Item
1. Business.
Overview
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 United States and in foreign capitals by an expanding advisory
board and through 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,
consensus-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.
Reverse
Stock Split
All
common share amounts (except par value and par value per share amounts) referred to in this Report prior to September 27, 2019
have been retroactively restated to reflect the Company’s one-for-200 reverse capital stock split effective September 27,
2019.
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 constantly fine tune our strategy
as it relates to the development of subsidiary start-ups and potential acquisitions for common stock. We concentrate on identifying
projects that have the potential to produce significant earnings and multiple the potential of those results through leverage.
This acceleration of levered growth and the acceptance of the risks associated, expedites the formation of the critical mass necessary
to up-list.
As
a result, we formed Payless Truckers, Inc. (“Payless”), a wholly-owned subsidiary 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, which 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 independents 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 has weathered many storms, including the Coronavirus and has grown stronger. Its operating
model of a streamlined trucking service company continues to be refined. It is now one Daniels believes will survive any potential
future slow-downs in the economy. The model was developed to allow for the maximum utilization of each truck.
We
hope to further enhance our plan for growth beginning in our fourth year by forming joint-ventures and/or partnerships with truck
maintenance companies across the United States in key traffic hubs. This will potentially afford independent drivers and operators
the opportunity to be serviced by trusted maintenance facilities.
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 project team believes are needed in a joint venture, consensus
– controlled, undertaking for the client’s optimum growth.
Daniels
may provide the client with multiple corporate strategies /opportunities including joint ventures, marketing opportunity agreements
and/or potential acquisitions structured in a leveraged buyout format. One or a combination of these strategies would allow the
client to enter new market niches or expand further into existing ones.
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.
OPTIMUM
GROWTH STRATEGY:
Daniels
is confident that the validity of its corporate strategy model will be proven further through the success of its initial subsidiary
incubation, Payless Truckers, Inc. The growing momentum of this cash flow engine should generate the interest of long-term straight
debt financing sources. This “collective approach” to growth should provide initial seed capital for other startup
subsidiaries or the acquisition and joint development of early-stage companies.
Daniels
plans to use its publicly traded common stock in a variety of securities packages, including convertible preferred stock and warrants,
to launch promising subsidiary start-ups, 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 through a spin-off strategy or merging
it with an exchange listed public company. The use of a collective cash flow and profits will allow expansion in one of the more
profitable niches of any market designated for expansion. The same corporate strategy model can/will be applied to any independent
mini-cap public client.
Senior
management believes our corporate strategy business model to be scalable. We continue to add to our networks, both talent and
capital and can expand support staff as client additions warrant it. Based upon the success of our strategy model in initial corporate
consulting assignments – causing the listing of our stock on a major Stock Exchange, Daniels may entertain the creation
of a franchising plan for key US cities and foreign capitals that are finance centers.
Sales
and Marketing
Daniels
senior management will concentrate its efforts to expand its corporate strategy and financial advisory services and related specialties
in the mini-cap segment of the private and public markets, where Daniels believes it will be effective. Marketing efforts will
increase through social and print media efforts and will be in addition to those methods already mentioned herein.
Daniels’
objective is to create and help manage implementation of accelerated expansion strategies and in so doing, aid in the creation
of financing alternatives to accomplish client goals.
Competition
Existing
and new competitors will continue to improve their services and introduce new services with competitive price and performance
characteristics.
Our
“collective” corporate financial service offerings will be expanded as our cash flow and following on social media
grows. Merchant banking/private equity would be obvious additions. These financial services are competitive but fragmented in
the Company’s market niche. While there are limited barriers to entry and new better capitalized competitors frequently
enter the market, management believes our being very selective in client/candidate choice and tailoring our model to fit the specific
client needs at competitive pricing will give us a competitive advantage.
Item
1A. Risk Factors.
An
investment in our Common Stock is highly speculative, involves a high degree of risk and should be considered only by those persons
who are able to afford a loss of their entire investment. In evaluating our business, prospective investors should carefully consider
the following risk factors in addition to the other information included in this Annual Report.
Risks
Relating to Our Business
We
have a limited operating history which may not serve as an adequate basis to judge our future prospects and results of operations.
Daniels
Corporate Advisory Company, Inc., which was incorporated on August 22, 2002, has a limited operating history upon which an evaluation
of our future performance and prospects can be made. We have a limited revenue history. Our prospects must be considered in light
of the risks, expenses, delays, problems and difficulties frequently encountered in the establishment of a new business. As an
investor in early-stage operating companies, Daniels Corporate Advisory faces risks and uncertainties relating to its ability
to successfully implement its business plan, which are described in more detail below.
Since
inception, as a subsidiary of INfe Human Resources, Inc., Daniels Corporate Advisory has always been an operating company, furnishing
its advisory services to all phases of operations, finance and in the management of the staffing industry roll-up for its parent
company for which revenues were eliminated during consolidations.
Limited
revenues and ongoing losses.
While
Daniels is still considered a Company with limited revenues, it has formed a wholly-owned subsidiary that is estimated to change
things over the next 18 to 24 months; including booking profits with accelerating sales revenue. All the start-up costs of the
Payless Truckers, Inc. subsidiary were absorbed in our 2018 fiscal year.
Our
business strategy is unproven and our prospects must be considered speculative.
Our
business strategy is unproven, even though our Payless Truckers, Inc. subsidiary is producing positive results with an established
momentum, and we may not be successful in addressing early-stage challenges, such as establishing our position in the market and
developing effective marketing of our services. To implement our business plan, capital may be provided from existing and possibly
new consulting business revenue and through outside financing. We have not yet located additional financing to implement our business
plan in its entirety. Growth may be very limited and based solely on internally generated cash flow from Payless Truckers and
on compensation from small, consulting assignments with no guarantee of obtaining additional assignments over the next twelve
months. The other potential growth segment of our business plan, after the Payless Truckers model is proven further, is the acquisition
of marketing rights for our services through the client networks of other business services companies. This will only occur if
we can obtain outside financing. Internally generated funds, alone, will not be sufficient to implement this phase of our business
plan.
Our
prospects must be considered speculative, considering the risks, expenses, and difficulties frequently encountered in the establishment
of a new business, specifically the risks inherent in developmental stage companies. We expect to continue to incur significant
operating and capital expenditures and, as a result, we expect significant net losses in the future. It is possible that we will
not be able to achieve profitable operations or, if profitability is achieved, that it will be maintained for any significant
period, or at all.
The
JOBS Act allows us to delay the adoption of new or revised accounting standards that have different effective dates for public
and private companies.
Since,
we have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1)
of the JOBS Act, this election allows us 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 this election, our financial
statements may not be comparable to companies that comply with public company effective dates.
We
have different disclosure requirements than other public companies as an Emerging Growth Company (EGC).
Pursuant
to Section 107 of the Jumpstart Our Business Startups Act (the “JOBS Act”) which was signed into law on April 5, 2012,
we have elected to claim the exemption provided to emerging growth companies.
The
JOBS Act provides an “IPO on ramp” for “emerging growth companies” (a newly created category of issuer
under the Securities Act), which are issuers with annual gross revenues of less than $1 billion during the most recently completed
fiscal year. Emerging growth companies may take advantage of the scaled disclosure requirements that already have been available
to “smaller reporting companies” (defined by the Securities Act as companies having a public float of less than $75
million). The scaled disclosure includes a requirement to include only two, rather than three, years of audited financial statements
in the issuer’s initial public offering (“IPO”) registration statement and, during the “IPO on ramp”
period, the ability to omit the auditor’s attestation on internal control over financial reporting required by the Sarbanes-Oxley
Act of 2002.
Also,
during the “IPO on ramp” period, emerging growth companies would not need to submit say-on-pay votes to their stockholders
(including say-on-pay frequency or golden parachute votes) and would face more limited executive compensation disclosure requirements
than larger companies.
We
may not be successful in the implementation of our business strategy or our business strategy may not be successful, either of
which will impede our development and growth.
Daniels
Corporate Advisory is engaged in the business of offering corporate financial consulting services, including referrals for capital
referral and merchant banking services. In some situations, it may use its own funds to help in the launch of a client.
We
do not know whether we will be able to continue successfully implementing our business strategy or whether our business strategy
will ultimately be successful. In assessing our ability to meet these challenges, a potential investor should take into account
our lack of operating history, our management’s relative inexperience, the competitive conditions existing in our industry
and general economic conditions. Our growth is largely dependent on our ability to successfully implement our business strategy.
Our revenues may be adversely affected if we fail to implement our business strategy or if we divert resources to a business strategy
that ultimately proves unsuccessful.
Our
service offerings may not be accepted.
We
constantly seek to modify our service offerings to the marketplace. As is typically the case evolving service offerings, anticipation
of demand and market acceptance are subject to a high level of uncertainty. The success of our service offerings primarily depends
on the interest of our customers. In general, achieving market acceptance for our services will require substantial marketing
efforts and the expenditure of significant funds, which we may not have available, to create awareness and demand among customers.
We
have limited marketing experience, and have extremely limited financial, personnel and other resources to undertake extensive
marketing activities. Accordingly, we are uncertain as to the acceptance of any of our services or our ability to generate the
revenues necessary to remain in business.
Risks
associated with our ability to manage expansion through acquisitions.
The
growth of our business depends in large part on our ability to manage expansion, control costs in our operations and consolidate
acquisitions into existing operations. This strategy will entail reviewing and potentially reorganizing acquired operations, corporate
infrastructure and system and financial controls. Unforeseen expenses, difficulties, complication and delays frequently encountered
in connection with the rapid expansion of operations could inhibit our growth and adversely affect our financial condition, results
of operations or cash flow.
Risks
associated with our inability to identify suitable acquisition or subsidiary/spin-off candidates.
We
may be unable to identify acquisition candidates that would result in the most successful combinations or be unable to consummate
acquisitions on acceptable terms. The magnitude, timing and nature of future acquisitions will depend upon various factors, including
our success in establishing the corporate development “pilot programs” for consulting clients as a viable means of
growth acceleration, the availability of suitable acquisition candidates that have the client base suitable for cross-marketing
opportunities, the negotiation of acceptable terms, our financial capabilities, the availability of skilled employees to manage
acquired companies and general economic and business conditions.
We
may be unable to obtain financing for the acquisitions or subsidiary/spin-offs that are available to us.
We
are currently attempting to obtain financing for our corporate financial consulting and or primary operating subsidiary as well
as for acquisition opportunities which could result in material dilution to our existing stockholders. We may be unable to obtain
adequate financing for further development of our proposed services and for any future acwuisitions, or that, if available, such
financing will be on favorable terms.
Our
future financial results are uncertain, and our operating results may fluctuate, due to, among other things, consumer trends,
seasonal fluctuations and market demand.
Our
short and sporadic operating history makes it difficult to accurately forecast our revenue. Further, we have little historical
financial data upon which to base planned operating expenses. We base our current and future expense levels on our operating plans
and estimates of future expenses. Our expenses are dependent in large part upon expenses associated with our proposed marketing
expenditures and related overhead expenses, and the costs of hiring and maintaining qualified personnel to carry out our respective
services. Sales and operating results are difficult to forecast because they will depend on the growth of our customer base, changes
in customer demands and consumer trends, the degree of utilization of our advertising services as well as the mix of services
and services sold. As a result, we may be unable to make accurate financial forecasts and adjust our spending in a timely manner
to compensate for any unexpected revenue shortfall. This inability could cause our net losses in a given quarter to be greater
than expected.
We
rely on the services of Arthur D. Viola.
Our
business relies mainly on the efforts and talents of our Chairman and director, Arthur D. Viola. The loss of his services could
have a very negative impact on our ability to fulfill our business plan. During our 2019 fiscal year and subsequently, the Company’s
senior management team has been expanded so that “continuity of management purpose” will be achieved going forward.
We
may fail to establish and maintain strategic relationships.
We
believe that the establishment of strategic partnerships will greatly benefit the growth of our business, and we intend to seek
out and enter into strategic alliances. We may not be able to enter into these strategic partnerships on commercially reasonable
terms, or at all. Even if we enter into strategic alliances, our partners may not attract significant numbers of customers or
otherwise prove advantageous to our business. Our inability to enter into new distribution relationships or strategic alliances
could have a material and adverse effect on our business.
We
may incur significant costs to ensure compliance with U.S. corporate governance and accounting requirements.
We
may incur significant costs associated with our public company reporting requirements, costs associated with newly applicable
corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by
the SEC. We expect all of these applicable rules and regulations to increase our legal and financial compliance costs and to make
some activities more time-consuming and costly. We also expect that these applicable rules and regulations may make it more difficult
and more expensive for us to obtain director and officers liability insurance and we may be required to accept reduced policy
limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult
for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently
evaluating and monitoring developments with respect to these newly applicable rules, and we cannot predict or estimate the amount
of additional costs we may incur or the timing of such costs.
Risks
Relating to Our Stock
Arthur
D. Viola owns 100,000 shares of our super voting preferred stock entitling him to vote 66 2/3 percent of the common stock shares
in any common stock vote. This concentration of ownership could discourage or prevent a potential takeover of Daniels Corporate
Advisory that might otherwise result in our stockholders receiving a premium over the market price for their common stock.
Mr.
Viola owns 152,334 shares of our common stock as well as 100,000 shares of the Daniels Corporate Advisory Super-Voting preferred
stock which has voting rights equal to 66 2/3 percent of the votes in any Common Stock Election. Mr. Viola’s ownership and
voting rights in our common stock allows Mr. Viola to have voting control on all matters submitted to our stockholders for approval
and to be able to control our management and affairs, including extraordinary transactions such as mergers and other changes of
corporate control, and going private transactions. Additionally, this concentration of voting power could discourage or prevent
a potential takeover of Daniels Corporate Advisory that might otherwise result in our stockholders receiving a premium over the
market price for their common stock.
The
stated listing requirements for the OTCBB are as follows:
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Fully
reporting with the Securities and Exchange Commission;
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Not
a blank check or inactive company;
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Minimum
of 40 stockholders of record holding at least 100 shares each (note: this number is informal and has been moving up);
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Directors,
officers, and stockholders will be scrutinized for previous involvements in other OTCBB companies, in particular, blank check
companies; and
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Must
have a market maker submit a Rule 15c211 application to FINRA and agree to act as market maker for securities of company.
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Even
if our shares become publicly quoted, they may not be “free-trading.”
Investors
should understand that their shares of our common stock will not become “free-trading” merely because Daniels Corporate
Advisory is a publicly-quoted company. In order for the shares to become “free-trading,” the shares must be registered,
or entitled to an exemption from registration under applicable law. See “Shares Eligible for Future Sale.”
We
may need to raise additional capital. If we are unable to raise necessary additional capital, our business may fail or our operating
results and our stock price may be materially adversely affected.
Because
we are a newly operational company, we need to secure adequate funding. Selling additional stock, either privately or publicly,
would dilute the equity interests of our stockholders. If we borrow more money, we will have to pay interest and may also have
to agree to restrictions that limit our operating flexibility. If we are unable to obtain adequate financing, we may have to curtail
our operations and our business would fail.
Our
issuance of additional common stock in exchange for services or to repay debt would dilute our stockholders’ proportionate
ownership and voting rights and could have a negative impact on the market price of our common stock.
Our
Chairman, Mr. Viola, may generally issue shares of common stock to pay for debt or services, without further approval by
our stockholders based upon such factors as our board of directors may deem relevant at that time. It is likely that we will issue
additional securities to pay for services and reduce debt in the future. It is possible that we will issue additional shares of
common stock under circumstances we may deem appropriate at the time.
We
have never paid or declared any dividends on our common stock.
We
have never paid or declared any dividends on our common stock. Likewise, we do not anticipate paying, dividends or distributions
on our common stock or our common stock to be sold in this offering. Any future dividends will be declared at the discretion of
our board of directors and will depend, among other things, on our earnings, our financial requirements for future operations
and growth, and other facts as we may then deem appropriate.
Our
directors have the right to authorize the issuance of shares of our preferred stock and additional shares of our common stock.
Our
Board of Directors, within the limitations and restrictions contained in our articles of incorporation and without further action
by our stockholders, has the authority to issue shares of preferred stock from time to time in one or more series and to fix the
number of shares and the relative rights, conversion rights, voting rights, and terms of redemption, liquidation preferences and
any other preferences, special rights and qualifications of any such series. We currently have no intention of issuing additional
shares of preferred stock. Any additional issuance of shares of preferred stock could adversely affect the rights of holders of
our common stock.
Should
we issue additional shares of our common stock, each investor’s ownership interest in our stock would be proportionally
reduced. No investor will have any preemptive right to acquire additional shares of our common stock, or any of our other securities.
If
our shares become publicly quoted and our shares are quoted on the Pink Sheets or the OTCBB, and we fail to remain current in
our reporting requirements, we could be removed from the OTCBB, which would limit the ability of broker-dealers to sell our securities
and the ability of stockholders to sell their securities in the secondary market.
Companies
whose shares are quoted for sale on the OTCBB and some whose shares are quoted for sale on the Pink Sheets must be reporting issuers
under Section 12 of the Exchange Act and must be current in their reports under Section 13 of the Exchange Act, to maintain price
quotation privileges on the Pink Sheets and OTCBB. If our shares become publicly quoted and our shares are quoted for sale on
the OTCBB, and we fail to remain current in our reporting requirements, we could be removed from the OTCBB. As a result, the market
liquidity for our securities could be adversely affected by limiting the ability of broker-dealers to sell our securities and
the ability of stockholders to sell their securities in the secondary market.
If
our shares become publicly quoted, the market price for our common stock will most likely be particularly volatile given our status
as a relatively unknown company with a small and thinly quoted public float, limited operating history and lack of net revenues
which could lead to wide fluctuations in our share price. The price at which stockholders purchase our common stock may not be
indicative of the price that will prevail in the trading market.
If
our shares become publicly quoted, the market for our common stock will most likely be characterized by significant price volatility
when compared to seasoned issuers, and we expect that our share price will be more volatile than a seasoned issuer for the indefinite
future. The volatility in our share price would be attributable to several factors. First, as noted above, the shares of our common
stock will likely be sporadically and/or thinly quoted. As a consequence of this lack of liquidity, the trading of relatively
small quantities of shares by our stockholders may disproportionately influence the price of those shares in either direction.
The price for our shares could, for example, decline precipitously if shares of our common stock are sold on the market without
commensurate demand, as compared to a seasoned issuer which could better absorb those sales without adverse impact on its share
price.
Secondly,
we will most likely be a speculative or “risky” investment due to our dependence on an initial flow of corporate consulting
assignments and their implementation producing positive results to attract new clients. Because of this enhanced risk, more risk-adverse
investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be
more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of
a seasoned issuer.
There
may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a mature
issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse
effect on share price. It is possible that a broader or more active public trading market for our common stock will not develop
or be sustained, or that current trading levels will continue.
Shares
eligible for future sale by our current stockholders may adversely affect our stock price.
The
sale of a significant number of shares of common stock at any particular time could be difficult to achieve at the market prices
prevailing immediately before such shares are offered. In addition, sales of substantial amounts of common stock, including shares
issued upon the exercise of outstanding options and warrants, under Securities and Exchange Commission Rule 144 or otherwise could
adversely affect the prevailing market price of our common stock and could impair our ability to raise capital at that time through
the sale of our securities.
Anti-takeover
provisions may impede the acquisition of Daniels Corporate Advisory.
Certain
provisions of the Nevada Revised Statutes have anti-takeover effects and may inhibit a non-negotiated merger or other business
combination. These provisions are intended to encourage any person interested in acquiring Daniels Corporate Advisory to negotiate
with, and to obtain the approval of, our Chairman, Mr. Viola, in connection with such a transaction. As a result, certain
of these provisions may discourage a future acquisition of Daniels Corporate Advisory, including an acquisition in which the stockholders
might otherwise receive a premium for their shares.
Our
stockholders may be unable to sell their common stock at or above their purchase price, which may result in substantial losses.
The
following factors may add to the volatility in the price of our common stock: actual or anticipated variations in our quarterly
or annual operating results; government regulations, announcements of significant acquisitions, strategic partnerships or joint
ventures; our capital commitments; and additions or departures of our key personnel. Many of these factors are beyond our control
and may decrease the market price of our common stock, regardless of our operating performance. We cannot make any predictions
or projections as to what the prevailing market price for our common stock will be at any time, including as to whether our common
stock will sustain the current market price, or as to what effect the sale of shares or the availability of common stock for sale
at any time will have on the prevailing market price.
We
may need to raise additional capital. If we are unable to raise necessary additional capital, our business may be negatively impacted
or our operating results and our stock price may be materially adversely affected.
We
may need to secure adequate funding. If we are unable to obtain adequate funding, we may not be able to successfully develop and
market our proposed products and our business will most likely fail. We do not have commitments for additional financing. To secure
additional financing, we may need to borrow money or sell more securities, which may reduce the value of our outstanding securities.
We may be unable to secure additional financing on favorable terms or at all.
Selling
additional stock, either privately or publicly, would dilute the equity interests of our stockholders. If we borrow more money,
we will have to pay interest and may also have to agree to restrictions that limit our operating flexibility. If we are unable
to obtain adequate financing, we may have to curtail business operations, which would have a material negative effect on operating
results and most likely result in a lower stock price.
If
our shares become publicly quoted, an active trading market in our shares may not be sustained.
If
our shares become publicly quoted, an active trading market in our shares may not be sustained. Factors such as those discussed
in this “Risk Factors” section may have a significant impact upon the market price of the securities to be distributed
by us. Many brokerage firms may not be willing to participate in transactions in a security if a low price develops in the trading
of the security. Even if a purchaser finds a broker willing to effect a transaction in our securities, the combination of brokerage
commissions, state transfer taxes, if any, and any other selling costs may exceed the selling price. Further, many lending institutions
will not permit the use of our securities as collateral for any loans.
If
our shares become publicly quoted, our common stock will most likely be subject to the “penny stock” rules of the
Securities and Exchange Commission, and the trading market in our common stock will be limited, which would make transactions
in our stock cumbersome and may reduce the investment value of our stock.
If
our shares become publicly quoted, our shares of common stock will most likely be “penny stocks” because they most
likely will not be registered on a national securities exchange or listed on an automated quotation system sponsored by a registered
national securities association, pursuant to Rule 3a51-1(a) under the Exchange Act. For any transaction involving a penny stock,
unless exempt, the rules require:
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That
a broker or dealer approve a person’s account for transactions in penny stocks; and
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That
the broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity
of the penny stock to be purchased.
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The
broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Securities
and Exchange Commission relating to the penny stock market, which, in highlight form:
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Sets
forth the basis on which the broker or dealer made the suitability determination; and
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That
the broker or dealer received a signed, written agreement from the investor prior to the transaction.
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Generally,
brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make
it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
Disclosure
also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the
commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the
rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to
be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny
stocks.
The
market for penny stocks has suffered in recent years from patterns of fraud and abuse.
Stockholders
should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns
of fraud and abuse. Such patterns include:
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Control
of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;
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Manipulation
of prices through prearranged matching of purchases and sales and false and misleading press releases;
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Boiler
room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced salespersons;
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Excessive
and undisclosed bid-ask differential and markups by selling broker-dealers; and
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The
wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level,
along with the resulting inevitable collapse of those prices and with consequential investor losses.
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Our
management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to dictate
the behavior of the market or of broker-dealers who participate in the market, if our shares become publicly quoted, management
will strive within the confines of practical limitations to prevent the described patterns from being established with respect
to our securities. The occurrence of these patterns or practices could increase the volatility of our share price.
We
may need to raise additional funds in the future for our operations and if we are unable to secure such financing, we may not
be able to support our operations.
Future
events, including the problems, delays, expenses and difficulties frequently encountered by growing companies, may lead to cost
and expense increases that could make our revenues insufficient to support our operations and business plans. We may seek additional
capital, including an offering of our equity securities, an offering of debt securities or obtaining financing through a bank
or other entity. We have not established a limit as to the amount of debt we may incur nor have we adopted a ratio of our equity
to a debt allowance. If we need to obtain additional financing, there is no assurance that financing will be available from any
source, that it will be available on terms acceptable to us, or that any future offering of securities will be successful.
We
may seek additional financing which may result in the issuance of additional shares of our common stock and/or rights to acquire
additional shares of our common stock. The issuance of our common stock in connection with such financing may result in substantial
dilution to the existing holders of our common stock who do not have anti-dilution rights. Our business, financial condition and
results of operations could suffer adverse consequences if we are unable to obtain additional capital when needed.
Our
common stock may be affected by limited trading volume and may fluctuate significantly.
The
Company filed with FINRA for a 1/200 Reverse Split. On September 27, 2019, the reverse split was approved by FINRA and made effective.
Prior to the application of the reverse split, the Company’s stock traded actively on both the OTCBB and then in the OTC
Markets. There is no guarantee that history will repeat itself, the Company’s stock may take time to rebuild an active market
after the processing of the reverse split. As a result, this could reduce our shareholders’ ability to sell our common stock
in short time periods, or possibly at all. Our common stock has experienced, and is likely to experience in the future, significant
price and volume fluctuations which could reduce the market price of our common stock without regard to our operating performance.
In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy
or the condition of the financial markets could cause the price of our common stock to fluctuate substantially.
Nevada
law and our certificate of incorporation may protect our directors from certain types of lawsuits which could result in liability
for Daniels and negatively impact our liquidity or operations.
Nevada
law provides that our officers and directors will not be liable to us or our stockholders for monetary damages for all but certain
types of conduct as officers and directors. Our Bylaws permit us broad indemnification powers to all persons against all damages
incurred in connection with our business to the fullest extent provided or allowed by law. These exculpation provisions may have
the effect of preventing stockholders from recovering damages against our officers and directors caused by their negligence, poor
judgment or other circumstances. The indemnification provisions may require us to use our limited assets to defend our officers
and directors against claims, including claims arising out of their negligence, poor judgment, or other circumstances.
If
we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results. As
a result, current and potential stockholders could lose confidence in our financial reporting, which could harm our business and
the trading price of our common stock.
We
are subject to reporting obligations under the U.S. securities laws. The Securities and Exchange Commission as required by Section
404(a) of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company to include a management report on such
company’s internal controls over financial reporting in its annual report, which contains management’s assessment
of the effectiveness of the company’s internal controls over financial reporting. Since our election to be treated as an
emerging growth company we are exempt from Section 404(b) which is an independent registered public accounting firm attesting
to and reporting on management’s assessment of the effectiveness of the company’s internal controls over financial
reporting. Our management may conclude that our internal controls over our financial reporting are not effective. Moreover, even
if our management concludes that our internal controls over financial reporting are effective, our independent registered public
accounting firm may still decline to attest to our management’s assessment or may issue a report that is qualified if they
are not satisfied with our controls or the level at which our controls are documented, designed, operated or reviewed, or if it
interprets the relevant requirements differently from us.
Our
reporting obligations as a public company will place a significant strain on our management, operational and financial resources
and systems for the foreseeable future. If we fail to timely achieve and maintain the adequacy of our internal controls, we may
not be able to conclude that we have effective internal controls over financial reporting at a reasonable assurance level. Moreover,
effective internal controls over financial reporting are necessary for us to produce reliable financial reports and are important
to help prevent fraud. As a result, our failure to achieve and maintain effective internal controls over financial reporting could
result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business
and negatively impact the trading price of our common stock. Furthermore, we anticipate that we will incur considerable costs
and use significant management time and other resources in an effort to comply with Section 404(a) and other requirements of the
Sarbanes-Oxley Act. As of the date of this report we do not have an estimate of the costs to the company of compliance with the
Act.
We
are preparing for compliance with Section 404(a) by strengthening, assessing and testing our system of internal controls to provide
the basis for our report. The process of strengthening our internal controls and complying with Section 404(a) is expensive and
time consuming and requires significant management attention. We cannot be certain that these measures will ensure that we will
maintain adequate controls over our financial processes and reporting in the future. Furthermore, as we rapidly grow our business,
our internal controls will become more complex and will require significantly more resources to ensure our internal controls overall
remain effective. Failure to implement required new or improved controls, or difficulties encountered in their implementation,
could harm our operating results or cause us to fail to meet our reporting obligations. If we or our auditors discover a material
weakness, the disclosure of that fact, even if quickly remedied, could reduce the market’s confidence in our financial statements
and harm our stock price.
Item
1B. Unresolved Staff Comments.
None.
Item
2. Properties.
Daniels
Corporate Advisory’s operational headquarters are located at Parker Towers, 104-60, Queens Boulevard, 12th Floor, Forest
Hills, New York 11375. Our office space is provided by Arthur D. Viola, our chairman, director, and controlling stockholder at
a monthly rate of approximately $2,100. As our business grows, we may be forced to move to other offices and pay more rent. We
believe that our existing facilities are adequate for our current needs for the foreseeable future and if additional space is
needed, it would be available on favorable terms at an acceptable location.
Payless
Truckers’ operating facility is located at 15138 Mills Road, Gulfport, Missouri 39503. The monthly rental rate is $2,500
over a two-year term.
Item
3. Legal Proceedings.
We
are not currently a party to any material legal proceedings. Our counsel has no formal knowledge in the form of filings of any
pending or contemplated litigation, claims or assessments. With regard to matters recognized to involve an unasserted possible
claim or assessment that may call for financial statement disclosure and to which counsel has formed a professional conclusion
that the Company should disclosure or consider disclosure concerning such possible claims or assessment, as a matter of professional
responsibility to the Company, counsel will so advise and will consult with the company concerning the question of such disclosure
and the applicable requirements of Statement of Financial Accounting Standard No. 5. To date, counsel has no formal knowledge
of any unasserted possible claims.
Item
4. MINE SAFETY DISCLOSURES.
Not
applicable to the Company.
PART
II
Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market
Information and Holders
The
shares of our common stock are not currently listed for sale on any exchange, although we do plan to attempt to have our shares
quoted for sale on the “Pink Sheets” or the OTC Bulletin Board. However, there can be no assurance that we will be
successful in having our shares quoted or traded on any public market.
The
table below shows the high and low sales prices for our common stock for the periods indicated.
|
|
Price
Ranges
|
|
Fiscal
Year Ended November 30, 2019
|
|
High
|
|
|
Low
|
|
First
Quarter
|
|
$
|
0.0400
|
|
|
$
|
0.0200
|
|
Second
Quarter
|
|
|
0.0200
|
|
|
|
0.0020
|
|
Third
Quarter
|
|
|
0.0200
|
|
|
|
0.0002
|
|
Fourth
Quarter
|
|
|
0.0400
|
|
|
|
0.0002
|
|
Fiscal
Year Ended November 30, 2020
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
0.0190
|
|
|
$
|
0.0050
|
|
Second
Quarter
|
|
|
0.0330
|
|
|
|
0.0030
|
|
Third
Quarter
|
|
|
0.0150
|
|
|
|
0.0060
|
|
Fourth
Quarter
|
|
|
0.0308
|
|
|
|
0.0024
|
|
There
were approximately 220 holders of record of our common stock. This number does not include stockholders for whom shares
were held in “nominee” or “street name”.
Dividends
We
have never declared or paid any cash dividends on our common stock and we do not intend to pay cash dividends in the foreseeable
future. We currently expect to retain any future earnings to fund the operation and expansion of our business.
Recent
Sales of Unregistered Securities and Equity Purchases by Company
Except
as set forth below, there were no sales of equity securities during the period covered by this Annual Report that were not registered
under the Securities Act and were not previously reported in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K filed
by the Company.
On
September 2, 2020, the Company issued 1,501,398 shares of its common stock in exchange for the conversion of $3,243 of convertible
debt principal.
On
September 22, 2020, the Company issued 1,558,824 shares of its common stock in exchange for the conversion of $7,950 of Series
B convertible preferred stock and accrued dividends.
On
October 14, 2020, the Company issued 1,606,061 shares of its common stock in exchange for the conversion of $5,300 of Series B
convertible preferred stock and accrued dividends.
On
October 23, 2020, the Company issued 1,702,424 shares of its common stock in exchange for the conversion of $5,618 of Series B
convertible preferred stock and accrued dividends.
On
November 2, 2020, the Company issued 1,817,143 shares of its common stock in exchange for the conversion of $3,816 of Series B
convertible preferred stock and accrued dividends.
On
November 2, 2020, the Company issued 1,819,195 shares of its common stock in exchange for the conversion of $1,583 of convertible
debt principal.
On
November 4, 2020, the Company issued 1,867,619 shares of its common stock in exchange for the conversion of $3,922 of Series B
convertible preferred stock and accrued dividends.
On
November 4, 2020, the Company issued 1,909,793 shares of its common stock in exchange for the conversion of $1,662 of convertible
debt principal.
On
November 5, 2020, the Company issued 1,867,619 shares of its common stock in exchange for the conversion of $3,922 of Series B
convertible preferred stock and accrued dividends.
On
November 6, 2020, the Company issued 1,867,619 shares of its common stock in exchange for the conversion of $3,922 of Series B
convertible preferred stock and accrued dividends.
On
November 11, 2020, the Company issued 2,271,429 shares of its common stock in exchange for the conversion of $4,770 of Series
B convertible preferred stock and accrued dividends.
On
November 11, 2020, the Company issued 2,375,494 shares of its common stock in exchange for the conversion of $2,067 of convertible
debt principal.
On
November 16, 2020, the Company issued 2,372,381 shares of its common stock in exchange for the conversion of $4,982 of Series
B convertible preferred stock and accrued dividends.
On
November 18, 2020, the Company issued 8,328,571 shares of its common stock in exchange for the conversion of $17,490 of Series
B convertible preferred stock and accrued dividends.
On
November 19, 2020, the Company sold 55,000 shares of its Series B convertible preferred stock, with an annual accruing dividend
of 10%, to Geneva, for $49,800 pursuant to a Series B preferred stock purchase agreement.
On
November 19, 2020, the Company issued 7,470,476 shares of its common stock in exchange for the conversion of $15,688 of Series
B convertible preferred stock and accrued dividends.
On
November 20, 2020, the Company issued 8,429,524 shares of its common stock in exchange for the conversion of $17,702 of Series
B convertible preferred stock and accrued dividends.
On
November 23, 2020, the Company issued 8,833,333 shares of its common stock in exchange for the conversion of $18,550 of Series
B convertible preferred stock and accrued dividends.
On
November 23, 2020, the Company issued 9,673,299 shares of its common stock in exchange for the conversion of $8,416 of convertible
debt principal.
On
November 24, 2020, the Company issued 8,833,333 shares of its common stock in exchange for the conversion of $18,550 of Series
B convertible preferred stock and accrued dividends.
On
November 25, 2020, the Company issued 9,590,476 shares of its common stock in exchange for the conversion of $20,140 of Series
B convertible preferred stock and accrued dividends.
On
November 30, 2020, the Company issued 10,990,526 shares of its common stock in exchange for the conversion of $20,882 of Series
B convertible preferred stock and accrued dividends.
Item
6. Selected Financial Data.
Not
applicable.
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overall,
total revenues were impacted minimally with 2020 revenues of $3,769,161 compared to $3,836,820 in 2019. The uncertainty of economic
conditions caused by the global COVID-19 pandemic was the cause of it and impacted the flip end of our business. However, Daniels’
Payless subsidiary’s long-haul rental business segment is the engine that drove the company forward during fiscal year ending
November 30, 2020. Their gross revenues increased 96% year over year for a current run rate of $417,937 and contributed to the
collective companies and segments reporting a gross profit of $744,108 for a 19.7% return on Sales.
Hard assets have grown
in both business segments of Payless. The flip segment – buy at auction, add electronics for location and added safety,
provide cosmetics, advertise and sell – has assets with a purchase price of $204,704. As of November 30, 2020 the rental
fleet segment had eighteen trucks with an asset purchase value of $629,164. Based on a balanced approach for expense management
among the two Payless business lines and the public company parent, the collective Daniels / Payless Truckers Companies has an
EBITDA of $71,471 for the year ended November 30, 2020.
All
efforts have and continue to be coordinated in the rapid rise of the heavy long-haul truck rental business. The critical mass
and positive cash flow from the rental fleet allowed Daniels to enter negotiations for term loans – longer term debt with
a market interest rate but with no equity dilution. The use of convertible debt and callable preferred stock was beneficial in
adding to our fleet and allowed us to conserve internally generated cash flows. These financial tools will continue to be used
but to a lesser extent. The cash raised from their use and the introduction of private loan investors to the capital mix in fiscal
2020 will continue to be used and now considered as “down payment” cash on trucks with the balance of the purchases
coming – on a leveraged basis - from tranches of a Term Loan. The acceleration of asset acquisition and the rental income
will allow for monthly payments on larger amounts under the term loan.
During
2020, an additional source of equity funding was created to support larger term loan amounts and reduce the use of merchant finance.
The Company issued 115,000,000 shares of stock as compensation at a stated value of $621,250 to our senior oversight financial
management team, operating managers and retained consultants. Each can act independently and now – as long-term incentivized
investors - participate in the building of the inhouse equity base for supporting leveraged finance. An agreed-upon percentage
of their shares – all of which are counted in the total outstanding calculation for 2020 – will be sold under Rule
144 as funds are needed to acquire trucks directly or to accelerate truck additions through providing the equity for term loan
leverage. Through this structure and ensuing Regulation A Offering, the Company is attempting to assure that adequate financing
will be available to reach the first major milestone for Payless – 100 rental trucks on the road generating Gross Rental
Income of $325,000 per month.
During
fiscal year 2020, Daniels, as an incubator, marked several important milestones in fulfilling its Corporate Aim (Aim). That Aim
is to achieve the forward earnings momentum and critical mass necessary to achieve major stock exchange consideration for listing.
Expectations for listing acceptance are for an 18 to 24-month period, based on the development and subsequent results of the most
promising of subsidiary candidates. Management believes generic (start-up opportunity) growth to be the catalyst in meeting the
net worth and earnings requirements through employment of limited amounts of capital.
Our
corporate securities packages (including stock, warrants, rights and debt) should become more acceptable as liquid forms of finance
to broker-dealers, investment bankers, private equity firms and the retail investor as meetings and high levels of interest are
expressed by the major exchanges and potential outside board candidates are announced. This favorable visibility should take us
to the realm of long-term financing of all types, including equity. Longer term finance options should be available at rates that
are open market, very competitive and with terms that pose no threat to serious equity dilution. In the majority of cases funds
raised will be committed to activities that are expected to be anti-dilutive in nature, and we will be acquiring hard assets and
capable of generating immediate positive cash flow and earnings.
While
the above aims have been stated before, things do not happen overnight when you are trying to build out a mini-cap public company.
The options for financing at this level are limited and extremely expensive.
However,
we believe our options may have improved with the launch of our premier subsidiary, Payless Truckers, Inc. We now have a subsidiary
with two business segments each of which has significant growth potential. The “flip” segment, which buys, refurbishes,
installs location electronics, advertises and the sells the heavy-duty trucks, has generated the positive cash-flows necessary
to cover all the start-up expenses and operational overhead during 2018. Now with all that behind this segment, we expect that
with the use of floor plan financing to keep the pipeline primed with an adequate supply to accomplish a total sales goal of $100,000
per week with a positive gross profit per truck. To date, most individual sales have been profitable and we have expectations
for significant improvement through the use internally generated funds and favorable cost financing to replace our present high-cost
floor plan financing.
The
“Credit Enhancement” segment of the business rents heavy-duty trucks to independent truckers with good driving records,
hauling for major companies. The cash flow is designed to be steady and significant for the driver and ultimately, for Payless.
The trucks are acquired at auction or from wholesale buying groups and are rented on a weekly basis under a five-year contract
with options to purchase at current retail, every six months.
Forward
Looking Statements
The
following discussion should be read in conjunction with our Consolidated Financial Statements and Notes thereto, included elsewhere
within this report. The Annual Report on Form 10-K contains forward-looking statements including statements using terminology
such as “can”, “may”, “believe”, “designated to”, “will”, “expect”,
“plan”, “anticipate”, “estimate”, “potential” or “continue”, or the
negative thereof or other comparable terminology regarding beliefs, plans, expectations or intentions regarding the future. You
should read statements that contain these words carefully because they:
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●
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discuss
our future expectations;
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|
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|
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●
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contain
projections of our future results of operations or of our financial condition; and
|
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●
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state
other “forward-looking” information.
|
We
believe it is important to communicate our expectations. However, forward looking statements involve risks and uncertainties and
our actual results and the timing of certain events could differ materially from those discussed in forward-looking statements
as a result of certain factors, including those set forth under “Risk Factors,” “Business” and elsewhere
in this report. All forward-looking statements and risk factors included in this document are made as of the date hereof, based
on information available to us as of the date thereof, and we assume no obligations to update any forward-looking statement or
risk factor, unless we are required to do so by law.
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.
Reverse
Stock Split
All
common share amounts (except par value and par value per share amounts) referred to in this Report prior to September 27, 2019
have been retroactively restated to reflect the Company’s one-for-200 reverse capital stock split effective September 27,
2019.
Recent
Business Developments
The
Company is operating through the corporate strategy segment of its business. It is attempting to build its own critical mass by
creation of start-up subsidiaries it believes have promise/potential. The stated goal is for the parent (DCAC) company to consolidate
the critical mass of the subsidiary/start-ups with that of the parent for eventually listing on a major stock exchange. We have
continued to focus our efforts on the build out of the Daniels corporate strategy model. We adjusted our strategy as it relates
to the development of subsidiary start-ups and potential acquisitions for common stock. We concentrate on identifying projects
that have the potential to produce significant earnings on the leveraged capital base of both the parent and the subsidiary/start-up
within an expedited time period.
As
a result, we formed Payless Truckers, Inc. (“Payless”), a wholly-owned subsidiary which was incorporated in the State
of Nevada, on April 11, 2018. Payless is a start-up, service company in the trucking industry. It has two business 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. This segment commenced operations subsequent to the close of our fiscal year. In an effort to grow
quickly and profitably, Daniels entered into an operating agreement with a senior operating management team in an effort to drive
the business and better realize its earnings and growth potential.
The
Payless two-segment trucking model represents a streamlined trucking service company; one Daniels believes should survive any
potential future slow-downs in the economy. The model was developed to allow for the maximum utilization of each truck. The first
phase of operations has already been implemented and has covered all the start-up costs plus its own operating expenses.
We
hope to further enhance our plan for growth beginning in our third year by forming joint-ventures and/or partnerships with truck
maintenance companies across the United States in key traffic hubs. This will potentially afford independent drivers and operators
the opportunity to be serviced by trusted maintenance facilities under our warranty program.
Business
Strategy - Current Operational Strategy & Current Client Projects:
Daniels
creates and implements corporate strategy alternatives for the mini-cap public or private company client. The addition of new
business opportunities and the location of professional talent for implementation is anticipated through the full-time efforts
of our senior management. These efforts are to be expanded in the US and in Foreign capitals by an expanding advisory board and
through the networks of independent consultants. Principals of the respective client company will open their networks to augment
professional access for specialties the Daniels corporate strategy consultants believe are needed in a joint venture, (jointly-controlled)
undertaking created for the client’s optimum growth.
Daniels
may provide the client with multiple corporate strategies /opportunities including joint-ventures, marketing opportunity agreements
and/or potential acquisitions structured in a leveraged buyout format. One or a combination of these strategies would allow the
client to enter new market niches or expand further into existing ones.
The
Goal: A major exchange listing. Senior management is estimating at least twenty-four months from commencement of a corporate
strategy assignment. Financial results, aided by all participating players, should be forthcoming and recorded in SEC filings.
At the same time, a senior management team and Board expanded with highly-credible interim (or permanent) professionals (directors)
will be organized in order to successfully navigate the listing process of a major stock exchange. While Daniels believes this
process should be successful in the above-noted time period, there is some uncertainty in the process which is dependent upon
any past issues the listing committee of a specific exchange may deem necessary to be addressed prior to uplifting. In addition,
it may take added time to find the appropriate outside directors that can not only satisfy the listing committee of the exchange
but who can also provide added networking/services to build the parent’s and subsidiary’s potential for accelerated
growth.
A
similar effort will be provided to tailor an optimum growth program for the private company client, whether it chooses to remain
private or to become a public company through alternative merger opportunities.
OPTIMUM
GROWTH STRATEGY:
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 its initial subsidiary
incubation, Payless Truckers, Inc. The growing momentum of this cash flow engine should generate the interest of long-term financing
sources that will realize upfront that debt service can/ will be covered. This “collective approach” to growth should
provide several initial seed capital sources for other startup subsidiaries or the acquisition and joint-development of early-stage
companies. Daniels plans to use its publicly traded common stock in a variety of securities packages, including convertible preferred
stock, to launch promising subsidiary start-ups, 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 through a spin-off strategy, or merging it with an exchange
listed public company that requires added critical mass. This infusion of cash flow and profits will allow expansion in one of
the more profitable niches of any market designated for expansion. The same corporate strategy model can/will be applied to any
independent mini-cap public client.
Senior
management believes our corporate strategy 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.
Sales
and Marketing
Daniels’
senior management will concentrate its efforts to expand its corporate strategy and financial advisory services and related specialties
in the mini-cap segment of the private and public markets, where Daniels believes it will be effective. Marketing efforts will
increase through social and print media efforts and will be in addition to those methods already mentioned herein.
Daniels’
objective is to create and help manage implementation of accelerated expansion strategies and in so doing, aid in the creation
of financing alternatives to accomplish client goals.
Competition
Existing
and new competitors will continue to improve their services and introduce new services with competitive price and performance
characteristics.
In
periods of reduced demand for our services, we can either choose to maintain market share by reducing our prices to meet competition
or maintain prices and choose only those assignments with new clients that have pressing goals to be met that offer Daniels optimum
potential for profits and growth.
The
“collective” corporate financial services, direct and referral, including merchant banking/private equity, are very
competitive and fragmented in the Company’s market niche. There are limited barriers to entry and new competitors frequently
enter the market. A significant number of our competitors possess substantially greater resources. We will continue to offer equity
compensation to our team in order to keep a stable, cohesive team of professionals, which is necessary and key to the creation
of operating and capital solutions in a timely fashion.
General
Our
discussion and analysis of our financial condition and results of operations is based on our financial statements, Actual results
may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies
affect our most significant judgments and estimates used in preparation of our financial statements. which have been prepared
in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires
us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. We base our estimates
on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent
from other sources.
Critical
Accounting Policies
Financial
Reporting Release No. 60, published by the SEC, recommends that all companies include a discussion of critical accounting policies
used in the preparation of their financial statements. While all these significant accounting policies impact our financial condition
and results of operations and we view certain of these policies as critical. Policies determined to be critical are those policies
that have the most significant impact on our consolidated financial statements and require management to use a greater degree
of judgment and estimates. Actual results may differ from those estimates.
We
believe that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies
would cause a material effect on our consolidated results of operations, financial position or liquidity for the periods presented
in this report.
The
accounting policies identified as critical are as follows:
Revenue
and Cost Recognition
We
recognize revenue when we satisfy performance obligations by the transfer of control of products or services to our customers,
in an amount that reflects the consideration we expect to be entitled to in exchange for those products or services. We recognize
revenue from class 8 heavy duty truck sales to customers when we satisfy our performance obligation, at a point in time, when
title to the truck is transferred to the customer. 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.
Fair
Value of Assets
The
Company has adopted the standard FASB Accounting Standards Codification (ASC 820) “Fair Value Measurements and Disclosures”
which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date ASC 820 also establishes a fair value hierarchy that distinguishes between
(1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2)
an entity’s own assumptions about market participant assumptions developed based on the best information available in the
circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority
to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable
inputs (Level 3). The three levels of the fair value hierarchy are described below:
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Level
1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted
assets or liabilities.
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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.
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Level
3—Inputs that are both significant to the fair value measurement and unobservable.
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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.
Use
of Estimates
In
preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management
is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and revenue and expenses during the reporting period.
Actual results could differ from those estimates.
COVID-19
On
January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency in response to a new strain
of a coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic
based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve as of the date
of this report. Management is actively monitoring the global situation and its effects on the Company’s industry, financial
condition, liquidity, and operations. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its
spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition,
or liquidity for fiscal year 2020. However, if the pandemic continues, it may have a material adverse effect on the Company’s
results of future operations, financial position, and liquidity in fiscal year 2020.
Liquidity
and Capital Resources
As
of November 30, 2020, we had $200,858 in cash and cash equivalents and a working capital deficit of $4,239,488.
During
the year ended November 30, 2020, net cash provided by operating activities was $239,892 compared to net cash provided
of $154,943 in 2019. The increase in net cash provided by operating activities is primarily attributable to the change in our
working capital assets, in particular inventory and accounts payable and other accrued liabilities.
Net
cash used in investing activities was $459,071 for the year ended November 30, 2020, as compared to $248,525 in 2019. The
increase is directly attributable to the purchases of a trucks utilized in our credit rebuilding business.
Net
cash provided by financing activities was $352,466 for the year ended November 30, 2020, as compared to net cash provided
of $112,500 in 2019. The increase in net cash provided by financing activities is directly related to proceeds received from the
issuance of Series B convertible preferred stock. During the year ended November 30, 2020, we received proceeds of $289,000 from
the issuance of Series B convertible preferred stock to fund operations. This compares to proceeds of $115,000 received from the
issuance of convertible debt received during the year ended November 30, 2019.
Our
primary source of liquidity has been proceeds received from the issuance of Series B convertible preferred stock, convertible
debt and loans from related parties. Since the creation of our subsidiary, Payless Truckers, Inc., cash flow from the “flip”
business of the truck service company has sustained the consolidated group
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 operations for the immediate future. Management estimates that it will
need up to $2.0 million to fund its PayLess Truckers subsidiary. It is possible that we can still achieve our objectives
by use of asset-based lending whereby we can leverage our truck purchases. However, because of the start-up nature of the subsidiary
this financing may be harder to achieve than normal. Even if limited funds are raised, PayLess will still be able to register
profits from its “flip” program while cost-effective funding for the “credit enhancement” program can
be arranged. The Company does have funding available under a commitment letter but these funds are very expensive; management
is trying to avoid their use.
It
is the Company’s intention to concentrate its efforts on the build-out of its PayLess Truckers, Inc. subsidiary. Once solidly
on its growth path, meeting projections and generating positive operating cash flows, additional subsidiary/start-up businesses
will be entertained be the parent company.
Senior
Management believes it will have sufficient cash flows to continue in business for the foreseeable future. While legal and accounting
expenses are significant for a reporting company, we will cover them out of operating cash flows.
Overall, total revenues
were impacted minimally with 2020 revenues of $3,769,161 compared to $3,836,820 in 2019. The uncertainty of economic conditions
caused by the global COVID-19 pandemic was the cause of it and impacted the flip end of our business. However, Daniels’
Payless subsidiary’s long-haul rental business segment is the engine that drove the company forward during fiscal year ending
November 30, 2020. Their gross revenues increased 77.5% year over year for a current run rate of $417,937 and contributed to the
collective companies and segments reporting a gross profit of $744,108 for a 19.7% return on Sales.
Hard assets have grown
in both business segments of Payless. The flip segment – buy at auction, add electronics for location and added safety,
provide cosmetics, advertise and sell – has assets with a purchase price of $204,704. As of November 30, 2020 the rental
fleet segment had eighteen trucks with an asset purchase value of $629,164. Based on a balanced approach for expense management
among the two Payless business lines and the public company parent, the collective Daniels / Payless Truckers Companies has an
EBITDA of $71,471 for the year ended November 30, 2020.
All
efforts have and continue to be coordinated in the rapid rise of the heavy long-haul truck rental business. The critical mass
and positive cash flow from the rental fleet allowed Daniels to enter negotiations for term loans – longer term debt with
a market interest rate but with no equity dilution. The use of convertible debt and callable preferred stock was beneficial in
adding to our fleet and allowed us to conserve internally generated cash flows. These financial tools will continue to be used
but to a lesser extent. The cash raised from their use and the introduction of private loan investors to the capital mix in fiscal
2020 will continue to be used and now considered as “down payment” cash on trucks with the balance of the purchases
coming – on a leveraged basis - from tranches of a Term Loan. The acceleration of asset acquisition and the rental income
will allow for monthly payments on larger amounts under the term loan.
During
2020, an additional source of equity funding was created to support larger term loan amounts and reduce the use of merchant finance.
The Company issued 115,000,000 shares of stock as compensation at a stated value of $621,250 to our senior oversight financial
management team, operating managers and retained consultants. Each can act independently and now – as long-term incentivized
investors - participate in the building of the inhouse equity base for supporting leveraged finance. An agreed-upon percentage
of their shares – all of which are counted in the total outstanding calculation for 2020 – will be sold under Rule
144 as funds are needed to acquire trucks directly or to accelerate truck additions through providing the equity for term loan
leverage. Through this structure and ensuing Regulation A Offering, the Company is attempting to assure that adequate financing
will be available to reach the first major milestone for Payless – 100 rental trucks on the road generating Gross Rental
Income of $325,000 per month.
Comparison
of the Year Ended November 30, 2020 to the Year Ended November 30, 2019 Revenues
Sales
Sales totaled $3,769,161 which were
comprised of (i) $3,324,479 from the resale of refurbished trucks, (ii) $417,937 from vehicle rental agreements,
and (iii) $26,745 from other miscellaneous sources for the year ended November 30, 2020, compared to sales of $3,836,820 which
were comprised of (i) $3,600,119 from the resale of refurbished trucks and (ii) $235,428 from vehicle rental agreements, and (iii)
$1,273 from other miscellaneous sources during the year ended November 30, 2019. The decrease in sales is believed to be primarily
attributable to the uncertainty of economic conditions caused by the global COVID-19 pandemic.
Gross
Profit
Gross
profit for the year ended November 30, 2020 and 2019 were $744,108 and $363,001, respectively. Gross profit percentage
for the year ended November 30, 2020 and 2019 were 19.7% and 9.5%, respectively. The increase in gross profit and gross
profit percentage for the current year period is directly attributable to an increase in revenues from truck rental agreements
which yield higher profit margins than truck resales.
Operating
Expenses
Operating expenses are primarily comprised
of compensation, facilities costs and outsourced services. Operating expenses totaled $1,746,563 for the year ended November
30, 2020, compared to operating expenses of $681,028 during the year ended November 30, 2019 representing an increase of $1,065,535
or 156.5%. The increase in operating expenses is generally related to the increase in our use of consulting and professional
services for corporate matters and financing efforts. Additionally, the Company issued 115,000,000 shares of its common stock
valued at $621,250 to employees and advisors as compensation. No such issuances were made during the year ended November 30, 2019.
Other
Income and Expenses
Net
other income for the year ended November 30, 2020 totaled $198,349, compared to $1,289,402 in net other expense for the
year ended November 30, 2019. The increase in net other income is attributable to the following factors: (i) we realized a decrease
in interest expense is due to less amortization of debt discounts attributable to our notes payable; (ii) we recorded a gain from
the change in fair value of derivative liabilities of $621,557 during the year ended November 30, 2020, compared to a loss from
the change in fair value of derivative liabilities of $464,333 during the year ended November 30, 2019; and (iii) we did not recognize
any expense for derivative liabilities during the year ended November 30, 2020, compared to expenses of $254,678 for derivative
liabilities recorded during the year ended November 30, 2019.
Net
Income Attributable to Common Stockholders
The
Company incurred a net loss attributable to common stockholders for the year ended November 30, 2020 of $1,406,741, compared
to a net loss attributable to common stockholders of $1,607,429 for the year ended November 30, 2019.
Off-Balance
Sheet Arrangements
None.
Inflation
We
believe that inflation has not had a material impact on our results of operations for the two years ended November 30, 2020 and
2019, and since inflation rates have generally remained at relatively low levels our operations are not otherwise uniquely affected
by inflation concerns.
Going
Concern
The
accompanying audited condensed consolidated financial statements included in this filing have been prepared in conformity with
generally accepted accounting principles that contemplate our continuance as a going concern. Our auditors, in their report dated
March 23, 2021, have expressed substantial doubt about our ability to continue as going concern. Our cash position may
be inadequate to pay all of the costs associated with the testing, production and marketing of our products. Management intends
to use borrowings and the sale of equity or convertible debt to mitigate the effects of its cash position, however no assurance
can be given that debt or equity financing, if and when required will be available. The accompanying audited consolidated financial
statements do not include any adjustments relating to the recoverability and classification of recorded assets and classification
of liabilities that might be necessary should we be unable to continue existence.
Item
7A. Quantitative and Qualitative Disclosures About Market Risk.
We
are a smaller reporting company as defined by Rule 12b-2 under the Exchange Act and are not required to provide the information
required under this item.
Item
8. Financial Statements and Supplementary Data.
The
financial statements and notes thereto and supplementary data required by this Item are presented beginning on page F-1 of this
annual report on Form 10-K.
Item
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item
9A. Controls and Procedures.
Evaluation
of Disclosure Controls and Procedures
We
maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Exchange Act that are designed
to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information
is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate
to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation
of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation
of our disclosure controls and procedures as of November 30, 2020. Based on the evaluation of these disclosure controls and procedures,
and in light of the material weaknesses found in our internal controls, the Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures were not effective.
Management
Report on Internal Control Over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision
of our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control
over financial reporting as of November 30, 2020 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, 2020, we determined that certain
control deficiencies existed that constituted material weaknesses, as described below:
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limited
documented policies and procedures.
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we
have no audit committee.
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there
is a risk of management override given that our officers have a high degree of involvement in our day-to-day operations.
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limited
separation of duties, which includes monitoring controls, between the members of management.
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Management
is currently evaluating what steps can be taken in order to 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 our internal controls.
As
a result of the material weaknesses described above, management has concluded that we did not maintain effective internal control
over financial reporting as of November 30, 2020 based on criteria established in Internal Control—Integrated Framework
issued by COSO.
Thayer
O’Neal Company, LLC, an independent registered public accounting firm, was not required to and has not issued a report concerning
the effectiveness of our internal control over financial reporting as of November 30, 2020.
Changes
in Internal Control over Financial Reporting
There
was no change in internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
during our fiscal year that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.
Item
9B. Other Information.
None.
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 start-up trucking company whose principal business is to acquire, refurbish, add location
electronics, advertise and sell or lease commercial vehicles to long haul drivers.
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
Company has 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 (“US GAAP”). The Company believes these 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.
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 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.
Reclassifications
Certain prior year amounts have been reclassified to conform
to the current period presentation. These reclassifications had no impact on net earnings (loss) or and financial position.
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.
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.
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.
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 write-down
for slow moving or obsolete inventory is necessary as of November 30, 2020.
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
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
(i) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (ii)
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:
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Level
1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted
assets or liabilities.
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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.
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Level
3—Inputs that are both significant to the fair value measurement and unobservable.
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The
respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term
nature of these instruments. These financial instruments include accounts receivable, accounts payable and accrued expenses, notes
payable, notes payable to related parties, related parties payable and derivative liabilities. The Company has also applied ASC
820 for all non-financial assets and liabilities measured at fair value on a non-recurring basis. The adoption of ASC 820 for
non-financial assets and liabilities did not have a significant impact on the Company’s financial statements.
Comprehensive
Loss
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.
Other-Than-Temporary
Impairment
All
of the Company’s 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 the Company uses to identify those events and circumstances include:
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the
investee’s revenue and earnings trends relative to predefined milestones and overall business prospects;
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general market conditions in the investee’s industry or geographic area, including regulatory or economic changes;
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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
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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.
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As of December 31, 2020 and 2019, the Company
did not recognize any impairment losses related to non-marketable or other investments.
Revenue
and Cost 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 the Company expects to be entitled to in exchange for those products or
services. 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. 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.
Revenue
is recognized and related accounts receivable is recorded
when the Company has transferred a good or service to a customer and its right to receive consideration is unconditional through
the completion of our performance obligation. The Company had accounts receivable totaling $2,903 and $30 as of November 30, 2020
and 2019, respectively.
Right
of Use Assets and Lease Liabilities
In
February 2016, the FASB issued ASU No. 2016-02, “Leases” (ASC 842). The standard requires lessees to recognize
almost all leases on the balance sheet as a Right-of-Use (“ROU”) asset and a lease liability and requires leases to
be classified as either an operating or a finance type lease. The standard excludes leases of intangible assets or inventory.
The standard became effective for the Company beginning December 1, 2018. The Company adopted ASC 842 using the modified retrospective
approach, by applying the new standard to all leases existing at the date of initial application. Results and disclosure requirements
for reporting periods beginning after January 1, 2019 are presented under ASC 842, while prior period amounts have not been adjusted
and continue to be reported in accordance with our historical accounting under ASC 840. The Company elected the package of practical
expedients permitted under the standard, which also allowed the Company to carry forward historical lease classifications. The
Company also elected the practical expedient related to treating lease and non-lease components as a single lease component for
all equipment leases as well as electing a policy exclusion permitting leases with an original lease term of less than one year
to be excluded from the ROU assets and lease liabilities.
Under
ASC 842, the Company determines if an arrangement is a lease at inception. Right-of-Use assets and liabilities are recognized
at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company
considers only payments that are fixed and determinable at the time of commencement. As most of the Company’s leases do
not provide an implicit rate, the Company estimated the incremental borrowing rate in determining the present value of lease payments.
The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received.
The Company lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will
exercise such options.
Operating
leases are included in operating lease right-of-use assets and operating lease liabilities on the Company’s condensed
consolidated balance sheets. The adoption did not impact the Company’s beginning retained earnings, or prior year consolidated
statements of income and statements of cash flows.
Property
and Equipment, Net
Property
and equipment, net is reported at cost less accumulated depreciation, which is generally provided on the straight-line method
over the estimated useful lives of the assets. Upon sale or retirement of an asset, the related costs and accumulated depreciation
are removed from the accounts and any gain or loss is recognized.
Income
Taxes
The
Company, a C-corporation, accounts for income taxes under ASC Topic 740 (SFAS No. 109). Under this method, deferred tax assets
and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and
are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation
allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
The
Company adopted the provisions of FASB ASC 740-10, “Uncertainty in Income Taxes” (ASC 740-10), on January 1,
2007. The Company has not recognized a liability as a result of the implementation of ASC 740-10. A reconciliation of the beginning
and ending amount of unrecognized tax benefits has not been provided since there is no unrecognized benefit since the date of
adoption. The Company has not recognized interest expense or penalties as a result of the implementation of ASC 740-10. If there
were an unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefits in interest
expense and penalties in operating expenses.
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.
Reverse
Stock Split
All
common share amounts (except par value and par value per share amounts) referred to in this Report prior to September 27, 2019
have been retroactively restated to reflect the Company’s one-for-200 reverse capital stock split effective September 27,
2019.
Recently
Issued Accounting Pronouncements
In
August 2018, the FASB issued Accounting Standards Update 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework
– Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which modifies the
disclosure requirements on fair value measurements. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019,
including interim periods within those fiscal years, with partial early adoption permitted for eliminated disclosures. The method
of adoption varies by the disclosure. The Company is currently evaluating the impact that adopting this guidance will have on
the consolidated financial statements.
In
December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2019-12, Income Taxes
(Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes.
This guidance will be effective for entities for the fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2020 on a prospective basis, with early adoption permitted. The Company will adopt the new standard effective December
1, 2021 and does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.
In January 2020, the FASB issued Accounting
Standards Update No. 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures
(Topic 323), and Derivatives and Hedging (Topic 815) (ASU 2020-01), which clarifies the interaction of the accounting for equity
securities under Topic 321, the accounting for equity method investments in Topic 323, and the accounting for certain forward
contracts and purchased options in Topic 815. This guidance will be effective for entities for the fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2020 on a prospective basis, with early adoption permitted. We are currently
evaluating the impact of the new guidance.
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.
NOTE
3 - RELATED PARTY TRANSACTIONS
The
Company currently rents space from Arthur Viola, the Company’s president. This is a month-to-month rental and there is no
commitment beyond each month. The monthly rent expense is $2,100.
Effective
December 15, 2016, Arthur 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. No repayment or conversion of the note occurred as of November 30, 2020, and no notice of default
has been issued.
In
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 November 30, 2020.
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. At November 30, 2020 and 2019, the total amount of accrued compensation owed to
Mr. Viola was $541,034 and $369,303, respectively. These amounts are included in accounts payable.
The Company’s
wholly-owned subsidiary Payless Truckers, Inc. have received net loan proceeds aggregating $271,230 from a
related party to help fund the subsidiary’s operations. The loans currently bear interest at rates ranging between
35% - 40%, are secured by certain inventory assets and are payable on demand.
Two companies
owned by Payless’ President and certain family members has loaned the Company floor plan financing for a monthly fee
per truck financed. During the years ended November 30, 2020 and 2019, financing fees and interest totaling approximately $47,000
and $14,000, respectively, were paid to the related party. At November 30, 2020, the outstanding loan balance was $32,000.
A company owned by
Payless’s President serves as an authorized agent to sell trucks for the Company. During the years ended November
30, 2020 and 2019, sales commissions of $120,500 and $36,500, respectively, were paid to the related party.
A different
company owned by a brother of Payless’ president performs contract services, including sales and shop work, for the
Company. During the years ended November 30, 2020 and 2019, sales commissions and shop work of $30,000 and $13,000,
respectively, were paid to the related party.
NOTE
4 - GOING CONCERN
The
accompanying financial statements have been prepared on a going concern basis which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business as they become due.
For
the year ended November 30, 2020, the Company incurred a net loss of $763,824 and had a working capital deficit of $4,239,488.
The Company has relied, in large part, upon debt financing to fund its operations. As of November 30, 2020, the Company had
outstanding indebtedness, net of discounts, of $1,789,234 and had $200,858 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.
NOTE
5 - COVID-19
On
January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency in response to a new strain
of a coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic
based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve as of the date
of this report. Management is actively monitoring the global situation and its effects on the Company’s industry, financial
condition, liquidity, and operations. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its
spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition,
or liquidity for fiscal year 2020. However, if the pandemic continues, it may have a material adverse effect on the Company’s
results of future operations, financial position, and liquidity in fiscal year 2021.
NOTE
6 - COMMITMENTS AND CONTINGENCIES
Commitments
The
Company currently has no long-term commitments.
Contingencies
None.
NOTE
7 - PROPERTY AND EQUIPMENT
The
following table sets forth the components of the Company’s property and equipment at December 31, 2020 and 2019:
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
|
Cost
|
|
|
Accumulated Depreciation
|
|
|
Net Book Value
|
|
|
Cost
|
|
|
Accumulated Depreciation
|
|
|
Net Book Value
|
|
Machinery and equipment
|
|
|
6,432
|
|
|
|
(1,738
|
)
|
|
|
4,694
|
|
|
|
4,600
|
|
|
|
(164
|
)
|
|
|
4,436
|
|
Vehicles
|
|
|
711,164
|
|
|
|
(56,873
|
)
|
|
|
654,291
|
|
|
|
286,425
|
|
|
|
(33,430
|
)
|
|
|
252,995
|
|
Total property and equipment
|
|
$
|
717,596
|
|
|
$
|
(58,611
|
)
|
|
$
|
658,985
|
|
|
$
|
291,025
|
|
|
$
|
(33,594
|
)
|
|
$
|
257,431
|
|
For the years ended November 30, 2020 and 2019,
the Company recorded depreciation expense of $56,790 and $33,594, respectively. During the year ended November 30, 2020, the Company
received proceeds of $83,751 and recorded a loss of $9,070 related to the disposal of two trucks. Additionally, the Company reclassified
one truck from property and equipment to inventory.
NOTE
8 - LEASES
The
Company has entered into operating leases primarily for real estate. These leases have terms which range from one year to two
years, and often include one or more options to renew. The Company recognizes on the balance sheet at the time of lease commencement
or modification a right of use (“RoU”) operating lease asset and a lease liability, initially measured at the present
value of the lease payments. Lease costs are recognized in the income statement over the lease term on a straight-line basis.
RoU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its
obligation to make lease payments arising from the lease.
Operating
lease ROU assets and liabilities commencing after January 1, 2019 are recognized at commencement date based on the present value
of lease payments over the lease term. Based on the present value of the lease payments for the remaining lease term of the Company’s
existing leases, the Company recorded ROU assets of $24,993 in assets and lease liabilities of $24,993 for operating leases as
of November 30, 2020. For the year ended November 30, 2020, the Company recognized approximately $71,918 in total lease costs.
Because
the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the
present value of the lease payments.
Information
related to the Company’s operating right-of-use assets and related lease liabilities were as follows:
Cash paid for operating
lease liabilities
|
|
$
|
30,000
|
|
Weighted-average remaining lease term
(in years)
|
|
|
0.9
|
|
Weighted-average discount rate
|
|
|
10.0
|
%
|
Minimum future lease payments
|
|
|
27,500
|
|
The
following table presents the Company’s future minimum lease obligation under ASC 842 as of November 30, 2020:
2021 fiscal year
|
|
$
|
27,500
|
|
NOTE
9 - INCOME TAXES
The
following table sets forth a reconciliation of income tax expense (benefit) at the federal statutory rate to recorded income tax
expense (benefit) for the years ended November 30, 2020 and 2019:
|
|
November
30, 2020
|
|
|
November
30, 2019
|
|
Tax provision (recovery)
at effective tax rate (21%)
|
|
$
|
(160,403
|
)
|
|
$
|
(337,560
|
)
|
Change in valuation reserve
|
|
|
160,403
|
|
|
|
337,560
|
|
Tax provision (recovery), net
|
|
$
|
–
|
|
|
$
|
–
|
|
As
of November 30, 2020, the Company had approximately $12.1 million in net operating loss carry forwards for federal income
tax purposes which expire at various times through 2039. Generally, these can be carried forward and applied against future
taxable income at the tax rate applicable at that time. We are currently using a 21% effective tax rate for our projected available
net operating loss carry-forward. However, as a result of potential stock offerings and stock issuance in connection with potential
acquisitions, as well as the possibility of the Company not realizing its business plan objectives and having future taxable income
to offset, the Company’s use of these NOLs may be limited under the provisions of Section 382 of the Internal Revenue Code
of 1986, as amended. The Company is in the process of evaluating the implications of Section 382 on its ability to utilize some
or all of its NOLs.
Components
of deferred tax assets and (liabilities) are as follows:
|
|
November
30, 2020
|
|
|
November
30, 2019
|
|
Net operating loss carry
forwards available at effective tax rate (21%)
|
|
$
|
2,532,000
|
|
|
$
|
2,236,000
|
|
Valuation Allowances
|
|
|
(2,532,000
|
)
|
|
|
(2,236,000
|
)
|
Deferred Tax Asset
|
|
$
|
–
|
|
|
$
|
–
|
|
In
accordance with FASB ASC 740 “Income Taxes”, valuation allowances are provided against deferred tax assets, if based
on the weight of available evidence, some or all of the deferred tax assets may or will not be realized. The Company has evaluated
its ability to realize some or all of the deferred tax assets on its balance sheet and has established a valuation allowance of
approximately $2.5 million at November 30, 2020. The Company did not utilize any NOL deductions for the full fiscal year ended
November 30, 2020.
NOTE
10 - NOTES PAYABLE
On
August 31, 2015, the Company entered in convertible note agreement with a private and accredited investor, LG Capital, in the
amount of $75,000, 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 November 30, 2020, 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 0.03% to 0.16%; Dividend rate of 0%; and, historical volatility rates ranging from 208% to 269%. As of November 30, 2020,
the note balance was $98,459 and all associated loan discounts were fully amortized.
On
January 21, 2016, the Company entered in convertible note agreement with a private and accredited investor, John De La Cross Capital
Partners Inc., in the amount of $8,000, 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 November 30, 2020, the note balance was $4,000 and all associated
loan discounts were fully amortized.
On
November 23, 2016, the Company entered in convertible note agreement with a private and accredited investor, Auctus Private Equity
Fund LLC, in the amount of $61,000, 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. As of November 30, 2020, the note balance was $78,700 and all associated
loan discounts were fully amortized.
On
October 15, 2018, the Company entered in convertible note agreement with a private and accredited investor, Auctus Fund LLC, in
the amount of $350,000, 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%. As of November 30, 2020, the
note balance was $350,000 and all associated loan discounts were fully amortized.
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, 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 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 1.76% to 2.54%; Dividend rate of 0%; and, historical volatility rates ranging
from 139% to 1,467%. As of November 30, 2020, the note balance was $57,750 and all associated loan discounts were fully amortized.
On
July 22, 2019, the Company entered in convertible note agreement with a private and accredited investor, Auctus Fund LLC, in the
amount of $75,250, 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 November 30, 2020, the note balance was $75,250 and all associated loan discounts were fully amortized.
On
January 31, 2020, the Company issued a promissory note to GC Capital Partners, LLC in the amount of $52,500, unsecured, with principal
amounts payable in monthly installments of $10,000 until maturity on August 26, 2020. The note had an original issuance discount
of $2,500, which will be amortized on a straight-line basis over the life of the note. As of November 30, 2020, the note balance
was $0 and all associated loan discounts were fully amortized.
On September 10, 2020, the Company executed
two future receivables sale and purchase agreements with Sutton Funding. Under the agreements, the Company sold an aggregate of
$67,200 in future receivables for a purchase amount of $48,000. The aggregate principal amount is payable in daily installments
totaling $538 until such time that the obligation is fully satisfied (approximately four months).
On September 10, 2020, the Company executed
a merchant cash advance agreement with Biz Buzz Capital. Under the agreement, the Company sold an aggregate of $57,200 in future
receivables for a purchase amount of $40,000. The aggregate principal amount is payable in weekly installments totaling $3,180
until such time that the obligation is fully satisfied (approximately four months).
On
September 17, 2020, the Company sold an aggregate $76,000 in secured promissory notes to individual investors. The notes bear
interest at 30% and are secured by the trucks for which the notes proceeds were used to purchase. Principal and interest are payable
monthly, on an amortized basis over 48 months, with the last payment due on August 25, 2024.
On
October 13, 2020, the Company sold a $38,000 secured promissory note to an individual investor. The note bears interest at 30%
and is secured by the truck for which the note proceeds were used to purchase. Principal and interest are payable monthly, on
an amortized basis over 48 months, with the last payment due on October 10, 2024.
On
October 16, 2020, the Company sold a $37,000 secured promissory note to an individual investor. The note bears interest at 30%
and is secured by the truck for which the note proceeds were used to purchase. Principal and interest are payable monthly, on
an amortized basis over 48 months, with the last payment due on October 10, 2024.
On
October 26, 2020, the Company sold an aggregate $82,000 in secured promissory notes to individual investors. The notes bear interest
at 30% and are secured by the trucks for which the notes proceeds were used to purchase. Principal and interest are payable monthly,
on an amortized basis over 48 months, with the last payment due on October 15, 2024.
On
November 20, 2020, the Company sold an aggregate $90,000 in secured promissory notes to individual investors. The notes bear interest
at 30% and are secured by the trucks for which the notes proceeds were used to purchase. Principal and interest are payable monthly,
on an amortized basis over 48 months, with the last payment due on October 20, 2024.
As
of November 30, 2020, the total outstanding principal on these secured promissory notes was approximately $319,000, with $50,385
classified as current, or payable within the next twelve months.
NOTE
11 - 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 some of the Company’s convertible promissory
notes and Series B preferred mandatorily redeemable convertible stock.
The
convertible promissory notes are hybrid instruments which contain embedded derivative features which individually warrant separate
accounting as a derivative instrument under Paragraph 815-10-05-4. The embedded derivative features include the conversion features
to the notes. Pursuant to ASC 815, the value of the embedded derivative liabilities has been bifurcated from the debt host contract
and recorded as derivative liabilities 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
Series B preferred mandatorily redeemable convertible stock are hybrid instruments which contain embedded derivative features
which individually warrant separate accounting as a derivative instrument under Paragraph 815-10-15-83. The embedded derivative
features include the conversion features to the preferred stock. Pursuant to ASC 815, the value of the embedded derivative liabilities
has been bifurcated from the debt host contract and recorded as derivative liabilities resulting in a reduction of the initial
carrying amount (as unaccreted dividend) of the preferred stock, which are amortized as stock dividend to be presented in other
(income) expenses in the statements of operations using the effective interest method over the life of the preferred stock.
The
embedded derivative within the notes 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 November 30, 2020 and 2019, the estimated fair value of derivative liabilities was determined to be $1,592,017 and $1,650,520,
respectively. During the year November 30, 2020, the Company recognized additional derivative liabilities of $723,176, compared
to $254,678 during the year ended November 30, 2019. The change in the fair value of derivative liabilities for the years ended
November 30, 2020 and 2019 was a gain of $621,557 and a loss of $464,333, respectively, 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 as of November 30,
2019:
|
|
|
|
|
Fair
Value Measurement Using
|
|
|
|
Carrying
Value
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Derivative
liabilities on conversion feature
|
|
|
1,650,520
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1,650,520
|
|
|
|
1,650,520
|
|
Total derivative liabilities
|
|
$
|
1,650,520
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
1,650,520
|
|
|
$
|
1,650,520
|
|
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 as of November 30,
2020:
|
|
|
|
|
Fair
Value Measurement Using
|
|
|
|
Carrying
Value
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Derivative
liabilities on conversion feature
|
|
|
1,592,017
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1,592,017
|
|
|
|
1,592,017
|
|
Total derivative liabilities
|
|
$
|
1,592,017
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
1,592,017
|
|
|
$
|
1,592,017
|
|
Summary
of the Changes in Fair Value of Level 3 Financial Liabilities
The
table below provides a summary of the changes in fair value of all financial assets and liabilities measured at fair value on
a recurring basis using significant unobservable inputs (Level 3) during the year ended November 30, 2020 and 2019:
|
|
Derivative
Liabilities
|
|
Fair value, November 30, 2018
|
|
$
|
931,509
|
|
Additions
|
|
|
254,678
|
|
Change in fair
value
|
|
|
464,333
|
|
Fair value, November 30, 2019
|
|
|
1,650,520
|
|
Additions
|
|
|
723,176
|
|
Relief from conversion of preferred
stock
|
|
|
(160,122
|
)
|
Change in fair value
|
|
|
(621,557
|
)
|
Fair value, November 30, 2020
|
|
$
|
1,592,017
|
|
NOTE
12 – STOCKHOLDERS’ 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 50,100,000, par value $0.001 per share. At November 30, 2020 and 2019, the Company
had 100,000 shares of Series A preferred stock issued and outstanding, and 125,600 and 0 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.
On
March 19, 2020, the Company sold 73,000 shares of its Series B convertible preferred stock, with an annual accruing dividend of
10%, to Geneva Roth Remark Holdings, Inc. (“Geneva”), for $70,000 pursuant to a Series B preferred stock purchase
agreement. The Series B preferred stock is classified as temporary equity since the shares are convertible at the option of the
shareholder. The Company recorded a derivative liability of $144,894, valued using the Black-Scholes Model, associated with Series
B preferred shares.
On
May 22, 2020, the Company sold 103,000 shares of its Series B convertible preferred stock, with an annual accruing dividend of
10%, to Geneva, for $100,000 pursuant to a Series B preferred stock purchase agreement. The Series B preferred stock is classified
as temporary equity since the shares are convertible at the option of the shareholder. The Company recorded a derivative liability
of $408,566, valued using the Black-Scholes Model, associated with Series B preferred shares.
On
July 6, 2020, the Company sold 58,000 shares of its Series B convertible preferred stock, with an annual accruing dividend of
10%, to Geneva, for $55,000 pursuant to a Series B preferred stock purchase agreement. The Series B preferred stock is classified
as temporary equity since the shares are convertible at the option of the shareholder. The Company recorded a derivative liability
of $92,317, valued using the Black-Scholes Model, associated with Series B preferred shares.
On
November 19, 2020, the Company sold 55,000 shares of its Series B convertible preferred stock, with an annual accruing dividend
of 10%, to Geneva, for $49,800 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 $77,399, valued using the Black-Scholes Model, associated with Series B preferred shares.
As
of November 30, 2020, the estimated fair value of these derivative liabilities was determined to be $123,104. The change in the
fair value for the year ended November 30, 2020 was an unrealized gain of $439,950.
During the year ended
November 30, 2020, the Company recorded $195,044 of accretion of discounts and $13,696 in dividends. As of
November 30, 2020, there were 125,600 shares outstanding and a remaining unamortized discount of $93,956.
Common
Stock
The
number of shares of common stock authorized is 6,000,000,000, par value $0.001 per share. At November 30, 2020 and 2019, the Company
had 241,774,989 and 25,546,452 shares of common stock, respectively, issued and outstanding.
On
January 9, 2019, the Company issued 1,054,250 shares of its common stock in exchange for the conversion of $6,325 of convertible
debt principal.
On
January 15, 2019, the Company issued 1,054,250 shares of its common stock in exchange for the conversion of $6,325 of convertible
debt principal.
On
September 27, 2019, FINRA approved a one-for-200 reverse split of the Company’s common stock. All common share amounts (except
par value and par value per share amounts) referred to in this Report prior to September 27, 2019 have been retroactively restated
to reflect the one-for-200 reverse capital stock.
On
October 10, 2019, the Company issued 1,159,400 shares of its common stock in exchange for the conversion of $1,043 of convertible
debt principal.
On
October 11, 2019, the Company issued 1,151,150 shares of its common stock in lieu of cash to satisfy certain accounts payable
owed to a service provider.
On
February 3, 2020, the Company issued 1,000,000 shares of common stock to a lender for commitment fees under a securities purchase
agreement with the Company.
On
February 12, 2020, the Company issued 750,000 shares of common stock to a vendor for public relations services provided to the
Company.
On
March 19, 2020, the Company issued 1,362,000 shares of its common stock in exchange for the conversion of $1,838 of convertible
debt principal.
On
June 10, 2020, the Company issued 1,430,000 shares of its common stock in exchange for the conversion of $1,330 of convertible
debt principal.
On
September 2, 2020, the Company issued 1,501,398 shares of its common stock in exchange for the conversion of $3,243 of convertible
debt principal.
On
September 22, 2020, the Company issued 1,558,824 shares of its common stock in exchange for the conversion of $7,950 of Series
B convertible preferred stock and accrued dividends.
On
October 14, 2020, the Company issued 1,606,061 shares of its common stock in exchange for the conversion of $5,300 of Series B
convertible preferred stock and accrued dividends.
On
October 23, 2020, the Company issued 1,702,424 shares of its common stock in exchange for the conversion of $5,618 of Series B
convertible preferred stock and accrued dividends.
On
November 2, 2020, the Company issued 1,817,143 shares of its common stock in exchange for the conversion of $3,816 of Series B
convertible preferred stock and accrued dividends.
On
November 2, 2020, the Company issued 1,819,195 shares of its common stock in exchange for the conversion of $1,583 of convertible
debt principal.
On
November 4, 2020, the Company issued 1,867,619 shares of its common stock in exchange for the conversion of $3,922 of Series B
convertible preferred stock and accrued dividends.
On
November 4, 2020, the Company issued 1,909,793 shares of its common stock in exchange for the conversion of $1,662 of convertible
debt principal.
On
November 5, 2020, the Company issued 1,867,619 shares of its common stock in exchange for the conversion of $3,922 of Series B
convertible preferred stock and accrued dividends.
On
November 6, 2020, the Company issued 1,867,619 shares of its common stock in exchange for the conversion of $3,922 of Series B
convertible preferred stock and accrued dividends.
On
November 11, 2020, the Company issued 2,271,429 shares of its common stock in exchange for the conversion of $4,770 of Series
B convertible preferred stock and accrued dividends.
On
November 11, 2020, the Company issued 2,375,494 shares of its common stock in exchange for the conversion of $2,067 of convertible
debt principal.
On
November 11, 2020, the Company issued 115,000,000 shares of its common stock to employees and advisors as compensation.
On
November 16, 2020, the Company issued 2,372,381 shares of its common stock in exchange for the conversion of $4,982 of Series
B convertible preferred stock and accrued dividends.
On
November 18, 2020, the Company issued 8,328,571 shares of its common stock in exchange for the conversion of $17,490 of Series
B convertible preferred stock and accrued dividends.
On
November 19, 2020, the Company issued 7,470,476 shares of its common stock in exchange for the conversion of $15,688 of Series
B convertible preferred stock and accrued dividends.
On
November 20, 2020, the Company issued 8,429,524 shares of its common stock in exchange for the conversion of $17,702 of Series
B convertible preferred stock and accrued dividends.
On
November 23, 2020, the Company issued 8,833,333 shares of its common stock in exchange for the conversion of $18,550 of Series
B convertible preferred stock and accrued dividends.
On
November 23, 2020, the Company issued 9,673,299 shares of its common stock in exchange for the conversion of $8,416 of convertible
debt principal.
On
November 24, 2020, the Company issued 8,833,333 shares of its common stock in exchange for the conversion of $18,550 of Series
B convertible preferred stock and accrued dividends.
On
November 25, 2020, the Company issued 9,590,476 shares of its common stock in exchange for the conversion of $20,140 of Series
B convertible preferred stock and accrued dividends.
On
November 30, 2020, the Company issued 10,990,526 shares of its common stock in exchange for the conversion of $20,882 of Series
B convertible preferred stock and accrued dividends.
NOTE
13 - LEGAL PROCEEDINGS
The
Company is not currently a party to any material legal proceedings. The Company’s counsel has no formal knowledge in the
form of filings of any pending or contemplated litigation, claims or assessments. With regard to matters recognized to involve
an unasserted possible claim or assessment that may call for financial statement disclosure and to which counsel has formed a
professional conclusion that the Company should disclosure or consider disclosure concerning such possible claims or assessment,
as a matter of professional responsibility to the Company, counsel will so advise and will consult with the company concerning
the question of such disclosure and the applicable requirements of FASB ASC 450, “Contingencies”. To date, counsel
has no formal knowledge of any unasserted possible claims.
NOTE
14 – 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
15 – 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.
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 year ended November 30, 2020, the Company recognized sales revenue from the resale of refurbished trucks
of $3,324,479, as compared to sales revenue from the resale of refurbished trucks of $3,600,119 during the year ended November
30, 2019.
The
Company also recognize revenue from the rental of class 8 heavy-duty trucks to customers. Revenue from these truck rental
agreements is recognized based upon the passage of time over the term of the arrangement once control of the underlying asset
has been transferred to the customer. The arrangements require weekly payments, and the customer may cancel the agreement at
any time by notifying the Company in writing at least 30 days before such termination. For the year ended November 30, 2020,
the Company recognized sales revenue from the rental of its trucks of $417,937, as wells as repair income of $26,745,
as compared to sales revenue from the rental of its trucks of $235,428 during the year ended November 30, 2019.
NOTE
16 - SUBSEQUENT EVENTS
In
accordance with FASB ASC 855-10 Subsequent Events, the Company has analyzed its operations subsequent to November 30, 2020 to
the date these consolidated financial statements were issued, and has determined that it does not have any material subsequent
events to disclose in these consolidated financial statements, except as follows:
On
December 1, 2020, the Company issued 7,420,000 shares of its common stock in exchange for the conversion of $13,356 of Series B convertible
preferred stock and accrued dividends.
On
December 9, 2020, the Company issued 12,434,783 shares of its common stock in exchange for the conversion of $8,580 of convertible debt
principal.
On
December 16, 2020, the Company executed two future receivables sale and purchase agreements with Sutton Funding. Under the agreements,
the Company sold an aggregate of $140,000 in future receivables for a purchase amount of $100,000. The aggregate principal amount is
payable in daily installments totaling $1,272 until such time that the obligation is fully satisfied.
On
December 21, 2020, the Company executed a future receivables sale and purchase agreement with Sutton Funding. Under the agreement, the
Company sold an aggregate of $70,000 in future receivables for a purchase amount of $50,000. The aggregate principal amount is payable
in daily installments totaling $676 until such time that the obligation is fully satisfied.
On
December 30, 2020, the Company sold 53,500 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.
On
January 8, 2021, the Company issued 7,227,273 shares of its common stock in exchange for the conversion of $15,900 of Series B convertible
preferred stock and accrued dividends.
On
January 11, 2021, the Company issued 11,081,818 shares of its common stock in exchange for the conversion of $24,380 of Series B convertible
preferred stock and accrued dividends.
On
January 13, 2021, the Company issued 10,095,238 shares of its common stock in exchange for the conversion of $21,200 of Series B convertible
preferred stock and accrued dividends.
On
January 19, 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.
*
Filed herewith
+
Management contract or compensatory plan or arrangement.