Washington, D.C. 20549
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of "large accelerated filer, "accelerated filer" and "smaller reporting company" in Rule 12b-2 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).
As of
December 7, 2016 the registrant had 2,686,756,136 shares of common stock outstanding.
PART I
ITEM 2. MANAGEMNT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
Overview
Daniels Corporate Advisory has established a permanent base upon which to provide the corporate strategy consulting services noted below, through a variety of methods: including the issunace of additional shares in private placement and/or issuance of anti-dilutive Convertible Preferred Stock and loans from senior officers to provide the necessary working capital of the Company to sustain activities under any consulting assignment obtained through the networking of senior executives or through the initial purchase of rights to be the provider of choice to offer a financial specialty package including corporate strategy to clients of other financial/business services companies. While rights agreements of this nature are not typical, senior management, drawing on personal contacts and those of credential members of its Corporate Strategy Advisory Board believes that offering to provide a very select service that would be very costly to duplicate with permanent in-house professionals and will augment other financial services already being offered/implemented by the financial/business services firm (a referral generator) entering into the rights agreement with Daniels Corporate Advisory, will be an acceptable additional option. However, there is no assurance that has time goes by a client may decide to enter our business and there is no provision in our agreement to prevent that from happening. However, our senior management believes that our success with the ultimate client, the client network member of a financial/business services client, will determine whether Daniels Corporate Advisory retains the client or not.
The services incorporated into corporate strategy advisory and implementation to help formulate a path for the acceleration of corporate development (growth) include market analysis, negotiation, deal structure and determination of finance alternatives for the creation of joint-ventures, marketing agreements, new product/creation additions and acquisitions. Daniels Corporate Advisory has a loosely organized cadre of highly-qualified, independent contractors/consultants available to perform the necessary services to achieve the optimum corporate strategy for a client.
Services will also be provided in corporate financial advisory, which, like corporate strategy, is a specialized segment of corporate advisory. It deals more with operations/cost control issues that can be established in-house with the aid of our on-call professionals. These offerings would be extremely expensive to do in-house by any potentially competitive financial service firm retaining Daniels Corporate Advisory, on behalf of on of its clients, because of its fixed overhead.
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Daniels is developing direct methods for the acquisition of clients, namely advertising in industry niches of interest and subsequent referral by a stockholder or partner. Name brand recognition is expected to be created after one or two successful corporate strategy assignments and the publicizing of these events on web sites related to this specialty, ours and theirs, on the worldwide web.
Daniels Corporate Advisory is operating at the present time through the corporate strategy segment of its business in order to build its own critical mass by creation of start-up subisidaries it believes to have promise/potential, with the stated goal of the parent (DCAC) company to meet the financial requirements necessary for major Stock Exchange Listing. Senior management and its Advisory Board are providing preliminary services to three such potential clients; one under a formal LOI (Letter of Intent) and two in final negotiations.
As our presence in the market place becomes more visible, through publication on client websites of our successes in our initial corporate strategy consulting assignments added financing options are expected to materialize for the benefit of our clients. Capital companies and high-net worth (accredited) individuals may contact us to see if they may participate directly in subsequent assignments.
Recent Business Developments
The Company conducts on-going
networking and
business development in
corporate strategy through its chairman, on a chairman to chairman basis, through the networks of its Advisory Board Members and its expanded, independent contractor consulting team. A full range of disciplines are offered to the nano-cap public and private company through personalized relationship networking to keep initial marketing costs at a minimum. Disciplines being offered are operational strategies, market-planning, senior oversight management and financial alternatives consulting on optimum paths for the client to take. This could include but not be limited to external growth alternatives requiring advisory on M & A, levered transactions, capital structure, bridge loans, and equity financing.
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Business Strategy - Current Operational Strategy & Current Client Projects:
Daniels creates and implements corporate strategy alternatives for the mini-cap public or private company client. The addition of new business opportunities and the location of professional talent for implementation is anticipated through the full-time efforts of our senior management. These efforts are to be expanded in the US and in foreign capitals by an expanding advisory board and through the networks of independent consultants. Principals of the respective client company will open their networks to augment professional access for specialties the Daniels corporate strategy consultants believe are needed in a jointly-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 LBO format. One or a combination of these strategies would allow the client to enter new market niches or expand further into existing ones.
The Goal
: Within twenty-four months from commencement of a Corporate Strategy Assignment, financial results, aided by all participating players, should be forthcoming and recorded in SEC Filings. At the same time, a senior management team and Board expanded with highly-credible interim (or permanent) professionals (directors) will be provided in order to successfully navigate the listing process of a major Stock Exchange. While Daniels believes this process should be successful in the above-noted, time period, there is some uncertainty in the process which is dependent upon any past issues the listing committee of a specific exchange may deem necessary to be addressed prior to uplifting.
A similar effort will be provided to tailor an optimum growth program for the private company client, whether it chooses to remain private or to become a public company through alternative merger opportunities.
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Current Projects: Start-Up Subsidiaries to be Expanded in Fiscal 2016.
Just after the Close of Fiscal 2015, Daniels Food & Beverage Group was launched and continues to grow and meet initial objectives. The Company purchased a permanent option for $27,500 to provide advisory and some capital to acquire a candidate for the Italian Cafe's segment of its announced business model. The initial target company does approximately $185,000 in revenues and generates a profit of $75,000. The total purchase price is $100,000 with the option value contributed as part payment. An operating partner corporation with significant, related experience is joint-venturing with Daniels in the further build-out of the Italian Cafe's segment of the Food & Beverage Group. Daniels intends to consummate this transaction during the first half of the current fiscal year.
Further expansion of the Consulting segment of our business model and that of the Food & Beverage Group is anticipated through our Letter Of Intent with Island Hospitality Concepts, Inc. ("IHC"). This Consulting Group develops and executes on restaurant themes for expansion in the Islands, initially concentrating in the Dominican Republic. It has a successful 30 year history and has already developed several profitable island brands that can be built out further through a Daniels incubation project and them offered through a Franchising Program.
Other Start-Up Potentials in discussions/negotiations at the current time include one in Merchant Finance and one in Construction - specifically, the reconstruction of disaster damaged properties.
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OPTIMUM GROWTH STRATEGY:
Twelve to Twenty four Month Horizons for Daniels ' Objectives:
Daniels' believes that the validity of its corporate strategy model will be proven further through the success of several of its client/incubation/subsidiary deals. The Company plans to use its publicly traded common stock, in a variety of securities packages, including anti-dilutive Convertible Preferred, to finance a subsidiary start-up, initially for generic sales/profits growth. Subsequent growth options noted above will be applied as external growth becomes a secondary goal. This method of two stage (generic and then external) growth is designed to leave existing client management with commanding equity and operating control positions. Eventually, an optimum exit strategy will be developed for the subsidiary, one that returns a significant return on corporate (parent) capital. The choices of optimum exit strategies could include bringing a subsidiary public, directly, or merging it with a public company operating in one of the more profitable niches of the specific market designated for expansion. The same corporate strategy model can/will be applied to any independent mini-cap public client.
We believe our business model to be scalable. Based upon the potential success of the initial corporate strategy consulting assignments creating our uplifting to a major Stock Exchange, Daniels may entertain the creation of a franchising plan for key US Cities and Foreign Capitals or Finance Centers.
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Sales and Marketing
Daniels senior management will concentrate its efforts to expand its corporate strategy and financial advisory services and related specialties in the nano-cap segment of the private and public markets, where Daniels believes it will be effective. Marketing efforts will increase through social and print media efforts and will be in addition to those methods already mentioned herein. Daniels objective is to create and help manage implementation of accelerated expansion strategies and in so doing, aid in the creation of financing alternatives to accomplish client goals.
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Competition
We believe that existing and new competitors will continue to improve their services and introduce new services with competitive price and performance characteristics.
In periods of reduced demand for our services, we can either choose to maintain market share by reducing our prices to meet competition or maintain prices and choose only those assignments with new clients, that have pressing goals to be met, that offer Daniels optimum potential for profits and growth.
The "collective" corporate financial services, including merchant banking/private equity, are very competitive and fragmented in the Company's market niche. There are limited barriers to entry and new competitors frequently enter the market. A significant number of our competitors possess substantially greater resources. We are and will continue to offer equity compensation to our team of Advisory Board Members, and independent strategy consultants in order to keep a stable, cohesive team of professionals, which is necessary and key to the creation of operating and capital solutions in a timely fashion.
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Liquidity and Capital Resources
Our primary source of liquidity has been expenses paid by Arthur D. Viola, our sole officer and director and controlling stockholder. As of August 31, 2016, we had $2 in cash and cash equivalents and a working capital deficit.
Financing Activities
We will have to raise capital by means of borrowings or through a private placement or a subsequent registered offering. At present, we do not have any commitments with respect to future financings. If we are unable to raise adequate capital, in the near term, to finance all phases of a client corporate consulting assignment, our proposed business will experience slow growth because it will be very hard to compete for business without a sound capital base to support advisory and implementation efforts on our suggested corporate growth strategies.
At present, we do have sufficient capital on hand to fund very limited operations for the immediate future. Our logistics income continues to provide enough working capital to fund our operations. We are continually seeking to raise funds for our projects through both debt and equity measures.
Results of Operations – For the Three Months ended August 31, 2016
Revenues
The Company did not have sales for the quarters ending August 31, 2016 or August 31, 2015.
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Operating Expenses
During the three months ended August 31, 2016, we incurred $36,955 in expenses, compared to $562,469 in the same period ended August 31, 2015 a decrease of $525,514. Our major cost is wages which was remained constant $25,000 in the current quarter. This quarter saw an increase in consulting expenses as we continue to develop our logistics business internally.
Other Income and Expenses
During the quarter ending August 31, 2016 we incurred a change in derivative liabilities of $19,564 which accounted for most of the increase in other charges. The Company also incurred derivative expense charges of $183,333 for the quarter.
Net Income
The Company had a net loss for the three months ended August 31, 2016 of $239,852 compared to a net loss of $564,132 for the three months ended August 31, 2015. This decrease of $324,280 was in majority due to our logistics subsidiary shutdown which was discontinued during the 2015 fiscal year.
Results of Operations – For the Nine Months ended August 31, 2016
Revenues
The Company did not have sales for the nine months ending August 31, 2016 or 2015.
Operating Expenses
During the nine months ended August 31, 2016, we incurred $288,467 in expenses, compared to $1,068,977 in the same period ended August 31, 2015 a decrease of $780,510. Our major cost is wages which was remained constant $50,000 in the current quarter. This period saw an increase in consulting expenses as we continue to develop our logistics business internally.
Other Income and Expenses
During the nine months ending August 31, 2016 we incurred derivative expense charge of $438,677 which accounted for most of the increase in other charges. The Company also incurred interest expense charges of $97,373 for the period which is an increase from the prior period as well.
Net Income
The Company had a net loss for the nine months ended August 31, 2016 of $914,828 compared to a net loss of $1,135,250 for the nine months ended August 31, 2015. This decrease of $220,422 was in majority financing cost highlighted in other expenses.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
ITEM 4 CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures.
We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure.
Our management, with the participation of our Chief Executive Officer ("CEO") and our Chief Financial Officer ("CFO"), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of May 29, 2014. In designing and evaluating disclosure controls and procedures, we and our management recognize that any disclosure controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objective. As of May 29, 2016, based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls, the CEO and CFO concluded that our disclosure controls and procedures were not effective.
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In light of the conclusion that our internal controls over financial reporting were ineffective as of November 30, 2015, we have applied procedures and processes as necessary to ensure the reliability of our financial reporting in regards to this quarterly report on Form 10-Q. Accordingly, management believes, based on its knowledge, that: (i) this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading with respect to the periods covered by this report; and (ii) the financial statements, and other financial information included in this quarterly report, fairly present in all material respects our financial condition, results of operations and cash flows as at, and for, the periods presented in this quarterly report.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected. Under the supervision of our CEO and PFO, the Company conducted an evaluation of the effectiveness of our internal control over financial reporting as of November 30, 2015 using the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In our assessment of the effectiveness of internal control over financial reporting as of November 30, 2015, we determined that control deficiencies existed that constituted material weaknesses, as described below:
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1)
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lack of documented policies and procedures;
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2)
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inadequate resources dedicated to the financial reporting function; and
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3)
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ineffective separation of duties due to limited staff.
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Subject to the Company's ability to obtain financing and hire additional employees, the Company expects to be able to design and implement effective internal controls in the future that address these material weaknesses.
Accordingly, we concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the Company's internal controls.
As a result of the material weaknesses described above, our CEO and CFO have concluded that the Company did not maintain effective internal control over financial reporting as of August 31, 2016 based on criteria established in Internal Control—Integrated Framework issued by COSO.
Changes in Internal Control Over Financial Reporting.
There were no changes in our internal control over financial reporting during the quarter ended August 31, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II
ITEM 1. LEGAL PROCEEDINGS
On May 29, 2015, we were notified that Lazarus Logistics and Consultants Corp. threatened to file a lawsuit against us alleging breach of contract, with a request for specific performance, breach of contract on a loan agreement. A settlement has been negotiated as of the date of this report.
We are not engaged in any other litigation at the present time, 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.
Not applicable
ITEM 2. RECENT SALES OF UNREGISTERED SECURITIES
During the nine months ended August 31, 2016 the company issued 2,445,303,623 shares of unregistered common stock to for various convertible loan conversions to qualified investors.
ITEM 6. EXHIBITS, REPORTS ON FORM 8-K AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
Exhibits required to be attached by Item 601 of Regulation S-B are listed in the Index to Exhibits and are incorporated herein by this reference.
EXHIBIT
No.
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Description
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31.1
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Certification of Chief Executive Officer/CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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32.1
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Certification of Chief Executive Officer/CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated December 5, 2016
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Daniels Corporate Advisory Company, Inc.
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(Registrant)
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By:
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/s/ Arthur D. Viola
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Arthur D. Viola
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Chief Executive Officer
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and Chief Financial Officer
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