The accompanying notes are an integral
part of these financial statements.
The accompanying notes are an integral
part of these financial statements.
The accompanying notes are an integral
part of these financial statements.
Notes to Unaudited Financial Statements
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
was organized to offer: (a) corporate financial consulting and (b) merchant banking services for public and private client companies
interested in implementing Daniels developed, agreed upon, accelerated growth strategies; including MBO/LBO, Roll-up Transactions.
Merchant banking includes equity funding of the growth of client and service companies, as well as funding equity of small public
companies. The business became a subsidiary in late 2003 as a result of INfe Human Resources, Inc. (a publicly quoted Nevada
Company) acquiring the common stock of Daniels Corporate Advisory Company, Inc. During August 24010, INfe Human Resources,
Inc. underwent a name change to Rhino Human Resources, Inc., but is still public and trades under the same (original) stock symbol:
"IFHR."
The company has
a growth goal of providing advisory services to business services as well as non-business services client companies. The company
works with companies seeking to create and/or acquire adjunct service businesses, whose services will initially provide better
lifestyles for its existing workforce, and ultimately will be packaged, on an additional profit center basis, for sale to other
small companies for the retention of their employees. The profits generated from all the financial consulting assignments will
be available for venture investment in public or private client companies, as well as other quality business concept/operating
companies, both public and private; through the Daniels' Merchant Bank Division.
The Daniels Merchant
Bank has an in-house equity funding program, whereby Daniels will participate in consulting client potential growth by helping
finance the growth of public and private client, business service companies, as well as non-business service companies. The Merchant
Bank will also participate in non-client potential growth by the purchase of equity in attractive small public companies whose
growth strategies are in line with a philosophy of growth through leveraged acquisitions.
The Company formed
on October 11, 2013 Daniel's Logistics Inc. a wholly owned operating subsidiary in the field of logistics was incorporated in the
state of Nevada to take advantage of niche operating opportunities and possible acquisitions in the logistics field. During the
quarter ending August 31, 2015 the Company discontinued these operations until further analysis could be done on the overall effectiveness
of all Company operations.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation:
We have prepared the accompanying
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. We believe these consolidated
financial statements reflect all adjustments (consisting of normal, recurring adjustments) that are necessary for a fair presentation
of our consolidated financial position and consolidated results of operations for the periods presented. Such rules and regulations
allow us to condense and omit certain information and footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of America. We believe these condensed
consolidated financial statements reflect all adjustments (consisting of normal, recurring adjustments) that are necessary for
a fair presentation of our consolidated financial position and consolidated results of operations for the periods presented.
Election to be treated as an emerging growth company:
For the five-year
period starting in the first quarter of 2012, Daniels if continuing eligibility applies has elected to use the extended transition
period now available for complying with new or revised accounting standards under Section 102(b) (1). This election allows
Daniels to delay the adoption of new or revised accounting standards that have different effective dates for public and private
companies until those standards apply to private companies. As a result of the Company still being eligible, the Daniels
financial statements may not be comparable to companies that comply with public company effective dates.
6
FASB Codification:
In
June 2009, the FASB issued ASC 105,
Generally Accepted Accounting Principles,
("Codification") effective
for interim and annual reporting periods ending after September 15, 2009. This statement establishes the Codification as the
source of authoritative accounting principles used in the preparation of financial statements in conformity with generally accepted
accounting principles. The Codification does not replace or affect guidance issued by the SEC or its staff. As a result of the
Codification, the references to authoritative accounting pronouncements included herein in this Annual Report now refer to the
Codification topic section rather than a specific accounting rule as was past practice.
Use of Estimates:
The preparation
of financial statements in conformity with accounting principles generally accepted in the United States of America 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 financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Risk and Uncertainties:
Our future results
of operations and financial condition will be impacted by the following factors, among others: our lack of capital resources, dependence
on third-party management to operate the companies in which we invest and dependence on the successful development and marketing
of any new products in new and existing markets. Generally, we are 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 our business.
Cash and Cash Equivalents:
For financial statement
presentation purposes, short-term, highly liquid investments with original maturities of three months or less are considered to
be cash equivalents. The Company maintains its cash accounts at several financial institutions, which at times may exceed the insurable
FDIC limit, but management believes that there is little risk of loss.
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.
|
7
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. 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.
Investments:
Our investments
consist of common stock of publicly quoted companies and are valued based on the closing stock price. We account for our investments
in accordance with ASC Topic 320,
Investments
.
We have designated our investments at May 31, 2018 as available-for-sale
and reported these investments at fair value, with unrealized gains and losses recorded in other comprehensive income (loss). We
determined the fair value of these investments based on the closing quoted stock price on May 31, 2018. We base the
cost of the investment sold on the specific identification method using market rates.
Comprehensive Income:
ASC Topic 220 (SFAS
No. 130) establishes standards for reporting comprehensive income and its components. Comprehensive income is defined as the
change in equity during a period from transactions and other events from non-owner sources. Per the consolidated financial
statements, the Company has purchased available-for-sale securities that are subject to this reporting.
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.
|
8
Recently Issued Accounting Pronouncements:
The Company has
implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements and
does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact
on its financial position or results of operations.
Revenue and Cost Recognition:
The Company applies
paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when
it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following
criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been
rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
Daniels Corporate Advisory
Company, Inc., generates revenues as a result of corporate financial consulting services which are recognized as services are performed.
Daniels also operates a merchant banking division. During the three months ended May 31, 2018 and 2017, the Company did not generate
any revenues.
Fixed Assets:
Fixed assets acquired
would be 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.
Financing Fees:
Financing fees were
being amortized over the life of the related liability on the straight-line method which is not materially different than using
the effective interest method. All amortization has been expensed since the ongoing staffing operations have discontinued from
which the finance fees were originally accrued.
Net Income (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.
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.
9
Currently, the Company
has projected $8,333,696 as of May 31, 2018 in Net Operating Loss carryforwards available. The benefits of the potential tax savings
will be recognized in the recorded to date.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company currently
rents space from Arthur Viola, CEO and shareholder. This is a month to month rental and there is no commitment beyond each month.
The monthly rent expense is $2,025.
Effective December 15,
2015, 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 matures 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 shares at any time.
During 2016, our
President Arthur Viola infused $10,200 in advances for working capital. These funds were advanced interest free with no payback
terms of twelve months and one day. No repayments have been made against these advances as of May 31, 2018.
NOTE 4 - GOING CONCERN
The accompanying
financial statements have been prepared assuming that the Company will continue as a going concern. Currently, the Company has
recurring operating losses, and as of May 31, 2018 the Company had a working capital deficit and an accumulated deficit. These
factors raise substantial doubt about the Company's ability to continue as a going concern. Management believes that the Company's
capital requirements will depend on many factors including the success of the Company's development efforts and its efforts to
raise capital. Management also believes the Company needs to raise additional capital for working capital purposes. There is no
assurance that such financing will be available in the future. The conditions described above raise substantial doubt
about our ability to continue as a going concern. The financial statements of the Company do not include any adjustments relating
to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary
should the Company be unable to continue as a going concern.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Commitments:
The Company currently has no long-term
commitments.
Contingencies:
None
NOTE 6 - LEGAL PROCEEDINGS
We are not engaged
in any other litigation and management is unaware of any claims or complaints that could result in future litigation. Management
will seek to minimize disputes with its customers but recognizes the inevitability of legal action in today's business environment
as an unfortunate price of conducting business.
NOTE 7 - INCOME TAXES
As of May 31, 2018,
the Company had approximately $8,333,696 in net operating loss carry forwards for federal income tax purposes which expire between
2018 and 2034. 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 carryforward. 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.
10
Components of deferred tax assets and
(liabilities) are as follows:
|
|
31-May-18
|
|
|
30-Nov-17
|
|
Net operating loss carry forwards valuation available
|
|
$
|
8,333,696
|
|
|
$
|
8,169,535
|
|
|
|
|
|
|
|
|
|
|
Less: Valuation Allowances
|
|
|
(8,333,696
|
)
|
|
|
(8,169,535
|
)
|
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 in the amount of
$8,333,696 at May 31, 2018. The Company did not utilize any NOL deductions for the full fiscal year ended November 30, 2017.
NOTE 8 - NOTES PAYABLE
Other than as described
below, there were no issuances of securities without registration under the Securities Act of 1933 during the reporting period
which were not previously included in our previous form 10K.
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 .03% to .08%; Dividend rate of 0%;
and, historical volatility rates ranging from 195% to 236%. As of May 31, 2018, the note balance was $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, 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 .03% to .16%; Dividend
rate of 0%; and, historical volatility rates ranging from 208% to 269%. As of May 31, 2018, the note balance was $113,992 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, 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 May 31, 2018, the note balance was $6,500 and all associated loan discounts were fully amortized.
11
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 .03% to .16%; Dividend
rate of 0%; and, historical volatility rates ranging from 208% to 269%. During the three months ended May 31, 2018, the Company
amended this agreement and received an additional $10,000 in funding under this note. As of May 31, 2018, the note balance was
$97,000 and all associated loan discounts were fully amortized.
NOTE 9 - 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 issued, (the "Note"), are a hybrid instrument 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 have 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 May 31, 2018
and November 30, 2017, the estimated fair value of derivative liability was determined to be $463,490 and $362,091, respectively.
For the three months ended May 31, 2018, new derivative liability was recognized of $18,489. The change in the fair value of derivative
liabilities for the three months ended February 28, 2018 was $20,045 resulting in an aggregate loss 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 on the balance sheets:
|
|
|
Fair Value Measurement Using
|
|
|
|
Carrying Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Derivative liabilities on conversion feature
|
|
|
463,490
|
|
|
|
–
|
|
|
|
–
|
|
|
|
463,490
|
|
|
|
463,490
|
|
Total derivative liabilities
|
|
$
|
463,490
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
463,490
|
|
|
$
|
463,490
|
|
12
Summary of the Changes in Fair
Value of Level 3 Financial Liabilities
The table below
provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities
measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the six months ended May 31,
2018:
|
|
Derivative Liability
|
|
Fair value, November 30, 2017
|
|
$
|
362,091
|
|
Additions
|
|
|
63,960
|
|
Change in fair value
|
|
|
37,439
|
|
Transfers in and/or out of Level 3
|
|
|
–
|
|
Fair value, February 28, 2018
|
|
$
|
463,490
|
|
NOTE 10 – SUBSEQUENT EVENTS
In accordance with FASB
ASC 855-10 Subsequent Events, the Company has analyzed its operations subsequent to May 31, 2018 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.
13