ARGENTUM 47, INC. Cautionary Forward - Looking Statement
The following discussion and analysis of the results of operations and financial condition ofArgentum 47, Inc. should be read in conjunction with the unaudited financial statements, and the related notes. References to "we," "our," or "us" in this section refers to the Company and its subsidiaries. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations, and intentions. We use words such as "anticipate," "estimate," "plan," "project," "continuing," "ongoing," "expect," "believe," "intend," "may," "will," "should," "could," and similar expressions to identify forward-looking statements. Certain matters discussed herein may contain forward-looking statements that are subject to risks and uncertainties. Such risks and uncertainties include, but are not limited to, the following: ? the volatile and competitive nature of our industry, ? the uncertainties surrounding the rapidly evolving markets in which we compete, ? the uncertainties surrounding technological change of the industry, ? our dependence on its intellectual property rights, ? the success of marketing efforts by third parties, ? the changing demands of customers and ? the arrangements with present and future customers and third parties. Should one or more of these risks or uncertainties materialize or should any of the underlying assumptions prove incorrect, actual results of current and future operations may vary materially from those anticipated.
Our MD&A is comprised of the following sections:
A. Critical accounting estimates and policies B. Business Overview
C. Results of operations for the three months ended
September 30, 2019 D. Results of operations for the nine months endedSeptember 30, 2020 andSeptember 30, 2019 E. Financial condition as ofSeptember 30, 2020 andDecember 31, 2019 F. Liquidity and capital reserves G. Business development
A. Critical accounting estimates and policies:
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles inthe United States ("GAAP"), which requires management to make estimates and assumptions that affect reported and disclosed amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. We believe that the critical accounting policies set forth in the accompanying unaudited consolidated financial statements describe the more significant judgments and estimates used in the preparation of our consolidated financial statements. These critical accounting policies pertain to revenue recognition, valuation of investments, convertible notes and derivatives and stock-based compensation. If actual events differ significantly from the underlying judgments or estimates used by management in the application of these accounting policies, there could be a material effect on our results of operations and financial condition.
B. Business overview:
Argentum 47, Inc. ("Company" or "ARG") was incorporated onOctober 1, 2010 , as aNevada corporation, for the express purpose of acquiringGlobal Equity Partners Plc ., a corporation formed under the laws of theRepublic of Seychelles ("GEP") onSeptember 2, 2009 . OnAugust 22, 2014 , GE Professionals DMCC was incorporated inDubai as a wholly owned subsidiary ofGlobal Equity Partners Plc . OnJune 10, 2016 , ARG incorporated its wholly owned subsidiary, calledGEP Equity Holdings Limited , under the laws of theRepublic of Seychelles .
On
OnJune 5, 2017 , the Company sold 100% of the common stock ofGlobal Equity Partners Plc . to a private citizen of the Kingdom ofThailand . The consideration for the purchase ofGlobal Equity Partners Plc . was the assumption by the purchaser of all liabilities and indebtedness ofGlobal Equity Partners Plc . in the approximate amount of$626,000 . At the time of this sale,Global Equity Partners Plc . had assets consisting of common shares of other companies having a book value of approximately$603,000 . 3
OnDecember 12, 2017 , we incorporated aUnited Kingdom company under the name of Argentum 47Financial Management Limited ("Argentum FM"). Argentum FM is a wholly owned subsidiary of the Company. Argentum FM was formed to serve as a holding company for the acquisition ofUnited Kingdom based advisory firms. During 2020, the Company intends to acquire more licensed financial advisory firms.
OnJanuary 12, 2018 , the Company secured a 12-month fixed price convertible loan fromXantis Private Equity Fund (Luxembourg) for a minimum of 2,000,000 GreatBritain Pounds (equivalent to approximatelyU.S. $2,680,000 ) carrying an interest at the rate of 6% per annum. The Company has a right to pay this note on the maturity date by issuing shares of common stock at a conversion price equal to the greater of$0.02 or the average closing price of the Company's common stock on the OTCBB for the prior 60 trading days. To date, the Company received$400,000 under this loan, which including the accrued interest of$24,000 was converted into 21,200,000 shares of the Company's common stock
onJanuary 14, 2019 .
OnJanuary 12, 2018 , the Company secured a 12-month fixed price convertible loan fromWilliam Marshal Plc ., aUnited Kingdom Public Limited Company listed on the Cyprus Public Exchange Emerging Companies Market, for a maximum of 2,000,000 GreatBritain Pounds (equivalent to approximatelyU.S. $2,680,000 ) carrying an interest at the rate of 6% per annum. The Company has a right to pay this note on the maturity date, by issuing shares of common stock at a conversion price equal to the greater of$0.02 or the average closing price of the Company's common stock on the OTCBB for the prior 60 trading days. To date, the Company received$100,000 under this loan, which including the accrued interest of$6,000 was converted to 5,300,000 common shares of the Company onJanuary 24, 2019 .
On
On
OnMay 30, 2018 , the Isle ofMan Financial Services Authority (FSA) approved the eventual change of control of an Isle of man based financial advisory firm albeit Management has decided not to acquire this Independent Financial Advisory firm as better and cheaper business propositions are currently in Management´s sights. OnJune 6, 2018 , the Company secured a 12-month fixed price convertible loan, fromXantis Aion Securitization Fund (Luxembourg), for a minimum of 1,700,000 GreatBritain Pounds (equivalent to approximately$1,940,000 ) carrying an interest at the rate of 6% per annum. The Company has a right to pay this note on earlier than 366 days' post investment of each tranche of funding, by issuing common shares at a conversion price equal to the greater of$0.02 or the average closing ask price of the Company's common stock on the OTCBB for the prior 60 trading days. To date, the Company has received$1,388,040 under this loan, of which$735,000 and related accrued interest was converted into 38,955,000 shares of the Company's common stock onJune 5, 2019 . OnAugust 1, 2018 , Argentum FM consummated a Share Purchase Agreement with Mr.Rodney Leonard and Equilibrium Pensions Limited (trustees of The Leonard R. Personal Pension), pursuant to which Argentum FM would acquire 100% of the ordinary shares (equity) ofCheshire Trafford (U.K.) Limited ofHull, United Kingdom ("Cheshire Trafford") fromMr. Leonard and Equilibrium Pensions Limited (trustees of The Leonard R. Personal Pension). The purchase consideration for the acquisition of Cheshire Trafford is based on a formula of 2.7 times Cheshire Trafford's projected annualized recurring revenues for the calendar year endingDecember 31, 2018 . We took the gross revenues of Cheshire Trafford for the five months endedMay 31, 2018 and annualized those recurring revenues and multiplied those revenues by 2.7 times in arriving at the contractual purchase consideration of U.S.$516,795 (389,300 GreatBritain Pounds or "GBP"). 4 The purchase consideration is payable in three tranches. The first and initial tranche ofU.S. $175,710 (132,362 GBP ) was paid upon closing of the transaction. The second tranche ofU.S. $170,542 (128,469 GBP ) would be due 18 months after the closing. TheAugust 31, 2018 acquisition agreement contemplated that the third and final tranche payment ofU.S. $170,542 (128,469 GBP ) that is due 36 months after the closing could be adjusted down (but not increased). This adjustment would only happen if Cheshire Trafford's trail or recurring revenues betweenAugust 1, 2018 andJuly 31, 2019 (agreed testing period) was less than the "Recurring Target" of144,185 GBP or, at current exchange rates,$168,365 . OnDecember 31, 2019 , management carried out this testing and determined that the fair value of third and final tranche payment will be reduced by approximately$100,000 . The funds for the first tranche were obtained via aJune 8, 2018 loan in the amount ofU.S. $735,000 from theXantis Aion Securitization Fund , as previously reported in the Company's Form 8-K Current Report filed with theSecurities and Exchange Commission onJune 11, 2018 . InMarch 2019 , Management decided that it made overall economic sense for the Company to close its employment placement services business inDubai ; hence, onMarch 18, 2019 , in order to fully concentrate on its core business of Independent Financial Advisory services and Consultancy Business, the Board of Directors decided to initiate liquidation proceedings of theDubai subsidiary "GE Professionals DMCC" (with an effective date ofMarch 31, 2019 ). As a result of this decision to liquidate the subsidiary, the Board of Directors also decided to discontinue its Human Resources and Placement business inDubai . OnFebruary 11, 2020 , liquidation process and deregistration of ourDubai subsidiary was formally completed. [[Image Removed]]Cheshire Trafford (UK) Limited (www.ctifa.com) was incorporated under the laws of theUnited Kingdom onJanuary 26, 1976 , as a limited liability company. Cheshire Trafford is a very well established andUK FCA regulated Independent Financial Advisory firm that offers a fully computerized investment management service, including advising on investments in Unit Trusts, Investment Bonds, Shares, Investment Trusts, Government Bonds, and Individual Savings Accounts. In addition, Cheshire Trafford advises investors on various types of Pension contracts, including Personal Pensions, Executive Pensions, Small Self-Administered Plans, Pension Mortgages and many more. Cheshire Trafford acts as a broker for the sale of Lump Sum or Single Premium Insurance Policies andRegular Premium Investment or "Insurance" Policies that are issued by reputable third-party insurance companies. 5
Cheshire Trafford invests the funds it has under administration with well-known and reputable Investment Houses such as:
? AJ Bell ?Canada Life International ?Fidelity International ?Old Mutual International ? Old Mutual Wealth Life ?Royal London ? Aviva ? Prudential Assurance
Cheshire Trafford's primary customer base resides in the
OnDecember 18, 2019 , the Company secured a 24-month convertible loan, fromAegeus Securitization Fund (Luxembourg), for 500,000 GreatBritain Pounds (equivalent to approximately$658,200 ) carrying an interest at the rate of 6% per annum. The lender has an option to convert this note into common stock of the Company after (2) years and one (1) day fromDecember 18, 2019 at a conversion price equivalent to the closing market price two days prior the new conversion date.Aegeus Securitization Fund andXantis AION Securitization Fund both have the same fund administrators,Xantis S.A. , henceAegeus Securitization Fund is treated as a related party of the Company as ofSeptember 30, 2020 . 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 fromJune 2020 toMay 2025 to the lender to serve as collateral for the loan. To date, the Company has receivedGBP 250,000 (equivalent to approximately$329,000 ) under this loan. Our authorized capital consists of 950,000,000 shares of common stock having a par value of$0.001 per share and 50,000,000 shares of preferred stock having a par value of$0.001 . As ofSeptember 30, 2020 , andDecember 31, 2019 , we had 590,989,409 shares of common stock issued and outstanding. We also have two series of preferred stock designated and authorized: Series "B" Preferred Stock and Series "C" Preferred Stock. As ofSeptember 30, 2020 , andDecember 31, 2019 , we had 45,000,000 shares of Series "B" Preferred Stock authorized, issued and outstanding. As ofSeptember 30, 2020 , andDecember 31, 2019 , we had designated and authorized 5,000,000 shares of Series "C" Preferred Stock, 3,300,000 and 3,200,000 shares of which, respectively, were issued and outstanding. We do not have any Series "A" Preferred Stock authorized, issued or outstanding. We have 1,700,000 shares of Series "C" Preferred Stock designated and authorized, which could be issued in the future. All shares of our Series "B" and Series "C" Preferred Stock are contractually locked-up untilDecember 31, 2022 ; hence, they cannot be sold or converted into common stock at any time prior to that date. We provide corporate advisory services to companies desiring to have their shares listed on stock exchanges or quoted on quotation bureaus in various parts of the world. We had an office inDubai untilMarch 31, 2019 . Our current offices are in theUnited Kingdom . We have affiliations with firms located in some of the world's leading financial centers such as London,New York ,Frankfurt , andDubai . These affiliations are informal and are comprised of personal relationships with groups of people or people with whom our Company or our management has done, or attempted to do, business in the past. We do not have any contractual arrangements, written or otherwise, with our affiliations. 6
C. Results of operations for the three months ended
September 30, 2019 : The Company had revenues from continuing operations amounting to$19,382 and$23,549 , for the three months endedSeptember 30, 2020 and 2019, respectively. September 30, September 30, 2020 2019 Changes Revenue from continuing operations$ 19,382 $ 23,549 $ (4,167 ) $ 19,382 $ 23,549 $ (4,167 )
During the three months ended
For the three months endedSeptember 30, 2020 and 2019, the Company had the following concentrations of revenues with customers from continuing operations: Customer Location September 30, 2020 September 30, 2019 Ongoing advisory fees United Kingdom 29.70 % 27.81 % Renewal commissions United Kingdom 4.43 % 4.04 %
Trail or recurring commissions United Kingdom 65.87 %
68.08 %
Other revenue United Kingdom 0 % 0.07 %
100 % 100 %
The total operating expenditures of continuing operations amounted to $130,921
and $169,211 , for the three months ended September 30, 2020 and 2019,
respectively. The following table sets forth the Company's operating expenditure
analysis for both periods:
September 30, September 30,
2020 2019 Changes
General and administrative expenses
$ (36,706 ) Compensation 63,451 93,834 (30,383 ) Professional services 36,801 8,071 28,730 Depreciation 726 656 70
Amortization of intangible asset 5,703 5,704 (1 ) Total operating expenses of continuing operations$ 130,921 $ 169,211 $ (38,290 )
During the three months endedSeptember 30, 2020 , total operating expenses of continuing operations were reduced by$38,290 from the previous three months ending onSeptember 30, 2019 . The reason for this decrease is mainly due to the decrease in the compensation expense and decrease in general and administrative expenses, partially offset by increase in professional services received by the Company during the three months endedSeptember 30, 2020 .
The loss from continuing operations for the three months ended
The Company´s other (expenses) and other income of continuing operations for the three months endedSeptember 30, 2020 and 2019, were$(118,430) and$420,958 , respectively. The following table sets forth the Company's other income and (expenses) analysis for both periods: September 30, 2020 September 30, 2019 Changes Interest expense $ (14,773 ) $ (9,698 )$ (5,075 ) Change in fair value of acquisition payable (902 ) (4,188 ) 3,286 Amortization of debt discount - (24,663 ) 24,663 (Loss) / gain on available for sale marketable securities, net (116,708 ) 466,832 (583,540 ) Exchange rate (loss) / gain 13,953 (7,325 ) 21,728 Total other (expenses) / other income of continuing operations $ (118,430 ) $ 420,958$ (539,388 ) 7
During the three months ended
The net (loss) / income from continuing operations for the three months ended
Net loss from discontinued operations for the three months ended
Net (loss) / income for the three months ended
The comprehensive (loss) / income for the three months endedSeptember 30, 2020 and 2019 amounted to$(252,859) and$291,757 , respectively. The Company's other comprehensive (loss) / income includes (loss) / gain recorded on foreign currency translation of$(22,890) and$16,593 for the three months endedSeptember 30, 2020 and 2019, respectively. September 30, 2020 September 30, 2019 Comprehensive (loss) / income: Net (loss) / income $ (229,969 ) $ 275,164 (Loss) / gain on foreign currency translation (22,890 )
16,593
Comprehensive (loss) / income $ (252,859 ) $ 291,757
The Company had 590,989,409 shares of common stock issued and outstanding at
September 30, 2020 and September 30, 2019 . Basic weighted average number of
common shares outstanding for the three months ended September 30, 2020 and
2019, was 590,989,409. Basic net (loss) / income per share from continuing
operations for both periods was $(0.00) and $0.00 , respectively. Diluted
weighted average number of common shares outstanding for the three months ended
September 30, 2019 was 1,393,641,384 and the Diluted net income per share from
continuing operations was $0.00 . Basic and diluted net loss per share from
discontinuing operations for the three months ended September 30, 2019 was
$(0.00) .
D. Results of operations for the nine months ended
September 30, 2019 :
The Company had revenues from continuing operations amounting to
September 30, 2020 September 30, 2019 Changes
Revenue from continuing operations $ 65,785 $
86,582$ (20,797 ) $ 65,785 $ 86,582$ (20,797 )
During the nine months ended
8 For the nine months endedSeptember 30, 2020 and 2019, the Company had the following concentrations of revenues with customers from continuing operations: September 30, 2020 September 30, 2019 Initial advisory fees 0 % 4.87 % Ongoing advisory fees 28.41 % 30.57 % Initial and renewal commissions 4.99 % 6.51 % Trail or recurring commissions 66.60 % 57.30 % Others 0 % 0.75 % 100 % 100 % The total operating expenditures of continuing operations amounted to$431,396 and$597,832 , for the nine months ending onSeptember 30, 2020 and 2019, respectively. The following table sets forth the Company's operating expenditure analysis for both periods: September 30, 2020 September 30, 2019 Changes
General and administrative expenses $ 79,932 $
153,255$ (73,323 ) Compensation 206,989 347,538 (140,549 ) Professional services 125,389 77,999 47,390 Depreciation 1,976 1,930 46
Amortization of intangible asset 17,110
17,110 - Total operating expenses of continuing operations $ 431,396 $ 597,832$ (166,436 ) 9 During the nine months endedSeptember 30, 2020 , total operating expenses from continuing operations decreased by$166,436 from the comparative period endedSeptember 30, 2019 . The decrease is mainly due to a decrease in the compensation expense pertaining to two of our officers and directors during the current nine months endedSeptember 30, 2020 .
The loss from continuing operations for the nine months ended
The Company´s other income and (expenses) of continuing operations for the nine
months ended
September 30, 2020 September 30, 2019 Changes
Interest expense $ (44,156 ) $ (49,300 ) $ 5,144
Change in fair value of acquisition
payable (3,476 ) (12,800 ) 9,324
Amortization of debt discount - (126,312 ) 126,312
Gain / (loss) on available for sale
marketable securities, net 379,300 (525,185 ) 904,485
Gain on extinguishment of debt and
other liabilities 40,471 - 40,471
Loss on disposal of fixed asset (260 )
- (260 )
Other income 12,612 - 12,612
Exchange rate (loss) / gain (1,357 ) (8,383 ) 7,026
Total other (expenses) / other income
of continuing operations $ 383,134 $ (721,980 ) $ 1,105,114
During the nine months ended September 30, 2020 , our total other income
increased by $1,105,114 when compared to our total other income (expenses) for
the nine months ended September 30, 2019 . This increase was mainly due to the
fact that during the nine months ended September 30, 2020 , the Company recorded
a net gain on available for sale marketable securities amounting to $379,300 ,
but recorded a loss of $(525,185) during the nine months ended September 30,
2019 . In addition, the Company recorded amortization of debt discount of
$126,312 during the nine months ended September 30, 2019 while the Company did
not record any amortization of debt discount during the nine months ended
September 30, 2020 .
The net income / (loss) from continuing operations for the nine months ended
Net loss from discontinued operations for the nine months ended
Net income / (loss) for the nine months ended
The comprehensive income / (loss) for the nine months endedSeptember 30, 2020 and 2019 amounted to$29,519 and$(1,248,840) , respectively. The Company's other comprehensive income / (loss) includes gain recorded on foreign currency translation of$11,996 and$19,395 for the nine months endedSeptember 30 ,
2020
and 2019, respectively.
September 30, 2020 September 30, 2019
Comprehensive income (loss) / income:
Net income / (loss) $ 17,523 $ (1,268,235 )
Gain on foreign currency translation 11,996 19,395 Comprehensive (loss) / income $ 29,519 $ (1,248,840 ) The Company had 590,989,409 shares of common stock issued and outstanding atSeptember 30, 2020 andSeptember 30, 2019 . Basic weighted average number of common shares outstanding for the nine months endedSeptember 30, 2020 and 2019, was 590,989,409 and 567,176,296, respectively. Basic net income / (loss) per share from continuing operations for both periods was$0.00 and$(0.00) , respectively. Diluted weighted average number of common shares outstanding for the nine months endedSeptember 30, 2020 was 1,882,911,897 and the Diluted net income per share from continuing operations was$0.00 . Basic and diluted net loss per share from discontinuing operations for both periods was$(0.00) and$(0.00) , respectively.
E. Financial condition as at
Assets: The Company reported total assets of$1,143,912 and$1,079,648 as ofSeptember 30, 2020 andDecember 31, 2019 , respectively. These mainly included our investments in securities of our clients that we received as part of our consulting fees in previous years. We had marketable securities at fair value of$583,539 and$204,239 as ofSeptember 30, 2020 andDecember 31, 2019 , respectively. OnSeptember 30, 2020 andDecember 31, 2019 , our non-current assets included fixed assets, right of use leased asset, intangibles, and goodwill. Fixed assets were comprised of office equipment having a net book value of$3,062 and$3,672 as ofSeptember 30, 2020 andDecember 31, 2019 , respectively. Right-of-use leased asset amounting to$64,020 and$75,786 as ofSeptember 30, 2020 andDecember 31, 2019 , respectively, represents fair value of ourUK office lease for a period of six years. Intangibles of$292,766 and$309,876 as ofSeptember 30, 2020 andDecember 31, 2019 , respectively, included fair value of customer list that was recognized as part of the business combination. We also recorded goodwill of$142,924 as the excess of the fair value of the consideration paid over the fair value of the identified net assets acquired at the date of acquisition. Furthermore, our current assets atDecember 31, 2019 amounted to$547,390 , and atSeptember 30, 2020 , these current assets amounted to$641,140 comprised of cash of$46,936 , accounts receivable of$5,264 , prepaid and other current assets of$5,401 and marketable securities valued at fair value of
$583,539 . 10 Liabilities: Our current liabilities as ofDecember 31, 2019 totaled$1,128,476 . OnSeptember 30, 2020 , the Company reported its current liabilities amounting to$1,144,584 , which represents a nominal increase of 1%. All our current liabilities reported atSeptember 30, 2020 mainly include third party debt which is due to various lenders, short term payable for acquisition, current portion of operating lease liability, trade creditors and payables to related parties on account of accrued salaries and expenses and notes payable.
Following is the summary of all notes, net of debt discount, including the
accrued interest as of
Date of Note Total Debt Remarks
Non-convertible and
October 17, 2013 $ 268,642 non-collateralized
Non-convertible and
November 26, 2013 37,971 non-collateralized
Convertible andOctober 10, 2018 (Related party) 701,132 non-collateralized
Convertible and collateralized
from June 2020 to May 2025 to
the amount of the receivables
from the Company and/or the next
Independent Financial Advisory
December 18, 2019 (Related party) 329,749 Firm acquired
Balance, December 31, 2019 $ 1,337,494 Following is the summary of all notes, net of debt discount, including the
accrued interest as of
Date of Note Total Debt Remarks
Non-convertible and
October 17, 2013 $ 268,642 non-collateralized
Convertible andOctober 10, 2018 (Related party) 730,519 non-collateralized
Convertible and collateralized
from June 2020 to May 2025 to
the amount of the receivables
from the Company and/or the next
Independent Financial Advisory
December 18, 2019 (Related party) 344,518 Firm acquired
Balance, September 30, 2020 $ 1,343,679
The Company's long-term liabilities amounted to $1,098,649 and $1,109,012 as of
September 30, 2020 and December 31, 2019 , respectively. These long-term
liabilities included long term payable for acquisition, long term convertible
notes to related party and a long-term lease liability for UK office.
Stockholders' Deficit:
OnDecember 31, 2019 , the Company had Stockholders´ Deficit of$1,157,840 . OnSeptember 30, 2020 , the Company had Stockholders´ Deficit of$1,099,321 . We reported accumulated other comprehensive income / (loss) of$6,448 and$(5,548) as ofSeptember 30, 2020 andDecember 31, 2019 , respectively. The Company had 590,989,409 shares of common stock issued and outstanding as ofSeptember 30, 2020 andDecember 31, 2019 . The Company also had issued and outstanding 45,000,000 shares of Series "B" Convertible Preferred Stock as ofSeptember 30, 2020 andDecember 31, 2019 . The Company further had issued and outstanding 3,300,000 and 3,200,000 shares of Series "C" Convertible Preferred Stock as ofSeptember 30, 2020 andDecember 31, 2019 , respectively.
F. Liquidity and capital reserves:
InMarch 2020 , the outbreak of the COVID-19 Coronavirus caused by a novel strain of the coronavirus was recognized as a Global Pandemic by theWorld 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. Amongst the factors that could impact our results are the 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 endedSeptember 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. 11
While the Company´s recurring revenues were not materially affected during the nine months endedSeptember 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 ofIndependent Financial Advisors (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 endedSeptember 30, 2020 . The accompanying unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern. As reflected in the accompanying unaudited consolidated financial statements, the Company had a net income of$17,523 and net cash used in operations of$283,517 for the nine months endedSeptember 30, 2020 ; working capital deficit, stockholder's deficit and accumulated deficit of$503,444 ,$1,099,321 and$13,205,665 , respectively as ofSeptember 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
Financial Advisory firm we acquired on
the current client base in the most professional and efficient manner
possible.
b) Organically growing the amount of Funds under
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.
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 June of 2018, the Company secured a funding agreement with Xantis AION
Securitization Fund (Luxembourg) for a minimum of 1,700,000 Great Britain Pounds
(equivalent to approximately U.S. $1.94 million at the time). The Company has a
unilateral right to pay each note, by issuing common shares, 366 days after each
tranche of funding is received, at a conversion price equal to the greater of
$0.02 or the average closing price of the Company's common stock on the OTCBB
for the prior 60 trading days. To date, the Company has received $1,388,040
under this loan, of which $735,000 and related accrued interest was converted
into 38,955,000 shares of the Company's common stock during the year ended
December 31, 2019 .
The remaining funding received from Xantis Aion Securitization Fund on October
10, 2018 amounting to $653,040 , represents 30% of the Company's total
liabilities as of March 31, 2020 . The management has recently negotiated revised
terms for this funding with the lender whereby the Company has deferred 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 13, 2019 . The conversion
price of the second tranche of the June 6, 2018 funding agreement into equity of
the Company will be equivalent to the closing market price two days prior the
new conversion date.
12
In December of 2019, the Company secured a two-year funding agreement withAegeus Securitization Fund (Luxembourg) for a minimum of 500,000 GreatBritain Pounds (equivalent to approximatelyU.S. $658,200 at the time) carrying an interest at the rate of 6% per annum. The lender has sole discretion to convert the loan into common shares of the Company, 2 years and 1 day from the execution date of funding agreement, at a conversion price equal to the closing market price of the Company's common stock on the OTCBB 2 trading days prior to the conversion. To date, the Company has received$329,100 under this loan. The accounts payable and accrued liabilities due to related parties currently amount to$471,877 . These accounts payable and accrued liabilities due to related parties represent 41% of the Company's current liabilities and are primarily due to management. It is important to note that this related party debt can or may be forgiven by management or alternatively converted into equity at any time, if required.
These obligatory conversions of debt into equity and the possibility of forgiveness of the related party debt are both factors that will help towards mitigating the risks of not being able to continue operating as a Going Concern.
During 2018, the Company´s management decided to implement its inorganic growth plan of targeting the acquisition of various licensed financial advisory firms with millions ofU.S. Dollars of funds under administration. OnAugust 1, 2018 , the Company acquired its first financial advisory firm that administrated approximatelyU.S. $44,000,000 and its intent is to continue growing these funds under administration organically (internal growth of the business acquired) and inorganically (by way of acquiring more independent financial advisory firms when the correct opportunities arise). During the latter part of 2018 and early 2019, the Company´sIFA business,Cheshire Trafford (U.K.) Limited , commenced leveraging its licenses in order to put in motion an aggressive marketing strategy with a view to significantly increase the business (funds under administration) and, by defect, the revenues. This was implemented at little extra cost and will improve, over time, our current recurring, and non-recurring revenues. The Company also started to market itsIFA business as aUnited Kingdom fully licensed entity for various Appointed Representatives ("AR") and also Introducer Appointed Representatives ("IAR"); hence, in late 2018,Aurum Wealth Management Limited was approved by theUK Financial Authority ("FCA") as an AR of Cheshire Trafford and in early 2019,Global Alternative Administration (The Pension Admin Team) was appointed as an IAR to Cheshire Trafford. The Company has also completely revamped the website of ourIFA business (www.ctifa.com) and started aUK radio campaign as part of the IFA Business´ marketing strategy.
Finally, any short fall in our projected operating revenues will be covered by:
? The cash fees and commissions received by our subsidiary Cheshire Trafford UK
Limited.
? Receiving short term loans from one or more of our directors even though at
the present time, we do not have verbal or written commitments from any of our
directors to lend us money.
? Continuing to receive capital funding from any of the lenders that have a
contractual agreement in place with the Company.
? Liquidating (selling), when necessary, part or all our investments and/or
Marketable Securities .
13
F. Business Development:
Our specific plan of operations and milestones from
1. CONTINUE TO DEVELOP AND GROW ALREADY ACQUIRED IFA BUSINESSES - CHESHIRE
TRAFFORD (U.K.) LIMITED .
In January 2020 , we revised the Terms of Business that we send out to all
current and new clients. This revision contemplates offering these clients two
types of services packages, "Basic" and "Comprehensive" at a fee rate of 0.75%
per annum (a minimum annual fee of 750 GBP or approximately $980 ) and 1% per
annum (a minimum annual fee of 1,000 GBP or approximately $1,300 ), respectively.
The "Basic" service package is what we are legally obliged to offer under U.K.
FCA guidelines and the "Comprehensive" service package is much more complete and
contemplates additional added value for the client. Within the revised Terms of
Business, we have also implemented an upfront 3% fee that is payable by each new
client that is on boarded to our client base. Both the upfront fee and annual
fee are based on the amount of Funds that legacy clients and new clients
authorize our Company to administer and ultimately look after their financial
affairs.
So far this year, we have identified 40 new business clients. A lot of them have already sent us signed letters of authority and wish to engage our Company. Most of these new clients have opted for the "Comprehensive" service package. It is important to note that the Funds that we currently administer range from$8,000 to$650,000 per client (equivalent to6,000 GBP to500,000 GBP ) and that we have calculated that the average amount of Funds that we administer per client, taking into consideration our historical data, is approximately$72,500 . These 40 new business clients represent approximately$3,750,000 of new funds under administration. Our goal for the next 12 months is to attract at least 100 new business clients; hence, our intent is to raise the Funds that we currently administer by between$7.25 million to up$10 million . Between the 3% initial upfront fee and the ongoing/recurring 1% or 0.75% administration fee, we are aiming to raise our gross income by at least$250,000 on the low side and up to$400,000 on the high side during the next 12 months. This uplift in gross revenue would represent 2 to 3 times the current gross revenue. In summary, it is our intent in the next 12 months to continue to leverage the licenses that we now own, as we believe that we can significantly increase our business and revenues at little extra cost and improve profitability. 2. SEEK FURTHER FUNDING FOR FURTHER INORGANIC GROWTH VIA ACQUISITION. The Company is looking into entering a long-term funding agreement up to U.S.$10,000,000 Dollars with a new European basedRegulated Fund to accelerate our inorganic growth and acquisition plan with a view to consolidate our Company in the marketplace. Recently, we sent the basic terms of a new funding agreement in the form of a draft Funding Agreement to thisRegulated Fund for their legal department to review and we plan to close this new funding agreement this year. 3. ACQUIRE CERTAIN INDEPENDENT FINANCIAL ADVISORY FIRMS WITH FUNDS UNDER ADMINISTRATION. During the year endedDecember 31, 2019 , management commenced certain negotiations to acquire 100% of an Independent Financial Advisory (IFA) firm based inLondon (United Kingdom ). This targetedIFA currently has180 Million GBP (approximatelyU.S. $225 Million ) of Funds under Administration and historical recurring revenues of a little more thanOne Million GBP (approximatelyU.S. $1.32 million ). However, we do not currently have any written agreements as management is still in verbal negotiations with the owners of thisIFA . During 2020, Management also commenced certain negotiations to acquire between 51% and 100% of an Independent Financial Advisory (IFA) firm based inHong Kong . This targetedIFA currently has approximately$200 Million of Funds under Administration and historical recurring revenues of a little more than$1.1 Million . However, we do not currently have any written agreements, as management is still in verbal negotiations with the owners of thisIFA . Management also commenced certain negotiations to acquire between 51% and 100% of an Independent Financial Advisory (IFA) firm based in Eastern Europe This targetedIFA currently has approximately U.S.$50 Million of Funds under Administration and historical recurring revenues of a little more than$280,000 with a lot of room to grow this recurring revenue by restructuring the client base. However, we do not currently have any written agreements, as management is still in verbal negotiations with the owners of thisIFA .
Depending on how successful we are with obtaining new funding, the Company intends to audit and then acquire one or more of these above-mentioned Independent Financial Advisory firms (partially or entirely) in the coming 12 months.
14 As the Company acquires more Financial Advisory firms, each book of business will be analyzed to achieve the maximum return and revenue from the client bank without affecting the client offering. In addition, certain cost savings will be managed into the budgets by using technology for the administration, looking for duplication of services and by managing the client and the funds under administration in a more efficient way.
The acquisition of these entities will open a new network for the services of:
? New capital markets clients. ? Distribution of new funds / products. ? Maximizing the current books of business being bought. ? Expand and thus increase business via more financial advisors.
? Seek products that offer both a 1% trail (recurring) income and a secure risk
averse home for clients' funds.
? Seek cost savings, where possible, due to elimination of duplicate services.
? Implement rapid and efficient systems to allow information to flow to the
clients and to management more effectively.
? Acquiring smaller, active client banks into our licenses and procedures for
cost effective growth.
4. COMMENCE A TARGETED MARKETING PLAN
During 2021, our United Kingdom regulated business, Cheshire Trafford (U.K.)
Limited , will continue with the direct marketing campaign that commenced in
2019, within the region using traditional print media, radio advertising, social
media and editorial pieces. In conjunction with this campaign, the website and
marketing of the Company will be refocused with a completely new image based
around "Over 40 years of serving the community." Two days per month in our
office in the United Kingdom , we will offer free consultation to prospective
clients that come and visit us, thus enabling us to potentially recruit them as
new clients.
5. FURTHER EXPAND OUR RANGE OF SERVICES TO OUR FINANCIAL SERVICES CLIENTS
We will bring additional products to the client bank to maximize the potential
returns per client with complementary products such as mortgages, trusts, and
more attractive funds.
6. CAPITAL MARKETS
The Company intends to continue its mandate to assist its client,Creditum Limited , with the listing of the Creditum Limited´s shares on theLondon Stock Exchange ("LSE"). Management believes that this public listing may be fully executed and finalized by sometime in the year 2020 or even 2021 depending on the COVID-19 global pandemic and the effects that this can have on the listing process.
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