Notes to the Condensed Consolidated
Financial Statements
August 31, 2022
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. All intercompany transactions and balances have been eliminated in consolidation.
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 nine months August 31, 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
has established doubtful accounts of $53,214 as of August 31, 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 nine months August 31, 2022, the Company wrote off $74,567 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 August 31, 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 accounts
for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities”.
Applicable GAAP requires companies
to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments according
to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative
instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument
that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes
in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument
would be considered a derivative instrument.
The Company accounts for convertible
instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) by
recording, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based
upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective
conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their
stated date of redemption.
Fair Value of Financial
Instruments
The Company has adopted FASB
Accounting Standards Codification (ASC) 820 “Fair Value Measurements and Disclosures” (ASC 820) that defines fair value
as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions
developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market
participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy
consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described
below:
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● |
Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. |
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Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability; either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g. interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
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● |
Level 3—Inputs that are both significant to the fair value measurement and unobservable. |
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 also applies ASC 820 for all non-financial assets and liabilities measured
at fair value on a non-recurring basis.
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:
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the investee’s revenue and earnings trends relative to predefined milestones and overall business prospects; |
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the general market conditions in the investee’s industry or geographic area, including regulatory or economic changes; |
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factors related to the investee’s ability to remain in business, such as the investee’s liquidity, debt ratios, and the rate at which the investee is using its cash; and |
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the investee’s receipt of additional funding at a lower valuation. If an investee obtains additional funding at a valuation lower than our carrying amount or a new round of equity funding is required for the investee to remain in business, and the new round of equity does not appear imminent, it is presumed that the investment is other than temporarily impaired, unless specific facts and circumstances indicate otherwise. |
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 net accounts receivable totaling $8,270 and $7,896 as of
August 31, 2022 and November 30, 2021, respectively.
Right
of Use Assets and Lease Liabilities
The Company recognizes according
to FASB 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 Company treats lease and non-lease components as a single
lease component for all equipment leases. Leases with an original lease term of less than one year are 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.
As
of August 31, 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 August 31, 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 nine months August
31, 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.
The
following table sets forth the components of the Company’s potential dilutive instruments as of August 31, 2022:
SCHEDULE
OF COMPONENTS OF POTENTIAL DILUTIVE INSTRUMENTS
| |
August 31, | |
| |
2022 | |
| |
(Shares) | |
Redeemable convertible preferred stock, Series B | |
| 540,384,616 | |
Convertible Notes | |
| 2,434,622,817 | |
| |
| 2,975,007,433 | |
Comparative Figures
Certain figures have been reclassified
to conform with current year presentation.
Recently Issued Accounting
Pronouncements
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 August
31, 2022, the note total is $1,012,172 including $327,172 of accrued interest. No repayment or conversion of the note occurred as of August
31, 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 August 31, 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 nine months August 31, 2022 the Company accrued management salaries of $132,200. At August 31, 2022 and November 30, 2021,
the total amount of accrued compensation owed to Mr. Viola was $838,584 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 nine months August 31, 2022 and 2021, financing fees and interest totaling approximately $4,252 and $2,134 were paid to the related
party, respectively At August 31, 2022, the outstanding loan balance was $0.
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 nine months August
31, 2022, the Company realized a net loss of $1,630,028
attributable to common stockholders and had a working capital deficit of $4,252,872.
For year ended November 30, 2021, the Company incurred a net loss of $329,150
attributable to common stockholders and a working capital deficit of $3,563,536.
The Company has relied, in large part, upon preferred equity and debt financings to fund its operations. As of August 31, 2022, the
Company had outstanding indebtedness, net of discounts, of $910,679
and had $49,071
in cash. As of November 30, 2021, the Company had outstanding indebtedness, net of discounts, of $801,986
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 August 31, 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 August 31, 2022 and November 30, 2021:
SCHEDULE
OF COMPONENTS OF PROPERTY AND EQUIPMENT
| |
Cost | | |
Accumulated Depreciation | | |
| |
| |
Balance as of 11/30/2021 | | |
Cost disposal | | |
Balance as of 08/31/2022 | | |
Balance as of 11/30/2021 | | |
Disposal | | |
Addition | | |
Balance as of 08/31/2022 | | |
Net Book Value | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Machinery and equipment | |
| 6,432 | | |
| - | | |
| 6,432 | | |
| 3,881 | | |
| - | | |
| 1,608 | | |
| 5,489 | | |
| 943 | |
Vehicles | |
| 880,951 | | |
| (134,913 | ) | |
| 746,038 | | |
| 182,496 | | |
| (50,395 | ) | |
| 112,922 | | |
| 245,023 | | |
| 501,015 | |
Total property and equipment | |
| 887,383 | | |
| (134,913 | ) | |
| 752,470 | | |
| 186,377 | | |
| (50,395 | ) | |
| 114,530 | | |
| 250,512 | | |
| 501,958 | |
For
the nine months August 31, 2022 and 2021, the Company recorded depreciation expense of $114,530 and $117,022, respectively. During the
nine months August 31, 2022, there was a gain on vehicle disposal of $68,227 included in other income.
In late August 2022 a Company rental truck was taken
off the Company’s premises by a former officer of the Company. The Company is actively pursuing to reclaim the truck.
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 0.03%
to 0.08%;
Dividend rate of 0%;
and, historical volatility rates ranging from 195%
to 236%.
As of August 31, 2022 and November 30, 2021, the note balance was $55,224
and $55,224
and accrued interest was $26,988
and $23,672,
respectively, and all associated loan discounts were fully amortized. Although some principal payments have not been paid on time by
the Company, management of the Company is currently in discussions with the lender to pay off the note with Company common stock. The
note is classified as current in the accompanying balance sheets.
On December 30, 2015, the Company
entered in convertible note agreement with a private and accredited investor, Auctus Private Equity Fund LLC, in the amount of $130,000,
unsecured, with principal and interest (stated at 10%)
amounts due and payable upon maturity on September
30, 2016. After six months, the note holder has the option to convert any portion of the unpaid principal balance into the Company’s
common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Company’s
stock and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature
using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from 0.03%
to 0.16%;
Dividend rate of 0%;
and, historical volatility rates ranging from 208%
to 269%.
As of August 31, 2022 and November 30, 2021, the note balance was $98,459
and $98,459
and accrued interest was $48,557
and $41,166,
respectively, and all associated loan discounts were fully amortized. Although some principal payments have not been paid on time by
the Company, management of the Company is currently in discussions with the lender to pay off the note with Company common stock. The
note is classified as current in the accompanying balance sheets.
On January 21, 2016, the
Company entered in convertible note agreement with a private and accredited investor, John De La Cross Capital Partners Inc., in the
amount of $8,000,
unsecured, with principal and interest (stated at 5%)
amounts due and payable upon demand. The note holder has the option to convert any portion of the unpaid principal balance into the
Company’s common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the
Company’s stock and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this
conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from 0.03%
to 0.16%;
Dividend rate of 0%;
and, historical volatility rates ranging from 208%
to 269%.
As of August 31, 2022 and November 30, 2021, the note balance was $4,000
and $4,000
and accrued interest was $1,538
and $1,388,
respectively, and all associated loan discounts were fully amortized. Although some principal payments have not been paid on time by
the Company, management of the Company is currently in discussions with the lender to pay off the note with Company common stock.
The note is classified as current in the accompanying balance sheets.
On November 23, 2016, the Company
entered in convertible note agreement with a private and accredited investor, Auctus Private Equity Fund LLC, in the amount of $61,000,
unsecured, with principal and interest (stated at 12%) amounts due and payable upon maturity on August 23, 2017. After six months, the
note holder has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time.
The Company has determined that the conversion feature in this note is not indexed to the Company’s stock and is considered to be
a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model
and the following assumptions: Risk-free interest rates ranging from 0.03% to 0.16%; Dividend rate of 0%; and, historical volatility rates
ranging from 208% to 269%. The Company amended its convertible note agreement to allow for additional principal borrowings. 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 nine months August 31, 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 August 31, 2022 and November 30, 2021, the note balance was $222,522 and $244,170 and accrued
interest was $147,218 and $148,599, respectively, and all associated loan discounts were fully amortized. Although some principal payments have not been paid on time by the Company, management of the Company is currently in discussions with the lender to pay off the note with Company common stock. The note is classified as current in the accompanying balance sheets.
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 August 31, 2022 and November 30, 2021, the note balance was $57,500 and $57,500 and accrued interest
was $15,408 and $10,206, respectively, and all associated loan discounts were fully amortized. Although some principal payments have not been paid on time by the Company, management of the Company is currently in discussions with the lender to pay off the note with Company common stock. The note is classified as current in the accompanying balance sheets.
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 August 31, 2022 and November 30, 2021, the
note balance was $75,250 and $75,250 and accrued interest was $25,968 and $19,189, respectively, and all associated loan discounts were
fully amortized. Although some principal payments have not been paid on time by the Company, management of the Company is currently in discussions with the lender to pay off the note with Company common stock. The note is classified as current in the accompanying balance sheets.
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 instalments 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 nine months
August 31, 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 instalments 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 nine months
August 31, 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 instalments totaling $656 until
such time that the obligation is fully satisfied. As of August 31, 2022 the total outstanding principal on these future receivable sale
and purchase agreements was $73,044, including $20,487 of accrued interest, and $96,361 as of November 30, 2021. As of August 31, 2022
the agreement is in default.
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 instalments totaling $967 until
such time that the obligation is fully satisfied. As of August 31, 2022, the total outstanding principal on these future receivable sales
and purchase agreement was $40,149, including $9,864 of accrued interest. As of August 31, 2022 the agreement is in default.
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 instalments totaling $596 until such
time that the obligation is fully satisfied. As of August 31, 2022, the total outstanding principal on these future receivable sales and
purchase agreement was $71,260 including $19,648 of accrued interest and fees. As of August 31, 2022 the agreement is in default.
On April 7, 2022, the Company
executed a merchant cash advance agreement with Gem Funding. Under the agreement, the Company sold an aggregate of $41,700 in future receivables
for a purchase amount of $30,000. The aggregate principal amount is payable in daily instalments totaling $348 until such time that the
obligation is fully satisfied. As of August 31, 2022, the total outstanding principal on these future receivable sales and purchase agreement
was $5,324 including $121 of accrued interest. As of August 31, 2022 the agreement is in default.
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 instalments totaling $767
until such time that the obligation is fully satisfied. As of August 31, 2022, the total outstanding principal on these future receivable
sales and purchase agreement was $46,138 including $8,471 of accrued interest. As of August 31, 2022 the agreement is in default.
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 August 31, 2022, the total amount outstanding under such notes was
$411,969, of which $353,999 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 $19,583.
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 August 31, 2022 and November
30, 2021, the estimated fair value of derivative liability was determined to be $1,127,015 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 August 31, 2022:
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 |
|
$ |
1,127,015 |
|
|
|
- |
|
|
|
- |
|
|
$ |
1,127,015 |
|
|
$ |
1,127,015 |
|
Total derivative liabilities |
|
$ |
1,127,015 |
|
|
|
- |
|
|
|
- |
|
|
$ |
1,127,015 |
|
|
$ |
1,127,015 |
|
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:
|
|
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 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 nine months August 31, 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 |
|
|
272,586 |
|
Relief of derivative liabilities from conversion of convertible notes |
|
|
(156,120 |
) |
Relief of derivative liabilities from conversion of series B preferred stock |
|
|
(443,906 |
) |
Loss (Gain) on change in fair value of the derivative |
|
|
578,968 |
|
Balance - August 31, 2022 |
|
$ |
1,127,015 |
|
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 August 31, 2022 and November 30, 2021, the Company had 100,000 shares of
Series A preferred stock issued and outstanding, and 140,500 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.
On August 15, 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.
On August 30, 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. As of August 31, 2022, the proceed of $ has not been received and was recorded as subscription receivable.
(Note 12) 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 August 30, 2022, the
Company also sold
shares of its Series B convertible preferred stock, with an annual accruing dividend of %,
to Boot Capital LLC, for $
pursuant to a Series B preferred stock purchase agreement. As of August 31, 2022, the proceed of $
has not been received and was recorded as subscription receivable. (Note 12) 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 August
31, 2022, the estimated fair value of these derivative liabilities was determined to be $. The change in the fair value for the
nine months August 31, 2022 was an unrealized loss of $164,608.
During the nine
months August 31, 2022, the Company recorded $194,545 of accretion of discounts and $7,140 in dividends. As of August 31, 2022, there
were 140,500 shares outstanding and a remaining unamortized discount of $137,927.
Common
Stock
The number of
shares of common stock authorized is 6,000,000,000, par value $0.001 per share.
Nine months
August 31, 2022
During the nine
months August 31, 2022, the Company issued:
|
● |
137,550,600 shares of common stock for the conversion of convertible note principal amount of $21,647 and accrued interest of $21,647 and $1,500 of conversion fees. |
|
● |
760,490,423 shares of common stock for the conversion of 283,750 shares of series B preferred stock and accrued dividend of $17,025. |
|
● |
63,859,548 shares of common stock valued at $57,860 to consultants. |
Nine months
ended August 31, 2021
During the nine
months ended August 31, 2021, the Company issued
|
● |
258,273,269 shares of common stock for the conversion of convertible note principal and accrued interest for a total of $263,631. |
|
● |
87,854,655 shares of common stock for the conversion of 169,100 shares of series B preferred stock. |
|
● |
14,590,743 shares of common stock valued at $60,348 to consultants. |
At August 31,
2022 and November 30, 2021, the Company had 1,741,199,100 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
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
August 31, |
|
Revenue |
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
Resale of refurbished trucks |
|
$ |
785,144 |
|
|
$ |
2,885,121 |
|
Truck rental |
|
|
517,951 |
|
|
|
625,873 |
|
Repair revenue |
|
|
14,591 |
|
|
|
33,798 |
|
Miscellaneous income |
|
|
10,913 |
|
|
|
- |
|
Total Revenue |
|
$ |
1,328,599 |
|
|
$ |
3,544,792 |
|
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 nine months August
31, 2022, the Company recognized sales revenue from the resale of refurbished trucks of $785,144 as compared to sales revenue from the
resale of refurbished trucks of $2,885,121 during the nine months ended August 31, 2021.
The Company
also recognizes revenue from the rental of class 8 heavy-duty trucks to customers. Revenue from these truck rental agreements is recognized
based upon the passage of time over the term of the arrangement once control of the underlying asset has been transferred to the customer.
The arrangements require weekly payments, and the customer may cancel the agreement at any time by notifying the Company in writing at
least 30 days before such termination. For the nine months August 31, 2022, the Company recognized sales revenue from the rental of its
trucks of $517,951, as well as repair revenue of $14,591 and miscellaneous income of $10,913, as compared to sales revenue from the rental
of its trucks of $625,873 as well as repair revenue of $33,798 during the nine months ended August 31, 2021.
NOTE 12 -
SUBSEQUENT EVENTS
In
accordance with FASB ASC 855-10 Subsequent Events, the Company has analyzed its operations subsequent to August 31, 2022, to October
17, 2022, the date these unaudited consolidated condensed financial statements were issued, and has determined that it has the
following material subsequent events to disclose in these consolidated financial statements.
During the early September 2022, the Company received $75,050 from the
issuance of 87,250 shares of its Series B convertible preferred stock on August 30, 2022. (Note 9)