Notes
to the Condensed Consolidated Financial Statements
NOTE
1 - ORGANIZATION AND BASIS OF PRESENTATION
Daniels
Corporate Advisory Company, Inc. (“Daniels” or the Company) was incorporated in the State of Nevada on May 2, 2002. The Company
creates and implements corporate strategy alternatives for mini-cap public and private companies.
The
Company formed Payless Truckers, Inc. (“Payless”), a wholly-owned subsidiary, which was incorporated in the State of Nevada,
on April 11, 2018. Payless is a trucking company whose principal business is to acquire, refurbish, add location electronics, advertise
and sell or lease commercial vehicles to long haul drivers.
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
Company has prepared the accompanying condensed consolidated financial statements in accordance with the rules and regulations of the
Securities and Exchange Commission (“SEC”) and in accordance with generally accepted accounting principles in the United
States of America (“US GAAP”). The Company believes these condensed consolidated financial statements reflect all adjustments
(consisting of normal, recurring adjustments) that are necessary for a fair presentation of its consolidated financial position and consolidated
results of operations for the periods presented.
Use
of Estimates
The
preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from
those estimates.
Risk
and Uncertainties
The
Company’s future results of operations and financial condition will be impacted by the following factors, among others: its lack
of capital resources, dependence on third-party management to operate the companies in which it invests and dependence on the successful
development and marketing of any new products in new and existing markets. Generally, the Company is unable to predict the future status
of these areas of risk and uncertainty. However, negative trends or conditions in these areas could have an adverse effect on its business.
Interim
Financial Statements
These
unaudited consolidated financial statements have been prepared in accordance with US GAAP for interim financial information and with
the instructions to Form 10-Q and Regulation S-X. Accordingly, the condensed consolidated financial statements do not include all of
the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments considered necessary for a fair presentation have been included and such adjustments are of a normal recurring
nature. These condensed consolidated financial statements should be read in conjunction with the financial statements for the fiscal
year ended November 30, 2021 and notes thereto and other pertinent information contained in our Form 10-K/A the Company has filed with
the Securities and Exchange Commission (the “SEC”) on March 28, 2022. The results of operations for the three months ended
February 28, 2022, are not necessarily indicative of the results to be expected for the full fiscal year ending November 30, 2022.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with a maturity of three months or less at the date of purchase to be cash equivalents.
The Company maintains its cash balances with a high-credit-quality financial institution. At times, such cash may be in excess of the
Federal Deposit Insurance Corporation-insured limit of $250,000. The Company has not experienced any losses in such accounts, and management
believes the Company is not exposed to any significant credit risk on its cash and cash equivalents.
Accounts
receivable
Accounts
receivable are customer obligations due under normal trade terms which are recorded at net realizable value. The Company establishes
an allowance for doubtful accounts based on management’s assessment of the collectability of trade receivables. A considerable
amount of judgment is required in assessing the amount of the allowance. The Company makes judgments about the creditworthiness of each
customer based on ongoing credit evaluations and monitors current economic trends that might impact the level of credit losses in the
future. If the financial condition of the customers were to deteriorate, resulting in their inability to make payments, a specific allowance
will be required. The Company believes that no allowance for doubtful accounts is necessary as of February 28, 2022.
Recovery
of bad debt amounts previously written off is recorded as a reduction of bad debt expense in the period the payment is collected. If
the Company’s actual collection experience changes, revisions to its allowance may be required. After all attempts to collect a
receivable have failed, the receivable is written off against the allowance. During the three months ended February 28, 2022, the Company
wrote off $4,234 in accounts receivable.
Inventory
Inventory
consists of well-maintained, class 8 heavy duty trucks primarily acquired at auction. Inventory is valued at the lower of cost (specific
identification method) or net realizable value. An allowance for potential non-saleable inventory due to movement, current conditions
or obsolescence is based upon a review of inventory quantities, past history and expected future usage. The Company believes that no
allowance or write-down for slow moving or obsolete inventory is necessary as of February 28, 2022.
Related
Party Balances and Transactions
The
Company follows FASB ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure
of related party transaction. (Note 3)
Convertible
Instruments
The
Company evaluates and account for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives
and Hedging Activities”.
Applicable
GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative
financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and
risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host
contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at
fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same
terms as the embedded derivative instrument would be considered a derivative instrument.
The
Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated
from their host instruments) by recording, when necessary, discounts to convertible notes for the intrinsic value of conversion options
embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date
of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized
over the term of the related debt to their stated date of redemption.
Fair
Value of Financial Instruments
In
September 2006, the Financial Accounting Standards Board (FASB) introduced a framework for measuring fair value and expanded required
disclosure about fair value measurements of assets and liabilities. The Company adopted the standard for those financial assets and liabilities
as of the beginning of the 2008 fiscal year and the impact of adoption was not significant. FASB Accounting Standards Codification (ASC)
820 “Fair Value Measurements and Disclosures” (ASC 820) defines fair value as the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820
also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data
obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions
developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three
broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level
1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
| |
● |
Level
1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets
or liabilities. |
| |
● |
Level
2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability; either directly or
indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets
or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g.
interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
| |
● |
Level
3—Inputs that are both significant to the fair value measurement and unobservable. |
The
respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature
of these instruments. These financial instruments include accounts receivable, accounts payable and accrued expenses, notes payable,
notes payable to related parties, related parties payable and derivative liabilities. The Company has also applied ASC 820 for all non-financial
assets and liabilities measured at fair value on a non-recurring basis. The adoption of ASC 820 for non-financial assets and liabilities
did not have a significant impact on the Company’s financial statements.
Comprehensive
Income (Loss)
ASC
Topic 220 (SFAS No. 130) establishes standards for reporting comprehensive income (loss) and its components. Comprehensive income (loss)
is defined as the change in equity during a period from transactions and other events from non-owner sources.
Other-Than-Temporary
Impairment
All
of our non-marketable and other investments are subject to a periodic impairment review. Investments are considered to be impaired when
a decline in fair value is judged to be other-than-temporary.
When
events or changes in circumstances indicate that long-lived assets other than goodwill may be impaired, an evaluation is performed to
determine if a write-down to fair value is required. When an asset is classified as held for sale, the asset’s book value is evaluated
and adjusted to the lower of its carrying amount or fair value less cost to sell. In addition, depreciation and amortization ceases while
it is classified as held for sale.
The
indicators that we use to identify those events and circumstances include:
| |
● |
the
investee’s revenue and earnings trends relative to predefined milestones and overall business prospects; |
| |
● |
the
general market conditions in the investee’s industry or geographic area, including regulatory or economic changes; |
| |
● |
factors
related to the investee’s ability to remain in business, such as the investee’s liquidity, debt ratios, and the rate
at which the investee is using its cash; and |
| |
● |
the
investee’s receipt of additional funding at a lower valuation. If an investee obtains additional funding at a valuation lower
than our carrying amount or a new round of equity funding is required for the investee to remain in business, and the new round of
equity does not appear imminent, it is presumed that the investment is other than temporarily impaired, unless specific facts and
circumstances indicate otherwise. |
Revenue
and Cost Recognition
The
Company recognizes revenue in accordance with ASC 606, “Revenue Recognition” following the five steps procedure:
Step
1: Identify the contract(s) with customers
Step
2: Identify the performance obligations in the contract
Step
3: Determine the transaction price
Step
4: Allocate the transaction price to performance obligations
Step
5: Recognize revenue when the entity satisfies a performance obligation
We
recognize revenue when we satisfy performance obligations by the transfer of control of products or services to our customers, in an
amount that reflects the consideration we expect to be entitled to in exchange for those products or services. We recognize revenue from
class 8 heavy duty truck sales to customers when we satisfy our performance obligation, at a point in time, when title to the truck is
transferred to the customer and collection of cash is certain. Delivery or shipping charges billed to customers, if applicable, are included
in product sales and the related shipping costs are included in cost of goods sold. We also recognize revenue from the rental of class
8 heavy-duty trucks to customers. Revenue from these truck rental agreements is recognized based upon the passage of time over the term
of the arrangement once control of the underlying asset has been transferred to the customer. The arrangements require weekly payments,
and the customer may cancel the agreement at any time by notifying the Company in writing at least 30 days before such termination.
Revenue
is recognized and related accounts receivable is recorded when the Company has transferred a good or service to a customer and our right
to receive consideration is unconditional through the completion of our performance obligation. We had accounts receivable totaling $8,023
and $7,896
as of February 28, 2022 and November 30, 2021,
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.
As
of February 28, 2022, the Company’s office is currently leased on month-to-month basis. The Company does not have ROU assets and
operating lease liabilities as of February 28, 2022.
Property
and Equipment, net
Vehicles
and equipment, net is reported at cost less accumulated depreciation, which is generally provided on the straight-line method over the
estimated useful lives of the assets. Upon sale or retirement of an asset, the related costs and accumulated depreciation are removed
from the accounts and any gain or loss is recognized.
Share-Based
Compensation
The
Company accounts for share-based compensation under the fair value method in accordance with ASC 718, “Compensation – Stock
Compensation,” which requires all such compensation to employees and non-employees to be calculated based on its fair value of
the equity instrument at the grant date and recognized in the earnings over the requisite service or vesting period.
During
the three months ended February 28, 2022, the Company issued 63,859,548 shares of common stock valued at $57,860 to consultants.
Income
Taxes
The
Company, a C-corporation, accounts for income taxes under ASC Topic 740 (SFAS No. 109). Under this method, deferred tax assets and liabilities
are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be realized.
The
Company adopted the provisions of FASB ASC 740-10 “Uncertainty in Income Taxes” (ASC 740-10), on January 1, 2007.
The Company has not recognized a liability as a result of the implementation of ASC 740-10. A reconciliation of the beginning and ending
amount of unrecognized tax benefits has not been provided since there is no unrecognized benefit since the date of adoption. The Company
has not recognized interest expense or penalties as a result of the implementation of ASC 740-10. If there were an unrecognized tax benefit,
the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.
Net
Loss Per Share
The
Company reports basic and diluted earnings per share (EPS) according to the provisions of ASC Topic 260, which requires the presentation
of basic EPS and, for companies with complex capital structures, diluted EPS. Basic EPS excludes dilution and is computed by dividing
net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted
EPS is computed by dividing net income (loss) available to common stockholders, adjusted by other changes in income or loss that would
result from the assumed conversion of those potential common shares, by the weighted number of common shares and common share equivalents
(unless their effect is antidilutive) outstanding. Common stock equivalents are not included in the computation of diluted earnings per
share when the Company reports a loss because to do so would be anti-dilutive. Thus, these equivalents are not included in the calculation
of diluted loss per share, resulting in basic and diluted loss per share being equal.
Comparative
Figures
Certain
figures have been reclassified to conform with current year presentation.
Recently
Issued Accounting Pronouncements
In
August 2020, the FASB issued ASU 2020-06, ASC Subtopic 470-20 “Debt—Debt with “Conversion and Other Options”
and ASC subtopic 815-40 “Hedging—Contracts in Entity’s Own Equity”. The standard reduced the number of accounting
models for convertible debt instruments and convertible preferred stock. Convertible instruments that continue to be subject to separation
models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition
of a derivative, and that do not qualify for a scope exception from derivative accounting; and, (2) convertible debt instruments issued
with substantial premiums for which the premiums are recorded as paid-in capital. ASU 2020-06 removes from U.S. GAAP the separation models
for (1) convertible debt with a CCF and (2) convertible instruments with a beneficial conversion feature (“BCF”). With the
adoption of ASU 2020-06, entities will not separately present in equity an embedded conversion feature these debts. The amendments in
this update are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early
adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal
years. The Company has chosen to early adopt this standard on December 1, 2021 financial statements and did not record BCF on the issuance
of convertible notes with conversion rate below the Company’s market stock price on the date of note issuance.
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 adopted the new standard effective March 1, 2021 and does not expect
the adoption of this guidance to have a material impact on its consolidated financial statements.
On
June 16, 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement
of Credit Losses on Financial Instruments, which introduced an expected credit loss model for the impairment of financial assets measured
at amortized cost basis. That model replaces the probable, incurred loss model for those assets. Through the amendments in that Update,
the Board added Topic 326, Financial Instruments— Credit Losses, and made several consequential amendments to the Codification.
This guidance will be effective for entities for the fiscal years, and interim periods within those fiscal years, beginning after December
15, 2022. The Company will adopt the new standard effective December 1, 2023 and does not expect the adoption of this guidance to have
a material impact on its consolidated financial statements.
The
Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will
have a material impact on its consolidated financial statements.
NOTE
3 - RELATED PARTY TRANSACTIONS
The
Company currently rents space from its president, Mr. Arthur Viola. This is a month-to-month rental and there is no commitment beyond
each month. The monthly rent expense is approximately $2,250.
Effective
December 15, 2016, Mr. Viola entered into a $685,000 convertible promissory note agreement with the Company and forgave all remaining
amounts outstanding at that time. The note matured on December 15, 2018 and bears interest at a rate of 10% per annum. Mr. Viola has
the option to convert any portion of the unpaid principal balance into the Company’s common stock at a discount to market of 50%
at any time. As of February 28, 2022, the note total is $977,640 including $292,640 of accrued interest. No repayment or conversion of
the note occurred as of February 28, 2022, and no notice of default has been issued.
During
2016, Mr. Viola personally funded $10,200 in expenses on behalf of the Company. These advances were made interest free with no maturity
date. No repayments have been made against these advances as of February 28, 2022.
Mr.
Viola is entitled to receive a salary of $175,000 annually. Mr. Viola has deferred all cash payments of his base salary in an effort
to help the Company fund its operations. During the three months ended February 28, 2022 and 2021, the Company accrued management salaries
of $43,750, respectively. At February 28, 2022 and November 30, 2021, the total amount of accrued compensation owed to Mr. Viola was
$774,284 and $716,033, respectively.
The
Company’s wholly-owned subsidiary Payless Truckers, Inc. has received net loan proceeds aggregating $50,000 from a related party
to help fund the subsidiary’s operations. The loans currently bear flat rates ranging between $1,500 - $3,500, and are secured
by certain inventory assets and are payable on demand.
Two
companies owned by Payless’ former President and certain family members have loaned the Company floor plan financing for a monthly
fee per truck financed. During the three months ended February 28, 2022 and 2021, financing fees and interest totaling approximately
$3,155 and $2,134 were paid to the related party, respectively At February 28, 2022, the outstanding loan balance was $16,454.
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 three months ended February 28, 2022, the Company realized net loss of $872,898 and had a working capital deficit of $3,843,056.
For the three months ending February 28, 2021, the Company incurred a net loss of $984,399 and a working capital deficit of $5,227,808.
The Company has relied, in large part, upon preferred equity and debt financings to fund its operations. As of February 28, 2022, the
Company had outstanding indebtedness, net of discounts, of $1,816,805 and had $104,493 in cash. As of November 30, 2021, the Company
had outstanding indebtedness, net of discounts, of $1,825,067 and had $181,088 in cash.
As
such, there is substantial doubt as to the Company’s ability to continue as a going concern. The Company’s ability to continue
as such is dependent upon management’s ability to successfully execute its business plan, including increasing revenues through
the sale of existing and future product offerings and reducing expenses in order to meet the Company’s current and future obligations.
In addition, the Company’s ability to continue as a going concern is dependent upon management’s ability to successfully
satisfy, refinance or replace its current indebtedness. Failure to satisfy existing or obtain new financing may have a material adverse
impact on the Company’s operations and liquidity.
The
Company is expanding its operations through its leasing program. It believes that it is well positioned to generate significant recurring
revenue and cash flows required to sustain its operations. However, even if the Company is successful in executing its plan, the Company
may not generate enough revenue to satisfy all of its current obligations as they become due in addition to its outstanding indebtedness.
Until the Company consistently generates positive cash flow from its operations, or successfully satisfies, refinances or replaces its
current indebtedness, there is substantial doubt as to the Company’s ability to continue as a going concern.
The
financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result if the Company is unable to operate as a going concern.
NOTE
5 - COVID-19
In
early 2020, the World Health Organization declared the rapidly spreading coronavirus disease (COVID-19) outbreak a pandemic. This pandemic
has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. Due to the outbreak and spread of
COVID-19, the Company’s management and advisors responsible for financial reporting have experienced administrative delays, include
travel restrictions and reduced work hours. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined
that there were no material adverse impacts on the Company’s results of operations and financial position at February 28, 2022.
The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a
revision of the carrying value of its assets or liabilities as of the date of issuance of this Quarterly Report on Form 10-Q. These estimates
may change, as new events occur and additional information is obtained.
NOTE
6 - PROPERTY AND EQUIPMENT
The
following table sets forth the components of the Company’s Vehicles and equipment at February 28, 2022 and November 30, 2021:
SCHEDULE
OF COMPONENTS OF PROPERTY AND EQUIPMENT
| | |
28-Feb-22 | | |
30-Nov-21 | |
| | |
Cost | | |
Accumulated Depreciation | | |
Net Book Value | | |
Cost | | |
Accumulated Depreciation | | |
Net Book Value | |
| Machinery and equipment | |
| 6,432 | | |
| (4,417 | ) | |
| 2,014 | | |
| 6,432 | | |
| (3,881 | ) | |
| 2,551 | |
| Vehicles | |
| 880,951 | | |
| (221,114 | ) | |
| 659,838 | | |
| 880,951 | | |
| (182,496 | ) | |
| 698,445 | |
| Total property and equipment | |
$ | 887,383 | | |
$ | (225,531 | ) | |
$ | 661,852 | | |
$ | 887,383 | | |
$ | (186,377 | ) | |
$ | 701,006 | |
For
the three months ended February 28, 2022 and 2021, the Company recorded depreciation expense of $39,154 and $35,473, respectively.
NOTE
7 - NOTES PAYABLE
Convertible
Notes
On
August 31, 2015, the Company entered in convertible note agreement with a private and accredited investor, LG Capital, in the amount
of $75,000,
unsecured, with principal and interest (stated at 8%)
amounts due and payable upon maturity on February
28, 2016. After six months, the note holder has
the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time. The Company has
determined that the conversion feature in this note is not indexed to the Company’s stock and is considered to be a derivative
that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following
assumptions: Risk-free interest rates ranging from .03%
to .08%;
Dividend rate of 0%;
and, historical volatility rates ranging from 195%
to 236%.
As of February 28, 2022 and November 30, 2021, the note balance was $55,224
and $55,224 and accrued interest was $24,761
and $23,672, respectively,
and all associated loan discounts were fully amortized. This note is currently in default.
On
December 30, 2015, the Company entered in convertible note agreement with a private and accredited investor, Auctus Private Equity Fund
LLC, in the amount of $130,000,
unsecured, with principal and interest (stated at 10%)
amounts due and payable upon maturity on September
30, 2016. After six months, the note holder has
the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time. The Company has
determined that the conversion feature in this note is not indexed to the Company’s stock and is considered to be a derivative
that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following
assumptions: Risk-free interest rates ranging from .03%
to .16%;
Dividend rate of 0%;
and, historical volatility rates ranging from 208%
to 269%.
As of February 28, 2022 and November 30, 2021, the note balance was $98,459
and $98,459
and accrued interest was $43,594
and $41,166, respectively,
and all associated loan discounts were fully amortized This note is currently in default.
On
January 21, 2016, the Company entered in convertible note agreement with a private and accredited investor, John De La Cross Capital
Partners Inc., in the amount of $8,000,
unsecured, with principal and interest (stated at 5%)
amounts due and payable upon demand. The note holder has the option to convert any portion of the unpaid principal balance into the Company’s
common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Company’s
stock and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature
using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03%
to .16%;
Dividend rate of 0%;
and, historical volatility rates ranging from 208%
to 269%.
As of February 28, 2022 and November 30, 2021, the note balance was $4,000
and $4,000 and accrued interest was $1,437
and $1,388, respectively,
and all associated loan discounts were fully amortized. This note is currently in default.
On
November 23, 2016, the Company entered in convertible note agreement with a private and accredited investor, Auctus Private Equity Fund
LLC, in the amount of $61,000, unsecured, with principal and interest (stated at 12%) amounts due and payable upon maturity on August
23, 2017. After six months, the note holder has the option to convert any portion of the unpaid principal balance into the Company’s
common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Company’s
stock and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature
using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03% to .16%; Dividend rate of 0%;
and, historical volatility rates ranging from 208% to 269%. The Company amended its convertible note agreement to allow for additional
principal borrowings. During the year ended November 30, 2021, the total balances of $78,700 of principal and $97,944 of accrued interest
were converted into 177,538,569 shares of the Company’s common stock fully paying the note.
On
October 15, 2018, the Company entered in convertible note agreement with a private and accredited investor, Auctus Fund LLC, in the amount
of $350,000,
unsecured, with principal and interest (stated at 12%)
amounts due and payable upon maturity on July
15, 2019. At any time following issuance, the
note holder has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time.
The Company has determined that the conversion feature in this note is not indexed to the Company’s stock and is considered to
be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model
and the following assumptions: Risk-free interest rates ranging from 2.67%
to 2.70%;
Dividend rate of 0%;
and historical volatility rates ranging from 390%
to 423%.
During the three months ended February 28, 2022, $21,648
of principal and $21,648
of accrued interest was converted into 137,550,600
shares of the Company’s common stock. As
of February 28, 2022 and November 30, 2021, the note balance was $222,522
and $244,170
and accrued interest was $133,756
and $148,599, respectively,
and all associated loan discounts were fully amortized. This note is currently in default.
On
February 14, 2019, the Company entered in convertible note agreement with a private and accredited investor, Auctus Fund LLC, in the
amount of $57,750,
unsecured, with principal and interest (stated at 12%)
amounts due and payable upon maturity on November
14, 2019. At any time following issuance, the
note holder has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time.
The Company has determined that the conversion feature in this note is not indexed to the Company’s stock and is considered to
be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model
and the following assumptions: Risk-free interest rates ranging from 2.53%
to 2.540%;
Dividend rate of 0%;
and, historical volatility rates ranging from 309%
to 339%.
As of February 28, 2022 and November 30, 2021, the note balance was $57,500
and $57,500
and accrued interest was $11,915
and $10,266, respectively,
and all associated loan discounts were fully amortized. This note is currently in default.
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 February 28, 2022 and November 30, 2021, the note balance was $75,250
and $75,250 and accrued interest was $21,416
and $19,189, respectively,
and all associated loan discounts were fully amortized. This note is currently in default.
Commercial
Loans
On
May 28, 2021, the Company executed two future receivables sale and purchase agreements with Sutton Funding. Under the agreements, the
Company sold an aggregate of $210,000
in future receivables for a purchase amount of
$150,000.
The aggregate principal amount is payable in daily installments totaling $1,591
until such time that the obligation is fully
satisfied. As of November 30, 2021, the loan balance was $6,213. During the three months ended February 28, 2022, the loan was
fully repaid.
On
June 21, 2021, the Company executed a merchant cash advance agreement with Consistent Funding. Under the agreement, the Company sold
an aggregate of $142,000
in future receivables for a purchase amount of
$100,000.
The aggregate principal amount is payable in daily installments totaling $1,076
until such time that the obligation is fully
satisfied. As of November 30, 2021, the loan balance was $24,087. During the three months ended February 28, 2022, the loan was
fully repaid.
On
November 8, 2021, the Company executed a merchant cash advance agreement with Consistent Funding. Under the agreement, the Company sold
an aggregate of $145,000
in future receivables for a purchase amount of
$100,000.
The aggregate principal amount is payable in daily installments totaling $656
until such time that the obligation is fully
satisfied. As of February 28, 2022 and November 30, 2021, the total outstanding principal on these future receivable sale and
purchase agreements was $73,685
and $96,361, respectively.
On
December 10, 2021, the Company executed a merchant cash advance agreement with Consistent Funding. Under the agreement, the Company sold
an aggregate of $116,000 in future receivables for a purchase amount of $80,000. The aggregate principal amount is payable in daily installments
totaling $967 until such time that the obligation is fully satisfied. As of February 28, 2022, the total outstanding principal on these
future receivable sales and purchase agreement was $37,100.
On
January 26, 2022, the Company executed a merchant cash advance agreement with Gem Funding. Under the agreement, the Company sold an aggregate
of $100,100 in future receivables for a purchase amount of $70,000. The aggregate principal amount is payable in daily installments totaling
$596 until such time that the obligation is fully satisfied. As of February 28, 2022, the total outstanding principal on these future
receivable sales and purchase agreement was $64,416.
From
time to time, the Company issues secured promissory notes to individual lenders to finance truck purchases for the Company’s rental
program. Annual interest rates on such notes are generally 30%
with terms of 48
months. As of February 28, 2022, the total amount
outstanding under such notes was $443,400,
of which $134,745
is considered current and classified under “Notes
payable, net of loan discounts” in the Company’s condensed consolidated financial statements. The remaining noncurrent portion
is classified under “Notes payable – non- current”. The aggregate monthly payments of principal and interest
on these promissory notes is $20,861.
NOTE
8 - DERIVATIVE LIABILITIES
The
Company accounts for derivative financial instruments in accordance with ASC 815, which requires that all derivative financial instruments
be recorded in the balance sheets either as assets or liabilities at fair value.
The
Company’s derivative liability is an embedded derivative associated with one of the Company’s convertible promissory notes.
The convertible promissory notes were issued at various times but with similar terms and are therefore being termed as one instrument
for this footnote, (the “Note”), is a hybrid instruments which contain an embedded derivative feature which would individually
warrant separate accounting as a derivative instrument under Paragraph 815-10-05-4. The embedded derivative feature includes the conversion
feature to the Note. Pursuant to Paragraph 815-10-05-4, the value of the embedded derivative liability has been bifurcated from the debt
host contract and recorded as a derivative liability resulting in a reduction of the initial carrying amount (as unamortized discount)
of the notes, which are amortized as debt discount to be presented in other (income) expenses in the statements of operations using the
effective interest method over the life of the notes.
The
embedded derivative within the note have been valued using the Black Scholes approach, recorded at fair value at the date of issuance;
and marked-to-market at each reporting period end date with changes in fair value recorded in the Company’s statements of operations
as “change in the fair value of derivative instrument”.
As
of February 28, 2022 and November 30, 2021, the estimated fair value of derivative liability was determined to be $1,071,508 and $875,487,
respectively.
Summary
of Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis
Financial
assets and liabilities measured at fair value on a recurring basis are summarized below and disclosed at November 30, 2021:
SUMMARY OF FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES MEASURED ON RECURRING BASIS
| | |
Carrying | | |
Fair Value Measurement Using | |
| | |
Value | | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| Derivative liabilities on conversion feature | |
$ | 875,487 | | |
$ | – | | |
$ | – | | |
$ | 875,487 | | |
$ | 875,487 | |
| Total derivative liabilities | |
$ | 875,487 | | |
$ | – | | |
$ | – | | |
$ | 875,487 | | |
$ | 875,487 | |
Summary
of Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis
Financial
assets and liabilities measured at fair value on a recurring basis are summarized below and disclosed at February 28, 2022:
| | |
Carrying | | |
Fair Value Measurement Using | |
| | |
Value | | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| Derivative liabilities on conversion feature | |
$ | 1,071,508 | | |
$ | – | | |
$ | – | | |
$ | 1,071,508 | | |
$ | 1,071,508 | |
| Total derivative liabilities | |
$ | 1,071,508 | | |
$ | – | | |
$ | – | | |
$ | 1,071,508 | | |
$ | 1,071,508 | |
Summary
of the Changes in Fair Value of Level 3 Financial Liabilities
The
table below provides a summary of the changes in fair value of derivative liabilities measured at fair value on a recurring basis using
significant unobservable inputs (Level 3) during the three months ended February 28, 2022:
SUMMARY OF CHANGES IN FAIR VALUE OF LEVEL 3 FINANCIAL LIABILITIES
| | |
Derivative | |
| | |
Liabilities | |
| Balance - November 30, 2021 | |
$ | 875,487 | |
| Addition of new derivative liabilities from issuance of series B preferred stock | |
| 53,592 | |
| Relief of derivative liabilities from conversion of convertible notes | |
| (156,120 | ) |
| Relief of derivative liabilities from conversion of series B preferred stock | |
| (217,979 | ) |
| Loss on change in fair value of the derivative | |
| 516,528 | |
| Balance - February 28, 2022 | |
$ | 1,071,508 | |
NOTE
9 – EQUITY
The
Company is authorized to issue two classes of shares being designated preferred stock and common stock.
Preferred
Stock
The
number of shares of preferred stock authorized is 1,100,000, par value $0.001 per share. At February 28, 2022 and November 30, 2021,
the Company had 100,000 shares of Series A preferred stock issued and outstanding, and 136,250 and 240,000, shares of Series B preferred
stock issued and outstanding, respectively.
Series
A Preferred Stock
Mr.
Arthur D. Viola, the Company’s president, owns 100,000 shares of super voting preferred stock entitling him to vote sixty-six and
two-thirds percent (66.67%) of the common stock shares in any common stock vote.
Series
B Preferred Stock
On
February 24, 2020, the Company filed a certificate of designations with the State of Nevada, designating 1,000,000 of its available preferred
shares as Series B preferred mandatorily redeemable convertible stock, stated value of $1.00 per share, and with a par value of $0.001
per share. The shares will carry an annual ten percent (10%) cumulative dividend, compounded daily, payable solely upon redemption, liquidation
or conversion. The certificate of designations provides the Company with the opportunity to redeem the Series B shares at various increased
prices at time intervals up to the 6-month anniversary of the closing and mandates full redemption on the 12-month anniversary. The holder
may convert the Series B shares into shares of the Company’s common stock, commencing on the 6-month anniversary of the closing
at a 35% discount to the lowest closing price during the 20-day trading period immediately preceding the notice of conversion.
All
shares of mandatorily redeemable convertible preferred stock have been presented outside of permanent equity in accordance with ASC 480,
Classification and Measurement of Redeemable Securities. The Company accretes the carrying value of its Series B mandatory redeemable
convertible preferred stock to its estimate of fair value (i.e., redemption value) at period end.
On
December 31, 2020, the Company sold shares of its Series B convertible preferred stock, with an annual accruing dividend of ,
to Geneva Roth Remark Holdings, Inc. (“Geneva”), for $ 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 $, valued using the Black-Scholes Model, associated with Series B preferred shares.
On
January 13, 2021, the Company sold shares of its Series B convertible preferred stock, with an annual accruing dividend of ,
to Geneva, for $ 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 $, valued
using the Black-Scholes Model, associated with Series B preferred shares.
On
March 2, 2021, the Company sold shares of its Series B convertible preferred stock, with an annual accruing dividend of , to
Geneva, for $ 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 $, valued
using the Black-Scholes Model, associated with Series B preferred shares.
On
May 20, 2021, the Company sold shares of its Series B convertible preferred stock, with an annual accruing dividend of , to
Geneva, for $ 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 $, valued
using the Black-Scholes Model, associated with Series B preferred shares.
On
June 28, 2021, the Company redeemed shares of its Series B convertible preferred stock from Geneva for $. The Company recorded
a $ deemed dividend as a result of the redemption.
On
June 28, 2021, the Company sold shares of its Series B convertible preferred stock, with an annual accruing dividend of , to
Geneva, for $ 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 $, valued
using the Black-Scholes Model, associated with Series B preferred shares.
On
July 14, 2021, the Company sold shares of its Series B convertible preferred stock, with an annual accruing dividend of , to
Geneva, for $ 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 $ valued
using the Black-Scholes Model, associated with Series B preferred shares.
On
September 2, 2021, the Company sold shares of its Series B convertible preferred stock, with an annual accruing dividend of ,
to Geneva, for $ 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 $ valued
using the Black-Scholes Model, associated with Series B preferred shares.
On
September 3, 2021, the Company sold shares of its Series B convertible preferred stock, with an annual accruing dividend of ,
to Geneva, for $ 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 $ valued
using the Black-Scholes Model, associated with Series B preferred shares.
On
February 1, 2022, the Company sold shares of its Series B convertible preferred stock, with an annual accruing dividend of ,
to Geneva, for $ 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 $ valued
using the Black-Scholes Model, associated with Series B preferred shares.
As
of February 28, 2022, the estimated fair value of these derivative liabilities was determined to be $. The change in the fair value
for the three months ended February 28, 2022 was an unrealized loss of $102,169.
During
the three months ended February 28, 2022, the Company recorded $106,897 of accretion of discounts and $4,227 in dividends. As of November
30, 2021, there were 136,250 shares outstanding and a remaining unamortized discount of $85,075.
Common
Stock
The
number of shares of common stock authorized is 6,000,000,000, par value $0.001 per share.
Three
months ended February 28, 2022
During
the three months ended February 28, 2022, the Company issued 137,550,600
shares of common stock for the conversion of
convertible note principal amount of $21,648
and accrued interest of $21,648
and $1,500 of conversion fees.
During
the three months ended February 28, 2022, the Company issued 289,025,154 shares of common stock for the conversion of 147,500 shares
of series B preferred stock and accrued dividend.
During
the three months ended February 28, 2022, the Company issued 63,859,548 shares of common stock
valued at $57,860 to consultants.
Three
months ended February 28, 2021
During
the three months ended February 28, 2021, the Company issued 12,434,783
shares of common stock for the conversion
of convertible note principal and accrued interest.
During
the three months ended February 28, 2021, the Company issued 35,824,329
shares of common stock for the conversion
of 70,600
shares of series B preferred stock.
During
the three months ended February 28, 2021, the Company issued 10,763,581
shares of
common stock valued at $49,249
to consultants.
At
February 28, 2022 and November 30, 2021, the Company had 1,269,733,831 and 779,298,529 shares of common stock, respectively, issued and
outstanding.
NOTE
10 – SEGMENT INFORMATION
The
Company views its operations and manages its business as one segment. The Company business is to acquire, refurbish, add location electronics,
advertise and either sell or lease its commercial vehicles to independent drivers and operators. The Company’s customers represent
a single market or segment. As such, the Company makes operating decisions and assesses financial performance only for the Company as
a whole and does not make operating decisions or assess financial performance from the sale or lease of commercial vehicles individually.
NOTE
11 – REVENUE RECOGNITION
The
Company recognizes revenue when it satisfies performance obligations by the transfer of control of products or services to its customers,
in an amount that reflects the consideration it expects to be entitled to in exchange for those products or services.
SCHEDULE
OF REVENUE RECOGNITION
| | |
| | |
| |
| | |
Three Months Ended | |
| | |
February 28, | |
| Revenue | |
2022 | | |
2021 | |
| | |
| | |
| |
| Resale of refurbished trucks | |
$ | 377,042 | | |
$ | 998,007 | |
| Truck rental | |
| 187,473 | | |
| 209,640 | |
| Repair income | |
| 12,396 | | |
| 5,295 | |
| Miscellaneous income | |
| 5,858 | | |
| - | |
| Total Revenue | |
$ | 582,769 | | |
$ | 1,212,942 | |
The
Company recognizes revenue from class 8 heavy duty truck sales to customers when it satisfies its performance obligation, at a point
in time, when title to the truck is transferred to the customer and collection of cash is certain. Delivery or shipping charges billed
to customers, if applicable, are included in product sales and the related shipping costs are included in cost of goods sold. For the
three months ended February 28, 2022, the Company recognized sales revenue from the resale of refurbished trucks of $377,042 as compared
to sales revenue from the resale of refurbished trucks of $998,007during the three ended February 28, 2021.
The
Company also recognize revenue from the rental of class 8 heavy-duty trucks to customers. Revenue from these truck rental agreements
is recognized based upon the passage of time over the term of the arrangement once control of the underlying asset has been transferred
to the customer. The arrangements require weekly payments, and the customer may cancel the agreement at any time by notifying the Company
in writing at least 30 days before such termination. For the three months ended February 28, 2022, the Company recognized sales revenue
from the rental of its trucks of $187,473, as well as repair income of $12,396, as compared to sales revenue from the rental of its
trucks of $209,640 as well as repair income of $5,295 during the three ended February 28, 2021.
NOTE
12 - SUBSEQUENT EVENTS
In
accordance with FASB ASC 855-10 Subsequent Events, the Company has analyzed its operations subsequent to February 28, 2022, to
the date these unaudited consolidated condensed 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
March 4, 2022, the Company executed a merchant cash advance agreement with E Advance Services, LLC. Under the agreement, the Company
sold an aggregate of $88,200 in future receivables for a purchase amount of $60,000. The aggregate principal amount is payable in daily
installments totaling $767 until such time that the obligation is fully satisfied.
On
March 29, 2022, the Company issued 63,278,788
shares of common stock for the conversion
of 19,700
shares of series B preferred stock.
On
March 31, 2022, the Company issued 66,490,909 shares of common stock for the conversion of 20,700 shares of series B preferred stock.
On
April 4, 2022, the Company issued 26,821,212 shares of common stock for the conversion of 8,350 shares of series B preferred stock.
On
April 8, 2022, the Company issued 70,666,667 shares of common stock for the conversion of 22,000 shares of series B preferred stock.
On
April 12, 2022, the Company issued 69,863,636 shares of common stock for the conversion of 21,750 shares of series B preferred stock.