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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended August 31, 2022

 

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 000-54762

 

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 York 11375

(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 ☒ 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 ☒ 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

 

As of October 13, 2022, the Registrant had 1,741,199,100 shares of Common Stock outstanding.

 

 

 

 
 

 

Daniels Corporate Advisory Company, Inc.

INDEX TO FORM 10-Q

 

      Page
PART I. FINANCIAL INFORMATION   3
       
Item 1. Condensed Consolidated Financial Statements:   3
       
  Condensed Consolidated Balance Sheets at August 31, 2022 (Unaudited) and November 30, 2021   3
       
  Condensed Consolidated Statements of Operations and Comprehensive Loss and for the Three and Nine months ended August 31, 2022 and 2021 (Unaudited)   4
       
  Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the Three and Nine months ended August 31, 2022 and 2021 (Unaudited)   5
       
  Condensed Consolidated Statements of Cash Flows for the Nine months ended August 31, 2022 and 2021 (Unaudited)   7
       
  Notes to Condensed Consolidated Financial Statements (Unaudited)   8
       
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations   19
       
Item 3. Quantitative and Qualitative Disclosures about Market Risk   26
       
Item 4. Controls and Procedures   26
       
PART II. OTHER INFORMATION   26
       
Item 1. Legal Proceedings   26
       
Item 1A. Risk Factors   26
       
Item 6. Exhibits   26
       
SIGNATURES   27

 

2
 

 

PART I. FINANCIAL INFORMATION

 

DANIELS CORPORATE ADVISORY COMPANY, INC.

Condensed Consolidated Balance Sheets

 

   August 31,   November 30, 
   2022   2021 
    (Unaudited)    (Audited) 
ASSETS          
Current assets:          
Cash and cash equivalents  $49,071   $181,088 
Accounts receivable, net   8,270    7,896 
Inventory   104,186    208,504 
Prepaid expenses and other current assets   -    6,096 
Total current assets   161,527    403,584 
Property and equipment, net   501,958    701,006 
Total assets  $

663,485

   $1,104,590 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
Current liabilities:          
Accounts payable and accrued liabilities  $756,286   $710,333 
Accounts payable and accrued liabilities – related party   848,784    726,233 
Notes payable, related party   685,000    685,000 
Notes payable, net of loan discounts   910,679    801,986 
Derivative liabilities   1,127,015    875,487 
Related party payables   86,635    168,081 
Total current liabilities   4,414,399    3,967,120 
Other noncurrent liabilities   250,410    338,081 
Total liabilities   4,664,809    4,305,201 
           
Commitments and contingencies        
           
Preferred Stock:          
Redeemable convertible preferred stock, Series B, $0.001 par value. 1,000,000 shares authorized; 140,500 and 240,000 shares issued and outstanding as of August 31, 2022 and November 30, 2021, respectively   2,882    101,972 
           
Stockholders’ Deficit:          
Series A preferred stock, $0.001 par value. 100,000 shares authorized; 100,000 shares issued and outstanding as of August 31, 2022 and November 30, 2021, respectively   100    100 
Common stock, $0.001 par value. 6,000,000,000 shares authorized; 1,741,199,100 and 779,298,529 shares issued and outstanding as of August 31, 2022 and November 30, 2021, respectively   1,741,199    779,299 
Subscription receivable   

(75,050

)   - 
Additional paid-in capital   8,408,392    8,366,837 
Accumulated deficit   (14,014,498)   (12,384,470)
Accumulated other comprehensive loss   (64,349)   (64,349)
Total stockholders’ deficit   (4,004,206)   (3,302,583)
Total liabilities, preferred stock and stockholders’ deficit  $663,485   $1,104,590 

 

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 Months and Nine Months Ended August 31, 2022 and 2021

 

   Three Months Ended August 31,   Three Months Ended August 31,   Nine Months Ended August 31,   Nine Months Ended August 31, 
   2022   2021   2022   2021 
                 
Revenue  $335,366   $1,189,371   $1,328,599   $3,544,792 
Cost of goods sold   205,161    828,142    812,859    2,486,524 
Gross profit   130,205    361,229    515,740    1,058,268 
Selling, general and administrative expenses   312,636    287,521    956,179    951,728 
(Gain) on disposal of property and equipment   (38,126)   (11,212)   (68,227)   (23,509)
Income (loss) from operations   (144,305)   84,920    (372,212)   130,049 
Other income (expense)                    
Gain (loss) on change in derivative liabilities   4,241    334,197    (689,004)   758,504 
Interest income (expense), net   (153,393)   (183,077)   (561,672)   (541,341)
Total other income (expense)   (149,152)   151,120    (1,250,676)   217,163 
Income (loss) before income taxes   (293,457)   236,040    (1,622,888)   347,212 
Provision for income taxes (benefit)   -    -    -    - 
Net income (loss)   (293,457)   236,040    (1,622,888)   347,212 
Deemed dividend on preferred stock   1,190    138,938    7,140    348,221 
Net income (loss) attributable to common stockholders  $(294,647)  $97,102   $(1,630,028)  $(1,009)
                     
Basic and diluted earnings (loss) per common share  $(0.00)  $0.00   $(0.00)  $(0.00)
Diluted earnings (loss) per common share  $(0.00)  $0.00   $(0.00)  $(0.00)
                     
Weighted-average number of common shares outstanding:                    
Basic   1,607,694,371    510,664,460    1,377,182,003    377,679,186 
Diluted   4,582,701,804    1,088,374,678    4,352,189,436    377,679,186 

 

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, 2022  Shares   Value   Shares   Value   Shares   Value   Subscription     Capital   Earnings  
Income
  
Deficit
 
   Series B Callable Preferred   Preferred Stock   Common Stock  

              
For the Three Months Ended August 31, 2022  Shares   Value   Shares   Value   Shares   Value   Subscription

Receivable

    Additional Paid-in Capital   Accumulated Deficit   Accumulated Other
Comprehensive Income
   Total
Stockholders’ Deficit
 
                                               
Balance, May 31, 2022   43,750   $16,009    100,000   $100    1,566,855,043   $1,566,855   $ -     $8,463,860   $(13,719,851)  $(64,349)  $    (3,753,385)
Net Loss             -    -    -    -            -    (293,457)   -    (293,457)
Issuance of preferred stock in connection with sales made under private or public offerings, net of costs and discounts   140,500    -    -    -    -    -     (75,050 )    -    -    -    (75,050)
Accrued dividends and accretion of conversion feature on Series B Preferred Stock   -    33,248    -    -    -    -     -      -    -    -    - 
Conversion of Series B preferred stock to common stock   (43,750)   (46,375)   -    -    174,344,057    174,344     -      (127,969)   -    -    46,375 
Relief of derivative liability from conversation of Series B Stock   -    -    -    -    -    -     -      72,501    -    -    72,501 
Deemed dividend related to series B preferred stock   -    -    -    -    -    -   -      -    (1,190)   -    (1,190)
Balance August 31 2022   140,500   $2,882    100,000   $100    1,741,199,100   $1,741,199   $ (75,050 )   $8,408,392   $(14,014,498)  $(64,349)  $(4,004,206)

 

For the Three Months Ended August 31, 2022  Shares   Value   Shares   Value   Shares   Value   Capital   Earnings  
Income
  
Deficit
 
                                       
   Series B Callable Preferred   Preferred Stock   Common Stock  

     

  

 

 
For the Three Months Ended August 31, 2021  Shares   Value   Shares   Value   Shares   Value   Additional Paid-in
Capital
   Accumulated Deficit   Accumulated
Other
Comprehensive
Income
   Total
Stockholders’ Deficit
 
                                         
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             -    -    -    -    -    236,040    -    236,040 
Issuance of preferred stock in connection with sales made under private or public offerings, net of costs and discounts   112,500    9,760    -    -    -    -    -    -    -    - 
Accrued dividends and accretion of conversion feature on Series B Preferred Stock   -    102,839    -    -    -    -    -    (102,839)   -    (102,839)
Conversion of Series B preferred stock to common stock   (43,500)   (46,110)   -    -    24,268,421    24,268    21,842    -    -    46,110 
Relief of derivative liability from conversation of Series B Preferred Stock   -    -    -    -    -    -    12,780    -    -    12,780 
Deemed dividend related to series B preferred stock   -    -    -    -    -    -    -    (13,575)   -    (13,575)
Redemption of Series B Preferred stock   (53,500)   (56,710)   -    -    -    -    -    (22,524)   -    (22,524)
Issuance of common stock for services   -    -    -    -    3,827,162    3,827    7,272    -    -    11,099 
Conversion of convertible debt and accrued interest to common stock   -    -    -    -    143,769,292    143,769    (6,488)   -    -    137,281 
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.

 

5
 

 

DANIELS CORPORATE ADVISORY COMPANY, INC.

Consolidated Statements of Changes in Stockholders’ Deficit (Unaudited)

 

For the Three Months Ended August 31, 2022  Shares   Value   Shares   Value   Shares   Value   Subscription     Capital   Earnings  
Income
  
Deficit
 
                                             
   Series B Callable Preferred   Preferred Stock   Common Stock        

     

  

 
For the Nine Months Ended August 31, 2022  Shares   Value   Shares   Value   Shares   Value  

Subscription

Receivable

    Additional Paid-in Capital   Accumulated Deficit   Accumulated Other Comprehensive Income   Total
Stockholders’ Deficit
 
                                               
Balance, November 30, 2021   240,000   $101,972    100,000   $100    779,298,829   $779,299   $ -     $8,366,837   $(12,384,470)  $(64,349)  $    (3,302,583)
Net Loss             -    -    -    -            -    (1,622,888)   -    (1,622,888)
Issuance of preferred stock in connection with sales made under private or public offerings, net of costs and discounts   184,250    -    -    -    -    -     (75,050)      -    -    -    (75,050)
Accrued dividends and accretion of conversion feature on Series B Preferred Stock   -    201,685    -    -    -    -     -      -    -    -    - 
Conversion of Series B preferred stock to common stock   (283,750)   (300,775)   -    -    760,490,423    760,490     -      (459,715)   -    -    300,775 
Relief of derivative liability from conversation of Series B Stock   -    -    -    -    -    -     -      443,906    -    -    443,906 
Deemed dividend related to series B preferred stock   -    -    -    -    -    -   -      -    (7,140)   -    (7,140)
Issuance of common stock for services   -    -    -    -    63,859,548    63,860     -      (6,000)   -    -    57,860 
Conversion of convertible debt and accrued interest to common stock   -    -    -    -    137,550,600    137,550   -      (92,756)   -    -    44,794 
Relief of derivative liability from conversion of convertible notes and accrued interest into common stock   -    -    -    -    -    -     -      156,120    -    -    156,120 
Balance August 31 2022   140,500   $2,882    100,000   $100    1,741,199,100   $1,741,199   $ (75,050 )   $8,408,392   $(14,014,498)  $(64,349)  $(4,004,206)

 

For the Three Months Ended August 31, 2022  Shares   Value   Shares   Value   Shares   Value   Capital   Earnings  
Income
  
Deficit
 
                                       
   Series B Callable Preferred   Preferred Stock   Common Stock  

     

  

 
For the Nine Months Ended August 31, 2021  Shares   Value   Shares   Value   Shares   Value   Additional Paid-in Capital   Accumulated Deficit   Accumulated Other Comprehensive Income   Total
Stockholders’ 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   -    257,400    -    -    -    -    -    (257,400)   -    (257,400)
Conversion of Series B preferred stock to common stock   (169,100)   (179,246)   -    -    87,854,655    87,855    91,391    -    -    179,246 
Relief of derivative liability from conversation of Series B Stock   -    -    -    -    -    -    178,429    -    -    178,429 
Deemed dividend related to 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 for services   -    -    -    -    14,590,743    14,591    45,757    -    -    60,348 
Conversion of convertible debt and accrued interest to 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, 2022 and 2021

 

  

Nine Months

Ended August 31,

  

Nine Months

Ended August 31,

 
   2022   2021 
Cash flows from operating activities of continuing operations:          
Net income (loss)  $(1,622,888)  $347,212 
Adjustments to reconcile net loss to cash used in operating activities:          
Bad debt expense   74,567    - 
Depreciation and amortization   114,530    117,022 
Interest penalties   56,017    - 
Amortization of debt discount   194,545    - 
Common stock issued in exchange for fees and services   57,860    60,348 
(Gain) loss on change in derivative liabilities   689,004    (758,504)
(Gain) loss on disposal of property and equipment   (68,227)   (23,509)
Note conversion fees   1,500    - 
Changes in operating assets and liabilities:          
Accounts receivable   (74,941)   (31,876)
Accounts payable and accrued liabilities – related party   122,551    - 
Inventory   104,318    (38,202)
Prepaid expenses and other current assets   6,096    86,000 
Accounts payable and accrued liabilities   98,280    196,052 
Related party payables   (81,446)   (112,138)
Other noncurrent liabilities   -    160,413 
Net cash (used in) provided by operating activities   (328,235)   2,818 
           
Cash flows from investing activities:          
Proceeds received from the disposal of property and equipment   152,745    - 
Purchase of property and equipment   -    (238,498)
Net cash provided by (used in) investing activities   152,745    (238,498)
           
Cash flows from financing activities:          
Note payable - non-current   (87,671)   - 
Proceeds from issuance of preferred stock, net of issuance costs   87,500    251,290 
Proceeds from commercial loans payable   284,500    316,649 
Redemption of preferred stock   -    (22,524)
Repayments of commercial loans payable   (240,856)   (215,860)
Net cash provided by financing activities   43,473    329,555 
           
Net increase (decrease) in cash and cash equivalents   (132,017)   93,875 
Cash and cash equivalents at beginning of period   181,088    200,858 
Cash and cash equivalents at end of period  $49,071   $294,733 
           
Supplemental disclosure of cash flow information:          
Cash paid for interest  $101,466   $- 
Cash paid for income taxes  $-   $- 
           
Supplemental disclosure of non-cash investing and financing activities:          
Conversion of convertible notes and accrued interest into common stock  $44,795   $263,361 
Conversion of Series B preferred stock into common stock  $300,775   $179,246 
Accrued dividends and accretion of conversion feature on Series B preferred stock  $111,124   $257,400 
Deemed dividends related to conversion feature of Series B preferred stock  $7,140   $68,296 
Relief of derivative liability from conversion of Series B preferred stock into common stock  $443,906   $178,249 
Relief of derivative liability from conversion of convertible notes into common stock  $156,120   $- 
Subscription receivable from issuance of Series B preferred stock  $75,050   $- 

 

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

August 31, 2022

 

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

 

Daniels Corporate Advisory Company, Inc. (“Daniels” or the Company) was incorporated in the State of Nevada on May 2, 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 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

 

The 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”). The Company believes these condensed consolidated financial statements reflect all adjustments (consisting of normal, recurring adjustments) that are necessary for a fair presentation of its consolidated financial position and consolidated results of operations for the periods presented. All intercompany transactions and balances have been eliminated in consolidation.

 

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

 

The Company’s future results of operations and financial condition will be impacted by the following factors, among others: its lack of capital resources, dependence on third-party management to operate the companies in which it invests and dependence on the successful development and marketing of any new products in new and existing markets. Generally, the 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 its business.

 

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, 2021 and notes thereto and other pertinent information contained in our Form 10-K/A the Company has filed with the Securities and Exchange Commission (the “SEC”) on March 28, 2022. The results of operations for the nine months August 31, 2022, are not necessarily indicative of the results to be expected for the full fiscal year ending November 30, 2022.

 

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. 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.

 

8
 

 

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 has established doubtful accounts of $53,214 as of August 31, 2022.

 

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 August 31, 2022, the Company wrote off $74,567 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 no allowance or write-down for slow moving or obsolete inventory is necessary as of August 31, 2022.

 

Related Party Balances and Transactions

 

The Company follows FASB ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transaction. (Note 3)

 

Convertible Instruments

 

The Company evaluates and accounts 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.

 

Fair Value of Financial Instruments

 

The Company has adopted FASB Accounting Standards Codification (ASC) 820 “Fair Value Measurements and Disclosures” (ASC 820) that 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 also applies ASC 820 for all non-financial assets and liabilities measured at fair value on a non-recurring basis.

 

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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 our 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;
  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

 

The Company recognizes revenue in accordance with ASC 606, “Revenue Recognition” following the five steps procedure:

 

Step 1: Identify the contract(s) with customers

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to performance obligations

Step 5: Recognize revenue when the entity satisfies a performance obligation

 

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 net accounts receivable totaling $8,270 and $7,896 as of August 31, 2022 and November 30, 2021, respectively.

 

Right of Use Assets and Lease Liabilities

 

The Company recognizes according to FASB 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 Company treats lease and non-lease components as a single lease component for all equipment leases. Leases with an original lease term of less than one year are excluded from the ROU assets and lease liabilities.

 

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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.

 

As of August 31, 2022, the Company’s office is currently leased on month-to-month basis. The Company does not have ROU assets and operating lease liabilities as of August 31, 2022.

 

Property and Equipment, net

 

Vehicles 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.

 

Share-Based Compensation

 

The Company accounts for share-based compensation under the fair value method in accordance with ASC 718, “Compensation – Stock Compensation,” which requires all such compensation to employees and non-employees to be calculated based on its fair value of the equity instrument at the grant date and recognized in the earnings over the requisite service or vesting period.

 

During the nine months August 31, 2022, the Company issued 63,859,548 shares of common stock valued at $57,860 to consultants.

 

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.

 

Net Loss Per Share

 

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.

 

The following table sets forth the components of the Company’s potential dilutive instruments as of August 31, 2022:

 

   August 31, 
   2022 
   (Shares) 
Redeemable convertible preferred stock, Series B   540,384,616 
Convertible Notes   2,434,622,817 
    2,975,007,433 

 

Comparative Figures

 

Certain figures have been reclassified to conform with current year presentation.

 

Recently Issued Accounting Pronouncements

 

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 consolidated financial statements.

 

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NOTE 3 - RELATED PARTY TRANSACTIONS

 

The Company currently rents space from its president, Mr. Arthur Viola. This is a month-to-month rental and there is no commitment beyond each month. The monthly rent expense is approximately $2,250.

 

Effective December 15, 2016, Mr. Viola entered into a $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. As of August 31, 2022, the note total is $1,012,172 including $327,172 of accrued interest. No repayment or conversion of the note occurred as of August 31, 2022, and no notice of default has been issued.

 

During 2016, Mr. Viola personally funded $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, 2022.

 

Mr. Viola is entitled to receive a salary of $175,000 annually. Mr. Viola has deferred all cash payments of his base salary in an effort to help the Company fund its operations. During the nine months August 31, 2022 the Company accrued management salaries of $132,200. At August 31, 2022 and November 30, 2021, the total amount of accrued compensation owed to Mr. Viola was $838,584 and $716,033, respectively.

 

The Company’s wholly-owned subsidiary Payless Truckers, Inc. has received net loan proceeds aggregating $50,000 from a related party to help fund the subsidiary’s operations. The loans currently bear flat rates ranging between $1,500 - $3,500, and are secured by certain inventory assets and are payable on demand.

 

Two companies owned by Payless’ former President and certain family members have loaned the Company floor plan financing for a monthly fee per truck financed. During the nine months August 31, 2022 and 2021, financing fees and interest totaling approximately $4,252 and $2,134 were paid to the related party, respectively At August 31, 2022, the outstanding loan balance was $0.

 

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 August 31, 2022, the Company realized a net loss of $1,630,028 attributable to common stockholders and had a working capital deficit of $4,252,872. For year ended November 30, 2021, the Company incurred a net loss of $329,150 attributable to common stockholders and a working capital deficit of $3,563,536. The Company has relied, in large part, upon preferred equity and debt financings to fund its operations. As of August 31, 2022, the Company had outstanding indebtedness, net of discounts, of $910,679 and had $49,071 in cash. As of November 30, 2021, the Company had outstanding indebtedness, net of discounts, of $801,986 and had $181,088 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.

 

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.

 

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NOTE 5 - COVID-19

 

In early 2020, the World Health Organization declared the rapidly spreading coronavirus disease (COVID-19) outbreak a pandemic. This pandemic has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. Due to the outbreak and spread of COVID-19, the Company’s management and advisors responsible for financial reporting have experienced administrative delays, include travel restrictions and reduced work hours. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no material adverse impacts on the Company’s results of operations and financial position at August 31, 2022. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change, as new events occur and additional information is obtained.

 

NOTE 6 - PROPERTY AND EQUIPMENT

 

The following table sets forth the components of the Company’s Vehicles and equipment at August 31, 2022 and November 30, 2021:

 

   Cost   Accumulated Depreciation     
   Balance as of 11/30/2021   Cost disposal   Balance as of 08/31/2022   Balance as of 11/30/2021   Disposal   Addition   Balance as of 08/31/2022   Net Book Value 
                                 
Machinery and equipment   6,432    -    6,432    3,881    -    1,608    5,489    943 
Vehicles   880,951    (134,913)   746,038    182,496    (50,395)   112,922    245,023    501,015 
Total property and equipment   887,383    (134,913)   752,470    186,377    (50,395)   114,530    250,512    501,958 

 

For the nine months August 31, 2022 and 2021, the Company recorded depreciation expense of $114,530 and $117,022, respectively. During the nine months August 31, 2022, there was a gain on vehicle disposal of $68,227 included in other income.

 

In late August 2022 a Company rental truck was taken off the Company’s premises by a former officer of the Company. The Company is actively pursuing to reclaim the truck.

 

NOTE 7 - NOTES PAYABLE

 

Convertible Notes

 

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, unsecured, with principal and interest (stated at 8%) amounts due and payable upon maturity on February 28, 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 0.03% to 0.08%; Dividend rate of 0%; and, historical volatility rates ranging from 195% to 236%. As of August 31, 2022 and November 30, 2021, the note balance was $55,224 and $55,224 and accrued interest was $26,988 and $23,672, respectively, and all associated loan discounts were fully amortized. Although some principal payments have not been paid on time by the Company, management of the Company is currently in discussions with the lender to pay off the note with Company common stock. The note is classified as current in the accompanying balance sheets.

 

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, unsecured, with principal and interest (stated at 10%) amounts due and payable upon maturity on September 30, 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 0.03% to 0.16%; Dividend rate of 0%; and, historical volatility rates ranging from 208% to 269%. As of August 31, 2022 and November 30, 2021, the note balance was $98,459 and $98,459 and accrued interest was $48,557 and $41,166, respectively, and all associated loan discounts were fully amortized. Although some principal payments have not been paid on time by the Company, management of the Company is currently in discussions with the lender to pay off the note with Company common stock. The note is classified as current in the accompanying balance sheets.

 

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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, 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 0.03% to 0.16%; Dividend rate of 0%; and, historical volatility rates ranging from 208% to 269%. As of August 31, 2022 and November 30, 2021, the note balance was $4,000 and $4,000 and accrued interest was $1,538 and $1,388, respectively, and all associated loan discounts were fully amortized. Although some principal payments have not been paid on time by the Company, management of the Company is currently in discussions with the lender to pay off the note with Company common stock. The note is classified as current in the accompanying balance sheets.

 

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, unsecured, with principal and interest (stated at 12%) amounts due and payable upon maturity on August 23, 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 0.03% to 0.16%; 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. During the year ended November 30, 2021, the total balances of $78,700 of principal and $97,944 of accrued interest were converted into 177,538,569 shares of the Company’s common stock fully paying the note.

 

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, unsecured, with principal and interest (stated at 12%) amounts due and payable upon maturity on July 15, 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%; and historical volatility rates ranging from 390% to 423%. During the nine months August 31, 2022, $21,648 of principal and $21,648 of accrued interest was converted into 137,550,600 shares of the Company’s common stock. As of August 31, 2022 and November 30, 2021, the note balance was $222,522 and $244,170 and accrued interest was $147,218 and $148,599, respectively, and all associated loan discounts were fully amortized. Although some principal payments have not been paid on time by the Company, management of the Company is currently in discussions with the lender to pay off the note with Company common stock. The note is classified as current in the accompanying balance sheets.

 

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, unsecured, with principal and interest (stated at 12%) amounts due and payable upon maturity on November 14, 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% to 2.540%; Dividend rate of 0%; and, historical volatility rates ranging from 309% to 339%. As of August 31, 2022 and November 30, 2021, the note balance was $57,500 and $57,500 and accrued interest was $15,408 and $10,206, respectively, and all associated loan discounts were fully amortized. Although some principal payments have not been paid on time by the Company, management of the Company is currently in discussions with the lender to pay off the note with Company common stock. The note is classified as current in the accompanying balance sheets.

 

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, secured by all of the assets of the Company and its subsidiaries, with principal and interest (stated at 12%) amounts due and payable upon maturity on April 22, 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% to 1.95%; Dividend rate of 0%; and, historical volatility rates ranging from 1,313% to 1,467%. As of August 31, 2022 and November 30, 2021, the note balance was $75,250 and $75,250 and accrued interest was $25,968 and $19,189, respectively, and all associated loan discounts were fully amortized. Although some principal payments have not been paid on time by the Company, management of the Company is currently in discussions with the lender to pay off the note with Company common stock. The note is classified as current in the accompanying balance sheets.

 

Commercial Loans

 

On May 28, 2021, the Company executed 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 purchase amount of $150,000. The aggregate principal amount is payable in daily instalments totaling $1,591 until such time that the obligation is fully satisfied. As of November 30, 2021, the loan balance was $6,213. During the nine months August 31, 2022, the loan was fully repaid.

 

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 instalments totaling $1,076 until such time that the obligation is fully satisfied. As of November 30, 2021, the loan balance was $24,087. During the nine months August 31, 2022, the loan was fully repaid.

 

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On November 8, 2021, the Company executed a merchant cash advance agreement with Consistent Funding. Under the agreement, the Company sold an aggregate of $145,000 in future receivables for a purchase amount of $100,000. The aggregate principal amount is payable in daily instalments totaling $656 until such time that the obligation is fully satisfied. As of August 31, 2022 the total outstanding principal on these future receivable sale and purchase agreements was $73,044, including $20,487 of accrued interest, and $96,361 as of November 30, 2021. As of August 31, 2022 the agreement is in default.

 

On December 10, 2021, the Company executed a merchant cash advance agreement with Consistent Funding. Under the agreement, the Company sold an aggregate of $116,000 in future receivables for a purchase amount of $80,000. The aggregate principal amount is payable in daily instalments totaling $967 until such time that the obligation is fully satisfied. As of August 31, 2022, the total outstanding principal on these future receivable sales and purchase agreement was $40,149, including $9,864 of accrued interest. As of August 31, 2022 the agreement is in default.

 

On January 26, 2022, the Company executed a merchant cash advance agreement with Gem Funding. Under the agreement, the Company sold an aggregate of $100,100 in future receivables for a purchase amount of $70,000. The aggregate principal amount is payable in daily instalments totaling $596 until such time that the obligation is fully satisfied. As of August 31, 2022, the total outstanding principal on these future receivable sales and purchase agreement was $71,260 including $19,648 of accrued interest and fees. As of August 31, 2022 the agreement is in default.

 

On April 7, 2022, the Company executed a merchant cash advance agreement with Gem Funding. Under the agreement, the Company sold an aggregate of $41,700 in future receivables for a purchase amount of $30,000. The aggregate principal amount is payable in daily instalments totaling $348 until such time that the obligation is fully satisfied. As of August 31, 2022, the total outstanding principal on these future receivable sales and purchase agreement was $5,324 including $121 of accrued interest. As of August 31, 2022 the agreement is in default.

 

On March 4, 2022, the Company executed a merchant cash advance agreement with E Advance Services, LLC. Under the agreement, the Company sold an aggregate of $88,200 in future receivables for a purchase amount of $60,000. The aggregate principal amount is payable in daily instalments totaling $767 until such time that the obligation is fully satisfied. As of August 31, 2022, the total outstanding principal on these future receivable sales and purchase agreement was $46,138 including $8,471 of accrued interest. As of August 31, 2022 the agreement is in default.

 

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, 2022, the total amount outstanding under such notes was $411,969, of which $353,999 is considered current and classified under “Notes payable, net of loan discounts” in the Company’s condensed consolidated financial statements. The remaining noncurrent portion is classified under “Notes payable – non- current”. The aggregate monthly payments of principal and interest on these promissory notes is $19,583.

 

NOTE 8 - 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 liability is an embedded derivative associated with one of the Company’s convertible promissory notes. The convertible promissory notes 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 notes, which are amortized as debt discount to be presented in other (income) expenses in the statements of operations using the effective interest method over the life of the notes.

 

The embedded derivative within the note have been valued using the Black Scholes approach, recorded at fair value at the date of issuance; and marked-to-market at each reporting period end date with changes in fair value recorded in the Company’s statements of operations as “change in the fair value of derivative instrument”.

 

As of August 31, 2022 and November 30, 2021, the estimated fair value of derivative liability was determined to be $1,127,015 and $875,487, respectively.

 

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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, 2022:

    Carrying     Fair Value Measurement Using  
    Value     Level 1     Level 2     Level 3     Total  
Derivative liabilities on conversion feature   $ 1,127,015       -       -     $ 1,127,015     $ 1,127,015  
Total derivative liabilities   $ 1,127,015       -       -     $ 1,127,015     $ 1,127,015  

 

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, 2021:

 

    Carrying     Fair Value Measurement Using  
    Value     Level 1     Level 2     Level 3     Total  
Derivative liabilities on conversion feature   $ 875,487     $     $     $ 875,487     $ 875,487  
Total derivative liabilities   $ 875,487     $     $     $ 875,487     $ 875,487  

 

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 derivative liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months August 31, 2022:

    Derivative  
    Liabilities  
Balance - November 30, 2021   $ 875,487  
Addition of new derivative liabilities from issuance of series B preferred stock     272,586  
Relief of derivative liabilities from conversion of convertible notes     (156,120 )
Relief of derivative liabilities from conversion of series B preferred stock     (443,906 )
Loss (Gain) on change in fair value of the derivative     578,968  
Balance - August 31, 2022   $ 1,127,015  

 

NOTE 9 – 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 1,100,000, par value $0.001 per share. At August 31, 2022 and November 30, 2021, the Company had 100,000 shares of Series A preferred stock issued and outstanding, and 140,500 and 240,000, shares of Series B preferred stock issued and outstanding, respectively.

 

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 1,000,000 of its available preferred shares as Series B preferred mandatorily redeemable convertible stock, stated value of $1.00 per share, and with a par value of $0.001 per share. The shares will carry an annual ten percent (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-day trading period immediately preceding the notice of conversion.

 

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.

 

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On December 31, 2020, the Company sold 53,500 shares of its Series B convertible preferred stock, with an annual accruing dividend of 10%, to Geneva Roth Remark Holdings, Inc. (“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 are convertible at the option of the shareholder. The Company recorded a derivative liability of $88,694, valued using the Black-Scholes Model, associated with Series B preferred shares.

 

On January 13, 2021, the Company sold 43,500 shares of its Series B convertible preferred stock, with an annual accruing dividend of 10%, to Geneva, for $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 $50,753, valued using the Black-Scholes Model, associated with Series B preferred shares.

 

On March 2, 2021, the Company sold 43,500 shares of its Series B convertible preferred stock, with an annual accruing dividend of 10%, to Geneva, for $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 $55,774, valued using the Black-Scholes Model, associated with Series B preferred shares.

 

On May 20, 2021, the Company sold 55,000 shares of its Series B convertible preferred stock, with an annual accruing dividend of 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 a derivative liability of $46,771, valued using the Black-Scholes Model, associated with Series B preferred shares.

 

On June 28, 2021, the Company redeemed 53,500 shares of its Series B convertible preferred stock from Geneva for $79,234. The Company recorded a $22,524 deemed dividend as a result of the redemption.

 

On June 28, 2021, the Company sold 53,750 shares of its 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 are convertible at the option of the shareholder. The Company recorded a derivative liability of $43,990, valued using the Black-Scholes Model, associated with Series B preferred shares.

 

On July 14, 2021, the Company sold 58,750 shares of its 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. The Company recorded a derivative liability of $72,325 valued using the Black-Scholes Model, associated with Series B preferred shares.

 

On September 2, 2021, the Company sold 48,750 shares of its Series B convertible preferred stock, with an annual accruing dividend of 10%, to Geneva, for $45,000 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 $41,002 valued using the Black-Scholes Model, associated with Series B preferred shares.

 

On September 3, 2021, the Company sold 43,750 shares of its Series B convertible preferred stock, with an annual accruing dividend of 10%, to Geneva, for $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 $40,365 valued using the Black-Scholes Model, associated with Series B preferred shares.

 

On February 1, 2022, the Company sold 43,750 shares of its Series B convertible preferred stock, with an annual accruing dividend of 12%, to Geneva, for $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 $53,592 valued using the Black-Scholes Model, associated with Series B preferred shares.

 

On August 15, 2022, the Company sold 53,250 shares of its Series B convertible preferred stock, with an annual accruing dividend of 12%, to Geneva, for $47,500 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 $93,778 valued using the Black-Scholes Model, associated with Series B preferred shares.

 

On August 30, 2022, the Company sold 43,625 shares of its Series B convertible preferred stock, with an annual accruing dividend of 12%, to Geneva, for $37,525 pursuant to a Series B preferred stock purchase agreement. As of August 31, 2022, the proceed of $37,525 has not been received and was recorded as subscription receivable. (Note 12) 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 $62,608 valued using the Black-Scholes Model, associated with Series B preferred shares.

 

On August 30, 2022, the Company also sold 43,625 shares of its Series B convertible preferred stock, with an annual accruing dividend of 12%, to Boot Capital LLC, for $37,525 pursuant to a Series B preferred stock purchase agreement. As of August 31, 2022, the proceed of $37,525 has not been received and was recorded as subscription receivable. (Note 12) 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 $62,608 valued using the Black-Scholes Model, associated with Series B preferred shares.

 

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As of August 31, 2022, the estimated fair value of these derivative liabilities was determined to be $153,165. The change in the fair value for the nine months August 31, 2022 was an unrealized loss of $164,608.

 

During the nine months August 31, 2022, the Company recorded $194,545 of accretion of discounts and $7,140 in dividends. As of August 31, 2022, there were 140,500 shares outstanding and a remaining unamortized discount of $137,927.

 

Common Stock

 

The number of shares of common stock authorized is 6,000,000,000, par value $0.001 per share.

 

Nine months August 31, 2022

 

During the nine months August 31, 2022, the Company issued:

 

  137,550,600 shares of common stock for the conversion of convertible note principal amount of $21,647 and accrued interest of $21,647 and $1,500 of conversion fees.

 

  760,490,423 shares of common stock for the conversion of 283,750 shares of series B preferred stock and accrued dividend of $17,025.

 

  63,859,548 shares of common stock valued at $57,860 to consultants.

 

Nine months ended August 31, 2021

 

During the nine months ended August 31, 2021, the Company issued

 

  258,273,269 shares of common stock for the conversion of convertible note principal and accrued interest for a total of $263,631.

 

  87,854,655 shares of common stock for the conversion of 169,100 shares of series B preferred stock.

 

  14,590,743 shares of common stock valued at $60,348 to consultants.

 

At August 31, 2022 and November 30, 2021, the Company had 1,741,199,100 and 779,298,529 shares of common stock, respectively, issued and outstanding.

 

NOTE 10 – SEGMENT INFORMATION

 

The Company views its operations and manages its business as one 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 11 – 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.

             
    Nine Months Ended  
    August 31,  
Revenue   2022     2021  
             
Resale of refurbished trucks   $ 785,144     $ 2,885,121  
Truck rental     517,951       625,873  
Repair revenue     14,591       33,798  
Miscellaneous income     10,913       -  
Total Revenue   $ 1,328,599     $ 3,544,792  

 

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 nine months August 31, 2022, the Company recognized sales revenue from the resale of refurbished trucks of $785,144 as compared to sales revenue from the resale of refurbished trucks of $2,885,121 during the nine months ended August 31, 2021.

 

The Company also recognizes 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 nine months August 31, 2022, the Company recognized sales revenue from the rental of its trucks of $517,951, as well as repair revenue of $14,591 and miscellaneous income of $10,913, as compared to sales revenue from the rental of its trucks of $625,873 as well as repair revenue of $33,798 during the nine months ended August 31, 2021.

 

NOTE 12 - SUBSEQUENT EVENTS

 

In accordance with FASB ASC 855-10 Subsequent Events, the Company has analyzed its operations subsequent to August 31, 2022, to October 17, 2022, the date these unaudited consolidated condensed financial statements were issued, and has determined that it has the following material subsequent events to disclose in these consolidated financial statements.

 

During the early September 2022, the Company received $75,050 from the issuance of 87,250 shares of its Series B convertible preferred stock on August 30, 2022. (Note 9)

 

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ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

 

The results of our quarter ended August 31, 2022, reflect the continuation of the business process being experienced in the incubation of our premier start-up subsidiary in the Transportation Services segment of the Trucking Industry. Daniels continued to umbrella its subsidiary, Payless Truckers, Inc.’s expansion through financing sources expensive in nature. Parent Company Management believes the capital costs incurred were warranted as they augmented working capital levels during a very challenging quarter. After months of negotiations, several financing options are in final review with some having very favorable terms including long-term financing.

 

For the nine months - December 1, 2021, through August 31, 2022 - Total Revenue was $1,328,599 compared to $3,544,792 for the corresponding quarter of the previous fiscal year. This was comprised of $785,144 from the Flip business and $517,951 in fleet rental, $14,591 repairs, and $10,913 miscellaneous income. While both businesses have the potential to produce high margins, our activities were severely limited by (1) the substantial increase in prices of used trucks for our fleet which was partially counteracted when we could afford to selectively bid at Auctions, (2) In spite of the substantial increase in fuel costs only the well positioned drivers continued in business. Most of the drivers in our rental fleet were able to sustain themselves, and (3) the lack of closings of financing transactions to continue our growth.

 

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. We are receiving continuing interest in our products because they are top of the line brands/models. We are confident that the financing alternatives being finalized - as noted below - will allow us to meet this demand soon. In addition, we have recently been able to find identify trucks for our flip business at reasonable prices that allow us to rebuild and maintain our historic top line and margins. The demand is growing, and our new financing arrangements mentioned below will allow us to meet that demand.

 

The normal short-term financing regularly provided was not provided at historic levels. This expensive money was necessary to fuel the working capital level to continue operations at fiscal year 2021 levels. The financier’s previous year’s capital commitment proved-out both our incubator and transportation services (Payless Truckers, Inc.) models. These models are perfect in concept and can easily have their expansion accelerated with the proper capital now that Class 8 Tractor prices have softened. Unfortunately, the capital needed - asset based lending at current market rates, and not from the hard money lenders, and long-term straight debt financing with warrants was still in negotiation. It could not help the results of the August 2022 quarter.

 

Negotiations with long-term straight debt lenders and Preferred Stock financiers are continuing. More creative approaches were developed by concerted efforts with several investment banking houses, finally centering on the use of our innovative financing structure which is currently being developed. The main objective - Daniels’ senior management believes levered financing - supported by equity and layered finance options - will allow Payless to achieve the first plateau of 100 rental fleet trucks in a measured amount of time. We realize that we will need to acquire 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 capacity and can only add five to six truck additions to our rental fleet each month.

 

The funding options being discussed and finalized will eliminate the need for continuation of expensive private investor funding. The use of our innovative concept allows for a lower interest rate because the secured loan financing provided to it is not under the existing heavily burdened capital structure of the consolidated companies. Blended Public market-rates for financing, - of a combination of asset based lending and long-term debt with warrants - will allow Daniels / Payless to attract institutional and retail investors. We will be able to service a larger debt load. This effort may be multiplied by any equity capital raised. Our overall cost of capital should drop significantly.

 

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 in light of the Coronavirus outbreak with its changes in how people and businesses operate as well as the inflationary trend in the US economy. However, in light of these new circumstances, 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.

 

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 segments with its launch and current results coming from the “flip” segment, whose principal business is to acquire class 8 heavy duty trucks, refurbish them, add location electronics, advertise and sell to independent drivers and operators. The second segment is the “credit rebuilding 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. 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.

 

The Payless two-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. 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 future years by forming joint-ventures and/or partnerships with truck maintenance companies across the United States in key tr