
other consideration. These costs are recorded as debt discounts and are amortized over the life of the debt to the statement of
operations as amortization of debt discount.
Original
Issue Discount
If
debt is issued with an original issue discount, the original issue discount is recorded to debt discount, reducing the face amount
of the note and is amortized over the life of the debt to the statement of operations as amortization of debt discount. If a conversion
of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
Valuation
of Derivative Instruments
ASC
815 “Derivatives and Hedging” requires that embedded derivative instruments be bifurcated and assessed, along with
free-standing derivative instruments such as warrants, on their issuance date and measured at their fair value for accounting
purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option pricing formula. Upon conversion
of a note where the embedded conversion option has been bifurcated and accounted for as a derivative liability, the Company records
the shares at fair value, relieves all related notes, derivatives and debt discounts and recognizes a net gain or loss on debt
extinguishment.
Business
combinations
The
Company accounts for its business acquisitions under the acquisition method of accounting as indicated in ASC No. 805, “Business
Combinations”, which requires the acquiring entity in a business combination to recognize the fair value of all assets acquired,
liabilities assumed and any non-controlling interest in the acquiree, and establishes the acquisition date as the fair value measurement
point. Accordingly, the Company recognizes assets acquired and liabilities assumed in business combinations, including contingent
assets and liabilities and non-controlling interest in the acquiree, based on fair value estimates as of the date of acquisition.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
June
30, 2020
(Unaudited)
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.
Impairment
of Long-Lived Assets
The
Company reviews long-lived assets, such as property and equipment for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison
of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying
amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying
amount of the asset exceeds the fair value of the asset. Assets to be disposed of by sale would be separately presented in the
balance sheet and reported at the lower of the carrying amount or fair value less costs related to the sale, and are no longer
depreciated. The assets and liabilities of a group classified as held for sale would be presented separately in the appropriate
asset and liability sections of the balance sheet.
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.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
June
30, 2020
(Unaudited)
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 unaudited
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 unaudited 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.
|
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.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
June
30, 2020
(Unaudited)
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 and relate to the insurance brokerage
business. For the six months ended June 30, 2020 and 2019, the Company had following concentrations of revenues from continuing
operations:
|
|
|
June
30, 2020
|
|
|
June
30, 2019
|
|
|
|
|
|
|
|
|
|
|
Initial advisory fees
|
|
|
0
|
%
|
|
|
6.87
|
%
|
|
Ongoing advisory fees
|
|
|
27.86
|
%
|
|
|
31.70
|
%
|
|
Initial and renewal commissions
|
|
|
5.40
|
%
|
|
|
8.11
|
%
|
|
Trail or recurring commissions
|
|
|
66.69
|
%
|
|
|
52.83
|
%
|
|
Others
|
|
|
0.05
|
%
|
|
|
0.49
|
%
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
June
30, 2020
(Unaudited)
At
June 30, 2020 and December 31, 2019, the Company had the following concentrations of accounts receivables with customers:
|
Customer
|
|
June
30, 2020
|
|
|
December
31, 2019
|
|
|
|
|
|
|
|
|
|
|
Customer 1
|
|
|
24.03
|
%
|
|
|
26.68
|
%
|
|
Customer 2
|
|
|
29.39
|
%
|
|
|
25.24
|
%
|
|
Customer 3
|
|
|
12.06
|
%
|
|
|
8.59
|
%
|
|
Others having
a concentration of less than 10%
|
|
|
34.52
|
%
|
|
|
39.49
|
%
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
Share-based
payments
Under
ASC 718 “Compensation – Stock Compensation”, the Company recognizes all forms of share-based payments to employees,
including stock option grants, warrants and restricted stock grants at their fair value on the grant date, which is based on the
estimated number of awards that are ultimately expected to vest.
On
January 1, 2019, the Company adopted ASU 2018-07 “Compensation – Stock Compensation” whereby share based payment
awards issued to non-employees will be treated the same as for employees. The guidance has been applied using the modified prospective
method which may result in a cumulative effect adjustment to retained earnings on the adoption date. The adoption of ASU 2018-07
did not result in a cumulative effect adjustment.
Share
based payments, excluding restricted stock, are valued using a Black-Scholes pricing model.
When
computing fair value, the Company considered the following variables:
|
|
●
|
The
risk-free interest rate assumption is based on the U.S. Treasury yield for a period consistent with the expected term of the
share-based payment in effect at the time of the grant.
|
|
|
●
|
The
expected term is developed by management estimate.
|
|
|
●
|
The
Company has not paid any dividends on common stock since inception and does not anticipate paying dividends on its common
stock in the near future.
|
|
|
●
|
The
expected volatility is based on management estimates which are based upon our historical volatility.
|
|
|
●
|
The
forfeiture rate is based on historical experience.
|
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.
At
June 30, 2020 and December 31, 2019, the Company had common stock equivalents of 331,332,677 and 363,755,756 common shares, respectively,
in the form of convertible notes, which, if converted, may be dilutive. See Note 9(D).
At
June 30, 2020 and December 31, 2019, the Company had common stock equivalents of 780,000,000 and 770,000,000 common shares, respectively,
in the form of convertible preferred stock, which, if converted, may be dilutive. See Note 10(A).
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
June
30, 2020
(Unaudited)
|
|
|
Number
of Common Shares
|
|
|
|
|
June
30, 2020
|
|
|
December
31, 2019
|
|
|
Potential
dilutive common stock
|
|
|
|
|
|
|
|
|
|
Convertible notes
|
|
|
331,332,677
|
|
|
|
363,755,756
|
|
|
Series “B” preferred stock
|
|
|
450,000,000
|
|
|
|
450,000,000
|
|
|
Series “C”
preferred stock
|
|
|
330,000,000
|
|
|
|
320,000,000
|
|
|
Total potential dilutive
common stock
|
|
|
1,111,332,677
|
|
|
|
1,133,755,756
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common
shares – Basic
|
|
|
590,989,409
|
|
|
|
573,178,505
|
|
|
Weighted average
number of common shares – Dilutive
|
|
|
1,702,322,086
|
|
|
|
1,706,934,261
|
|
As
of June 30, 2020 and December 31, 2019, diluted weighted average number of common shares exceeds total authorized common shares.
However, 780,000,000 and 770,000,000 common shares as of June 30, 2020 and December 31, 2019, respectively 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 December 31, 2022. See Note
10(A)
Comprehensive
Income / (Loss)
The
Comprehensive Income Topic of the FASB Accounting Standards Codification establishes standards for reporting and presentation
of comprehensive income and its components in a full set of financial statements. Comprehensive income (loss) for the six months
ended June 30, 2020 and 2019, includes only foreign currency translation gain / (loss), and is presented in the Company’s
consolidated statements of comprehensive income / (loss).
Changes
in Accumulated Other Comprehensive Income (Loss) by Component during the six months ended June 30, 2019 were as follows:
|
Balance,
December 31, 2018
|
|
$
|
13,592
|
|
|
Foreign currency
translation adjustment for the period
|
|
|
2,802
|
|
|
Balance, June
30, 2019
|
|
$
|
16,394
|
|
Changes
in Accumulated Other Comprehensive Income (Loss) by Component during the six months ended June 30, 2020 were as follows:
|
Balance,
December 31, 2019
|
|
$
|
(5,548
|
)
|
|
Foreign currency
translation adjustment for the period
|
|
|
34,886
|
|
|
Balance, June
30, 2020
|
|
$
|
29,338
|
|
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.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
June
30, 2020
(Unaudited)
The
authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring
or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical
levels of inputs to measure fair value:
|
|
●
|
Level
1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
|
|
|
|
|
|
●
|
Level
2: Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar
assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities;
or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
|
|
|
|
|
|
●
|
Level
3: Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair
value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.
|
The
carrying amounts reported in the balance sheet for prepaid expenses, accounts receivable, accounts payable, accounts payable to
related parties, loans payable to related parties and notes payable, 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 June 30,
2020 and December 31, 2019, using quoted prices in active markets for identical assets (Level 1), significant other observable
inputs (Level 2), and significant unobservable inputs (Level 3):
|
|
|
June
30, 2020
|
|
|
December
31, 2019
|
|
|
Level 1 – Marketable
Securities – Recurring
|
|
$
|
700,247
|
|
|
$
|
204,239
|
|
The
following section describes the valuation methodologies the Company uses to measure financial instruments at fair value:
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 marketable securities measured at fair value for the six months ended June 30, 2020 were as follows:
|
Balance,
December 31, 2019
|
|
$
|
204,239
|
|
|
Sales and settlements during the
period
|
|
|
-
|
|
|
Gain on available
for sale marketable securities, net
|
|
|
496,008
|
|
|
Balance,
June 30, 2020
|
|
$
|
700,247
|
|
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
June
30, 2020
(Unaudited)
Non-Marketable
Securities at Fair Value on a Non-Recurring Basis — Certain assets are measured at fair value on a nonrecurring basis.
The level 3 position consist of investments accounted for under the cost method. The Level 3 position consists of investments
in equity securities held in private companies.
Management
believes that an “other-than-temporary impairment” would be justified, as according to ASC 320-10 an investment is
considered impaired when the fair value of an investment is less than its amortized cost basis. The impairment is considered either
temporary or other-than-temporary. The accounting literature does not define other-than-temporary. It does, however, state that
other-than-temporary does not mean permanent, although, all permanent impairments are considered other-than-temporary. The literature
does provide some examples of factors, which may be indicative of an “other-than-temporary impairment”, such as:
|
|
●
|
the
length of time and extent to which market value has been less than cost;
|
|
|
●
|
the
financial condition and near-term prospects of the issuer; and
|
|
|
●
|
the
intent and ability of the holder to retain its investment in the issuer for a period of time sufficient to allow for any anticipated
recovery in market value.
|
Management
believes that the fair value of its investment has been correctly measured, as the length of time that the stock has been less
than cost is nominal. See Note 7(B)
Recent
Accounting Pronouncements
There
are no new accounting pronouncements that we expect to have an impact on the Company’s consolidated 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 which is February 1, 2020. Management is currently
in negotiation with the seller about a possible reduction in the second instalment per the terms of the acquisition agreement.
|
|
|
●
|
The
third installment of $170,542 is due 36 months after the acquisition date.
|
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
June
30, 2020
(Unaudited)
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 were treated as contingent purchase consideration. Based on the historical data available regarding
the recurring/trail revenues of Cheshire Trafford, Management believed that there was a 95% probability that Cheshire Trafford
would achieve the recurring income target of GBP 144,185 during the 12-month period ending on July 31, 2019. Hence, the contingent
purchase consideration was adjusted to take into account this probability factor. (See below for update)
To
calculate the fair value of the contingent purchase consideration, our Management has discounted the remaining two installments
of $341,084 to be paid, at a discount rate of 6% (our borrowing rate for the purpose of acquisitions) to arrive at the present
value of $284,298 at the acquisition date. Total fair value of the purchase consideration is as follows:
|
|
|
Fair
Value
|
|
|
Cash payment
|
|
$
|
175,710
|
|
|
Fair value
of contingent consideration
|
|
|
284,298
|
|
|
Total
Fair Value of Purchase Consideration
|
|
$
|
460,008
|
|
Below
table depicts the allocation of fair value of the purchase consideration to the fair value of the net assets of Cheshire Trafford
at the acquisition date:
|
Assets
acquired
|
|
Fair
Value
|
|
|
Cash
|
|
$
|
4,743
|
|
|
Accounts receivable – net
|
|
|
6,555
|
|
|
Intangibles – customer list
|
|
|
342,194
|
|
|
Goodwill
|
|
|
142,924
|
|
|
Property and
equipment, net
|
|
|
614
|
|
|
|
|
|
497,030
|
|
|
Liabilities
assumed
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
4,012
|
|
|
Due to director
of Cheshire Trafford
|
|
|
33,010
|
|
|
|
|
|
(37,022
|
)
|
|
Purchase
consideration allocated
|
|
$
|
460,008
|
|
This
acquisition was accounted for under the acquisition method of accounting. Accordingly, the Company recognized amounts for identifiable
assets acquired and liabilities assumed at their initial estimated acquisition date fair values. During the purchase price measurement
period, which may be one year from the business acquisition date, the Company may record adjustments to the assets acquired and
liabilities assumed based on completion of valuations.
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 at December 31, 2018. This intangible asset is 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.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
June
30, 2020
(Unaudited)
|
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
|
|
|
(22,813
|
)
|
|
Net
Book Value at December 31, 2019
|
|
$
|
309,876
|
|
|
Amortization
charge for the period
|
|
|
(11,407
|
)
|
|
Net
Book Value at June 30, 2020
|
|
$
|
298,469
|
|
As
at December 31, 2019, the management recalculated the third installment of the purchase price consideration as the recurring income
period of 12 months ended on July 31, 2019 based upon the terms of the purchase agreement. Accordingly, the fair value of contingent
acquisition payable was reduced, and the Company recorded a gain on revaluation of payable for acquisition of $67,897 during the
year ended December 31, 2019. The total amount owed under the purchase agreement was $222,623 as of June 30, 2020.
Note
6 – Discontinued Operations
In March 2019, Management decided that it
made overall economic sense for the Company to close its employment placement services business in Dubai; hence, in order to fully
concentrate on its core business of Independent Financial Advisory services and consultancy business, the Board of Directors decided
to initiate liquidation proceedings of the Dubai subsidiary “GE Professionals DMCC” and discontinue the related employment
placement services business. As a result, Dubai subsidiary operations for the three months ended June 30, 2019 and the
six months ended June 30, 2019 and 2020 are treated as discontinued operations in the accompanying unaudited consolidated
financial statements. The consolidated statements of operations only comprise the continuing operations. Net loss from the discontinued
operations is presented on a single line after the net loss from the continuing operations.
There
were no assets and liabilities from discontinued operations as at June 30, 2020 and December 31, 2019.
Statement
of Operations from discontinued operations for the three months ended June 30, 2019 was as follows:
|
|
|
June
30, 2020
|
|
|
June
30, 2019
|
|
|
Revenue
|
|
|
N/A
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative expenses
|
|
|
N/A
|
|
|
$
|
1,235
|
|
|
Net
loss from discontinued operations
|
|
|
N/A
|
|
|
$
|
(1,235
|
)
|
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
June
30, 2020
(Unaudited)
Statement
of Operations from discontinued operations for the six months ended June 30, 2020 and 2019 was as follows:
|
|
|
June
30, 2020
|
|
|
June
30, 2019
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
expenses
|
|
$
|
-
|
|
|
$
|
9,320
|
|
|
Compensation expense
|
|
|
-
|
|
|
|
22,743
|
|
|
Professional services
|
|
|
-
|
|
|
|
2,382
|
|
|
Depreciation
|
|
|
-
|
|
|
|
77
|
|
|
Loss from discontinued
operations
|
|
$
|
-
|
|
|
$
|
(34,522
|
)
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
Loss due to fixed assets write off
|
|
$
|
-
|
|
|
$
|
(164
|
)
|
|
Exchange rate
loss
|
|
|
-
|
|
|
|
(187
|
)
|
|
Total
other (expenses) / income
|
|
$
|
-
|
|
|
$
|
(351
|
)
|
|
Net
loss from discontinued operations
|
|
$
|
-
|
|
|
$
|
(34,873
|
)
|
Note
7 – Investments
A.
Marketable Securities at Fair Value
Following
is the summary of Company’s investment in marketable securities at fair value as at June 30, 2020 and December 31, 2019:
|
|
|
June
30, 2020
|
|
|
December
31, 2019
|
|
|
Company
|
|
No.
of Shares
|
|
|
Book
value
|
|
|
No.
of Shares
|
|
|
Book
value
|
|
|
DUO
|
|
|
5,835,392
|
|
|
$
|
700,247
|
|
|
|
5,835,392
|
|
|
$
|
204,239
|
|
|
|
|
|
5,835,392
|
|
|
$
|
700,247
|
|
|
|
5,835,392
|
|
|
$
|
204,239
|
|
At
June 30, 2020, the Company revalued 5,835,392 common shares at their quoted market price of $0.12 per share, to $700,247; hence,
recording a net gain on available for sale securities of $496,008 into the statement of operations for the six months ended June
30, 2020. For the six months ended June 30, 2019, loss on available for sale securities was $992,017.
B.
Investments at Cost
The
Company, through its subsidiary, GEP Equity Holdings Limited, holds the following common equity securities in private and reporting
companies as at June 30, 2020 and December 31, 2019:
|
|
|
June
30, 2020
|
|
|
December
31, 2019
|
|
|
|
|
Company
|
|
No.
of Shares
|
|
|
Book
value
|
|
|
No.
of Shares
|
|
|
Book
value
|
|
|
Status
|
|
PDI
|
|
|
5,006,521
|
|
|
$
|
-
|
|
|
|
5,006,521
|
|
|
$
|
-
|
|
|
Private
Company
|
|
|
|
|
5,006,521
|
|
|
$
|
-
|
|
|
|
5,008,792
|
|
|
$
|
-
|
|
|
|
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
June
30, 2020
(Unaudited)
The
Company, through its subsidiary, GEP Equity Holdings Limited, holds the following preferred equity securities in private and reporting
companies as at June 30, 2020 and December 31, 2019:
|
|
|
June
30, 2020
|
|
|
December
31, 2019
|
|
|
|
|
Company
|
|
No.
of Shares
|
|
|
Book
value
|
|
|
No.
of Shares
|
|
|
Book
value
|
|
|
Status
|
|
PDI
|
|
|
450,000
|
|
|
$
|
-
|
|
|
|
450,000
|
|
|
$
|
-
|
|
|
Private
Company
|
|
|
|
|
450,000
|
|
|
$
|
-
|
|
|
|
450,000
|
|
|
$
|
-
|
|
|
|
Note
8 – Fixed Assets
Following
table reflects net book value of furniture and equipment as of June 30, 2020 and December 31, 2019:
|
|
|
Furniture
and Equipment
|
|
|
Useful
Life
|
|
3
to 10 years
|
|
|
|
|
|
|
|
Cost
|
|
|
|
|
|
Balance as at December 31, 2019
|
|
$
|
46,447
|
|
|
Addition during the period
|
|
|
1,626
|
|
|
Disposals during the period
|
|
|
(5,763
|
)
|
|
Translation rate
differences
|
|
|
(2,583
|
)
|
|
Balance as at
June 30, 2020
|
|
$
|
39,727
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
|
|
|
Balance as at December 31, 2019
|
|
$
|
42,775
|
|
|
Depreciation expense for the period
– continuing operations
|
|
|
1,249
|
|
|
Disposals during the period
|
|
|
(5,499
|
)
|
|
Translation rate
differences
|
|
|
(2,497
|
)
|
|
Balance as at
June 30, 2020
|
|
$
|
36,029
|
|
|
Net book value
as at June 30, 2020
|
|
$
|
3,698
|
|
|
Net book value
as at December 31, 2019
|
|
$
|
3,672
|
|
Note
9 – Debt, Accounts Payable and Accrued Liabilities
(A)
Accounts Payable and Other Accrued Liabilities
The
following table represents breakdown of accounts payable and other accrued liabilities as of June 30, 2020 and December 31, 2019,
respectively:
|
|
|
June
30, 2020
|
|
|
December
31, 2019
|
|
|
Accrued salaries and
benefits
|
|
$
|
61,350
|
|
|
$
|
61,452
|
|
|
Accounts payable
and other accrued liabilities
|
|
|
71,339
|
|
|
|
68,127
|
|
|
|
|
$
|
132,689
|
|
|
$
|
129,579
|
|
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
June
30, 2020
(Unaudited)
(B)
Accounts Payable and Accrued Liabilities – Related Parties
The
following table represents the accounts payable and accrued expenses to related parties as of June 30, 2020 and December 31, 2019,
respectively:
|
|
|
June
30, 2020
|
|
|
December
31, 2019
|
|
|
Accrued salaries and benefits
|
|
$
|
413,385
|
|
|
$
|
382,165
|
|
|
Expenses payable
|
|
|
21,500
|
|
|
|
76,353
|
|
|
|
|
$
|
434,885
|
|
|
$
|
458,518
|
|
(C)
Short Term Notes Payable
Following
is the summary of all non-convertible notes, net of debt discount, including the accrued interest as at December 31, 2019:
|
Date
of Note
|
|
Principal
|
|
|
Accrued
Interest
|
|
|
Total
|
|
|
November 26, 2013 – JSP
|
|
$
|
-
|
|
|
$
|
37,971
|
|
|
$
|
37,971
|
|
|
September 30, 2018 – EDEN
|
|
|
260,584
|
|
|
|
8,058
|
|
|
|
268,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance –
December 31, 2019
|
|
$
|
260,584
|
|
|
$
|
46,029
|
|
|
$
|
306,613
|
|
Following
is the summary of all non-convertible notes, net of debt discount, including the accrued interest as at June 30, 2020:
|
Date
of Note
|
|
Principal
|
|
|
Accrued
Interest
|
|
|
Total
|
|
|
November 26, 2013 – JSP
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
September 30, 2018 – EDEN
|
|
|
260,584
|
|
|
|
8,058
|
|
|
|
268,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance –
June 30, 2020
|
|
$
|
260,584
|
|
|
$
|
8,058
|
|
|
$
|
268,642
|
|
|
|
●
|
On
November 26, 2013, the Company secured from a private individual, a twelve-month fixed price convertible loan amounting to
$450,000 having an interest at 10% per annum and an agreed fixed conversion price of $0.5 per share. During the year ended
December 31, 2014, the Company recorded a total accrued interest of $42,971 on this Note. On December 23, 2014, the Company
fully repaid the principal note balance of $450,000 in cash and also paid $5,000 on account of accrued interest payment, thereby
leaving an accrued and unchanged interest balance of $37,971 as of December 31, 2019.
|
|
|
|
|
|
|
|
During
the six months ended June 30, 2020, the Company wrote off the aged accrued interest balance of $37,971 as this is past the
State of Nevada´s Statute of Limitations of six years for written debt agreements and recorded a gain on debt extinguishment
of $37,971 in the unaudited consolidated statement of operations.
|
|
|
|
|
|
|
●
|
On
October 17, 2013, the Company secured a non-convertible three-month bridge loan for 200,000 GBP (equivalent to $319,598) with
the agreement to repay the principal plus 5% per month interest on or before January 18, 2014. The note holder received, as
a form of guarantee, 1,600,000 shares of an investment we held then in a company called Direct Security Integration Inc. The
shares used as a form of guarantee formed part of the assets of our Company at that time but are not considered an asset since
the date we provided them to the lender as we were no longer in control of such shares.
|
On
September 18, 2015, the Company and the note holder agreed to amend the previous terms of the agreement and both parties agreed
on the new terms whereby the Company was now liable to pay $500,000 as full and final payment of the October 17, 2013 loan principal,
accrued interest, and all other related penalties. This repayment will not accrue any further interest or penalties.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
June
30, 2020
(Unaudited)
On
December 21, 2015, the Company repaid the first installment of the accrued interest amounting to $20,000, leaving the accrued
interest balance of $160,402 and principal loan balance of $319,598 as on December 31, 2015.
On
September 30, 2018, the Company and the lender agreed to amend the previous terms of the agreement and both parties agreed on
the new terms whereby the Company is now liable to pay GBP 220,000 or $286,642 as full and final payment regarding this loan.
This repayment will not accrue any further interest or penalties. Both parties also agreed on a repayment plan of $3,000 monthly
payment commencing on the date of signature of this addendum and additional ad hoc interim payments will be made to fully settle
this loan within 36 months of this addendum dated September 30, 2018.
During
the year ended December 31, 2018, the Company repaid three monthly payments against accrued interest totaling to $9,000 as per
the addendum dated September 30, 2018 and the outstanding note balance amounted to $260,584 and accrued interest balance amounted
to $17,058 as of December 31, 2018.
During
the year ended December 31, 2019, the Company repaid three monthly payments against accrued interest totaling to $9,000 as per
the addendum dated September 30, 2018 and the outstanding note balance amounted to $260,584 and accrued interest balance amounted
to $8,058 as of December 31, 2019.
During
the six months ended June 30, 2020, the Company did not repay any monthly installment, hence the outstanding note balance amounted
to $260,584 and accrued interest balance amounted to $8,058 as of June 30, 2020.
(D)
Long Term Convertible Notes Payable – Related Party
Following
is the summary of all long-term convertible notes, net of debt discounts including the accrued interest as at December 31, 2019:
|
Date
of Note
|
|
Principal
|
|
|
Accrued
Interest
|
|
|
Total
|
|
|
October 10, 2018 - Xantis AION Sec Fund
|
|
$
|
653,040
|
|
|
$
|
48,092
|
|
|
$
|
701,132
|
|
|
December 18, 2019 - Aegeus Sec Fund
|
|
|
329,100
|
|
|
|
649
|
|
|
|
329,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December
31, 2019
|
|
$
|
982,140
|
|
|
$
|
48,742
|
|
|
$
|
1,030,882
|
|
Following
is the summary of all long-term convertible notes, net of debt discounts including the accrued interest as at June 30, 2020:
|
Date
of Note
|
|
Principal
|
|
|
Accrued
Interest
|
|
|
Total
|
|
|
October 10, 2018 - Xantis AION Sec Fund
|
|
$
|
653,040
|
|
|
$
|
67,684
|
|
|
$
|
720,724
|
|
|
December 18, 2019 - Aegeus Sec Fund
|
|
|
329,100
|
|
|
|
10,441
|
|
|
|
339,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June
30, 2020
|
|
$
|
982,140
|
|
|
$
|
78,125
|
|
|
$
|
1,060,265
|
|
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
June
30, 2020
(Unaudited)
|
|
●
|
On
October 10, 2018, the Company received second tranche of funding from Xantis AION Securitization Fund amounting to $653,040
pursuant to the funding agreement dated June 6, 2018. The Company had a right to pay this note no earlier than 366 days’
post investment of each tranche of funding, by issuing common shares at greater of $0.02 or the average closing ask price
of the Company’s common stock on the OTCBB for the prior 60 trading days. There was no beneficial conversion feature
since the conversion price exceeded the quoted trading price on the funding date. The Company paid $98,651 cash commission,
which is treated as debt issuance cost discount for this note. This particular Convertible Note issued to Xantis AION Securitization
Fund was to mature on October 11, 2019.
|
During
the year ended December 31, 2018, $20,552 of the debt issuance cost discount was amortized to income statement, leaving an unamortized
debt issue cost balance of $78,099. The Company further recorded $3,328 as interest expense during the year ended December 31,
2018 and the outstanding note balance amounted to $653,040 as of December 31, 2018.
On
December 13, 2019, the Company and the lender mutually agreed to defer the conversion of the second tranche of the June 6, 2018
funding agreement for a further two (2) years and one (1) day from December 18, 2019. In this case, the agreed conversion price
will be the closing market price two days prior the new conversion date. The Company will continue to accrue 6% interest on the
outstanding principal until the note is fully converted to its common stock.
During
the year ended December 31, 2019, $78,099 of the debt issuance cost discount was amortized to income statement, leaving an unamortized
debt issuance cost discount balance of $0. The Company further recorded $44,764 as interest expense during the year ended December
31, 2019 and the outstanding note balance amounted to $653,040 as of December 31, 2019.
During
the six months ended June 30, 2020, the Company recorded $19,592 as interest expense and the outstanding note balance amounted
to $653,040 as of June 30, 2020.
|
|
●
|
On
December 18, 2019, the Company secured a 24-month convertible loan, from Aegeus Securitization Fund (Luxembourg), for 500,000
Great Britain Pounds (equivalent to approximately $658,200) carrying an interest at the rate of 6% per annum and received
the first tranche amounting to GBP 250,000 (equivalent to approximately $329,000). The lender has an option to convert this
note into common stock of the Company after (2) years and one (1) day from December 18, 2019 at a conversion price equivalent
to the closing market price two days prior the new conversion date. Aegeus Securitization Fund and Xantis AION Securitization
Fund both have the same fund administrators, Xantis S.A., hence Aegeus Securitization Fund is treated as a related party of
the Company as at December 31, 2019. The Company simultaneously also entered into a Receivables Assignment Agreement whereby
an amount of the receivables from the Company and/or the next Independent Financial Advisory Firm acquired will be securitized
to the lender. Pursuant to the terms of this Assignment Agreement, the Company assigned its receivables for the period from
June 2020 to May 2025 to the lender which will act as collateral in the event of default.
|
During
the year ended December 31, 2019, the Company recorded $649 as interest expense and the outstanding note balance amounted to $329,100
as of December 31, 2019.
During
the six months ended June 30, 2020, the Company recorded $9,792 as interest expense and the outstanding note balance amounted
to $329,100 as of June 30, 2020.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
June
30, 2020
(Unaudited)
Note
10 - Stockholders’ Equity (Deficit)
(A)
Preferred Stock
|
|
●
|
Series
“B” Convertible Preferred Stock
|
On
November 10, 2016, the Company designated 45,000,000 of its authorized preferred stock as Series “B” convertible preferred
shares. The Certificate of Designation stated the following:
|
|
1.
|
Voting
Rights: 10 votes per share (votes along with common stock); and
|
|
|
|
|
|
|
2.
|
Conversion
Rights: Each share of Series “B” Preferred is convertible at any time, and from time to time, into ten (10) shares
of common stock 1 day after the first anniversary of issuance. Pursuant to two funding agreements entered in January 2018,
the management contractually agreed to not convert or sell any of these preferred shares until September 27, 2020. On May
22, 2020, the Board of Directors voted unanimously to extend the lock-up period of the Company´s Preferred “B”
shares from September 27, 2020 to December 31, 2022; and
|
|
|
|
|
|
|
3.
|
Dividend
Rights: In the event the Board of Directors declares a dividend on the common stock, each Series “B” Preferred
share will be entitled to receive an equivalent dividend as if the Series “B” Preferred share had been converted
into common stock prior to the declaration of such dividend; and
|
|
|
|
|
|
|
4.
|
Liquidation
Rights: None.
|
On
November 11, 2016, certain Officers and Directors of the Company, offered to retire and exchange an aggregate 450,000,000 shares
of Common Stock owned by them for 45,000,000 Series “B” Preferred Stock. The Company permitted Officers and Directors
of the Company to exchange 200,000,000, 50,000,000 and 200,000,000 shares of Common Stock, respectively, for 20,000,000, 5,000,000
and 20,000,000 shares of Series “B” Preferred Stock, respectively.
|
|
●
|
Series
“C” Convertible Preferred Stock
|
On
September 18, 2017, the Company designated 5,000,000 of its authorized preferred stock as Series “C” convertible preferred
shares. The Certificate of Designation stated the following:
|
|
1.
|
Voting
Rights: 100 votes per share (votes along with common stock); and
|
|
|
|
|
|
|
2.
|
Conversion
Rights: Each share of Series “C” Preferred is convertible at any time, and
from time to time, into one hundred (100) shares of common stock 1 day after the third
anniversary of issuance. Pursuant to two funding agreements entered in January 2018,
the management contractually agreed to not convert or sell any of these preferred shares
until September 27, 2020. On May 22, 2020, the Board of Directors voted unanimously to
extend the lock-up period of the Company´s Preferred “C” shares from
September 27, 2020 to December 31, 2022; and
|
|
|
|
|
|
|
3.
|
Dividend
Rights: In the event the Board of Directors declares a dividend on the common stock,
each Series “C” Preferred share will be entitled to receive an equivalent
dividend as if the Series “C” Preferred stock had been converted into common
stock prior to the declaration of such dividend; and
|
|
|
|
|
|
|
4.
|
Liquidation
Rights: None.
|
On
September 26, 2017, all of the officers and directors of the Company decided to convert their partial accrued salaries balance
amounting to $240,000 to 2,400,000 series “C” preferred stock at par value of $0.001 per share having an equivalent
common stock fair value of $0.0028 per share or $672,000 at the date of issuance of preferred stock.
On
June 5, 2018, all of the officers and directors of the Company decided to convert their partial accrued salary balances amounting
to $160,000 into 800,000 shares of Series “C” Preferred Stock at par value of $0.001 per share, having an equivalent
common stock fair value of $0.004 per share or $320,000 at the date of issuance of such preferred stock.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
June
30, 2020
(Unaudited)
On
March 19, 2020, the Company issued 100,000 shares of Series “C” Preferred Stock to Nicholas Paul Tuke, our
new President and Chief Executive Officer, as a signing bonus agreed in his February 1, 2020 employment agreement. These shares
were issued at par value of $0.001 per share having an equivalent common stock fair value of $0.0029 per share or $29,000 at the
date of issuance of preferred stock.
(B)
Common Stock
At
June 30, 2020 and December 31, 2019, the Company had 950,000,000 authorized shares of common stock having a par value of $0.001.
At June 30, 2020 and December 31, 2019, the Company had 590,989,409 shares of common stock issued and outstanding.
During
the six months ended June 30, 2020, the Company did not issue any new shares of common stock.
Note
11 – Revenue
For
the six months ended June 30, 2020 and 2019, the Company recognized total revenues amounting to $46,403 and $63,033, respectively.
Unfulfilled
performance obligations represent the remaining contract transaction prices allocated to the performance obligations that are
unsatisfied, or partially unsatisfied, and therefore revenues have not yet been recorded. Unfulfilled performance obligations
primarily consist of the remaining fees not yet recognized under the Company´s proportional performance method for both
our fixed fee arrangements, and the portion of performance based and contingent arrangements, which we have deemed probable. As
of June 30, 2020 and, 2019, the Company´s management believes that all of the fixed fee, performance based and contingent
arrangements have an original expected duration of one year or less; hence, the Company elected to utilize the optional exemption
to exclude it from this disclosure.
Contract
Assets and Liabilities
Contract
assets are defined as assets for which we have recorded revenue because we determined that it is probable that we will earn a
performance based or contingent fee, but we are not yet entitled to receive our fees, because certain events, such as completion
of the measurement period or client approval, must occur. The contract asset balance was immaterial as of June 30, 2020 and 2019,
respectively.
Contract
liabilities are defined as liabilities incurred when we have received consideration from a client but have not yet performed the
agreed upon services. This may occur when we receive advance billings before delivery of services when clients pay us up-front
fees before we begin work for them. The contract liability balance was immaterial as of June 30, 2020 and 2019.
Note
12 – Pension Plan
The
Company operates a defined “contribution pension plan” for its subsidiary in the United Kingdom, Cheshire Trafford
UK Limited. Each participant needs to complete a probation period before being included in the pension plan. The contributions
payable to the company’s pension plan are charged to the consolidated statement of operations in the period to which they
relate. We contributed a total of $1,371 and $1,405 to this pension plan during the six months ended June 30, 2020 and 2019, respectively.
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
June
30, 2020
(Unaudited)
Note
13 – Related Party Transactions
At
June 30, 2020 and December 31, 2019, there were accounts payable, accrued liabilities and loans payable due to related parties.
(See Note 9(B and D).
Note
14 – Commitments and Contingencies
Contingencies
|
●
|
From
time to time, the Company may be involved in litigation or disputes relating to claims
arising out of its operations in the normal course of business. As of June 30, 2020,
the Company is not involved in any such litigation or disputes.
|
The
Company entered into a non-cancelable operating lease for its United Kingdom office in the city of Hull (United Kingdom) on August
29, 2019, for a period of six years amounting to a rental of GBP 1,000 or approximately $1,260 per month.
In
adopting ASC Topic 842, Leases, the Company has elected the package of practical expedients which permits it not to reassess its
prior conclusions about lease identifications, lease classifications and initial direct costs under the new standard. In addition,
the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 months or less. Upon adoption of this ASC,
the Company recorded right-of-use leased asset and operating lease liability of $79,129. At June 30, 2020, the balance of the
right-of-use leased asset and operating lease liability was $64,417.
The
significant assumptions used to determine the present value of the operating lease liability was a discount rate of 6% which was
based on the Company’s estimated incremental borrowing rate.
At
June 30, 2020, the right-of-use leased asset (ROU) is summarized as follows:
|
|
|
June
30, 2020
|
|
|
Office lease right-of-use
asset
|
|
$
|
79,129
|
|
|
Less: Accumulated amortization
|
|
|
(9,350
|
)
|
|
Less: Translation
rate difference
|
|
|
(5,362
|
)
|
|
Balance of ROU
asset as of June 30, 2020
|
|
$
|
64,417
|
|
At
June 30, 2020, operating lease liability is summarized as follows:
|
|
|
June
30, 2020
|
|
|
Lease liability related
to office lease right-of-use asset
|
|
$
|
79,129
|
|
|
Less: Lease reduction
|
|
|
(9,350
|
)
|
|
Less: Translation rate difference
|
|
|
(5,362
|
)
|
|
Less: Current
portion of operating lease liability
|
|
|
(12,467
|
)
|
|
Long term operating
lease liability as of June 30, 2020
|
|
$
|
51,950
|
|
Argentum
47, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
June
30, 2020
(Unaudited)
The
following is a schedule, by years, of the future minimum lease payments as of June 30, 2020 required under the non-cancelable
operating lease:
|
12
months period ended June 30,
|
|
Operating
Lease
|
|
|
2021
|
|
$
|
14,842
|
|
|
2022
|
|
|
14,842
|
|
|
2023
|
|
|
14,842
|
|
|
2024
|
|
|
14,842
|
|
|
2025
|
|
|
14,842
|
|
|
Thereafter
|
|
|
2,475
|
|
|
Total minimum lease
payments
|
|
$
|
76,685
|
|
|
Less: Discount
to fair value
|
|
|
(12,268
|
)
|
|
Total
Operating Lease Liability at June 30, 2020
|
|
$
|
64,417
|
|
Total
rent expense for the six months ended June 30, 2020 and 2019 was $7,565 and $17,390, respectively.
Note
15 – Segment Information
During
the three and six months ended June 30, 2020 and 2019, the Company operated in two reportable business segments - (1) Management
Consultancy Services (the “Consultancy” segment) consisting of management consultancy such as assistance in designing
client’s capitalization strategy, introductions to potential capital funding sources; and (2) a segment which concentrates
on third party insurance policy sales and renewals (the “Insurance brokerage” segment). The Company’s reportable
segments were strategic business units that offered different products. They were managed separately based on the fundamental
differences in their operations and locations. All goodwill in the accompanying consolidated balance sheets is assigned to the
Insurance brokerage segment.
Information
with respect to these reportable business segments for the three and six months ended June 30, 2020 and 2019 was as follows:
|
|
|
For
the three months ended
June 30,
|
|
|
For
the six months ended
June 30,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consultancy
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Insurance
brokerage
|
|
|
22,694
|
|
|
|
28,844
|
|
|
|
46,403
|
|
|
|
63,033
|
|
|
|
|
$
|
22,694
|
|
|
$
|
28,844
|
|
|
$
|
46,403
|
|
|
$
|
63,033
|
|
|
Depreciation
and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consultancy
|
|
$
|
566
|
|
|
$
|
606
|
|
|
$
|
1,132
|
|
|
$
|
1,189
|
|
|
Insurance
brokerage
|
|
|
5,765
|
|
|
|
5,745
|
|
|
|
11,523
|
|
|
|
11,491
|
|
|
|
|
$
|
6,331
|
|
|
$
|
6,351
|
|
|
$
|
12,655
|
|
|
$
|
12,680
|
|
|
Net
income / (loss) from continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consultancy
|
|
$
|
490,738
|
|
|
$
|
(552,619
|
)
|
|
$
|
263,502
|
|
|
$
|
(1,491,900
|
)
|
|
Insurance
brokerage
|
|
|
(764
|
)
|
|
|
(14,059
|
)
|
|
|
(16,009
|
)
|
|
|
(16,626
|
)
|
|
|
|
$
|
489,974
|
|
|
$
|
(566,678
|
)
|
|
$
|
247,493
|
|
|
$
|
(1,508,526
|
)
|
|
|
|
June
30, 2020
|
|
|
December
31, 2019
|
|
|
Identifiable
long-lived tangible assets as of June 30, 2020 and December 31, 2019 by segment:
|
|
|
|
|
|
|
|
|
|
Consultancy
|
|
$
|
1,603
|
|
|
$
|
2,734
|
|
|
Insurance
brokerage
|
|
|
2,095
|
|
|
|
938
|
|
|
|
|
$
|
3,698
|
|
|
$
|
3,672
|
|
