UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X]☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 20202021
[ ] ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________.
Commission File Number 333-169128
DANIELS CORPORATE ADVISORY COMPANY, INC.
(Exact name of registrant as specified in its charter)
Nevada | 04-3667624 | |
(State or other jurisdiction of Incorporation or organization) | (I.R.S. Employer Identification No.) |
Parker Towers, 104-60, Queens Boulevard,
12th Floor
Forest Hills, New York11375
(Address of principal executive offices)
(347)242-3148
(Issuer’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Not applicable | Not applicable | Not applicable |
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] ☒ No [ ]☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] ☒ No [ ]☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | Accelerated filer | ||
Non-accelerated filer | Smaller reporting company | ||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] ☐ No [X] ☒
As of October 14, 2020,13, 2021, the Registrant had 34,754,735 shares of Common Stock outstanding.
Daniels Corporate Advisory Company, Inc.
INDEX TO FORM 10-Q
2 |
PART I –I. FINANCIAL INFORMATION
DANIELS CORPORATE ADVISORY COMPANY, INC.
Condensed Consolidated Balance Sheets (Unaudited)
August 31, 20202021 and November 30, 20192020
August 31, | November 30, | August 31, | November 30, | |||||||||||||
2020 | 2019 | 2021 | 2020 | |||||||||||||
(Unaudited) | (Audited) | |||||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 250,029 | $ | 75,914 | $ | 294,733 | $ | 200,858 | ||||||||
Accounts receivable | - | 30 | ||||||||||||||
Inventory | 202,455 | 504,135 | ||||||||||||||
Accounts receivable, net | 34,778 | 2,903 | ||||||||||||||
Inventory, net | 242,906 | 204,704 | ||||||||||||||
Prepaid expenses and other current assets | 13,776 | 15,187 | - | 82,997 | ||||||||||||
Right of use assets | 35,421 | 49,212 | 6,248 | 24,993 | ||||||||||||
Total current assets | 501,681 | 644,478 | 578,665 | 516,455 | ||||||||||||
Property and equipment, net | 309,137 | 257,431 | 803,970 | 658,985 | ||||||||||||
Total assets | $ | 810,818 | $ | 901,909 | $ | 1,382,635 | $ | 1,175,440 | ||||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable and accrued liabilities | $ | 1,091,919 | $ | 1,079,884 | $ | 1,367,956 | $ | 1,304,417 | ||||||||
Notes payable, related party | 685,000 | 685,000 | 685,000 | 685,000 | ||||||||||||
Notes payable, net of loan discounts | 736,353 | 709,313 | 907,807 | 835,734 | ||||||||||||
Derivative liabilities | 2,062,570 | 1,650,520 | 1,013,390 | 1,592,017 | ||||||||||||
Lease liabilities | 37,391 | 50,000 | 6,248 | 24,993 | ||||||||||||
Related party payables | 379,141 | 242,706 | 194,974 | 313,782 | ||||||||||||
Total current liabilities | 4,992,374 | 4,417,423 | 4,175,375 | 4,755,943 | ||||||||||||
Note payables – non current | 336,184 | 268,500 | ||||||||||||||
Total liabilities | 4,992,374 | 4,417,423 | 4,511,559 | 5,024,443 | ||||||||||||
Commitments and contingencies | - | - | - | - | ||||||||||||
Preferred Stock: | ||||||||||||||||
Redeemable convertible preferred stock, Series B, $0.001 par value. 1,000,000 shares authorized; 234,000 and 0 shares issued and outstanding as of August 31, 2020 and November 30, 2019, respectively | 130,942 | - | ||||||||||||||
Redeemable convertible preferred stock, Series B, $ | par value. and shares issued and outstanding as of August 31, 2021 and November 30, 2020, respectively74,970 | 35,536 | ||||||||||||||
Stockholders’ Deficit: | ||||||||||||||||
Series A preferred stock, $0.001 par value. 100,000 shares authorized; 100,000 shares issued and outstanding as of August 31, 2020 and November 30, 2019, respectively | 100 | 100 | ||||||||||||||
Common stock, $0.001 par value. 6,000,000,000 shares authorized; 30,088,452 and 25,546,452 shares issued and outstanding as of August 31, 2020 and November 30, 2019, respectively | 30,088 | 25,546 | ||||||||||||||
Preferred stock, $ | par value. shares authorized- | - | ||||||||||||||
Series A preferred stock, $ shares issued and outstanding as of August 31, 2021 and November 30, 2020, respectively | par value.100 | 100 | ||||||||||||||
Preferred stock value | - | - | ||||||||||||||
Common stock, $ | par value. shares authorized; and shares issued and outstanding as of August 31, 2021 and November 30, 2020, respectively602,494 | 241,775 | ||||||||||||||
Additional paid-in capital | 7,193,395 | 7,171,768 | 8,314,190 | 7,993,255 | ||||||||||||
Accumulated deficit | (11,471,732 | ) | (10,648,579 | ) | (12,056,329 | ) | (12,055,320 | ) | ||||||||
Accumulated other comprehensive loss | (64,349 | ) | (64,349 | ) | (64,349 | ) | (64,349 | ) | ||||||||
Total stockholders’ deficit | (4,312,498 | ) | (3,515,514 | ) | (3,203,894 | ) | (3,884,539 | ) | ||||||||
Total liabilities, preferred stock and stockholders’ deficit | $ | 810,818 | $ | 901,909 | $ | 1,382,635 | $ | 1,175,440 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
3 |
DANIELS CORPORATE ADVISORY COMPANY, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
For the Three and Nine Months Ended August 31, 20202021 and 20192020
Three Months Ended August 31, | Three Months Ended August 31, | Nine Months Ended August 31, | Nine Months Ended August 31, | Three Months Ended August 31, | Three Months Ended August 31, | Nine Months Ended August 31, | Nine Months Ended August 31, | |||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||
Sales | $ | 800,682 | $ | 1,229,699 | $ | 2,891,993 | $ | 2,832,957 | $ | 1,189,371 | $ | 800,682 | $ | 3,544,792 | $ | 2,891,993 | ||||||||||||||||
Cost of goods sold | 616,539 | 1,075,272 | 2,386,428 | 2,506,746 | 828,142 | 616,539 | 2,486,524 | 2,386,428 | ||||||||||||||||||||||||
Gross margin | 184,143 | 154,427 | 505,565 | 326,211 | ||||||||||||||||||||||||||||
Gross profit | 361,229 | 184,143 | 1,058,268 | 505,565 | ||||||||||||||||||||||||||||
Selling, general and administrative expenses | 267,455 | 251,042 | 750,774 | 510,359 | 287,521 | 267,455 | 951,728 | 750,774 | ||||||||||||||||||||||||
Loss from operations | (83,312 | ) | (96,615 | ) | (245,209 | ) | (184,148 | ) | ||||||||||||||||||||||||
Income (loss) from operations | 73,708 | (83,312 | ) | 106,540 | (245,209 | ) | ||||||||||||||||||||||||||
Other income (expense) | ||||||||||||||||||||||||||||||||
Derivative expense | - | (150,500 | ) | - | (254,679 | ) | ||||||||||||||||||||||||||
Gain (loss) on change in derivative liabilities | 1,331,276 | (594,397 | ) | 233,727 | (241,421 | ) | 334,197 | 1,331,276 | 758,504 | 233,727 | ||||||||||||||||||||||
Interest expense, net | (97,811 | ) | (128,955 | ) | (264,515 | ) | (499,925 | ) | ||||||||||||||||||||||||
Other expense, net | - | - | (4,436 | ) | - | |||||||||||||||||||||||||||
Interest income (expense), net | (183,077 | ) | (97,811 | ) | (541,341 | ) | (264,515 | ) | ||||||||||||||||||||||||
Other income (expense), net | 11,212 | - | 23,509 | (4,436 | ) | |||||||||||||||||||||||||||
Total other income (expense) | 1,233,465 | (873,852 | ) | (35,224 | ) | (996,025 | ) | 162,332 | 1,233,465 | 240,672 | (35,224 | ) | ||||||||||||||||||||
Income (loss) before income taxes | 1,150,153 | (970,467 | ) | (280,433 | ) | (1,180,173 | ) | 236,040 | 1,150,153 | 347,212 | (280,433 | ) | ||||||||||||||||||||
Provision for income taxes (benefit) | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Net income (loss) | 1,150,153 | (970,467 | ) | (280,433 | ) | (1,180,173 | ) | 236,040 | 1,150,153 | 347,212 | (280,433 | ) | ||||||||||||||||||||
Deemed dividend on preferred stock | 141,268 | - | 542,720 | - | 138,938 | 141,268 | 348,221 | 542,720 | ||||||||||||||||||||||||
Net income (loss) attributable to common stockholders | 1,008,885 | (970,467 | ) | $ | (823,153 | ) | $ | (1,180,173 | ) | 97,102 | 1,008,885 | $ | (1,009 | ) | $ | (823,153 | ) | |||||||||||||||
Basic and diluted earnings (loss) per common share | $ | 0.03 | $ | (0.04 | ) | $ | (0.03 | ) | $ | (0.05 | ) | |||||||||||||||||||||
Basic earnings (loss) per common share | $ | 0.00 | $ | 0.03 | $ | (0.00 | ) | $ | (0.03 | ) | ||||||||||||||||||||||
Diluted earnings (loss) per common share | $ | 0.00 | $ | 0.00 | $ | (0.00 | ) | $ | (0.03 | ) | ||||||||||||||||||||||
Weighted-average number of common shares outstanding: | ||||||||||||||||||||||||||||||||
Basic and diluted | 29,933,017 | 23,235,758 | 28,101,870 | 22,885,623 | ||||||||||||||||||||||||||||
Basic | 510,664,460 | 29,933,017 | 377,679,186 | 28,101,870 | ||||||||||||||||||||||||||||
Diluted | 1,088,374,678 | 251,172,633 | 377,679,186 | 28,101,870 | ||||||||||||||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||||||||||
Comprehensive income (loss): | ||||||||||||||||||||||||||||||||
Net income (loss) | $ | 1,150,153 | $ | (970,467 | ) | $ | (280,433 | ) | $ | (1,180,173 | ) | $ | 236,040 | $ | 1,150,153 | $ | 347,212 | $ | (280,433 | ) | ||||||||||||
Unrealized gain (loss) | - | - | - | - | ||||||||||||||||||||||||||||
Comprehensive income (loss) | $ | 1,150,153 | $ | (970,467 | ) | $ | (280,433 | ) | $ | (1,180,173 | ) | $ | 236,040 | $ | 1,150,153 | $ | 347,212 | $ | (280,433 | ) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
4 |
DANIELS CORPORATE ADVISORY COMPANY, INC.
Consolidated Statements of Changes in Stockholders’ Deficit (Unaudited)
For the Three Months Ended August 31, 2021 and 2020
Series B Callable Preferred Stock | Series A Preferred Stock | Common Stock | Additional Paid-in | Retained | Accumulated Other Comprehensive | Total Stockholders’ | ||||||||||||||||||||||||||||||||||
For the Three Months Ended August 31, 2020 | Shares | Value | Shares | Value | Shares | Value | Capital | Earnings | Income | Deficit | ||||||||||||||||||||||||||||||
Balance, May 31, 2020 | 176,000 | $ | 23,991 | 100,000 | $ | 100 | 28,658,452 | $ | 28,658 | $ | 7,193,495 | $ | (12,480,617 | ) | $ | (64,349 | ) | $ | (5,322,713 | ) | ||||||||||||||||||||
Net income | - | - | - | - | - | - | - | 1,150,153 | - | 1,150,153 | ||||||||||||||||||||||||||||||
Issuance of preferred stock in connection with sales made under private or public offerings, net of costs and discounts | 58,000 | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
Accrued dividends and accretion of conversion feature on Series B preferred stock | - | 106,951 | - | - | - | - | - | (106,951 | ) | - | (106,951 | ) | ||||||||||||||||||||||||||||
Conversion of Series B preferred stock into common stock | ||||||||||||||||||||||||||||||||||||||||
Conversion of Series B preferred stock into common stock, shares | ||||||||||||||||||||||||||||||||||||||||
Relief of derivative liability from conversion of Series B preferred stock into common stock | ||||||||||||||||||||||||||||||||||||||||
Deemed dividends related to conversion feature of Series B preferred stock | - | - | - | - | - | - | - | (34,317 | ) | - | (34,317 | ) | ||||||||||||||||||||||||||||
Redemption of Series B preferred stock | ||||||||||||||||||||||||||||||||||||||||
Redemption of Series B preferred stock, shares | ||||||||||||||||||||||||||||||||||||||||
Issuance of common stock in exchange for consulting, professional and other services | ||||||||||||||||||||||||||||||||||||||||
Issuance of common stock in exchange for consulting, professional and other services, shares | ||||||||||||||||||||||||||||||||||||||||
Conversion of convertible notes and accrued interest into common stock | - | - | - | - | 1,430,000 | 1,430 | (100 | ) | - | - | 1,330 | |||||||||||||||||||||||||||||
Balance, August 31, 2020 | 234,000 | $ | 130,942 | 100,000 | $ | 100 | 30,088,452 | $ | 30,088 | $ | 7,193,395 | $ | (11,471,732 | ) | $ | (64,349 | ) | $ | (4,312,498 | ) |
Series B Callable Preferred Stock | Series A Preferred Stock | �� | Common Stock | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | Total Stockholders’ | Series B Callable Preferred Stock | Series A Preferred Stock | Common Stock | Additional Paid-in | Retained | Accumulated Other Comprehensive | Total Stockholders’ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For the Three Months Ended August 31, 2020 | Shares | Value | Shares | Value | Shares | Value | Capital | Deficit | Income | Deficit | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For the Three Months Ended August 31, 2021 | Shares | Value | Shares | Value | Shares | Value | Capital | Earnings | Income | Deficit | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, May 31, 2020 | 176,000 | $ | 23,991 | 100,000 | $ | 100 | 28,658,452 | $ | 28,658 | $ | 7,193,495 | $ | (12,480,617 | ) | $ | (64,349 | ) | $ | (5,322,713 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, May 31, 2021 | 195,500 | $ | 65,191 | 100,000 | $ | 100 | 430,628,781 | $ | 430,629 | $ | 8,278,785 | $ | (12,153,431 | ) | $ | (64,349 | ) | $ | (3,508,266 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | - | - | - | - | - | - | - | 1,150,153 | - | 1,150,153 | - | - | - | - | - | - | - | 236,040 | - | 236,040 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of preferred stock in connection with sales made under private or public offerings | 58,000 | - | - | - | - | - | - | - | - | - | 112,500 | 9,760 | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued dividends and accretion of conversion feature on Series B preferred stock | - | 106,951 | - | - | - | - | - | (106,951 | ) | - | (106,951 | ) | - | 102,839 | - | - | - | - | - | (102,839 | ) | - | (102,839 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of Series B preferred stock into common stock | (43,500 | ) | (46,110 | ) | - | - | 24,268,421 | 24,269 | 21,841 | - | - | 46,110 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Relief of derivative liability from conversion of Series B preferred stock into common stock | - | - | - | - | - | - | 12,780 | - | - | 12,780 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deemed dividends related to conversion feature of Series B preferred stock | - | - | - | - | - | - | - | (34,317 | ) | - | (34,317 | ) | - | - | - | - | - | - | - | (13,575 | ) | - | (13,575 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of convertible debentures and accrued interest into common stock | - | - | - | - | 1,430,000 | 1,430 | (100 | ) | - | - | 1,330 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Redemption of Series B preferred stock | (53,500 | ) | (56,710 | ) | - | - | - | - | - | (22,524 | ) | - | (22,524 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock in exchange for consulting, professional and other services | - | - | - | - | 3,827,162 | 3,827 | 7,272 | - | - | 11,099 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of convertible notes and accrued interest into common stock | - | - | - | - | 143,769,292 | 143,769 | (6,488 | ) | - | - | 137,281 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, August 31, 2020 | 234,000 | $ | 130,942 | 100,000 | $ | 100 | 30,088,452 | $ | 30,088 | $ | 7,193,395 | $ | (11,471,732 | ) | $ | (64,349 | ) | $ | (4,312,498 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, August 31, 2021 | 211,000 | $ | 74,970 | 100,000 | $ | 100 | 602,493,656 | $ | 602,494 | $ | 8,314,190 | $ | (12,056,329 | ) | $ | (64,349 | ) | $ | (3,203,894 | ) |
Series B Callable Preferred Stock | Series A Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Accumulated Other | Total Stockholders’ | ||||||||||||||||||||||||||||||||||
For the Three Months Ended August 31, 2019 | Shares | Value | Shares | Value | Shares | Value | Capital | Deficit | Income | Deficit | ||||||||||||||||||||||||||||||
Balance, May 28, 2019 | �� - | $ | - | 100,000 | $ | 100 | 23,235,902 | $ | 23,236 | $ | 7,081,459 | $ | (9,250,856 | ) | $ | (64,349 | ) | $ | (2,210,410 | ) | ||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | (970,467 | ) | - | (970,467 | ) | ||||||||||||||||||||||||||||
Recognition of beneficial conversion features related to convertible debentures | - | - | - | - | - | - | 50,167 | - | - | 50,167 | ||||||||||||||||||||||||||||||
Balance, August 31, 2019 | - | $ | - | 100,000 | $ | 100 | 23,235,902 | $ | 23,236 | $ | 7,131,626 | $ | (10,221,323 | ) | $ | (64,349 | ) | $ | (3,130,710 | ) |
Series B Callable Preferred Stock | Series A Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | Total Stockholders’ | ||||||||||||||||||||||||||||||||||
For the Nine Months Ended August 31, 2020 | Shares | Value | Shares | Value | Shares | Value | Capital | Deficit | Income | Deficit | ||||||||||||||||||||||||||||||
Balance, November 30, 2019 | - | $ | - | 100,000 | $ | 100 | 25,546,452 | $ | 25,546 | $ | 7,171,768 | $ | (10,648,579 | ) | $ | (64,349 | ) | $ | (3,515,514 | ) | ||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | (280,433 | ) | - | (280,433 | ) | ||||||||||||||||||||||||||||
Issuance of preferred stock in connection with sales made under private or public offerings | 234,000 | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
Accrued dividends and accretion of conversion feature on Series B preferred stock | - | 130,942 | - | - | - | - | - | (130,942 | ) | - | (130,942 | ) | ||||||||||||||||||||||||||||
Deemed dividends related to conversion feature of Series B preferred stock | - | - | - | - | - | - | - | (411,778 | ) | - | (411,778 | ) | ||||||||||||||||||||||||||||
Issuance of common stock in exchange for consulting, professional and other services | - | - | - | - | 1,750,000 | 1,750 | 21,250 | - | - | 23,000 | ||||||||||||||||||||||||||||||
Conversion of convertible debentures and accrued interest into common stock | - | - | - | - | 2,792,000 | 2,792 | 377 | - | - | 3,169 | ||||||||||||||||||||||||||||||
Balance, August 31, 2020 | 234,000 | $ | 130,942 | 100,000 | $ | 100 | 30,088,452 | $ | 30,088 | $ | 7,193,395 | $ | (11,471,732 | ) | $ | (64,349 | ) | $ | (4,312,498 | ) |
Series B Callable Preferred Stock | Series A Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | Total Stockholders’ | ||||||||||||||||||||||||||||||||||
For the Nine Months Ended August 31, 2019 | Shares | Value | Shares | Value | Shares | Value | Capital | Deficit | Income | Deficit | ||||||||||||||||||||||||||||||
Balance, November 30, 2018 | - | $ | - | 100,000 | $ | 100 | 21,127,402 | $ | 21,127 | $ | 7,032,417 | $ | (9,041,150 | ) | $ | (64,349 | ) | $ | (2,051,855 | ) | ||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | (1,180,173 | ) | - | (1,180,173 | ) | ||||||||||||||||||||||||||||
Conversion of convertible debentures and accrued interest into common stock | - | - | 2,108,500 | 2,109 | 10,542 | - | - | 12,651 | ||||||||||||||||||||||||||||||||
Recognition of beneficial conversion features related to convertible debentures | - | - | - | - | - | - | 88,667 | - | - | 88,667 | ||||||||||||||||||||||||||||||
Balance, August 31, 2019 | - | $ | - | 100,000 | $ | 100 | 23,235,902 | $ | 23,236 | $ | 7,131,626 | $ | (10,221,323 | ) | $ | (64,349 | ) | $ | (3,130,710 | ) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5 |
DANIELS CORPORATE ADVISORY COMPANY, INC.
Consolidated Statements of Cash FlowsChanges in Stockholders’ Deficit (Unaudited)
For the Nine Months Ended August 31, 20202021 and 20192020
Nine Months Ended August 31, | Nine Months Ended August 31, | |||||||
2020 | 2019 | |||||||
Cash flows from operating activities of continuing operations: | ||||||||
Net loss | $ | (280,433 | ) | $ | (1,180,173 | ) | ||
Adjustments to reconcile net loss to cash used in operating activities: | ||||||||
Depreciation and amortization | 37,533 | 30,091 | ||||||
Amortization of debt discount | 32,708 | 335,138 | ||||||
Common stock issued in exchange for fees and services | 23,000 | - | ||||||
Derivative expense | - | 254,679 | ||||||
Gain (loss) on change in derivative liabilities | (233,727 | ) | 241,421 | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 443 | 74,488 | ||||||
Inventory | 301,680 | (409,458 | ) | |||||
Prepaid expenses and other current assets | 1,411 | 199,972 | ||||||
Right of use assets and lease liabilities | 1,182 | - | ||||||
Accounts payable and accrued liabilities | 11,622 | 574,905 | ||||||
Related party payables | 136,435 | 19,000 | ||||||
Net cash provided by operating activities | 31,854 | 140,063 | ||||||
Cash flows from investing activities: | ||||||||
Purchase of fixed assets | (89,239 | ) | (209,722 | ) | ||||
Net cash used in investing activities | (89,239 | ) | (209,722 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of preferred stock, net of issuance costs | 234,000 | - | ||||||
Proceeds from issuance of convertible debentures | 50,000 | 115,000 | ||||||
Repayments of convertible debentures | (52,500 | ) | (2,500 | ) | ||||
Net cash provided by financing activities | 231,500 | 112,500 | ||||||
Net increase in cash and cash equivalents | 174,115 | 42,841 | ||||||
Cash and cash equivalents at beginning of period | 75,914 | 56,996 | ||||||
Cash and cash equivalents at end of period | $ | 250,029 | $ | 99,839 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | $ | - | $ | - | ||||
Cash paid for income taxes | $ | - | $ | - | ||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||
Conversion of convertible debentures and accrued interest into common stock | $ | 3,169 | $ | 12,651 | ||||
Discount for issuance costs and/or beneficial conversion features on convertible debentures | $ | 2,500 | $ | 88,667 | ||||
Accrued dividends and accretion of conversion feature on Series B preferred stock | $ | 130,942 | $ | - | ||||
Deemed dividends related to conversion feature of Series B preferred stock | $ | 411,778 | $ | - |
Series B Callable Preferred Stock | Series A Preferred Stock | Common Stock | Additional Paid-in | Retained | Accumulated Other Comprehensive | Total Stockholders’ | ||||||||||||||||||||||||||||||||||
For the Nine Months Ended August 31, 2020 | Shares | Value | Shares | Value | Shares | Value | Capital | Earnings | Income | Deficit | ||||||||||||||||||||||||||||||
Balance, November 30, 2019 | - | $ | - | 100,000 | $ | 100 | 25,546,452 | $ | 25,546 | $ | 7,171,768 | $ | (10,648,579 | ) | $ | (64,349 | ) | $ | (3,515,514 | ) | ||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | (280,433 | ) | - | (280,433 | ) | ||||||||||||||||||||||||||||
Issuance of preferred stock in connection with sales made under private or public offerings, net of costs and discounts | 234,000 | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
Accrued dividends and accretion of conversion feature on Series B preferred stock | - | 130,942 | - | - | - | - | - | (130,942 | ) | - | (130,942 | ) | ||||||||||||||||||||||||||||
Deemed dividends related to conversion feature of Series B preferred stock | - | - | - | - | - | - | - | (411,778 | ) | - | (411,778 | ) | ||||||||||||||||||||||||||||
Issuance of common stock in exchange for consulting, professional and other services | - | - | - | - | 1,750,000 | 1,750 | 21,250 | - | - | 23,000 | ||||||||||||||||||||||||||||||
Conversion of convertible notes and accrued interest into common stock | - | - | - | - | 2,792,000 | 2,792 | 377 | - | - | 3,169 | ||||||||||||||||||||||||||||||
Balance, August 31, 2020 | 234,000 | $ | 130,942 | 100,000 | $ | 100 | 30,088,452 | $ | 30,088 | $ | 7,193,395 | $ | (11,471,732 | ) | $ | (64,349 | ) | $ | (4,312,498 | ) |
Series B Callable Preferred Stock | Series A Preferred Stock | Common Stock | Additional Paid-in | Retained | Accumulated Other Comprehensive | Total Stockholders’ | ||||||||||||||||||||||||||||||||||
For the Nine Months Ended August 31, 2021 | Shares | Value | Shares | Value | Shares | Value | Capital | Earnings | Income | Deficit | ||||||||||||||||||||||||||||||
Balance, November 30, 2020 | 125,600 | $ | 35,536 | 100,000 | $ | 100 | 241,774,989 | $ | 241,775 | $ | 7,993,255 | $ | (12,055,320 | ) | $ | (64,349 | ) | $ | (3,884,539 | ) | ||||||||||||||||||||
Net income | - | - | - | - | - | - | - | 347,212 | - | 347,212 | ||||||||||||||||||||||||||||||
Issuance of preferred stock in connection with sales made under private or public offerings, net of costs and discounts | 308,000 | 17,990 | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
Accrued dividends and accretion of conversion feature on Series B preferred stock | - | 257,400 | - | - | - | - | - | (257,400 | ) | - | (257,400 | ) | ||||||||||||||||||||||||||||
Conversion of Series B preferred stock into common stock | (169,100 | ) | (179,246 | ) | - | - | 87,854,655 | 87,855 | 91,391 | - | - | 179,246 | ||||||||||||||||||||||||||||
Relief of derivative liability from conversion of Series B preferred stock into common stock | - | - | - | - | - | - | 178,429 | - | - | 178,429 | ||||||||||||||||||||||||||||||
Deemed dividends related to conversion feature of Series B preferred stock | - | - | - | - | - | - | - | (68,297 | ) | - | (68,297 | ) | ||||||||||||||||||||||||||||
Redemption of Series B preferred stock | (53,500 | ) | (56,710 | ) | - | - | - | - | - | (22,524 | ) | - | (22,524 | ) | ||||||||||||||||||||||||||
Issuance of common stock in exchange for consulting, professional and other services | - | - | - | - | 14,590,743 | 14,591 | 45,757 | - | - | 60,348 | ||||||||||||||||||||||||||||||
Conversion of convertible notes and accrued interest into common stock | - | - | - | - | 258,273,269 | 258,273 | 5,358 | - | - | 263,631 | ||||||||||||||||||||||||||||||
Balance, August 31, 2021 | 211,000 | $ | 74,970 | 100,000 | $ | 100 | 602,493,656 | $ | 602,494 | $ | 8,314,190 | $ | (12,056,329 | ) | $ | (64,349 | ) | $ | (3,203,894 | ) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6 |
DANIELS CORPORATE ADVISORY COMPANY, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended August 31, 2021 and 2020
Nine Months Ended August 31, | Nine Months Ended August 31, | |||||||
2021 | 2020 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | 347,212 | $ | (280,433 | ) | |||
Adjustments to reconcile net income (loss) to cash used in operating activities: | ||||||||
Depreciation and amortization | 117,022 | 37,533 | ||||||
Amortization of debt discount | - | 32,708 | ||||||
Common stock issued in exchange for fees and services | 60,348 | 23,000 | ||||||
Loss on change in derivative liabilities | (758,504 | ) | (233,727 | ) | ||||
Loss on disposal of property and equipment | (23,509 | ) | - | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (31,876 | ) | 443 | |||||
Inventory | (38,202 | ) | 301,680 | |||||
Prepaid expenses and other current assets | 86,000 | 1,411 | ||||||
Right of use assets and lease liabilities | - | 1,182 | ||||||
Accounts payable and accrued liabilities | 196,052 | 11,622 | ||||||
Related party payables | (112,138 | ) | 136,435 | |||||
Other noncurrent liabilities | 160,413 | - | ||||||
Net cash provided by operating activities | 2,818 | 31,854 | ||||||
Cash flows from investing activities: | ||||||||
Purchase of property and equipment | (238,498 | ) | (89,239 | ) | ||||
Net cash used in investing activities | (238,498 | ) | (89,239 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of preferred stock, net of issuance costs | 251,290 | 234,000 | ||||||
Proceeds from issuance of convertible notes | - | 50,000 | ||||||
Proceeds from commercial loans payable | 316,649 | - | ||||||
Proceeds from related party payables | - | (52,500 | ) | |||||
Redemption of preferred stock | (22,524 | ) | - | |||||
Repayments of commercial loans payable | (215,860 | ) | - | |||||
Net cash provided by financing activities | 329,555 | 231,500 | ||||||
Net increase in cash and cash equivalents | 93,875 | 174,115 | ||||||
Cash and cash equivalents at beginning of period | 200,858 | 75,914 | ||||||
Cash and cash equivalents at end of period | $ | 294,733 | $ | 250,029 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | $ | - | $ | - | ||||
Cash paid for income taxes | $ | - | $ | - | ||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||
Conversion of convertible notes and accrued interest into common stock | $ | 263,631 | $ | 3,169 | ||||
Conversion of Series B preferred stock into common stock | $ | 179,246 | $ | - | ||||
Discount for issuance costs and/or beneficial conversion features on convertible notes | $ | - | $ | 2,500 | ||||
Accrued dividends and accretion of conversion feature on Series B preferred stock | $ | 257,400 | $ | 130,942 | ||||
Deemed dividends related to conversion feature of Series B preferred stock | $ | 68,296 | $ | 411,778 | ||||
Relief of derivative liability from conversion of Series B preferred stock into common stock | $ | 178,429 | $ | - |
The accompanying notes are an integral part of these condensed consolidated financial statements.
7 |
DANIELS CORPORATE ADVISORY COMPANY, INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Daniels Corporate Advisory Company, Inc. (“Daniels” or the Company) was incorporated as a C-Corporation in the State of Nevada on May 2, 2002.2002. The Company creates and implements corporate strategy alternatives for mini-cap public and private companies.
The Company formed Payless Truckers, Inc. (“Payless”), a wholly-owned subsidiary which was incorporated in the State of Nevada, on April 11, 2018. Payless is a start-up trucking company whose principal business is to acquire, refurbish, add location electronics, advertise and sell or lease commercial vehicles to long haul drivers.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
We haveThe Company has prepared the accompanying condensed consolidated financial statements in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). We believeThe Company believes these condensed consolidated financial statements reflect all adjustments (consisting of normal, recurring adjustments) that are necessary for a fair presentation of ourits consolidated financial position and consolidated results of operations for the periods presented.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Risk and Uncertainties
OurThe Company’s future results of operations and financial condition will be impacted by the following factors, among others: ourits lack of capital resources, dependence on third-party management to operate the companies in which we investit invests and dependence on the successful development and marketing of any new products in new and existing markets. Generally, we arethe Company is unable to predict the future status of these areas of risk and uncertainty. However, negative trends or conditions in these areas could have an adverse effect on ourits business.
8 |
Interim Financial Statements
These unaudited consolidated financial statements have been prepared in accordance with US GAAP for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, the condensed consolidated financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and such adjustments are of a normal recurring nature. These condensed consolidated financial statements should be read in conjunction with the financial statements for the fiscal year ended November 30, 20192020 and notes thereto and other pertinent information contained in our Form 10-K the Company has filed with the Securities and Exchange Commission (the “SEC”) on March 16, 2020.24, 2021. The results of operations for the three and nine months ended August 31, 2020,2021, are not necessarily indicative of the results to be expected for the full fiscal year ending November 30, 2020.2021.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less at the date of purchase to be cash equivalents. The Company maintains its cash balances with a high-credit-quality financial institution. At times, such cash may be in excess of the Federal Deposit Insurance Corporation-insured limit of $250,000.$250,000. The Company has not experienced any losses in such accounts, and management believes the Company is not exposed to any significant credit risk on its cash and cash equivalents.
Accounts receivable
Accounts receivable are customer obligations due under normal trade terms which are recorded at net realizable value. The Company establishes an allowance for doubtful accounts based on management’s assessment of the collectability of trade receivables. A considerable amount of judgment is required in assessing the amount of the allowance. The Company makes judgments about the creditworthiness of each customer based on ongoing credit evaluations and monitors current economic trends that might impact the level of credit losses in the future. If the financial condition of the customers were to deteriorate, resulting in their inability to make payments, a specific allowance will be required. The Company believes that 0 allowance for doubtful accounts is necessary as of August 31, 2021.
Recovery of bad debt amounts previously written off is recorded as a reduction of bad debt expense in the period the payment is collected. If the Company’s actual collection experience changes, revisions to its allowance may be required. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. During the nine months ended August 31, 2021, the Company wrote off $36,030 in accounts receivable.
Inventory
Inventory consists of well-maintained, class 8 heavy duty trucks primarily acquired at auction. Inventory is valued at the lower of cost (specific identification method) or net realizable value. An allowance for potential non-saleable inventory due to movement, current conditions or obsolescence is based upon a review of inventory quantities, past history and expected future usage. The Company believes that no0 allowance or write-down for slow moving or obsolete inventory is necessary as of August 31, 2020.2021.
Convertible Instruments
The Company evaluates and account for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities”.
Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
The Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) by recording, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.
9 |
Fair Value of Financial Instruments
In September 2006, the Financial Accounting Standards Board (FASB) introduced a framework for measuring fair value and expanded required disclosure about fair value measurements of assets and liabilities. The Company adopted the standard for those financial assets and liabilities as of the beginning of the 2008 fiscal year and the impact of adoption was not significant. FASB Accounting Standards Codification (ASC) 820 “Fair Value Measurements and Disclosures” (ASC 820) defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
● | Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. | |
● | Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability; either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g. interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. | |
● | Level 3—Inputs that are both significant to the fair value measurement and unobservable. |
The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include accounts receivable, accounts payable and accrued expenses, notes payable, notes payable to related parties, related parties payable and derivative liabilities. The Company has also applied ASC 820 for all non-financial assets and liabilities measured at fair value on a non-recurring basis. The adoption of ASC 820 for non-financial assets and liabilities did not have a significant impact on the Company’s financial statements.
Comprehensive Income (Loss)
ASC Topic 220 (SFAS No. 130) establishes standards for reporting comprehensive income (loss) and its components. Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events from non-owner sources.
Other-Than-Temporary Impairment
All of the Company’sour non-marketable and other investments are subject to a periodic impairment review. Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary.
When events or changes in circumstances indicate that long-lived assets other than goodwill may be impaired, an evaluation is performed to determine if a write-down to fair value is required. When an asset is classified as held for sale, the asset’s book value is evaluated and adjusted to the lower of its carrying amount or fair value less cost to sell. In addition, depreciation and amortization ceases while it is classified as held for sale.
The indicators that we use to identify those events and circumstances include:
● | the investee’s revenue and earnings trends relative to predefined milestones and overall business prospects; | |
● | the general market conditions in the investee’s industry or geographic area, including regulatory or economic changes; |
10 |
● | factors related to the investee’s ability to remain in business, such as the investee’s liquidity, debt ratios, and the rate at which the investee is using its cash; and | |
● | the investee’s receipt of additional funding at a lower valuation. If an investee obtains additional funding at a valuation lower than our carrying amount or a new round of equity funding is required for the investee to remain in business, and the new round of equity does not appear imminent, it is presumed that the investment is other than temporarily impaired, unless specific facts and circumstances indicate otherwise. |
Revenue and Cost Recognition
We recognize revenue when we satisfy performance obligations by the transfer of control of products or services to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those products or services. We recognize revenue from class 8 heavy duty truck sales to customers when we satisfy our performance obligation, at a point in time, when title to the truck is transferred to the customer and collection of cash is certain. Delivery or shipping charges billed to customers, if applicable, are included in product sales and the related shipping costs are included in cost of goods sold. We also recognize revenue from the rental of class 8 heavy-duty trucks to customers. Revenue from these truck rental agreements is recognized based upon the passage of time over the term of the arrangement once control of the underlying asset has been transferred to the customer. The arrangements require weekly payments, and the customer may cancel the agreement at any time by notifying the Company in writing at least 30 days before such termination.
Revenue is recognized and related accounts receivable is recorded when the Company has transferred a good or service to a customer and our right to receive consideration is unconditional through the completion of our performance obligation. We had accounts receivable totaling $34,778 and $2,903 as of August 31, 2021 and November 30, 2020, respectively.
Right of Use Assets and Lease Liabilities
In February 2016, the FASB issued ASU No. 2016-02, “Leases” (ASC 842). The standard requires lessees to recognize almost all leases on the balance sheet as a Right-of-Use (“ROU”) asset and a lease liability and requires leases to be classified as either an operating or a finance type lease. The standard excludes leases of intangible assets or inventory. The standard became effective for the Company beginning December 1, 2018. The Company adopted ASC 842 using the modified retrospective approach, by applying the new standard to all leases existing at the date of initial application. Results and disclosure requirements for reporting periods beginning after January 1, 2019 are presented under ASC 842, while prior period amounts have not been adjusted and continue to be reported in accordance with our historical accounting under ASC 840. The Company elected the package of practical expedients permitted under the standard, which also allowed the Company to carry forward historical lease classifications. The Company also elected the practical expedient related to treating lease and non-lease components as a single lease component for all equipment leases as well as electing a policy exclusion permitting leases with an original lease term of less than one year to be excluded from the ROU assets and lease liabilities.
Under ASC 842, the Company determines if an arrangement is a lease at inception. Right-of-Use assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of the Company’s leases do not provide an implicit rate, the Company estimated the incremental borrowing rate in determining the present value of lease payments. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Company lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.
Operating leases are included in operating lease right-of-use assets and operating lease liabilities on the Company’s condensed consolidated balance sheets. The adoption did not impact the Company’s beginning retained earnings, or prior year consolidated statements of income and statements of cash flows.
11 |
Property and Equipment, Netnet
PropertyVehicles and equipment, net is reported at cost less accumulated depreciation, which is generally provided on the straight-line method over the estimated useful lives of the assets. Upon sale or retirement of an asset, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is recognized.
Income Taxes
The Company, a C-corporation, accounts for income taxes under ASC Topic 740 (SFAS No. 109). Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
The Company adopted the provisions of FASB ASC 740-10 “Uncertainty in Income Taxes” (ASC 740-10), on January 1, 2007. The Company has not recognized a liability as a result of the implementation of ASC 740-10. A reconciliation of the beginning and ending amount of unrecognized tax benefits has not been provided since there is no unrecognized benefit since the date of adoption. The Company has not recognized interest expense or penalties as a result of the implementation of ASC 740-10. If there were an unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.
The Company reports basic and diluted earnings per share (EPS) according to the provisions of ASC Topic 260, which requires the presentation of basic EPS and, for companies with complex capital structures, diluted EPS. Basic EPS excludes dilution and is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS is computed by dividing net income (loss) available to common stockholders, adjusted by other changes in income or loss that would result from the assumed conversion of those potential common shares, by the weighted number of common shares and common share equivalents (unless their effect is antidilutive) outstanding. Common stock equivalents are not included in the computation of diluted earnings per share when the Company reports a loss because to do so would be anti-dilutive. Thus, these equivalents are not included in the calculation of diluted loss per share, resulting in basic and diluted loss per share being equal.
Reverse Stock Split
All common share amounts (except par value and par value per share amounts) referred to in these financial statements have been retroactively adjusted to reflect the Company’s one-for-200 reverse capital stock split effective September 27, 2019.
Recently Issued Accounting Pronouncements
In August 2018, the FASB issued Accounting Standards Update 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which modifies the disclosure requirements on fair value measurements. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with partial early adoption permitted for eliminated disclosures. The method of adoption varies by the disclosure. The Company is currently evaluating the impact that adopting this guidance will have on the unaudited condensed consolidated financial statements.
In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes. This guidance will be effective for entities for the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020 on a prospective basis, with early adoption permitted. The Company will adoptadopted the new standard effective DecemberMarch 1, 2021 and does not expect the adoption of this guidance to have a material impact on ourits consolidated financial statementsstatements.
On June 16, 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced an expected credit loss model for the impairment of financial assets measured at amortized cost basis. That model replaces the probable, incurred loss model for those assets. Through the amendments in that Update, the Board added Topic 326, Financial Instruments— Credit Losses, and made several consequential amendments to the Codification. This guidance will be effective for entities for the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The Company will adopt the new standard effective December 1, 2023 and does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.
The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its unaudited condensed consolidated financial statements.
12 |
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company currently rents space from ourits president, Mr. Arthur Viola. This is a month to monthmonth-to-month rental and there is no commitment beyond each month. The monthly rent expense is approximately $2,100.$2,100.
Effective December 15, 2016, Mr. Viola entered into a $685,000$685,000 convertible promissory note agreement with the Company and forgave all remaining amounts outstanding at that time. The note matured on December 15, 2018 and bears interest at a rate of 10% per annum. Mr. Viola has the option to convert any portion of the unpaid principal balance into the Company’s common stock at a discount to market of 50% at any time. No repayment or conversion of the note occurred as of August 31, 2020,2021, and no notice of default has been issued. See Note 8.
InDuring 2016, Mr. Viola personally funded $10,200$10,200 in expenses on behalf of the Company. These advances were made interest free with no maturity date. No repayments have been made against these advances as of August 31, 2020.2021.
Mr. Viola is entitled to receive a salary of $175,000$175,000 annually. Mr. Viola has deferred all cash payments of his base salary in an effort to help the Company fund its operations. At August 31, 20202021 and November 30, 2019,2020, the total amount of accrued compensation owed to Mr. Viola was $497,803$672,284 and $369,303,$541,034, respectively. These amounts are included in accounts payable.
The Company’s wholly-owned subsidiary Payless Truckers, Inc. hashave received net loan proceeds aggregating $331,941$148,526 from twoa related partiesparty to help fund the subsidiary’s operations. The loans currently bear interest at rates ranging between 35% - 40%, are secured by certain inventory assets and are payable on demand.
A companyTwo companies owned by Payless’ President and certain family members has loaned the Company floor plan financing for a monthly fee per truck financed. During the nine months ended August 31, 2020 and 2019,2021, financing fees of $12,500 and $8,000, respectively,interest totaling approximately $11,134 were paid to the related party. At August 31, 2020,2021, the outstanding loan balance was $37,000.$2,173.
A company owned by Payless’Payless’s President serves as a sales representativean authorized agent to sell trucks for the Company. During the nine months ended August 31, 2020,2021, sales commissions of $88,450$36,500 were paid to the related party. During the nine months ended August 31, 2019, sales commissions of $39,050 were paid to the related party.
A sister of Payless’ President performs contact services, including sales, for the Company. During the nine months ended August 31, 2020 and 2019, sales commissions and clerical services of $26,000 and $17,860, respectively, were paid to the related party.
Adifferent company owned by a brother of Payless’ president performs contract services, including sales and shop work, for the Company during the nine months ended August 31, 2020, sales commissions of $19,650 and shop work totaling $14,300 were paid to the related party.Company. During the nine months ended August 31, 2019, the Company paid the related party $1,000 in2021, sales commissions and $5,500 for shop work.work of $21,549 were paid to the related party.
NOTE 4 - GOING CONCERN
The accompanying 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 as they become due.
For the nine months ended August 31, 2020,2021, the Company incurred a net lossesloss attributable to stockholders of $280,443.$1,009. The Company has relied, in large part, upon proceeds received from the issuance of Series B convertible preferred stock, convertible debt and equity financingloans from related parties to fund its operations. As of August 31, 2020,2021, the Company had outstanding indebtedness, net of discounts, of $1,421,353$1,928,991 and had $250,029$294,733 in cash.
As such, there is substantial doubt as to the Company’s ability to continue as a going concern. The Company’s ability to continue as such is dependent upon management’s ability to successfully execute its business plan, including increasing revenues through the sale of existing and future product offerings and reducing expenses in order to meet the Company’s current and future obligations. In addition, the Company’s ability to continue as a going concern is dependent upon management’s ability to successfully satisfy, refinance or replace its current indebtedness. Failure to satisfy existing or obtain new financing may have a material adverse impact on the Company’s operations and liquidity.
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The Company is expanding its operations through its leasing program. It believes that it is well positioned to generate significant recurring revenue and cash flows required to sustain its operations. However, even if the Company is successful in executing its plan, the Company may not generate enough revenue to satisfy all of its current obligations as they become due in addition to its outstanding indebtedness. Until the Company consistently generates positive cash flow from its operations, or successfully satisfies, refinances or replaces its current indebtedness, there is substantial doubt as to the Company’s ability to continue as a going concern.
The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result if the Company is unable to operate as a going concern.
NOTE 5 - COVID-19
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency in response to a new strain of a coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. Management is actively monitoring the global situation and its effects on the Company’s industry, financial condition, liquidity, and operations. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2021. However, if the pandemic continues, it may have a material adverse effect on the Company’s results of future operations, financial position, and liquidity in fiscal year 2021.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Commitments
The Company currently has no long-term commitments.
Contingencies
None.
NOTE 6 - LEASESCOMMITMENTS AND CONTINGENCIES
None.
NOTE 7 - PROPERTY AND EQUIPMENT
The following table sets forth the components of the Company’s Vehicles and equipment at August 31, 2021 and November 30, 2020:
SCHEDULE OF COMPONENTS OF VEHICLES AND EQUIPMENT
August 31, 2021 | November 30, 2020 | |||||||||||||||||||||||
Cost | Accumulated Depreciation | Net Book Value | Cost | Accumulated Depreciation | Net Book Value | |||||||||||||||||||
Machinery and equipment | 6,932 | (3,345 | ) | 3,587 | 6,432 | (1,738 | ) | 4,694 | ||||||||||||||||
Vehicles | 950,111 | (149,728 | ) | 800,383 | 711,164 | (56,873 | ) | 654,291 | ||||||||||||||||
Total property and equipment | $ | 957,043 | $ | (153,073 | ) | $ | 803,970 | $ | 717,596 | $ | (58,611 | ) | $ | 658,985 |
For the nine months ended August 31, 2021 and 2020, the Company recorded depreciation expense of $117,022 and $37,533, respectively.
NOTE 8 - LEASES
The Company has entered into operating leases primarily for real estate. These leases have terms which range from one year to two years, and often include one or more options to renew. The Company recognizes on the balance sheet at the time of lease commencement or modification a right of use (“ROU”) operating lease asset and a lease liability, initially measured at the present value of the lease payments. Lease costs are recognized in the income statement over the lease term on a straight-line basis. RoUROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease.
Operating lease ROU assets and liabilities commencing after January 1, 2019 are recognized at commencement date based on the present value of lease payments over the lease term. Based on the present value of the lease payments for the remaining lease term of the Company’s existing leases, the Company recorded ROU assets of $35,421$6,248 in assets and lease liabilities of $37,391$6,248 for operating leases as of August 31, 2020.2021. For the ninethree months ended August 31, 2020,2021, the Company recognized approximately $22,541$43,895 in total lease costs.
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Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments.
Information related to the Company’s operating right-of-use assets and related lease liabilities were as follows:
SCHEDULE OF OPERATING RIGHT-OF-USE ASSETS AND RELATED LEASE LIABILITIES
Cash paid for operating lease liabilities | $ | 22,500 | $ | 20,625 | ||||
Weighted-average remaining lease term (in years) | 1.1 | 0.2 | ||||||
Weighted-average discount rate | 10.0 | % | 10.0 | % | ||||
Minimum future lease payments | 35,000 | 6,875 |
The following table presents the Company’s future minimum lease obligation under ASC 840 as of August 31,November 30, 2020:
SCHEDULE OF FUTURE MINIMUM LEASE OBLIGATION
2020 fiscal year | $ | 7,500 | ||
2021 fiscal year | $ | 27,500 |
2021 fiscal year | $ | 27,500 |
NOTE 79 - LEGAL PROCEEDINGS
The Company is not currently a party to any material legal proceedings. The Company’s counsel has no formal knowledge in the form of filings of any pending or contemplated litigation, claims or assessments. With regard to matters recognized to involve an unasserted possible claim or assessment that may call for financial statement disclosure and to which counsel has formed a professional conclusion that the Company should disclosure or consider disclosure concerning such possible claims or assessment, as a matter of professional responsibility to the Company, counsel will so advise and will consult with the company concerning the question of such disclosure and the applicable requirements of FASB ASC 450, “Contingencies”. To date, counsel has no formal knowledge of any unasserted possible claims.
NOTE 810 - INCOME TAXES
The following table sets forth a reconciliation of income tax expense (benefit) at the federal statutory rate to recorded income tax expense (benefit) for the ninethree months ended August 31, 20202021 and 2019:2020:
SCHEDULE OF INCOME TAX EXPENSE (BENEFIT)
August 31, 2020 | August 31, 2019 | August 31, 2021 | August 31, 2020 | |||||||||||||
Tax provision (recovery) at effective tax rate (21%) | $ | (58,891 | ) | $ | (247,836 | ) | ||||||||||
Tax provision (recovery) at effective tax rate (21%) | $ | 72,915 | $ | (58,891 | ) | |||||||||||
Change in valuation reserve | 58,891 | 247,836 | (72,915 | ) | 58,891 | |||||||||||
Tax provision (recovery), net | $ | – | $ | – | $ | – | $ | – |
As of August 31, 2020,2021, the Company had approximately $11.5$12.1 million in net operating loss carry forwards for federal income tax purposes which expire at various dates through 2039.2039. Generally, these can be carried forward and applied against future taxable income at the tax rate applicable at that time. We are currently using a 21% effective tax rate for our projected available net operating loss carry-forward. However, as a result of potential stock offerings and stock issuance in connection with potential acquisitions, as well as the possibility of the Company not realizing its business plan objectives and having future taxable income to offset, the Company’s use of these NOLs may be limited under the provisions of Section 382 of the Internal Revenue Code of 1986, as amended. The Company is in the process of evaluating the implications of Section 382 on its ability to utilize some or all of its NOLs.
Components of deferred tax assets and (liabilities) are as follows:
SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES
August 31, 2020 | November 30, 2019 | August 31, 2021 | November 30, 2020 | |||||||||||||
Net operating loss carry forwards available at effective tax rate (21%) | $ | 2,409,000 | $ | 2,236,000 | ||||||||||||
Net operating loss carry forwards available at effective tax rate (21%) | $ | 2,532,000 | $ | 2,532,000 | ||||||||||||
Valuation Allowances | (2,409,000 | ) | (2,236,000 | ) | (2,532,000 | ) | (2,532,000 | ) | ||||||||
Deferred Tax Asset | $ | – | $ | – | $ | – | $ | – |
In accordance with FASB ASC 740 “Income Taxes”, valuation allowances are provided against deferred tax assets, if based on the weight of available evidence, some or all of the deferred tax assets may or will not be realized. The Company has evaluated its ability to realize some or all of the deferred tax assets on its balance sheet and has established a valuation allowance of approximately $2.4$2.5 million at August 31, 2020.2021. The Company did not utilize any NOL deductions for the nine months ended August 31, 2020.2021.
NOTE 911 - NOTES PAYABLE
On August 31, 2015, the Company entered in convertible note agreement with a private and accredited investor, LG Capital, in the amount of $75,000,$75,000, unsecured, with principal and interest (stated at 8%) amounts due and payable upon maturity on February 28, 2016.2016. After six months, the note holder has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Company’s stock and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03% to .08%; Dividend rate of 0%; and, historical volatility rates ranging from 195% to 236%. As of August 31, 2020,2021, the note balance was $55,224$55,224 and all associated loan discounts were fully amortized.
On December 30, 2015, the Company entered in convertible note agreement with a private and accredited investor, Auctus Private Equity Fund LLC, in the amount of $130,000,$130,000, unsecured, with principal and interest (stated at 10%) amounts due and payable upon maturity on September 30, 2016.2016. After six months, the note holder has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Company’s stock and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03% to .16%; Dividend rate of 0%; and, historical volatility rates ranging from 208% to 269%. On January 9, 2019, $6,325 of principal was converted into 210,850,000 shares of the Company’s common stock. On January 15, 2019, $6,325 of principal was converted into 210,850,000 shares of the Company’s common stock. On March 19, 2020, $1,839 of principal was converted into 1,362,000 shares of the Company’s common stock. See Note 11. As of August 31, 2020,2021, the note balance was $98,459$98,459 and all associated loan discounts were fully amortized.
On January 21, 2016, the Company entered in convertible note agreement with a private and accredited investor, John De La Cross Capital Partners Inc., in the amount of $8,000,$8,000, unsecured, with principal and interest (stated at 5%) amounts due and payable upon demand. The note holder has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Company’s stock and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03% to .16%; Dividend rate of 0%; and, historical volatility rates ranging from 208% to 269%. As of August 31, 2020,2021, the note balance was $4,000$4,000 and all associated loan discounts were fully amortized.
On November 23, 2016, the Company entered in convertible note agreement with a private and accredited investor, Auctus Private Equity Fund LLC, in the amount of $61,000,$61,000, unsecured, with principal and interest (stated at 12%) amounts due and payable upon maturity on August 23, 2017.2017. After six months, the note holder has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Company’s stock and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from ..03% .03% to .16%; Dividend rate of 0%; and, historical volatility rates ranging from 208% to 269%. The Company amended its convertible note agreement to allow for additional principal borrowings. On June 10, 2020, $1,330 During the nine months ended August 31, 2021, $78,700of principal and $97,944of accrued interest was converted into 1,430,000 shares of the Company’s common stock. See Note 11. As of August 31, 2020,2021, the note balance was $95,670 $0 and all associated loan discounts were fully amortized.
On October 15, 2018, the Company entered in convertible note agreement with a private and accredited investor, Auctus Fund LLC, in the amount of $350,000,$350,000, unsecured, with principal and interest (stated at 12%) amounts due and payable upon maturity on July 15, 2019.2019. At any time following issuance, the note holder has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Company’s stock and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from 2.67% to 2.70%; Dividend rate of 0%0%; and, historical volatility rates ranging from 390% to 423%. As of August 31, 2020,2021, the note balance was $350,000$350,000 and all associated loan discounts were fully amortized.
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On February 14, 2019, the Company entered in convertible note agreement with a private and accredited investor, Auctus Fund LLC, in the amount of $57,750,$57,750, unsecured, with principal and interest (stated at 12%) amounts due and payable upon maturity on November 14, 2019.2019. At any time following issuance, the note holder has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Company’s stock and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from 2.53%2.53% to 2.540%2.540%; Dividend rate of 0%0%; and, historical volatility rates ranging from 309%309% to 339%339%. During the nine months ended August 31, 2021, $42,743 of principal and $44,243 of accrued interest was converted into shares of the Company’s common stock. See Note 11. As of August 31, 2020,2021, the note balance was $57,750$17,257 and all associated loan discounts were fully amortized.
On July 22, 2019, the Company entered in convertible note agreement with a private and accredited investor, Auctus Fund LLC, in the amount of $75,250,$75,250, secured by all of the assets of the Company and its subsidiaries, with principal and interest (stated at 12%12%) amounts due and payable upon maturity on April 22, 2020.2020. At any time following issuance, the note holder has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Company’s stock and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from 1.76%1.76% to 1.95%1.95%; Dividend rate of 0%0%; and, historical volatility rates ranging from 1,313%1,313% to 1,467%1,467%. As of August 31, 2020,2021, the note balance was $75,250$75,250 and all associated loan discounts were fully amortized.
On January 31, 2020,May 28, 2021, the Company issuedexecuted two future receivables sale and purchase agreements with Sutton Funding. Under the agreements, the Company sold an aggregate of $210,000 in future receivables for a promissory note to GC Capital Partners, LLC in thepurchase amount of $52,500, unsecured, with$150,000. The aggregate principal amountsamount is payable in monthlydaily installments of $10,000totaling $1,591 until maturity on August 26, 2020. The note had an original issuance discount of $2,500, which will be amortized on a straight-line basis oversuch time that the life of the note.obligation is fully satisfied. As of August 31, 2020,2021, the note balancetotal outstanding principal on these future receivable sale and purchase agreements was $0$91,997.
On June 21, 2021, the Company executed a merchant cash advance agreement with Consistent Funding. Under the agreement, the Company sold an aggregate of $142,000 in future receivables for a purchase amount of $100,000. The aggregate principal amount is payable in daily installments totaling $1,076 until such time that the obligation is fully satisfied. As of August 31, 2021, the total outstanding principal on these future receivable sale and all associatedpurchase agreements was $72,507.
From time to time, the Company issues secured promissory notes to individual lenders to finance truck purchases for the Company’s rental program. Annual interest rates on such notes are generally 30% with terms of 48 months. As of August 31, 2021, the total amount outstanding under such notes was $479,297, of which $143,113 is considered current and classified under “Notes payable, net of loan discounts were fully amortized.discounts” in the Company’s condensed consolidated financial statements. The remaining noncurrent portion is classified under “Other noncurrent liabilities”. The aggregate monthly payments of principal and interest on these promissory notes is $18,183.
NOTE 1012 - DERIVATIVE LIABILITIES
The Company accounts for derivative financial instruments in accordance with ASC 815, which requires that all derivative financial instruments be recorded in the balance sheets either as assets or liabilities at fair value.
The Company’s derivative liabilities result from conversion featuresliability is an embedded derivative associated with one of the Company’s convertible promissory notes. The convertible promissory notes or convertible preferred stock.were issued at various times but with similar terms and are therefore being termed as one instrument for this footnote, (the “Note”), is a hybrid instruments which contain an embedded derivative feature which would individually warrant separate accounting as a derivative instrument under Paragraph 815-10-05-4. The embedded derivative feature includes the conversion feature to the Note. Pursuant to Paragraph 815-10-05-4, the value of the embedded derivative liability has been bifurcated from the debt host contract and recorded as a derivative liability resulting in a reduction of the initial carrying amount (as unamortized discount) of the promissory notes, or preferred stock, which are amortized as financingdebt discount andto be presented underin other (income) expenses in the statements of operations using the effective interest method over the life of the securities.notes.
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The embedded derivative liabilities arewithin the note have been valued using the Black Scholes Model,approach, recorded at fair value at the date of issuance,issuance; and marked-to-market at each subsequent reporting period end date with the changes in fair value recorded in the Company’s statements of operations as “gain (loss) on change“change in the fair value of derivative liabilities”instrument”.
As of August 31, 20202021 and November 30, 2019,2020, the estimated fair value of derivative liabilitiesliability was determined to be $2,062,570$1,013,390 and $1,650,520,$1,592,017, respectively. The change in the fair value of derivative liabilities for the three and nine months ended August 31, 20202021 was a$758,504 resulting in an aggregate gain of $1,331,276 and $233,727, respectively. See “Note 11 – Equity” for more information.on derivative liabilities.
Summary of Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis
Financial assets and liabilities measured at fair value on a recurring basis are summarized below and disclosed at November 30, 2019:2020:
SUMMARY OF FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES MEASURED ON RECURRING BASIS
Carrying | Fair Value Measurement Using | Carrying | Fair Value Measurement Using | |||||||||||||||||||||||||||||||||||||
Value | Level 1 | Level 2 | Level 3 | Total | Value | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||||
Derivative liabilities on conversion feature | $ | 1,650,520 | $ | – | $ | – | $ | 1,650,520 | $ | 1,650,520 | $ | 1,592,017 | $ | – | $ | – | $ | 1,592,017 | $ | 1,592,017 | ||||||||||||||||||||
Total derivative liabilities | $ | 1,650,520 | $ | – | $ | – | $ | 1,650,520 | $ | 1,650,520 | $ | 1,592,017 | $ | – | $ | – | $ | 1,592,017 | $ | 1,592,017 |
Summary of Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis
Financial assets and liabilities measured at fair value on a recurring basis are summarized below and disclosed at August 31, 2020:2021:
Carrying | Fair Value Measurement Using | Carrying | Fair Value Measurement Using | |||||||||||||||||||||||||||||||||||||
Value | Level 1 | Level 2 | Level 3 | Total | Value | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||||
Derivative liabilities on conversion feature | $ | 2,062,570 | $ | – | $ | – | $ | $ | 2,062,570 | $ | 1,013,390 | $ | – | $ | – | $ | 1,013,390 | $ | 1,013,390 | |||||||||||||||||||||
Total derivative liabilities | $ | 2,062,570 | $ | – | $ | – | $ | $ | 2,062,570 | $ | 1,013,390 | $ | – | $ | – | $ | 1,013,390 | $ | 1,013,390 |
Summary of the Changes in Fair Value of Level 3 Financial Liabilities
The table below provides a summary of the changes in fair value of all financial assets andderivative liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended August 31, 2020:2021:
SUMMARY OF CHANGES IN FAIR VALUE OF LEVEL 3 FINANCIAL LIABILITIES
Derivative Liabilities | Derivative Liabilities | |||||||
Fair value, November 30, 2019 | 1,650,520 | |||||||
Fair value, November 30, 2020 | $ | 1,592,017 | ||||||
Additions | 645,777 | 358,306 | ||||||
Relief from conversion of preferred stock | (178,429 | ) | ||||||
Change in fair value | (233,727 | ) | (758,504 | ) | ||||
Fair value, August 31, 2020 | $ | 2,062,570 | ||||||
Fair value, August 31, 2021 | $ | 1,013,390 |
NOTE 1113 – EQUITY
The Company is authorized to issue two classes of shares being designated preferred stock and common stock.
Preferred Stock
The number of shares of preferred stock authorized is $0.001$ per share. At August 31, 20202021 and November 30, 2019,2020, the Company had shares of Series A preferred stock issued and outstanding, and 234,000 and 0 shares of Series B preferred stock issued and outstanding, respectively. , par value
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Series A Preferred Stock
Mr. Arthur D. Viola, the Company’s president, owns 100,000 shares of super voting preferred stock entitling him to vote sixty-six and two-thirds percent (66.67%) of the common stock shares in any common stock vote.
Series B Preferred Stock
On February 24, 2020, the Company filed a certificate of designations with the State of Nevada, designating $1.00$ per share, and with a par value of $0.001$ per share. The shares will carry an annual ten percent (10%(10%) cumulative dividend, compounded daily, payable solely upon redemption, liquidation or conversion. The certificate of designations provides the Company with the opportunity to redeem the Series B shares at various increased prices at time intervals up to the 6-month anniversary of the closing and mandates full redemption on the 12-month anniversary. The holder may convert the Series B shares into shares of the Company’s common stock, commencing on the 6-month anniversary of the closing at a 35% discount to the lowest closing price during the 20-day20-day trading period immediately preceding the notice of conversion. of its available preferred shares as Series B preferred mandatorily redeemable convertible stock, stated value of
All shares of mandatorily redeemable convertible preferred stock have been presented outside of permanent equity in accordance with ASC 480, Classification and Measurement of Redeemable Securities. The Company accretes the carrying value of its Series B mandatory redeemable convertible preferred stock to its estimate of fair value (i.e., redemption value) at period end.
On March 19,December 31, 2020, the Company sold 73,000 shares of its Series B convertible preferred stock, with an annual accruing dividend of 10%, to Geneva Roth Remark Holdings, Inc. (“Geneva”), for $70,000$50,000 pursuant to a Series B preferred stock purchase agreement. The Series B preferred stock is classified as temporary equity since the shares are convertible at the option of the shareholder. The Company recorded a derivative liability of $144,894,$88,694, valued using the Black-Scholes Model, associated with Series B preferred shares.
On May 22, 2020,January 13, 2021, the Company sold 103,000 shares of its Series B convertible preferred stock, with an annual accruing dividend of 10%10%, to Geneva, for $100,000$40,000 pursuant to a Series B preferred stock purchase agreement. The Series B preferred stock is classified as temporary equity since the shares are convertible at the option of the shareholder. The Company recorded a derivative liability of $408,566,$50,753, valued using the Black-Scholes Model, associated with Series B preferred shares.
On July 6, 2020,March 2, 2021, the Company sold 58,000 shares of its Series B convertible preferred stock, with an annual accruing dividend of 10%, to Geneva, for $55,000$40,000 pursuant to a Series B preferred stock purchase agreement. The Series B preferred stock is classified as temporary equity since the shares are convertible at the option of the shareholder. The Company recorded a derivative liability of $92,317,$55,774, valued using the Black-Scholes Model, associated with Series B preferred shares.
As of August 31, 2020, the estimated fair value of these derivative liabilities was determined to be $341,470. The change in the fair value for the three and nine months ended August 31, 2020 was an unrealized gain of $413,780 and $304,308, respectively.
During the three and nine months ended August 31, 2020,On May 20, 2021, the Company sold 10%, to Geneva, for $51,250 pursuant to a Series B preferred stock purchase agreement. The Series B preferred stock is classified as temporary equity since the shares are convertible at the option of the shareholder. The Company recorded $122,319a derivative liability of accretion$46,771, valued using the Black-Scholes Model, associated with Series B preferred shares. shares of its Series B convertible preferred stock, with an annual accruing dividend of
On June 28, 2021, the Company redeemed discounts and $8,623its Series B convertible preferred stock from Geneva for $79,234. The Company recorded a $22,524 deemed dividend as a result of accrued dividends. Asthe redemption. shares of
On June 28, 2021, the Company sold August 31, 2020, there were 234,000its Series B convertible preferred stock, with an annual accruing dividend of 10%, to Geneva, for $50,000 pursuant to a Series B preferred stock purchase agreement. The Series B preferred stock is classified as temporary equity since the shares outstanding andare convertible at the option of the shareholder. The Company recorded a remaining unamortized discountderivative liability of $111,681.$43,990, valued using the Black-Scholes Model, associated with Series B preferred shares. shares of
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On July 14, 2021, the Company sold 10%, to Geneva, for $55,000 pursuant to a Series B preferred stock purchase agreement. The Series B preferred stock is classified as temporary equity since the shares are convertible at the option of the shareholder. The Company recorded a derivative liability of $72,325 valued using the Black-Scholes Model, associated with Series B preferred shares. shares of its Series B convertible preferred stock, with an annual accruing dividend of
Common Stock
The number of shares of common stock authorized is $0.001$ per share. At August 31, 20202021 and November 30, 2019,2020, the Company had 30,088,452 and 25,546,452 shares of common stock, respectively, issued and outstanding. , par value
During the nine months ended August 31,
On December 1, 2020, the Company issued 1,750,000 shares of common stock valued at $23,000 in exchange for consulting, professional and other services.
During the nine months ended August 31, 2020, the Company issued 2,792,000 shares ofits common stock in exchange for the conversion of $3,169$13,356 of Series B convertible preferred stock and accrued dividends.
On December 9, 2020, the Company issued 8,580 of convertible debt principal.
shares of its common stock in exchange for the conversion of $On January 8, 2021, the Company issued
shares of common stock to two contractors for consulting services provided to the Company.On January 8, 2021, the Company issued 15,900 of Series B convertible preferred stock and accrued dividends.
shares of its common stock in exchange for the conversion of $On January 11, 2021, the Company issued 24,380 of Series B convertible preferred stock and accrued dividends.
shares of its common stock in exchange for the conversion of $On January 13, 2021, the Company issued 21,200 of Series B convertible preferred stock and accrued dividends.
shares of its common stock in exchange for the conversion of $On February 23, 2021, the Company issued
shares of common stock to two contractors for consulting services provided to the Company.On March 16, 2021, the Company issued 18,462 of convertible debt principal.
shares of its common stock in exchange for the conversion of $On April 8, 2021, the Company issued 19,383 of convertible debt principal.
shares of its common stock in exchange for the conversion of $On April 19, 2021, the Company issued 19,854 of convertible debt principal.
shares of its common stock in exchange for the conversion of $On May 4, 2021, the Company issued 22,324 of convertible debt principal and accrued interest.
shares of its common stock in exchange for the conversion of $On May 12, 2021, the Company issued 20,791 of accrued interest.
shares of its common stock in exchange for the conversion of $On May 24, 2021, the Company issued 15,900 of Series B convertible preferred stock and accrued dividends.
shares of its common stock in exchange for the conversion of $On May 25, 2021, the Company issued 18,956 of convertible debt principal.
shares of its common stock in exchange for the conversion of $On May 26, 2021, the Company issued 21,200 of Series B convertible preferred stock and accrued dividends.
shares of its common stock in exchange for the conversion of $20 |
On May 27, 2021, the Company issued 21,200 of Series B convertible preferred stock and accrued dividends.
shares of its common stock in exchange for the conversion of $On June 8, 2021, the Company issued 16,761 of accrued interest on convertible debt. shares of its common stock in exchange for the conversion of $
On June 15, 2021, the Company issued shares of common stock to a contractor for consulting services provided to the Company.
On June 24, 2021, the Company issued 17,746 of accrued interest on convertible debt. shares of its common stock in exchange for the conversion of $
On July 8, 2021, the Company issued 15,788 of accrued interest on convertible debt. shares of its common stock in exchange for the conversion of $
On July 19, 2021, the Company issued 31,800 of Series B convertible preferred stock and accrued dividends. shares of its common stock in exchange for the conversion of $
On July 20, 2021, the Company issued 14,310 of Series B convertible preferred stock and accrued dividends. shares of its common stock in exchange for the conversion of $
On July 26, 2021, the Company issued 27,804 of convertible debt principal and accrued interest. shares of its common stock in exchange for the conversion of $
On August 9, 2021, the Company issued 30,547 of convertible debt principal and accrued interest. shares of its common stock in exchange for the conversion of $
On August 25, 2021, the Company issued 28,636 of convertible debt principal and accrued interest. shares of its common stock in exchange for the conversion of $
NOTE 14 – SEGMENT INFORMATION
The Company views its operations and manages its business as 1 segment. The Company business is to acquire, refurbish, add location electronics, advertise and either sell or lease its commercial vehicles to independent drivers and operators. The Company’s customers represent a single market or segment. As such, the Company makes operating decisions and assesses financial performance only for the Company as a whole and does not make operating decisions or assess financial performance from the sale or lease of commercial vehicles individually.
NOTE 1215 – REVENUE RECOGNITION
The Company recognizes revenue when it satisfies performance obligations by the transfer of control of products or services to its customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those products or services.
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The Company recognizes revenue from class 8 heavy duty truck sales to customers when it satisfies its performance obligation, at a point in time, when title to the truck is transferred to the customer and collection of cash is certain. Delivery or shipping charges billed to customers, if applicable, are included in product sales and the related shipping costs are included in cost of goods sold. For the three and nine months ended August 31, 2020,2021, the Company recognized sales revenue from the resale of refurbished trucks of $688,932$952,231 and $2,570,250,$2,885,121, respectively, as compared to sales revenue from the resale of refurbished trucks of $1,169,831$688,932 and $2,655,276,$2,570,250, respectively, during the three and nine months ended August 31, 2019.2020.
The Company also recognize revenue from the rental of class 8 heavy-duty trucks to customers. Revenue from these truck rental agreements is recognized based upon the passage of time over the term of the arrangement once control of the underlying asset has been transferred to the customer. The arrangements require weekly payments, and the customer may cancel the agreement at any time by notifying the Company in writing at least 30 days before such termination. For the three and nine months ended August 31, 2020,2021, the Company recognized sales revenue from the rental of its trucks of $102,930$215,227 and $298,255,$625,873, respectively, as wells as repair income of $21,913 and $33,798, respectively, as compared to sales revenue from the rental of its trucks of $59,868$102,930 and $177,381,$298,255, respectively, as well as repair income of $8,820 and $23,488, during the three and nine months ended August 31, 2019.2020.
NOTE 1316 - SUBSEQUENT EVENTS
In accordance with FASB ASC 855-10 Subsequent Events, the Company has analyzed its operations subsequent to August 31, 20202021 to the date these consolidated financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these consolidated financial statements, except as follows:
On September 2, 2020,2021, the Company issued 1,501,398 shares of its common stock in exchange for the conversion of $3,243$26,500 of Series B convertible debt principal.preferred stock and accrued dividends.
On September 22, 2020,3, 2021, the Company issued 1,558,824 shares of its common stock in exchange for the conversion of $7,500$19,610 of Series B convertible preferred stock.stock and accrued dividends.
On September 9, 2021, the Company issued 18,320 of convertible debt principal and accrued interest.
shares of its common stock in exchange for the conversion of $22 |
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
Financial Summary: The Coronavirus finally had its effect on our results. Sales were flat for the nine months ending August 2020 at $2,891,993 as compared to $2,832,957 in 2019. Anticipating this understandable situation, our operating and financial oversight management tightened up controls and our gross margin for the nine months of 2020 improved 55.9% to $505,565 from $326,211 for the nine months of 2019.31, 2021:
Comparative salesThe results for the currentof our August quarter were $880,682 versus $1,229,699 forreflect the 2019 quarter. Our gross margins improved 19.2 % year over year through continuation of tight cost controls and systems implementation.
For the August 2020 quarter,success being experienced in the consolidated company (Daniels - “DCAC”) had net income attributable to common shareholders of $1,008,885 or $0.03 per share on a weighted average of 29,933,017. This profit was from a gain in derivative liabilities on our balance sheet and not from subsidiary or consulting operations.
Corporate Strategy for the Quarter:
During our third quarter of fiscal year 2020, Daniels, as an incubator, continued to build upon earlier milestones in fulfillment of its corporate aim. Cash of $250,029 was raised from the issuance of Callable Preferred Stock and is reserved on our balance sheet for expansionincubation of our rental fleet. By itself these funds can double the size and month rental income of our rental fleet. The decision was made to seek asset-based loans from private investors and institutions to leverage the funds. Negotiations continue with lenders so trucks can be purchased for two-thirds equity one-third debt. Forward momentum continues through the generation of cash flows from our rental business. Our existing fleet is generating between $21,000 - $24,000 per monthpremier start-up subsidiary in revenues. These rental cash flows are sustaining the overall Company as the “flip” segment continues to generate revenues on a more modified level. The goal established for this quarter - which was the positioning of the Payless subsidiary so levered asset purchases could be made to accelerate earnings - was advanced. In the next several quarters, the Company should be in a position to use leverage to take advantage of the continuing health / dislocations risks in the economy and then the eventual restart of approximately thirty percent of the US GDP.
Management’s on-going efforts in selecting additional start-up or add-on opportunities as client (subsidiary) candidates is promising. Final discussions were in progress during the quarter with a research think tank. They will have the role of supporting the parent company senior oversight management team in the detailed review and analysis of all candidates. A board decision was made to focus solely on the Transportation Services segment of the economyTrucking Industry. Daniels continued to umbrella its Subsidiary, Payless Truckers’, Inc. expansion through financing sources expensive in nature. Parent Company Management believes the capital costs incurred were warranted and helped produce another stellar quarter for its key growth engine. After months of negotiations, a number of financing options are in final review with some having very favorable terms including long term financing.
For the nine months - December 1, 2020 through August 31, 2021 - Total Revenue was $3,544,792 compared to $2,570,250 for the previous fiscal year. This was comprised of $2,885,121 from the Flip business and $659,671 in fleet rental and repairs income. While both businesses continue to produce high margins, our program rental fleet has the potential to be scale-able and provide significant growth because of its predictable gross cash flow / potential earnings stream. The financing alternatives being discussed are primarily for that purpose.
During the August quarter, in-house financing potential of aged management award shares - while available and already counted in the outstanding shares total - continued to be held in check in favor of continuing negotiations with financing options which continue to multiply because of proved operating results. The grants were created for a specific purpose – for Senior oversight financial management. operations managers and retained consultants – to participate individually and voluntarily in the in-house control and timing of funding as needed. The eventual use of the award shares could provide selective management of the growth of Payless.
Negotiations with long term straight debt lenders and Preferred Stock financiers continued through the further build-outAugust quarter. More creative approaches were developed and options continue to be studied. The main objective - which continued to take more time than expected - is to create alternatives that (a) that are repaid out of cash flows and/or (b) with equity participation that is accretive. Daniels’ senior management believes levered financing - supported by the equity and layered finance options mentioned - will allow Payless Truckers, Inc. subsidiary.
Forward Looking Statementsto achieve the first plateau of 100 rental fleet trucks in a measured amount of time. We are seriously considering the acquisition of a larger operating facility so we can accelerate the build out of Payless. Current capital negotiations now include a real estate component so we can accelerate our fleet expansion. Our current operating facility has limited monthly capacity and can only add five to six truck additions to our rental fleet.
The statements contained in this report other than statementsfunding options being discussed will eliminate the need for the continuation of historical fact are “forward-looking statements” within the meaningexpensive private investor funding. Blended Public market-rates for financing, will allow Daniels / Payless to service a larger debt load and accelerate growth prospects. Our cost of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements represent the Registrant’s present expectations or beliefs concerning future events. The Registrant cautions that such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Registrant to be materially differentcapital should drop significantly from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, the uncertainty as to the Registrant’s future profitability; the uncertainty as to the demand for Registrant’s services; increasing competition in the markets that Registrant conducts business; the Registrant’s ability to hire, train and retain sufficient qualified personnel; the Registrant’s ability to obtain financing on acceptable terms to finance its growth strategy; and the Registrant’s ability to develop and implement operational and financial systems to manage its growth. These forward-looking statements speak only as of the date of this report. We assume no obligation or undertaking to update or revise any forward-looking statements contained herein to reflect any changes in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. You should, however, review additional disclosures we make in the reports we file with the SEC.current levels.
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As used in this interim report, the terms “we”, “us”, “our”, the “Company”, the “Registrant”, “Daniels Corporate Advisory”, “DCAC” and “Daniels” mean Daniels Corporate Advisory Company, Inc. unless otherwise indicated.
Overview
Daniels Corporate Advisory creates and implements corporate strategy alternatives for the mini-cap public or private company client. The addition of new business opportunities and the location of professional talent for implementation is anticipated through the full-time efforts of our senior management. These efforts are to be expanded in the United States and in foreign capitals by an expanding advisory board and through the networks of independent consultants. Principals of the respective client company will open their networks to augment professional access for specialties the Daniels corporate strategy consultants believe are needed in a joint-venture, jointly-controlled undertaking created for the client’s optimum growth.
Daniels may provide the client with multiple corporate strategies/opportunities including joint-ventures, marketing opportunity agreements and/or potential acquisitions structured in leveraged buyout format. One or a combination of these strategies would allow the client to enter new market niches or expand further into existing ones.
Recent Business Developments
The Company is operating through the corporate strategy segment of its business. It is attempting to build its own critical mass by creation of start-up subsidiaries it believes have promise/potential. The stated goal is for the parent (DCAC) company to consolidate the critical mass of the subsidiary/start-ups with that of the parent for eventually listing on a major stock exchange. We have continued to focus our efforts on the build out of the Daniels corporate strategy model. We adjusted our strategy as it relates to the development of subsidiary start-ups and potential acquisitions for common stock. We concentrate on identifying projects that have the potential to produce significant earnings on the leveraged capital base of both the parent and the subsidiary/start-up within an expedited time period.
As a result, we formed Payless Truckers, Inc. (“Payless”), a wholly-owned subsidiary which was incorporated in the State of Nevada, on April 11, 2018. Payless is a start-up, service company in the trucking industry. It has two business linessegments with its launch and current results coming from the “flip” business,segment, whose principal activitybusiness is to acquire class 8 heavy duty trucks, refurbish them, add location electronics, advertise and sell to independent drivers and operators. The second linesegment is the “credit rebuilding business”segment” where class 8 heavy duty trucks, owned by Daniels/Payless, are rented to experienced independent drivers. These independent drivers rent for a period of up to five years, and have the option to buy the vehicle at retail value every six months. This businesssegment commenced operations subsequent to the close of our fiscal year. In an effort to grow quickly and profitably, Daniels entered into an operating agreement with a senior operating management team in an effort to drive the business and better realize its earnings and growth potential.
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The Payless two-linetwo-segment trucking model represents a streamlined Transportation Services Company; one Daniels believes can be restructured/redirected to survive any potential future slow-downs in the economy. The model was developed to allow for the maximum utilization of each truck as it is put into immediate service in numbers that are manageable without causing excess capacity. Top brand/model Tractors with low mileage are handpicked by our operations team - a family with three generations in automotive/trucking. Our drivers continue to be handpicked for their driving skills and their established hauling networks. They rent/switch trailers to meet the available work on Load Boards or haul for major hauling companies using hauling company trailers. Due to the current dislocations in every industry due to the Coronavirus, our independent contractor drivers are constantly on the road.
We hope to further enhance our plan for growth beginning in our second year by forming joint-ventures and/or partnerships with truck maintenance companies across the United States in key traffic hubs. This will potentially afford independent drivers and operators the opportunity to be serviced by trusted maintenance facilities under our warranty program.
Business Strategy - Current Operational Strategy & Current Client Projects
Daniels creates and implements corporate strategy alternatives for the mini-cap public or private company client. The addition of new business opportunities and the location of professional talent for implementation is anticipated through the full-time efforts of our senior management. These efforts are to be expanded in the US and in Foreign capitals by an expanding advisory board and through the networks of independent consultants. Principals of the respective client company will open their networks to augment professional access for specialties the Daniels corporate strategy consultants believe are needed in a joint venture, (jointly-controlled) undertaking created for the client’s optimum growth.
Daniels may provide the client with multiple corporate strategies /opportunities including joint-ventures, marketing opportunity agreements and/or potential acquisitions structured in a leveraged buyout format. One or a combination of these strategies would allow the client to enter new market niches or expand further into existing ones.
One of the Company’s primary objectives is to be listed on a major exchange listing. Senior management is estimating at least twenty-four months from commencement of a corporate strategy assignment. Financial results, aided by all participating players, should be forthcoming and recorded in SEC filings. At the same time, a senior management team and Board expanded with highly-credible interim (or permanent) professionals (directors) will be organized in order to successfully navigate the listing process of a major stock exchange. While Daniels believes this process should be successful in the above-noted time period, there is some uncertainty in the process which is dependent upon any past issues the listing committee of a specific exchange may deem necessary to be addressed prior to uplifting. In addition, it may take added time to find the appropriate outside directors that can not only satisfy the listing committee of the exchange but who can also provide added networking/services to build the parent’s and subsidiary’s potential for accelerated growth.
A similar effort will be provided to tailor an optimum growth program for the private company client, whether it chooses to remain private or to become a public company through alternative merger opportunities.
Growth Strategy - Short-Term Objectives
Daniels’ believes that the validity of its corporate strategy model is proven through the success of its initial subsidiary incubation, Payless Truckers, Inc. The growing momentum of this cash flow engine is generating the interest of long-term financing sources. They recognize the obvious - the cash flows from the fleet truck program can cover significant debt service on longer term financing which can accelerate the levered growth of the Company. Daniels has used its publicly-traded common stock in a variety of securities packages, including convertible preferred stock, to launch its premier subsidiary start-up, (Payless Truckers) and will do so for other start-up opportunities being reviewed. Initial subsidiaries (start-up clients) are those that can generate significant return on invested capital so that growth acceleration comes from generic sales/profit growth. Alternative growth options - joint-ventures, marketing agreements, acquisitions/LBO’s - will be applied secondarily as external growth opportunities are entered into to bring the start-up (now considered an early-stage company) to critical mass for stability.
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Senior management believes our corporate strategy business model - as an incubator of subsidiary / spin-off companies - to be scalable. Based upon the potential success of the initial corporate strategy consulting assignments creating Daniels’ uplifting to a major stock exchange, Daniels (the publicly traded Exchange listed parent incubator with sophisticated senior advisory and capital raised at very advantageous rates) - may entertain the creation of a franchising program for key US cities and foreign finance centers.
Sales and Marketing
Daniels’ senior management will concentrate its efforts to expand its corporate strategy and financial advisory services and related specialties in the mini-cap segment of the private and public markets, where Daniels believes it will be effective. Marketing efforts will increase through social and print media efforts and will be in addition to those methods already mentioned herein.
Daniels’ objective is to create and help manage implementation of accelerated expansion strategies and in so doing, aid in the creation of financing alternatives to accomplish client goals.
Competition
Existing and new competitors will continue to improve their services and introduce new services with competitive price and performance characteristics.
In periods of reduced demand for our services, we can either choose to maintain market share by reducing our prices to meet competition or maintain prices and choose only those assignments with new clients that have pressing goals to be met that offer Daniels optimum potential for profits and growth.
The “collective” corporate financial services, direct and referral, including merchant banking/private equity, are very competitive and fragmented in the Company’s market niche. There are limited barriers to entry and new competitors frequently enter the market. A significant number of our competitors possess substantially greater resources. We will continue to offer equity compensation to our team in order to keep a stable, cohesive team of professionals, which is necessary and key to the creation of operating and capital solutions in a timely fashion.
The above competitive considerations are no longer considered by senior advisory/oversight management to be as important as they once were. More importantly, we are now known for the success of our visionary growth strategies and their execution in the development and launch of our premier subsidiary - Payless Truckers Inc. The return on investment on early stages of our developing 100 truck fleet should generate the positive cash flow that will eventually create excess profits and help launch other promising new candidates (start-up clients) as subsidiary deals.
General
Our discussion and analysis of our financial condition and results of operations is based on our financial statements, Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our most significant judgments and estimates used in preparation of our financial statements. which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
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Critical Accounting Policies
Financial Reporting Release No. 60, published by the SEC, recommends that all companies include a discussion of critical accounting policies used in the preparation of their financial statements. While all these significant accounting policies impact our financial condition and results of operations and we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our consolidated financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates.
We believe that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause a material effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.
The accounting policies identified as critical are as follows:
Revenue and Cost Recognition
We recognize revenue when we satisfy performance obligations by the transfer of control of products or services to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those products or services. We recognize revenue from class 8 heavy duty truck sales to customers when we satisfy our performance obligation, at a point in time, when title to the truck is transferred to the customer and collection of cash is certain.customer. Delivery or shipping charges billed to customers, if applicable, are included in product sales and the related shipping costs are included in cost of goods sold. We also recognize revenue from the rental of class 8 heavy-duty trucks to customers. Revenue from these truck rental agreements is recognized based upon the passage of time over the term of the arrangement once control of the underlying asset has been transferred to the customer. The arrangements require weekly payments, and the customer may cancel the agreement at any time by notifying the Company in writing at least 30 days before such termination.
Fair Value of Assets
We haveThe Company has adopted the standard FASB Accounting Standards Codification (ASC 820) “Fair Value Measurements and Disclosures” which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
● | Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. |
● | Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability; either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g. interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. | |
● | Level 3—Inputs that are both significant to the fair value measurement and unobservable. |
The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include investments in available-for-sale securities and accounts payable and accrued expenses. We haveThe Company has also applied ASC 820 for all non-financial assets and liabilities measured at fair value on a non-recurring basis. The adoption of ASC 820 for non-financial assets and liabilities did not have a significant impact on ourthe Company’s financial statements.
Use of Estimates
In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenue and expenses during the reporting period. Actual results could differ from those estimates.
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COVID-19
COVID-19
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency in response to a new strain of a coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. Management is actively monitoring the global situation and its effects on the Company’s industry, financial condition, liquidity, and operations. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2020.2021. However, if the pandemic continues, it may have a material adverse effect on the Company’s results of future operations, financial position, and liquidity in fiscal year 2020.2021.
Liquidity and Capital Resources
As of August 31, 2020,2021, we had $250,029$294,733 in cash and cash equivalents and a working capital deficit of $4,490,693.$3,596,710.
Net cash used inprovided by operating activities was $31,854$2,818 for the nine months ended August 31, 2020,2021, compared to net provided by operating activities of $140,063$31,854 during the nine months ended August 31, 2019.2020. The decrease in net cash provided by operating activities is primarily attributable to the change in our working capital assets offset in particular inventory and accounts payable and other accrued liabilities.part by the increase in our net income.
Net cash used in investing activities was $89,239$238,498 for the nine months ended August 31, 2020,2021, compared to $209,722$89,239 during the nine months ended August 31, 2019.2020. The decreaseincrease in net cash used is directly attributable to the number of trucks purchased for use in our credit rebuilding business line.
Net cash provided by financing activities was $231,500$329,555 for the nine months ended August 31, 2020,2021, compared to net cash provided of $112,500$231,500 during the nine months ended August 31, 2019.2020. The increase in net cash provided by financing activities is directly related to salethe net proceeds received from merchant loans payable used to finance vehicle purchases. During the nine months ended August 31, 2021, we received $316,649 in proceeds from loans payable and repaid $215,860 of shares of our Series B convertible preferred stock.principal on the loans.
Our primary source of liquidity has been proceeds received from the issuance of convertible debt and preferred stock. Since the creation of our subsidiary, Payless Truckers, Inc., cash flows from the operations of the truck service company have helped to supplement cash flows provided by our financing activities for the consolidated group.
On February 24, 2020, we filed a certificate of designations with the State of Nevada, designating 1,000,000 of our available preferred shares as Series B preferred convertible stock, stated value of $1.00 per share, and with a par value of $0.001 per share. The certificate of designations provides us with the opportunity to redeem the Series B shares at various increased prices at time intervals up to the 6-month anniversary of the closing and mandates full redemption on the 12-month anniversary. The holder may convert the Series B shares into shares of our common stock, commencing on the 6-month anniversary of the closing at a 35% discount to the lowest closing price during the 20-day trading period immediately preceding the notice of conversion.
On March 19, 2020, we sold 73,000 shares of our Series B convertible preferred stock, with an annual accruing dividend of 10%,convertible debt and loans from related parties. In addition, cash flow generated by our subsidiary Payless Truckers has helped to Geneva Roth Remark Holdings, Inc. (“Geneva”), for $70,000 pursuant to a Series B preferred stock purchase agreement. The Series B preferred stock is classified as temporary equity sincesustain the shares are convertible at the option of the shareholder. We recorded a derivative liability of $144,894, valued using the Black-Scholes Model, associated with Series B preferred shares.consolidated group.
On May 22, 2020, we sold 103,000 shares of our Series B convertible preferred stock, with an annual accruing dividend of 10%, to Geneva, for $100,000 pursuant to a Series B preferred stock purchase agreement. The Series B preferred stock is classified as temporary equity since the shares are convertible at the option of the shareholder. We recorded a derivative liability of $408,566, valued using the Black-Scholes Model, associated with Series B preferred shares.
On July 6, 2020, we sold 58,000 shares of our Series B convertible preferred stock, with an annual accruing dividend of 10%, to Geneva, for $55,000 pursuant to a Series B preferred stock purchase agreement. The Series B preferred stock is classified as temporary equity since the shares are convertible at the option of the shareholder. We recorded a derivative liability of $92,317, valued using the Black-Scholes Model, associated with Series B preferred shares.
Financing Activities
We will have to continue to raise capital by means of borrowings or through a private placement or a subsequent registered offering. At present, we do not have any commitments with respect to future financings. If we are unable to raise adequate capital, in the near term, to finance all phases of a client corporate consulting assignment, our proposed business will experience slow growth because it will be very hard to compete for business without a sound capital base to support advisory and implementation efforts on our suggested corporate growth strategies.
At present, we do have sufficient capital on hand to fund operations for the immediate future. Management estimates that it will need up to $2.0 million to fund its operations.PayLess Truckers subsidiary. It is possible that we can still achieve our objectives by use of asset-based lending whereby we can leverage our truck purchases. However, because of the start-up nature of the subsidiary this financing may be harder to achieve than normal. Even if limited funds are raised, we canPayLess will still be able to register profits from ourits “flip” program while cost-effective funding for the “credit enhancement” program can be arranged. The Company does have funding available under a commitment letter but these funds are very expensive; management is trying to avoid their use.
It is the Company’s intention to concentrate its efforts on the build-out of its trucking operations.PayLess Truckers, Inc. subsidiary. Once solidly on its growth path, meeting projections and generating positive operating cash flows, additional subsidiary/start-up businesses will be entertained be the parent company.
Senior Management believes it will have sufficient cash flows to continue in business for the foreseeable future. While legal and accounting expenses are significant for a reporting company, we will cover them out of operating cash flows.
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Comparison of the Results of Operations forThree Months Ended August 31, 2021 to the Three Months Ended August 31, 2020 toResults of Operations
Sales
Sales totaled $1,189,371 which were comprised of (i) $952,231 from the Three Months Endedresale of refurbished trucks and (ii) $215,227 from vehicle rental agreements, and (iii) $21,913 from other miscellaneous sources for the three months ended August 31, 2019
Sales
Sales totaled2021, compared to sales $800,682 which were comprised of (i) $688,932 from the resale of refurbished trucks, (ii) $102,930 from vehicle rental agreements, and (iii) $3,320$8,820 from other miscellaneous sources during the three months ended August 31, 2020.
Gross Profit
Gross profit is calculated by subtracting cost of goods sold from sales. Gross profit percentage is calculated by dividing gross margins by revenue. Current gross profit percentages may not be indicative of future gross profit performance. Gross profit totaled $361,229 for the three months ended August 31, 2020,2021, compared to sales of $1,229,699 which were comprised of (i) $1,169,831 from the resale of refurbished trucks and (ii) $59,868 from vehicle rental agreements$184,143 during the three months ended August 31, 2019. The decrease in sales2020, respectively. Gross profit percentage was 30.4% and 23.0% for the three months ended August 31, 2020 is believed to be primarily attributable to the uncertainty of economic conditions caused by the global COVID-19 pandemic.
Gross Profit
Gross profit totaled $184,143 for the three months ended August 31, 2020, compared to $154,427 during the three months ended August 31, 2019, respectively. Gross profit percentage was 23.0%2021 and 12.6% for the three months ended August 31, 2020, and August 31, 2019, respectively. The increase in gross profit and gross profit percentage for the current year period is directly attributable to an increase in revenues from truck rental agreements, which typically yield higher profit margins, than truck resales.and improved profit margins from the resale of our trucks.
Operating Expenses
Operating expenses are primarily comprised of compensation, facilities costs and outsourced services. Operating expenses totaled $267,455$287,521 for the three months ended August 31, 2020,2021, compared to operating expenses of $251,042$267,455 during the three months ended August 31, 20192020 representing an increase of $16,413$20,066 or 6.5%7.5%. The increase in operating expenses is generally related to the increase in our use of consulting and professional services for corporate matters and increased operating activities at Payless.financing efforts.
Other Income (Expenses), Netand Expenses
Net otherOther income totaled $1,233,465$162,332 for the three months ended August 31, 2020,2021, compared to net other expenseincome of $873,852$1,233,465 during the three months ended August 31, 20192020 representing an increasea decrease in other income of $2,137,033$1,071,133 or 220.2%86.8%. Interest expense decreasedincreased to $97,811$183,077 for the three months ended August 31, 20202021 from $128,955$97,811 during the three months ended August 31, 2019.2020. The decreaseincrease in interest expense is due to less amortizationan increase in debt utilized to purchase trucks for our leasing program. We recorded a gain from the change in fair value of debt discounts attributablederivative liabilities of $334,197 during the three months ended August 31, 2021, compared to our notes payable. We recorded a gain from the change in fair value of derivative liabilities of $1,331,276 during the three months ended August 31, 2020, compared to a loss from the change in fair value of derivative liabilities of $594,397 during the three months ended August 31, 2019.2020.
Net Income (Loss) Attributable to Common Stockholders
The Company realized net income attributable to common stockholders of $1,008,885$97,102 for the three months ended August 31, 2020,2021, compared to a net loss attributable to common stockholdersincome of $970,467 incurred$1,008,885 realized during the three months ended August 31, 2019.2020. The increasedecrease in our net income attributable to common stockholders is largely attributable to the unrealizeddecrease in our gain associated with our derivative liabilities offset in part by deemed dividends of $141,268 to our Series B preferred stockholders and the change in fair value of our derivative liabilities. There were no deemed dividends to preferred stockholders during the three months ended August 31, 2019.
Comparison of the Results of Operations forNine Months Ended August 31, 2021 to the Nine Months Ended August 31, 2020 toResults of Operations
Sales
Sales totaled $3,544,792 which were comprised of (i) $2,885,121 from the Nine Months Endedresale of refurbished trucks and (ii) $625,873 from vehicle rental agreements, and (iii) $33,798 from other miscellaneous sources for the nine months ended August 31, 2019
Sales
Sales totaled2021, compared to sales $2,891,993 which were comprised of (i) $2,570,250 from the resale of refurbished trucks, (ii) $298,255 from vehicle rental agreements, and (iii) $23,488 from other miscellaneous sources during the nine months ended August 31, 2020.
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Gross Profit
Gross profit is calculated by subtracting cost of goods sold from sales. Gross profit percentage is calculated by dividing gross margins by revenue. Current gross profit percentages may not be indicative of future gross profit performance. Gross profit totaled $1,058,268 for the nine months ended August 31, 2020,2021, compared to sales of $2,832,957 which were comprised of (i) $2,655,276 from the resale of refurbished trucks and (ii) $177,381 from vehicle rental agreements$505,565 during the nine months ended August 31, 2019.
Gross Profit
2020, respectively. Gross profit totaled $505,565percentage was 29.9% and 17.5% for the nine months ended August 31, 2020, compared to $326,211 during the nine months ended August 31, 2019, respectively. Gross profit percentage was 17.5%2021 and 11.5% for the nine months ended August 31, 2020, and August 31, 2019, respectively. The increase in gross profit and gross profit percentage for the current year period is directly attributable to an increase in revenues from truck rental agreements, which typically yield higher profit margins, than truck resales.and improved profit margins from the resale of our trucks.
Operating Expenses
Operating expenses are primarily comprised of compensation, facilities costs and outsourced services. Operating expenses totaled $750,774$951,728 for the nine months ended August 31, 2020,2021, compared to operating expenses of $510,359$750,774 during the nine months ended August 31, 20192020 representing an increase of $240,415$200,954 or 47.1%26.8%. The increase in operating expenses is generally related to the increase in our use of consulting and professional services for corporate matters and increased operating activities at Payless.financing efforts.
Other Income (Expenses), Netand Expenses
Net other expensesOther income totaled $35,224$240,672 for the nine months ended August 31, 2020,2021, compared to net other expenses of $996,025$35,224 during the nine months ended August 31, 20192020 representing a decreasean increase in other income of $960,801$275,896 or 76.2%783.3%. Interest expense decreasedincreased to $264,515$541,341 for the nine months ended August 31, 20202021 from $499,925$264,515 during the nine months ended August 31, 2019.2020. The decreaseincrease in interest expense is due to less amortizationan increase in debt utilized to purchase trucks for our leasing program. We recorded a gain from the change in fair value of debt discounts attributablederivative liabilities of $758,504 during the nine months ended August 31, 2021, compared to our notes payable. We recorded a gain from the change in fair value of derivative liabilities of $233,727 during the nine months ended August 31, 2020, compared to a loss from the change in fair value of derivative liabilities of $241,421 during the nine months ended August 31, 2019.2020.
Net Income (Loss)Loss Attributable to Common Stockholders
The Company incurred a net loss attributable to common stockholders of $823,153$1,009 for the nine months ended August 31, 2020,2021, compared to a net loss attributable to common stockholders of $1,180,173$823,153 incurred during the nine months ended August 31, 2019.2020. The decrease in our net loss attributable to common stockholders is largely attributable to the reductionincrease in our net other expenses offset in part by deemed dividends of $542,720 to our Series B preferred stockholdersgross profits and the gain associated with the change in fair value of our derivative liabilities. There were no deemed dividends to preferred stockholders during the nine months ended August 31, 2019.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
ITEM 4 CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures.
We maintain disclosure controlsUnder the supervision and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed underwith the Securities Exchange Actparticipation of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure.
Our management, with the participation of our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), evaluated the effectivenessAugust 31, 2021, we conducted an evaluation of our disclosure controls and procedures, (asas such term is defined in Rulesunder Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act)Act of 1934, as of August 31, 2020. In designingamended. Based on this evaluation, our principal executive officer and evaluating disclosure controls and procedures, we and our management recognize that any disclosure controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objective. In prior periods, management concluded that internal controls and procedures were not effective. During the past several months, proceduresprincipal financial officer have been implemented including, but not limited to, (i) personnel changes to upgrade our basic accounting and reporting functions, (ii) an increase in the frequency of reviews conducted on related party transactions, and (iii) the implementation of forms and procedures to reduce the risk that material errors could occur and could go undetected. Therefore, as of August 31, 2020, based on the evaluation of these improved disclosure controls and procedures, the CEO and CFO concluded that our disclosure controls and procedures were effective.effective as of August 31, 2021 to ensure that information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act were recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Act Commission’s rules and forms and that our disclosure controls are effectively designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Accordingly,Our management, believes,including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of any system of controls is based onin part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its knowledge, that: (i) this quarterly report does not contain any untrue statementstated goals under all potential future conditions. Further, the design of a materialcontrol system must reflect the fact or omitthat there are resource constraints, and the benefits of controls must be considered relative to state a material fact necessary to make the statements made, in lighttheir costs. Because of the circumstances under which they were made, not misleading with respect to the periods covered by this report; and (ii) the financial statements, and other financial information included in this quarterly report, fairly presentinherent limitations in all material respects our financial condition, resultscontrol systems, no evaluation of operations and cash flows as at, and for, the periods presented in this quarterly report.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Because of its inherent limitations, internal control over financial reporting is not intended tocontrols can provide absolute assurance that a misstatementall control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdown can occur because of simple error or mistake. In particular, many of our financial statements would be prevented or detected. Under the supervision of our CEOcurrent processes rely upon manual reviews and CFO, the Company conducted an evaluation of the effectiveness of our internal control over financial reporting as of August 31, 2020 using the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
A materialprocesses to ensure that neither human error nor system weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In our assessment of the effectiveness of internal control over financial reporting as of August 31, 2020, we determined that our internal controls over financial reporting improved as described below:
Subject to the Company’s ability to obtain financing and hire additional employees, the Company expects to be able to continue to design, implement and maintain effective internal controls.
Accordingly, we concluded that these improvements to our internal controlshas resulted in a reasonable possibility that a material misstatementerroneous reporting of the annual or interim financial statements will be prevented or detected on a timely basis by the Company’s internal controls.data.
As a result of the improvements described above, our CEO and CFO have concluded that the Company maintained effective internal control over its financial reporting as of August 31, 2020 based on criteria established in Internal Control—Integrated Framework issued by COSO.
Changes in Internal Control Over Financial Reporting.
TheThere were no changes in our internal control over financial reporting during the quarter ended August 31, 2020 as described above have2021 that has materially improvedaffected, or is reasonably likely to materially affect, our internal control over financial reporting.
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We are not currently a party to any material legal proceedings. Our counsel has no formal knowledge in the form of filings of any pending or contemplated litigation, claims or assessments. With regard to matters recognized to involve an unasserted possible claim or assessment that may call for financial statement disclosure and to which counsel has formed a professional conclusion that the Company should disclosure or consider disclosure concerning such possible claims or assessment, as a matter of professional responsibility to the Company, counsel will so advise and will consult with the company concerning the question of such disclosure and the applicable requirements of FASB ASC 450, “Contingencies”. To date, counsel has no formal knowledge of any unasserted possible claims.
There have been no material changes to the risk factors disclosed in “Risk Factors” in our Annual Report on Form 10-K for the year ended November 30, 20192020 filed with the SEC on March 16, 2020.24, 2021.
ITEM 2. RECENT SALES OF UNREGISTERED SECURITIES
Except as set forth below, there were no sales of equity securities during the period covered by this Quarterly Report that were not registered under the Securities Act and were not previously reported in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K filed by the Company.
On June 10, 2020,8, 2021, the Company issued 1,430,00021,488,300 shares of its common stock uponin exchange for the conversion of $1,230 in principal$16,761 of accrued interest on convertible notes payable.debt.
On July 6, 2020,June 15, 2021, the Company sold 58,000issued 3,827,162 shares of common stock to a contractor for consulting services provided to the Company.
On June 24, 2021, the Company issued 22,751,590 shares of its common stock in exchange for the conversion of $17,746 of accrued interest on convertible debt.
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On July 8, 2021, the Company issued 18,794,702 shares of its common stock in exchange for the conversion of $15,788 of accrued interest on convertible debt.
On July 19, 2021, the Company issued 16,736,842 shares of its common stock in exchange for the conversion of $31,800 of Series B convertible preferred stock with an annual accruing dividendand accrued dividends.
On July 20, 2021, the Company issued 7,531,579 shares of 10%, to Geneva Roth Remark Holdings, Inc.,its common stock in exchange for $55,000 pursuant to athe conversion of $14,310 of Series B convertible preferred stock purchase agreement.and accrued dividends.
On July 26, 2021, the Company issued 24,824,700 shares of its common stock in exchange for the conversion of $27,804 of convertible debt principal and accrued interest.
On August 9, 2021, the Company issued 27,274,500 shares of its common stock in exchange for the conversion of $30,547 of convertible debt principal and accrued interest.
On August 25, 2021, the Company issued 28,635,500 shares of its common stock in exchange for the conversion of $28,636 of convertible debt principal and accrued interest.
The Company relied upon an exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Regulation D promulgated under the Securities Act of 1934, as amended, in connection with the foregoing issuances.
ITEM 6. EXHIBITS, REPORTS ON FORM 8-K AND FINANCIAL STATEMENT SCHEDULES
Exhibits required to be attached by Item 601 of Regulation S-B are listed in the Index to Exhibits and are incorporated herein by this reference.
101.INS | Inline XBRL Instance Document | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacity and on the dates indicated.
Signature | Title | Date | ||
/S/ NICHOLAS VIOLA | Chief Executive Officer | October 15, | ||
Nicholas Viola | (Principal Executive Officer) | |||
/S/ KEITH L. VOIGTS | Chief Financial Officer | October 15, | ||
Keith L. Voigts | (Principal Financial and Accounting Officer) |