The following excerpt is from the company's SEC filing.
Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets at May 31, 2015(unaudited), and November 30, 2014 (unaudited)
Condensed Consolidated Statements of Operations and for the Three and Six Months Ended May 31, 2015, and (unaudited) 2014 (unaudited)
Condensed Consolidated Statements of Cash Flows for the Three and Six Months Ended May 31, 2015, and (unaudited) 2014 (unaudited)
Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended May 31, 2015, and (unaudited) 2014 (unaudited)
Notes to Condensed Con solidated Financial Statements
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Controls and Procedures
Unregistered Sales of Equity Securities and Use of Proceeds
Daniels Corporate Advisory Company, Inc.
Consolidated Balance Sheets
Cash and cash equivalents
Total Current Assets
Liabilities and Equity(Deficit)
Accounts payable and accrued expenses
Notes payable net of discounts
Total Current Liabilities
Related Party - Stockholder loans
Commitments and Contingencies (Note 6)
Daniels Corporate Advisory Company, Inc.("DCAC") Shareholders' Deficit
Preferred Stock, $.001 par value; 100,000 shares authorized
100,000 issued and outstanding 5/31/2015
Common Stock, $001 par value; 750,000,000 shares
authorized 16,053,319 and 10,791,319 shares issued
and outstanding 5/31/2015 and 11/30/2014
Accumulated other comprehensive (loss)
Total liabilities and equity(Deficit)
"The accompanying notes are an integral part of these financial statements"
For the Three Months Ended
For the Six Months Ended
May 31, 2014
Net Income(Loss) from Operations
Other Income (Expense):
Derivative liability gain
Net Income(Loss) Before
Provision for Income Taxes
Provision for income taxes
Net Income(Loss) before discontinued operations
Net Income Loss dicontinued operations
Basic and Diluted Loss Per Share before discontinued operations
Basic and Diluted Loss Per Share discontinued operations
Weighted average number
of shares outstanding
Cash flows from operating activities:
Net income (loss)
Common stock issued for services
(Gain)loss on derivative liability
Debt discount amortization
Realized gain(loss) on securities
(Increase)decrease in prepaid expenses
(Increase)decrease in other assets
(Increase)decrease in accounts receivable
Increase(decrease) in accounts payable and accrued expenses
Net cash used in operating activities
Cash flows from investing activities:
Net cash provided(used) by investing activities
Cash flows from financing activities:
Proceeds from loans
Disbursements for loan receivable
Net cash provided(used) by financing activities
Increase in cash and equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Unrealized gain (loss) on securities
Consolidated Statement of Comprehensive Income (Loss)
Other comprehensive income (loss)
Unrealized gains(losses) arising during the period
Comprehensive income (loss)
DANIELS CORPORATE ADVISORY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF MAY 31, 2015
NOTE 1- ORGANIZATION AND BASIS OF PRESENTATION
Daniels Corporate Advisory Company, Inc.(The company) was incorporated in the State of Nevada on May 2, 2002. The Company was organized to offer: (a) corporate financial consulting and (b) merchant banking services for public and private client companies interested in implementing Daniels developed, agreed upon, accelerated growth strategies; including MBO/LBO, Roll-up Transactions. Merchant banking includes equity funding of the growth of client and service companies, as well as funding equity of small public companies. The business became a subsidiary in late 2003 as a result of INfe Human Resources, Inc. (a publicly quoted Nevada Company) acquiring the common stock of Daniels Corporate Advisory Company, Inc. During August 24010, INfe Human Resources, Inc. underwent a name change to Rhino Human Resources, Inc., but is still public and trades under the same (original) stock symbol: IFHR.
The company has a growth goal of providing advisory services to business services as well as non-business services client companies. The company works with companies seeking to create and/or acquire adjunct service businesses, whose services will initially provide better lifestyles for its existing workforce, and ultimately will be packaged, on an additional profit center basis, for sale to other small companies for the retention of their employees. The profits generated from all the financial consulting assignments will be available for venture investment in public or private client companies, as well as other quality business concept/operating companies, both public and private; through the Daniels Merchant Bank Division.
The Daniels Merchant Bank has an in-house equity funding program, whereby Daniels will participate in consulting client potential growth by helping finance the growth of public and private client, business service companies, as well as non-business service companies. The Merchant Bank will also participate in non-client potential growth by the purchase of equity in attractive small public companies whose growth strategies are in line with a philosophy of growth through leveraged acquisitions.
The Company formed on October 11, 2013 Daniel's Logistics Inc. a wholly owned operating subsidiary in the field of logistics was incorporated in the state of Nevada to take advantage of niche operating opportunities and possible acquisitions in the logistics field. During the quarter ending May 31, 2015 the Company discontinued these operations until further analysis could be done on the overall effectiveness of all Company operations.
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation:
We have prepared the accompanying condensed consolidated financial statements in accordance with the rules and regulations of the Securities and Exchange Commission (SEC) including the instructions to Form S-1 and Rule 10-01 of Regulation S-X. Such rules and regulations allow us to condense and omit certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America. We believe these condensed consolidated financial statements reflect all adjustments (consisting of normal, recurring adjustments) that are necessary for a fair presentation of our consolidated financial position and consolidated results of operations for the periods presented.
Election to be treated as an emerging growth company:
For the five year period starting in the first quarter of 2012, Daniels if continuing eligibility applies has elected to use the extended transition period now available for complying with new or revised accounting standards under Section 102(b) (1). This election allows Daniels to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of the Company still being eligible, the Daniels financial statements may not be comparable to companies that comply with public company effective dates.
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In June 2009, the FASB issued ASC 105,
Generally Accepted Accounting Principles,
(Codification) effective for interim and annual reporting periods ending after September 15, 2009. This statement establishes the Codification as the source of authoritative accounting principles used in the preparation of financial statements in conformity with generally accepted accounting principles. The Codification does not replace or affect guidance issued by the SEC or its staff. As a result of the Codification, the references to authoritative accounting pronouncements included herein in this Annual Report now refer to the Codification topic section rather than a specific accounting rule as was past practice.
Use of Estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Risk and Uncertainties:
Our future results of operations and financial condition will be impacted by the following factors, among others: our lack of capital resources, dependence on third-party management to operate the companies in which we invest and dependence on the successful development and marketing of any new products in new and existing markets. Generally, we are unable to predict the future status of these areas of risk and uncertainty. However, negative trends or conditions in these areas could have an adverse affect on our business.
Cash and Cash Equivalents:
For financial statement presentation purposes, short-term, highly liquid investments with original maturities of three months or less are considered to be cash equivalents. The Company maintains its cash accounts at several financial institutions, which at times may exceed the insurable FDIC limit, but management believes that there is little risk of loss.
Fair Value of Financial Instruments:
In September 2006, the Financial Accounting Standards Board (FASB) introduced a framework for measuring fair value and expanded required disclosure about fair value measurements of assets and liabilities. The Company adopted the standard for those financial assets and liabilities as of the beginning of the 2008 fiscal year and the impact of adoption was not significant. FASB Accounting Standards Codification (ASC) 820
Fair Value Measurements and Disclosures
(ASC 820) defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entitys 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 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 Companys financial statements.
Our investments consist of common stock of publicly quoted companies and are valued based on the closing stock price. We account for our investments in accordance with ASC Topic 320,
We have designated our investments at February 28, 2013 as available-for-sale and reported these investments at fair value, with unrealized gains and losses recorded in other comprehensive income (loss). We determined the fair value of these investments based on the closing quoted stock price on February 28, 2013. We base the cost of the investment sold on the specific identification method using market rates.
ASC Topic 220 (SFAS No. 130) establishes standards for reporting comprehensive income and its components. Comprehensive income is defined as the change in equity during a period from transactions and other events from non-owner sources. Per the consolidated financial statements, the Company has purchased available-for-sale securities that are subject to this reporting.
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.
Recently Issued Accounting Pronouncements:
The Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
Revenue and Cost Recognition:
The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
Daniels Corporate Advisory Company, Inc., (Daniels) has revenues as a result of corporate financial consulting services which are recognized as services are performed. Daniels also operates the merchant banking division, which did not have any revenues to recognize.
Fixed assets acquired would be reported at cost less accumulated depreciation, which is generally provided on the straight-line method over the estimated useful lives of the assets. Upon sale or retirement of an asset, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is recognized.
Financing fees were being amortized over the life of the related liability on the straight-line method which is not materially different than using the effective interest method. All amortization has been expensed since the ongoing staffing operations have discontinued from which the finance fees were originally accrued.
Net Income (Loss) Per Share
The Company reports basic and diluted earnings per share (EPS) according to the provisions of ASC Topic 260, which requires the presentation of basic EPS and, for companies with complex capital structures, diluted EPS. Basic EPS excludes dilution and is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS is computed by dividing net income (loss) available to common stockholders, adjusted by other changes in income or loss that would result from the assumed conversion of those potential common shares, by the weighted number of common shares and common share equivalents (unless their effect is antidilutive) outstanding. Common stock equivalents are not included in the computation of diluted earnings per share when the Company reports a loss because to do so would be anti-dilutive. Thus, these equivalents are not included in the calculation of diluted loss per share, resulting in basic and diluted loss per share being equal. The following is a reconciliation of the computation for basic and diluted EPS for the six months ended May 31, 2015 and 2014:
Weighted-average common shares outstanding basic
Weighted-average common stock
Weighted-average common shares outstanding- basic and diluted
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.
Currently the Daniels has projected $4,990,743 as of May 31, 2015 in Net Loss Operating Loss carryforwards available. The benefits of the potential tax savings will be recognized in the recorded to date.
NOTE 3- RELATED PARTY TRANSACTIONS
The Company currently rents space from Arthur Viola, CEO and shareholder. This is a month to month rental and there is no commitment beyond each month. The monthly rent is $2,025 and three months was expensed in the quarter ending May 31, 2015. Arthur Viola was also compensated through stock issuance in the quarter 2,885,000 shares valued at $86,533.
NOTE 4- INVESTMENTS
Investments consist of a portfolio of common stocks trading on the OTC: BB. The fair market values of the investments held for sale were $191 and $195 at May 31, 2015 and November 30, 2014, respectively. Due to the immaterial amounts and that they are liquid they have been classified as cash equivalents. Investments held as other assets as long term investments had fair market values of $10,200 and $10,200 at May 31, 2015 and November 30, 2014, respectively. Other assets are securities of the Companys clients for long term capital appreciation. The total net unrealized loss for the period ended May 31, 2015 was $4 and the total net unrealized gain for the period ended May 31, 2015 was $0
Cash Equivalents are marketable securities that are available-for-sale and not deemed long term investments by the Company. During the periods ended May, 2015 and 2014, there were no available-for-sale securities sold and gross realized (losses) gains on these sales were zero. For purpose of determining gross realized gains, the cost of securities when sold is based on the FIFO method of valuation. Net unrealized holding gains (losses) on available-for-sale securities both in cash and investments was $(38,849) and $(38,845), respectively, for May 31, 2015 and November 30, 2014 and have been included in accumulated other comprehensive income.
NOTE 5- GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. Currently, the Company has recurring operating losses, and as of May 31, 2015 the Company had a working capital deficit and an accumulated deficit. These factors raise substantial doubt about the Companys ability to continue as a going concern. Management believes that the Companys capital requirements will depend on many factors including the success of the Companys development efforts and its efforts to raise capital. Management also believes the Company needs to raise additional capital for working capital purposes. There is no assurance that such financing will be available in the future. The conditions described above raise substantial doubt about our ability to continue as a going concern. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 6- COMMITMENTS AND CONTINGENCIES
The Company currently has no long term commitments.
NOTE 7- INCOME TAXES
As of May 31, 2015, the Company had approximately $4,990,743 in net operating loss carry forwards for federal income tax purposes which expire between 2016 and 2032. 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 35% 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 Companys 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:
Net operating loss carry forwards valuation available
Deferred Tax Asset
The effective tax rate is as follows:
Statutory Federal Rate
Effect of Valuation Allowance
In accordance with FASB ASC 740 Income Taxes, valuation allowances are provided against deferred tax assets, if based on the weight of available evidence, some or all of the deferred tax assets may or will not be realized. The Company has evaluated its ability to realize some or all of the deferred tax assets on its balance sheet and has established a valuation allowance in the amount of $1,696,853 at May 31, 2015 and November 30, 2014. The Company did not utilize any NOL deductions for the full fiscal year ended November 30, 2014 and expects to use $79,725 for the fiscal year ending November 30, 2015.
NOTE 8 - NOTES PAYABLE
Other than as described below, there were no issuances of securities without registration under the Securities Act of 1933 during the reporting period which were not previously included in our Quarterly Report on Form 10-Q.
On February 23, 2015, the Company entered in convertible note agreement with a private and accredited investor, LG Capital, in the amount of $37,500, unsecured, with principal and interest(stated at 8%) amounts due and payable upon maturity on August 13, 2015. After six months, the note holder has the option to convert any portion of the unpaid principal balance into the Companys common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Companys stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03% to .08%; Dividend rate of 0%; and, historical volatility rates ranging from 195% to 236%. As of May 31, 2015 the note balance was $37,500 and the unamortized discount was $17,397.
On April 28, 2015, the Company entered in convertible note agreement with a private and accredited investor, KBM Capital, in the amount of $65,000, unsecured, with principal and interest(stated at 8%) amounts due and payable upon maturity on October 28, 2015. After six months, the note holder has the option to convert any portion of the unpaid principal balance into the Companys common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Companys stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03% to .08%; Dividend rate of 0%; and, historical volatility rates ranging from 195% to 236%. As of May 31, 2015 the note balance was $65,000 and the unamortized discount was $44,953.
On April 28, 2015, the Company entered in convertible note agreement with a private and accredited investor, JMJ Capital, in the amount of $16,500, unsecured, with principal and interest(stated at 12%) amounts due and payable upon maturity on October 28, 2017. After twenty four months, the note holder has the option to convert any portion of the unpaid principal balance into the Companys common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Companys stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03% to .08%; Dividend rate of 0%; and, historical volatility rates ranging from 195% to 236%. As of May 31, 2015 the note balance was $16,500 and the unamortized discount was $15,755.
On May 5, 2015, the Company entered in convertible note agreement with a private and accredited investor, JMJ Capital, in the amount of $26,150, unsecured, with principal and interest(stated at 12%) amounts due and payable upon maturity on November 5, 2017. After twenty four months, the note holder has the option to convert any portion of the unpaid principal balance into the Companys common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Companys stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03% to .08%; Dividend rate of 0%; and, historical volatility rates ranging from 195% to 236%. As of May 31, 2015 the note balance was $26,150 and the unamortized discount was $25,256.
On May 14, 2015, the Company entered in convertible note agreement with a private and accredited investor, KBM Capital, in the amount of $50,000, unsecured, with principal and interest(stated at 8%) amounts due and payable upon maturity on November 14, 2015. After six months, the note holder has the option to convert any portion of the unpaid principal balance into the Companys common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Companys stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03% to .08%; Dividend rate of 0%; and, historical volatility rates ranging from 195% to 236%. As of May 31, 2015 the note balance was $50,000 and the unamortized discount was $45,380.
On May 15, 2015, the Company entered in convertible note agreement with a private and accredited investor, Actus Capital, in the amount of $55,000, unsecured, with principal and interest(stated at 10%) amounts due and payable upon maturity on February 15, 2016. After nine months, the note holder has the option to convert any portion of the unpaid principal balance into the Companys common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Companys stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03% to .08%; Dividend rate of 0%; and, historical volatility rates ranging from 195% to 236%. As of May 31, 2015 the note balance was $55,000 and the unamortized discount was $51,812.
NOTE 9 - DERIVATIVE LIABILITIES
The Company accounts for derivative financial instruments in accordance with ASC 815, which requires that all derivative financial instruments be recorded in the balance sheets either as assets or liabilities at fair value.
The Companys derivative liability is an embedded derivative associated with one of the Companys 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 have been bifurcated from the debt host contract and recorded as a derivative liability resulting in a reduction of the initial carrying amount (as unamortized discount) of the notes, which are amortized as debt discount to be presented in other (income) expenses in the statements of operations using the effective interest method over the life of the notes.
The embedded derivative within the note have been valued using the Black Scholes approach, recorded at fair value at the date of issuance; and marked-to-market at each reporting period end date with changes in fair value recorded in the Companys statements of operations as change in the fair value of derivative instrument.
As of May 31, 2015 and November 30, 2014, the estimated fair value of derivative liability was determined to be $300,688 and $0, respectively. .During the quarter additional derivative liabilities of $235,662 were recognized with a debt discount of $66,631. During the three months ended May 31, 2015, amortization of $48,555 was recorded against the note discounts. The change in the fair value of derivative liabilities for the three months ended May 31, 20154 was $34,970 resulting in an aggregate gain 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 ay November 30, 2014:
Fair Value Measurement Using
Derivative liabilities on conversion feature
Total derivative liabilities
Financial assets and liabilities measured at fair value on a recurring basis are summarized below and disclosed May 31, 2015:
Summary of the Changes in Fair Value of Level 3 Financial Liabilities
The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the six months ended May 31, 2015:
Fair value, March 1, 2015
Change in fair value
Transfers in and/or out of Level 3
Fair value, May 31, 2015
NOTE 10 - NOTE RECEIVABLE
The Company has advanced funds to Companies in the logistics field in a dual effort to earn higher returns on idle funds and to help clients expand their businesses which increases our customer base. This is an unsecured demand note with a stated interest rate of 8%. The balance was $315,000 at May 31, 2015 and $205,000 at Year end November 30, 2014.
NOTE 11 - LEGAL PROCEEDINGS
On May 29, 2015, we were notified that Lazarus Logistics and Consultants Corp. threatened to file a lawsuit against us alleging breach of contract, with a request for specific performance, breach of contract on a loan agreement, and unjust enrichment. We feel the alleged claim is without merit and frivolous, and in the event any lawsuit is filed by Lazarus Logistics and Consultants Corp., we will vigorously defend our position and file a counterclaim against Lazarus Logistics and Consultants Corp. and its attorney.
We are not engaged in any other litigation at the present time, and management is unaware of any claims or complaints that could result in future litigation. Management will seek to minimize disputes with its customers but recognizes the inevitability of legal action in todays business environment as an unfortunate price of conducting business.
NOTE 12 - DISCONTINUED OPERATIONS
During the quarter our capital and human resource efforts to build the Daniels Logistics subsidiary have been limited due to ongoing negotiations with independent contractors and the fact that we recognized and are committing capital and human resources to the Food & Beverage Industry niches, those with the potential for significantly higher rates of return on human and financial capital than currently available in Logistics. We have not ruled out re-entry into Logistics during the current fiscal year.
For comparative purposes results from our logistics segment has been reclassified into discontinued operation for this and prior periods. The company is continuing to compile all of the results of these activities but feels the net number presented is reasonable for these financial statements.
ITEM 2. MANAGEMNT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
Daniels Corporate Advisory intends to provide the corporate strategy consulting services noted below, through two methods: first prior to the issuance of additional shares in a private placement or a registered offering, Mr. Viola will loan Daniels Corporate Advisory the necessary capital to accomplish the initial purchase of rights to be the provider of choice to offer a financial specialty called corporate strategy to clients networks of other financial/business services companies. While rights agreements of this nature are not typical, senior management, drawing on personal contacts, believes that offering to provide a very select service that is very costly to create in-house and will augment other financial services already being offered/implemented by the financial/business services firm entering into the rights agreement with Daniels Corporate Advisory, will be an acceptable addition. However, there is no assurance that has time goes by a client may decide to enter our business and there is no provision in our agreement to prevent that from happening. However, our senior management believes that our success with the ultimate client, the client network member of a financial/business services client, will determine whether Daniels Corporate Advisory retains the client or not.
The services incorporated into corporate strategy advisory and implementation to help formulate a path for the acceleration of corporate development (growth) include market analysis, negotiation, deal structure and determination of finance alternatives for the creation of joint-ventures, marketing agreements, new product/creation additions and acquisitions. Daniels Corporate Advisory has a loosely organized cadre of highly-qualified, independent contractors/consultants available to perform the necessary services to achieve the optimum corporate strategy for a client. We will need to raise approximately $150,000 in the future to hire the most seasoned consultants as full time senior management and/or as our advisory board. While conversations with various parties have taken place, nothing has been finalized and there is no assurance that these funds will be raised.
A key service to be provided to clients is their recommendation to financing options/sources and our participation in the negotiation of amounts and terms. The average cost of financing for any one of the accelerated growth alternatives mentioned above may be below market because of our participation, as the client may be offered in-house, short-term financing at preferential rates/terms. To accommodate these needs, going forward, we plan to engage in our own financing in the future. We have not decided on the amount or timing of any such financing. It is at the discretion of our sole officer, Mr. Viola, whether these funds are offered, with the decision to participate based upon the long term growth potential of the client, its current projections for the availability of excess cash flows for repayment of the advanced funds which would be provided by Daniels Corporate Advisory as low interest rate loans for short term working capital additions and with the understanding Daniels Corporate Advisory will be retained for further advisory.
Services will also be provided in corporate financial advisory, which, like corporate strategy, is a specialized segment of corporate advisory. It deals more with operations/cost control issues that can be done in-house with the aid of our professionals. The corporate strategy and corporate financial advisory expertise that we will offer would be extremely expensive to do in-house by any potential financial service firm retaining Daniels Corporate Advisory, because of the talent compensation costs involved on a full time basis. Daniels Corporate Advisory, even though it currently lacks financing to operate on a viable scale, is still able to provide its specialized services to its one client through our chairman, Arthur D. Viola. Also it takes time and money to organize a qualified team that can work together, in a variety of industry environments. Daniels Corporate Advisory has already assembled a team through verbal agreements and with no contingent compensation being offered or asked for by the interested parties, whom are all professionals known personally by Mr. Viola. These verbal agreements may be formalized once subsequent financing of at least $100,000 is achieved. In the interim, and going forward, should financing not be available, Mr. Viola will personally loan funding, if necessary, to retain those professionals needed to complete the current corporate strategy assignment and commence any other. The potential profits contemplated from the sales of appreciate equity upon completion of the corporate strategy assignment of our one client is expected to provide adequate working capital for our internal needs for the next assignment. Our sole officer, Mr. Viola, believes we will be cash flow positive at that time. Open communication has transpired amongst the team over the past six months to assure it will be able to react quickly in any situation. In addition, we may use our own in-house funds initially provided by Mr. Viola and from any potential profits from our one corporate strategy assignment for any implementation process; something none of the potential financial/business service clients like accounting, financial planning, estate planning, tax firms and those other firms specifically earmarked by Daniels Corporate Advisory to approach for business will not do because of rules set up by their industry or government regulatory bodies/authorities. This could be a costly method for Daniels Corporate Advisory to gain business, but it is believed by our senior management to be one of the fastest ways to fill our pipeline and produce profits enabling Daniels Corporate Advisory to direct hire the most seasoned independent contractor/consultants as additions to our senior management.
The second method Daniels Corporate Advisory will use to provide its corporate strategy consulting services is more direct and less costly. It will mean the development of advertising and end-user, client referrals. Name brand recognition is expected to be created after one or two successful corporate strategy assignments and the publicizing of these events on web sites related to this specialty and through an aggressive in-house direct-marketing campaign to micro-cap public companies.
Daniels Corporate Advisory is operating at the present time through the corporate strategy segment of its business. Our sole officer, Mr. Viola, is providing preliminary services to one additional client potential, in addition to our one contracted client, as we continue to negotiate the equity portion of fee arrangements. Our one contracted client has already paid the retainer portion of its fee and has agreed to the portion of the fee to be paid through stock participation. Once the full cash retainer amount is paid a formal contract will be entered into between client and Daniels Corporate Advisory. The scope of the contracted clients corporate strategy assignment is being developed with planned additions to our staff being determined based on the requirements to do the assignment. The shares received as part payment of the retainer will be handled in the following manner: part will be sold off at the culmination of the advisory assignment for consultant payments and the balance will be held in an in-house portfolio to be sold off as funds are needed for expansion in the future. Our sole officer, Mr. Viola, expects to effectively carry out the current corporate strategy assignment through the use of his own personal reserves. In addition, potential candidates for our advisory board are being reviewed. The merchant banking segment of our business model will become operational if funding is raised in the future, either through loans, or by a Private Placement Offering.
As our presence in the market place becomes more visible, through publication on client websites of our successes in our initial corporate strategy consulting assignments coupled with an assumed resulting improvement in the clients common stock price, added financing options are expected to materialize for the benefit of our clients. Capital companies and high-net worth (accredited) individuals may contact us to see if they may participate directly in subsequent assignments.
Recent Business Developments
Daniels is an operating company in transition. During the quarter we continued execution on an extensive research plan to determine the most opportunistic niches of industries from which the Company will accept clients. This is and will continue to be of key importance as our earnings are dependent upon the success of the clients we chose to work with; we are and will continue to be selective. A key element in our review is our determining those niches that are currently in favor and also have promising near term possibilities for the companies operating within them. The final decisions into which industry/niches Daniels expands (accepts clients from) are currently being made. This ongoing fluid process will determine our client base for the current fiscal year. It will also determine our own acquisition plans, as principals.
The Company's equity will be valued based upon the perception that the institutional investor and the retail investor has of our plans for acceleration of growth.
The initial targeted industry/niche for Daniels is the restaurant segment of the Food and Beverage Industry with positive cash flow. Daniels is creating a Food & Beverage Group. Negotiations for several targets which were in progress during the quarter .
As per GAAP requirements, although profitable we are recording the activity from Daniels Logistics as discontinued operations until such time management makes a decision to continue operations in that segment on a long term basis which is still a possibility. Our remaining reported activity is from Daniels consulting operations which is operating on a continuing basis.
Liquidity and Capital Resources
Our primary source of liquidity has been expenses paid by Arthur D. Viola, our sole officer and director and controlling stockholder. As of May 31, 2015, we had $158,771 in cash and cash equivalents and a working capital deficit of $591,392.
We will have to raise capital by means of borrowings or through a private placement or a subsequent registered offering.. At present, we do not have any commitments with respect to future financings. If we are unable to raise adequate capital, in the near term, to finance all phases of a client corporate consulting assignment, our proposed business will experience slow growth because it will be very hard to compete for business without a sound capital base to support advisory and implementation efforts on our suggested corporate growth strategies.
At present, we do have sufficient capital on hand to fund very limited operations for the immediate future. Our logistics income continues to provide enough working capital to fund our operations. We are continually seeking to raise funds for our projects through both debt and equity measures.
Results of Operations For the Three Months ended May 31, 2015
Revenue from our operating consulting business for the three months ended May 31, 2015 was $0 compared to $0 for the three months ended ended May 31, 2014 resulting in no change.
During the three months ended May 31, 2015, we incurred $385,272 in expenses, compared to $34,470 in the same period ended May 31, 2014 an increase of $350,802. Our major cost increase was stock compensation which resulted in an increase of $258,386 in the current quarter. The rest of the increase was due to increased fees of approximately $90,000 incurred for financing and promotional cost as the company tries to establish itself in the market.
Our net income from our discontinued operating segment for the three months ended May 31, 2015 was $14,500 compared to $13,232 for the three months ended ended May 31, 2014 resulting a small increase of $1,268.
Other Income and Expenses
During the quarter ending May 31, 2015 we incurred interest expense charges of $117,053 and we recorded interest income of $6,711 of finance charges on loans we had made. Additionally we recorded gains of $34,741 resulting from the change in fair market value of derivative instruments. The company has increased its loans payable substantially in order to move forward with its business plans. The prior period had no other income and expense items.
The Company had a net loss for the three months ended March 31, 2015 of $446,373 compared to a net loss of $21,238 for the three months ended March 31, 2014. This increase of $425,135 was in majority due to operating and other expense increases described above.
Results of Operations For the Six Months ended May 31, 2015
Revenue from our operating consulting business for the six months ended May 31, 2015 was $0 compared to $0 for the six months ended ended May 31, 2014 resulting in no change.
During the six months ended May 31, 2015, we incurred $445,050 in expenses, compared to $67,450 in the same period ended May 31, 2014 an increase of $377,600. Our major cost increase was stock compensation which resulted in an increase of $258,386 in the second quarter of the period. The rest of the increase was due to increased fees of approximately $90,000 incurred for financing and promotional cost as the company tries to establish itself in the market
Our net income from our discontinued operating segment for the six months ended May 31, 2015 was $94,366 compared to $141,470 for the six months ended ended May 31, 2014 resulting a decrease of $47,104 as the company had committed resources elsewhere and operations declined.
During the six months ending May 31, 2015 we incurred interest expense charges of $136,972 and we recorded interest income of $12,953 on finance charges on loans we had made. Additionally we recorded gains of $34,970 resulting from the change in fair market value of derivative instruments. The prior period had no other income and expense items.
The Company had a net loss for the six months ended May 31, 2015 of $439,733 compared to a net income of $74,020 for the six months ended May 31, 2014. This increase of $513,753 was in majority due to operating and other expense increases described above.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 4 CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures.
We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure.
Our management, with the participation of our Chief Executive Officer (CEO) and our Chief Financial Officer (CFO), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of May 31, 2015. In designing and evaluating disclosure controls and procedures, we and our management recognize that any disclosure controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objective. As of May 31, 2015, based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls, the CEO and CFO concluded that our disclosure controls and procedures were not effective.
In light of the conclusion that our internal controls over financial reporting were ineffective as of May 31, 2015, we have applied procedures and processes as necessary to ensure the reliability of our financial reporting in regards to this quarterly report on Form 10-Q. Accordingly, management believes, based on its knowledge, that: (i) this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading with respect to the periods covered by this report; and (ii) the financial statements, and other financial information included in this quarterly report, fairly present in all material respects our financial condition, results of operations and cash flows as at, and for, the periods presented in this quarterly report.
Managements Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected. Under the supervision of our CEO and PFO, the Company conducted an evaluation of the effectiveness of our internal control over financial reporting as of November 30, 2014 using the criteria established in Internal ControlIntegrated 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 May 31, 20154, we determined that control deficiencies existed that constituted material weaknesses, as described below:
lack of documented policies and procedures;
inadequate resources dedicated to the financial reporting function; and
ineffective separation of duties due to limited staff.
Subject to the Companys ability to obtain financing and hire additional employees, the Company expects to be able to design and implement effective internal controls in the future that address these material weaknesses.
Accordingly, we concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the Company's internal controls.
As a result of the material weaknesses described above, our CEO and CFO have concluded that the Company did not maintain effective internal control over financial reporting as of May 31, 2015 based on criteria established in Internal ControlIntegrated Framework issued by COSO.
Changes in Internal Control Over Financial Reporting.
There were no changes in our internal control over financial reporting during the quarter ended May 31, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 1. LEGAL PROCEEDINGS
ITEM 1A. RISK FACTORS
We are a "smaller reporting Company" as defined by Rule 12b-2 of the Securities Exchange Act of 1934 (the "Exchange Act") and are not required to provide information under this item.
ITEM 2. RECENT SALES OF UNREGISTERED SECURITIES
RLB Freight Consultants Corp.
Shares of common stock valued at the stock price
at the close of trading on the date the
issuance was approved
for consulting services.
the issuance was approved
Richard Delima Consulting
Gary I. Syner
the issuance was approved
ITEM 6. EXHIBITS, REPORTS ON FORM 8-K AND FINANCIAL STATEMENT SCHEDULES
Exhibits required to be attached by Item 601 of Regulation S-B are listed in the Index to Exhibits and are incorporated herein by this reference.
Certification of Chief Executive Officer/CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Executive Officer/CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated July 20, 2015
/s/ Arthur D. Viola
and Chief Financial Officer
The above information was disclosed in a filing to the SEC. To see this filing in its entirety, click here.
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