Daniels Corporate Advisory Company, Inc. - Quarter Report: 2016 August (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

 

☒   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 31, 2016

 

OR

  ☐      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number 333-169128

DANIELS CORPORATE ADVISORY COMPANY, INC.

(Exact name of Registrant as specified in its charter)

 

Nevada	04-3667624
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)
Parker Towers, 104-60, Queens Boulevard 12th Floor Forest Hills, New York 11375	11375
(Address of principal executive offices)	(Zip Code)

 

(347) 242-3148

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of "large accelerated filer, "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

 

As of December 7, 2016 the registrant had 2,686,756,136 shares of common stock outstanding.

 

 

1

Daniels Corporate Advisory Company, Inc.

INDEX TO FORM 10-Q

 

 

 

2

 

		August 31, 2016				November 30, 2015
		"Unaudited"				"Unaudited"
Assets
Current Assets
Cash and cash equivalents		$	2			$	22,941
Deposits			0				27,500
Investments			8,563				8,026
Total Current Assets		$	8,565			$	58,467
Liabilities and Equity(Deficit)
Current liabilities
Accounts payable and accrued expenses		$	735,129			$	803,959
Derivative Liability			341,351				383,396
Note payable net of discount of $0 and $108,732			222,000				172,896
Total Current Liabilities			1,298,480				1,360,251
Related Party - Stockholder loans			10,200				0
Total Liabilities			1,308,680				1,360,251
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 8/31/2016 and 11/30/2015			100				100
Common Stock, $.001 par value; 5,000,000,000 shares authorized 2,686,796,136 and 86,462,512 shares issued and outstanding 8/31/2016 and 11/30/2015			2,686,796				86,463
Additional paid-in-capital			4,497,382				6,181,755
Accumulated deficit			(8,428,607	)			(7,513,779	)
Accumulated other comprehensive (loss)			(55,786	)			(56,323	)
Total Equity(Deficit)			(1,300,115	)			(1,301,784	)
Total liabilities and equity(Deficit)		$	8,565			$	58,467

 

 

 

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		For the Three Months Ended								For the Nine Months Ended
		August 31, 2016				August 31, 2015				August 31, 2016				August 31, 2015
		"Unaudited"				"Unaudited"				"Unaudited"				"Unaudited"
Revenues		$	0			$	0			$	0			$	0
Operating Expenses			36,955				562,469				288,467				1,068,977
Net Income(Loss) from Operations			(36,955	)			(562,469	)			(288,467	)			(1,068,977	)
Other Income (Expense):
Derivative expense			(183,333	)			0				(439,677	)			0
Gain(loss) on debt retirement			0				0				(27,223	)			0
Gain on sale of stock			0				0				3,130				0
Interest (income)expense			0				(96,598	)			(97,373	)			(220,617	)
Derivative liability gain(loss)			(19,564	)			17,829				(65,218	)			52,799
			(202,897	)			(78,769	)			(626,361	)			(167,818	)
Net Income(Loss) Before
Provision for Income Taxes			(239,852	)			(641,238	)			(914,828	)			(1,236,795	)
Provision for income taxes			0				5,775				0				5,775
Net Income(Loss) before discontinued operations			(239,852	)			(647,013	)			(914,828	)			(1,242,570	)
Net Income Loss dicontinued operations			0				82,881				0				107,320
Net Income(Loss)		$	(239,852	)		$	(564,132	)		$	(914,828	)		$	(1,135,250	)
Basic and Diluted Loss Per Share before discontinued operations		$	(0.00	)		$	(0.02	)		$	(0.00	)		$	(0.06	)
Basic and Diluted Loss Per Share discontinued operations		$	0.00			$	0.00			$	0.00			$	0.01
Basic and Diluted Loss Per Share		$	(0.00	)		$	(0.01	)		$	(0.00	)		$	(0.05	)
Weighted average number
of shares outstanding			2,686,796,136				37,751,652				1,594,701,282				21,127,708

 

"The accompanying notes are an integral part of these financial statements"

4

Daniels Corporate Advisory Company, Inc.

Consolidated Statements of Cash Flows

		For the Nine Months Ended
		August 31, 2016				August 31, 2015
		"Unaudited"				"Unaudited"
Cash flows from operating activities:
Net income (loss)		$	(914,828	)		$	(1,135,250	)
Gain on debt conversions			69,219				0
Realized gain(loss) on securities			0				11,850
(Gain)loss on derivative liability			65,218				52,799
Debt discount amortization			97,373				233,570
Derivative expense			439,677				0
Stock issued for services			67,350				603,830
(Increase)decrease in prepaid expenses			(27,500	)			3,136
(Increase)decrease in other assets			0				(12,954	)
(Increase)decrease in accounts receivable			0				4,530
Increase(decrease) in accounts payable and accrued expenses			(68,830	)			60,160
Net cash used in operating activities			(272,321	)			(178,329	)
Cash flows from investing activities:
Proceeds(purchases) from sale securities			3,082				(15,300	)
Net cash provided(used) by investing activities			3,082				(15,300	)
Cash flows from financing activities:
Payments on convertible notes			(49,200	)			(62,500	)
Issuance(payments) of note receivable			0				(135,000	)
Proceeds from related party loans			10,200				0
Proceeds from convertible notes			285,300				447,510
Net cash provided(used) by financing activities			246,300				250,010
Increase in cash and equivalents			(22,939	)			56,381
Cash and cash equivalents at beginning of period			22,941				89,733
Cash and cash equivalents at end of period		$	2			$	146,114

"The accompanying notes are an integral part of these financial statements"

5

Daniels Corporate Advisory Company, Inc.

Consolidated Statements of Cash Flows

		For the Nine Months Ended
		August 31, 2016				August 31, 2015
		"Unaudited"				"Unaudited"
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest		$	0			$	0
Income taxes		$	0			$	0
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Unrealized gain (loss) on securities		$	537			$	4
Common stock issued for compensation		$	67,350			$	603,830
Equity for debt conversions		$	363,765			$	0

"The accompanying notes are an integral part of these financial statements"

6

Daniels Corporate Advisory Company, Inc.

Consolidated Statement of Comprehensive Income (Loss)

		For the Nine Months Ended
		August 31, 2016				August 31, 2015
		"Unaudited"				"Unaudited"
Net loss		$	(914,828	)		$	(1,135,250	)
Other comprehensive income (loss)			0				0
Unrealized gains(losses) arising during the period			537				4
Comprehensive income (loss)		$	(914,291	)		$	(1,135,246	)

"The accompanying notes are an integral part of these financial statements"

 

 

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 August 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.

 

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NOTE 2-   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

FASB Codification:

 

  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 effect 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 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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NOTE 2-   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

●	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 Company's financial statements.

 

Investments:

 

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, Investments. We have designated our investments at August 31, 2016 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 August 31, 2016.  We base the cost of the investment sold on the specific identification method using market rates.

 

Comprehensive Income:

 

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.

 

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.

 

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NOTE 2-   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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.

 

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NOTE 2-   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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:

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:

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 nine months ended August 31, 2016 and 2015:

 

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NOTE 2-   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

		8/31/2016				8/31/2015
Net  (Loss)		$	(914,828	)		$	(1,135,250	)
Weighted-average common shares outstanding  basic
Weighted-average common stock			1,594,701,282				21,127,708
Equivalents
Stock options			-				-
Warrants			-				-
Convertible Notes			-				-
Weighted-average common shares outstanding- basic and diluted			1,594,701,282				21,127,708

 

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.

Currently the Daniels has projected $8,428,607 as of May 31, 2016 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, 2016. During the three months ended May 31, 2016 our President Arthur Viola infused $10,200 in advances for working capital. These funds were advanced interest free with no payback terms of twelve months and one day.

 

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NOTE 4-   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 August 31, 2016 the Company had a working capital deficit and an accumulated deficit. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management believes that the Company's capital requirements will depend on many factors including the success of the Company's 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 5-   COMMITMENTS AND CONTINGENCIES

Commitments:

 

The Company currently has no long term commitments.

 

Contingencies:

 

None

  

NOTE 6 - LEGAL PROCEEDINGS

On May 29, 2015, we were notified that Lazarus Logistics and Consultants Corp. threatened to file a lawsuit against us alleging breach of contract, with a request for specific performance, breach of contract on a loan agreement.  A settlement has been negotiated as of the date of this report.

We are not engaged in any other litigation at the present time, and management is unaware of any claims or complaints that could result in future litigation.  Management will seek to minimize disputes with its customers but recognizes the inevitability of legal action in today's business environment as an unfortunate price of conducting business.

NOTE 7- INCOME TAXES

 

As of August 31, 2016, the Company had approximately $8,428,607 in net operating loss carry forwards for federal income tax purposes which expire between 2017 and 2033.  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 carryforward. However, as a result of potential stock offerings and stock issuance in connection with potential acquisitions, as well as the possibility of the Company not realizing its business plan objectives and having future taxable income to offset, the Company's use of these NOLs may be limited under the provisions of Section 382 of the Internal Revenue Code of 1986, as amended.  The Company is in the process of evaluating the implications of Section 382 on its ability to utilize some or all of its NOLs.

Components of deferred tax assets and (liabilities) are as follows:

		31-Aug-16				30-Nov-15
Net operating loss carry forwards valuation available		$	8,428,607			$	7,513,779
Less: Valuation Allowances			(8,428,607	)			(7,513,779	)
Deferred Tax Asset		$	0			$	0

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 $8,428,607 at August 31, 2016. The Company did not utilize any NOL deductions for the full fiscal year ended November 30, 2015.

 

 

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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 issued, (the "Note"), are a hybrid instrument 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 Company's statements of operations as "change in the fair value of derivative instrument".

As of August 31, 2016 and November 30, 2015, the estimated fair value of derivative liability was determined to be $341,351 and $383,396, respectively. For the quarter ended August 31, 2016, new derivative liability was recognized of $202,897. During the nine months ended August 31, 2016, amortization of $97,373 was recorded against the discount. The change in the fair value of derivative liabilities for the nine months ended May 31, 2016 was $42,045 resulting in an aggregate loss on derivative liabilities.

Financial assets and liabilities measured at fair value on a recurring basis are summarized below and disclosed on the balance sheets:

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 nine months ended August 31, 2016:

		Derivative Liability
Fair value, December 1, 2015		$	383,396
Additions			256,344
Change in fair value			65,218
Transfers in and/or out of Level 3			(363,607	)
Fair value, May 31, 2016		$	341,351

Note 9  -  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 August 31, 2015. The entire balance was impaired as management deemed this uncollectible at year end November 30, 2015.

 

15

 

PART I

 ITEM 2.    MANAGEMNT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

Overview

 

Daniels Corporate Advisory has established a permanent base upon which to provide the corporate strategy consulting services noted below, through a variety of methods: including the issunace of additional shares in private placement and/or issuance of anti-dilutive Convertible Preferred Stock and loans from senior officers to provide the necessary working capital of the Company to sustain activities under any consulting assignment obtained through the networking of senior executives or through the initial purchase of rights to be the provider of choice to offer a financial specialty package including corporate strategy to clients of other financial/business services companies.  While rights agreements of this nature are not typical, senior management, drawing on personal contacts and those of credential members of its Corporate Strategy Advisory Board believes that offering to provide a very select service that would be very costly to duplicate with permanent in-house professionals and will augment other financial services already being offered/implemented by the financial/business services firm (a referral generator) entering into the rights agreement with Daniels Corporate Advisory, will be an acceptable additional option.  However, there is no assurance that has time goes by a client may decide to enter our business and there is no provision in our agreement to prevent that from happening.  However, our senior management believes that our success with the ultimate client, the client network member of a financial/business services client, will determine whether Daniels Corporate Advisory retains the client or not.

The services incorporated into corporate strategy advisory and implementation to help formulate a path for the acceleration of corporate development (growth) include market analysis, negotiation, deal structure and determination of finance alternatives for the creation of joint-ventures, marketing agreements, new product/creation additions and acquisitions.  Daniels Corporate Advisory has a loosely organized cadre of highly-qualified, independent contractors/consultants available to perform the necessary services to achieve the optimum corporate strategy for a client.

Services will also be provided in corporate financial advisory, which, like corporate strategy, is a specialized segment of corporate advisory.  It deals more with operations/cost control issues that can be established in-house with the aid of our on-call professionals. These offerings would be extremely expensive to do in-house by any potentially competitive financial service firm retaining Daniels Corporate Advisory, on behalf of on of its clients, because of its fixed overhead.

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Daniels is developing direct methods for the acquisition of clients, namely advertising in industry niches of interest and subsequent referral by a stockholder or partner.  Name brand recognition is expected to be created after one or two successful corporate strategy assignments and the publicizing of these events on web sites related to this specialty, ours and theirs, on the worldwide web.

Daniels Corporate Advisory is operating at the present time through the corporate strategy segment of its business in order to build its own critical mass by creation of start-up subisidaries it believes to have promise/potential, with the stated goal of the parent (DCAC) company to meet the financial requirements necessary for major Stock Exchange Listing.   Senior management and its Advisory Board are providing preliminary services to three such potential clients; one under a formal LOI (Letter of Intent) and two in final negotiations.

As our presence in the market place becomes more visible, through publication on client websites of our successes in our initial corporate strategy consulting assignments added financing options are expected to materialize for the benefit of our clients.  Capital companies and high-net worth (accredited) individuals may contact us to see if they may participate directly in subsequent assignments.

Recent Business Developments

Daniels creates and implements corporate strategy alternatives for the mini-cap public or private company client.  The addition of new business opportunities and the location of professional talent for implementation is anticipated through the full-time efforts of our senior management.  These efforts are to be expanded in the US and in foreign capitals by an expanding advisory board and through the networks of independent consultants.  Principals of the respective client company will open their networks to augment professional access for specialties the Daniels corporate strategy consultants believe are needed in a jointly-venture, (jointly-controlled) undertaking created for the client's optimum growth.

Daniels may provide the client with multiple corporate strategies /opportunities including joint-ventures, marketing opportunity agreements and/or potential acquisitions structured in LBO format. One or a combination of these strategies would allow the client to enter new market niches or expand further into existing ones.

The Goal:  Within twenty-four months from commencement of a Corporate Strategy Assignment, financial results, aided by all participating players, should be forthcoming and recorded in SEC Filings.  At the same time, a senior management team and Board expanded with highly-credible interim (or permanent) professionals (directors) will be provided  in order to successfully navigate the listing process of a major Stock Exchange.  While Daniels believes this process should be successful in the above-noted, time period, there is some uncertainty in the process which is dependent upon any past issues the listing committee of a specific exchange may deem necessary to be addressed prior to uplifting.

A similar effort will be provided to tailor an optimum growth program for the private company client, whether it chooses to remain private or to become a public company through alternative merger opportunities.

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Current Projects: Start-Up Subsidiaries to be Expanded in Fiscal 2016.

Just after the Close of Fiscal 2015, Daniels Food & Beverage Group was launched and continues to grow and meet initial objectives.   The Company purchased a permanent option for $27,500 to provide advisory and some capital to acquire a candidate for the Italian Cafe's segment of its announced business model.  The initial target company does approximately $185,000 in revenues and generates a profit of $75,000.  The total purchase price is $100,000 with the option value contributed as part payment.  An operating partner corporation with significant, related experience is joint-venturing with Daniels in the further build-out of the Italian Cafe's segment of the Food & Beverage Group.  Daniels intends to consummate this transaction during the first half of the current fiscal year.

Further expansion of the Consulting segment of our business model and that of the Food & Beverage Group is anticipated through our Letter Of Intent with Island Hospitality Concepts, Inc. ("IHC").   This Consulting Group develops and executes on restaurant themes for expansion in the Islands, initially concentrating in the Dominican Republic.  It has a successful 30 year history and has already developed several profitable island brands that can be built out further through a Daniels incubation project and them offered through a Franchising Program.

Other Start-Up Potentials in discussions/negotiations at the current time include one in Merchant Finance and one in Construction - specifically, the reconstruction of disaster damaged properties.

Twelve to Twenty four Month Horizons for Daniels ' Objectives:

Daniels' believes that the validity of its corporate strategy model will be proven further through the success of several of its client/incubation/subsidiary deals.   The Company plans to use its publicly traded common stock, in a variety of securities packages, including anti-dilutive Convertible Preferred, to finance a subsidiary start-up, initially for generic sales/profits growth.  Subsequent growth options noted above will be applied as external growth becomes a secondary goal.  This method of two stage (generic and then external) growth is designed to leave existing client management with commanding equity and operating control positions.  Eventually, an optimum exit strategy will be developed for the subsidiary, one that returns a significant return on corporate (parent) capital.  The choices of optimum exit strategies could include bringing a subsidiary public, directly, or merging it with a public company operating in one of the more profitable niches of the specific market designated for expansion.  The same corporate strategy model can/will be applied to any independent mini-cap public client.

We believe our business model to be scalable. Based upon the potential success of the initial corporate strategy consulting assignments creating our uplifting to a major Stock Exchange, Daniels may entertain the creation of a franchising plan for key US Cities and Foreign Capitals or Finance Centers.

Daniels senior management will concentrate its efforts to expand its corporate strategy and financial advisory services and related specialties in the nano-cap segment of the private and public markets, where Daniels believes it will be effective.  Marketing efforts will increase through social and print media efforts and will be in addition to those methods already mentioned herein. Daniels objective is to create and help manage implementation of accelerated expansion strategies and in so doing, aid in the creation of financing alternatives to accomplish client goals.

We believe that existing and new competitors will continue to improve their services and introduce  new  services  with  competitive  price  and performance characteristics.

In periods of reduced demand for our services, we can either choose to maintain market share by reducing our prices to meet competition or maintain prices and choose only those assignments with new clients, that have pressing goals to be met, that offer Daniels optimum potential for profits and growth.

The "collective" corporate financial services, including merchant banking/private equity, are very competitive and fragmented in the Company's market niche. There are limited barriers to entry and new competitors frequently enter the market. A significant number of our competitors possess substantially greater resources. We are and will continue to offer equity compensation to our team of Advisory Board Members, and independent strategy consultants in order to keep a stable, cohesive team of professionals, which is necessary and key to the creation of operating and capital solutions in a timely fashion.

 

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Liquidity and Capital Resources

Our primary source of liquidity has been expenses paid by Arthur D. Viola, our sole officer and director and controlling stockholder.  As of August 31, 2016, we had $2 in cash and cash equivalents and a working capital deficit.

Financing Activities

We will have to raise capital by means of borrowings or through a private placement or a subsequent registered offering.  At present, we do not have any commitments with respect to future financings.  If we are unable to raise adequate capital, in the near term, to finance all phases of a client corporate consulting assignment, our proposed business will experience slow growth because it will be very hard to compete for business without a sound capital base to support advisory and implementation efforts on our suggested corporate growth strategies.

 

At present, we do have sufficient capital on hand to fund very limited operations for the immediate future.  Our logistics income continues to provide enough working capital to fund our operations. We are continually seeking to raise funds for our projects through both debt and equity measures.

 

Results of Operations – For the Three Months ended August 31, 2016

Revenues

The Company did not have sales for the quarters ending August 31, 2016 or August 31, 2015.

 

 

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Operating Expenses

During the three months ended August 31, 2016, we incurred $36,955 in expenses, compared to $562,469 in the same period ended August 31, 2015 a decrease of $525,514. Our major cost is wages which was remained constant $25,000 in the current quarter. This quarter saw an increase in consulting expenses as we continue to develop our logistics business internally.

Other Income and Expenses

During the quarter ending August 31, 2016 we incurred a change in derivative liabilities of $19,564 which accounted for most of the increase in other charges. The Company also incurred derivative expense charges of $183,333 for the quarter.

Net Income

The Company had a net loss for the three months ended August 31, 2016 of $239,852 compared to a net loss of $564,132 for the three months ended August 31, 2015. This decrease of $324,280 was in majority due to our logistics subsidiary shutdown which was discontinued during the 2015 fiscal year.

Results of Operations – For the Nine Months ended August 31, 2016

Revenues

The Company did not have sales for the nine months ending August 31, 2016 or 2015.

Operating Expenses

During the nine months ended August 31, 2016, we incurred $288,467 in expenses, compared to $1,068,977 in the same period ended August 31, 2015 a decrease of $780,510. Our major cost is wages which was remained constant $50,000 in the current quarter. This period saw an increase in consulting expenses as we continue to develop our logistics business internally.

Other Income and Expenses

During the nine months ending August 31, 2016 we incurred derivative expense charge of $438,677 which accounted for most of the increase in other charges. The Company also incurred interest expense charges of $97,373 for the period which is an increase from the prior period as well.

Net Income

The Company had a net loss for the nine months ended August 31, 2016 of $914,828 compared to a net loss of $1,135,250 for the nine months ended August 31, 2015. This decrease of $220,422 was in majority financing cost highlighted in other expenses.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

None.

 

ITEM 4 CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures.

 

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure.

Our management, with the participation of our Chief Executive Officer ("CEO") and our Chief Financial Officer ("CFO"), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of May 29, 2014. In designing and evaluating disclosure controls and procedures, we and our management recognize that any disclosure controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objective. As of May 29, 2016, based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls, the CEO and CFO concluded that our disclosure controls and procedures were not effective.

 

 

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In light of the conclusion that our internal controls over financial reporting were ineffective as of November 30, 2015, we have applied procedures and processes as necessary to ensure the reliability of our financial reporting in regards to this quarterly report on Form 10-Q. Accordingly, management believes, based on its knowledge, that: (i) this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading with respect to the periods covered by this report; and (ii) the financial statements, and other financial information included in this quarterly report, fairly present in all material respects our financial condition, results of operations and cash flows as at, and for, the periods presented in this quarterly report.

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected. Under the supervision of our CEO and PFO, the Company conducted an evaluation of the effectiveness of our internal control over financial reporting as of November 30, 2015 using the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In our assessment of the effectiveness of internal control over financial reporting as of November 30, 2015, we determined that control deficiencies existed that constituted material weaknesses, as described below:

1)	lack of documented policies and procedures;
2)	inadequate resources dedicated to the financial reporting function; and
3)	ineffective separation of duties due to limited staff.

 

Subject to the Company's ability to obtain financing and hire additional employees, the Company expects to be able to design and implement effective internal controls in the future that address these material weaknesses.

Accordingly, we concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the Company's internal controls.

As a result of the material weaknesses described above, our CEO and CFO have concluded that the Company did not maintain effective internal control over financial reporting as of August 31, 2016 based on criteria established in Internal Control—Integrated Framework issued by COSO.

 

Changes in Internal Control Over Financial Reporting.

 

There were no changes in our internal control over financial reporting during the quarter ended August 31, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

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                                    PART II

 ITEM 1.    LEGAL PROCEEDINGS

On May 29, 2015, we were notified that Lazarus Logistics and Consultants Corp. threatened to file a lawsuit against us alleging breach of contract, with a request for specific performance, breach of contract on a loan agreement.  A settlement has been negotiated as of the date of this report.

We are not engaged in any other litigation at the present time, and management is unaware of any claims or complaints that could result in future litigation.  Management will seek to minimize disputes with its customers but recognizes the inevitability of legal action in today's business environment as an unfortunate price of conducting business.

 

 Not applicable

 ITEM 2.  RECENT SALES OF UNREGISTERED SECURITIES

During the nine months ended August 31, 2016 the company issued 2,445,303,623 shares of unregistered common stock to for various convertible loan conversions to qualified investors.

 ITEM  6.   EXHIBITS, REPORTS ON FORM  8-K AND FINANCIAL STATEMENT SCHEDULES

      (a)   Exhibits

Exhibits required to be attached by Item 601 of Regulation S-B are listed in the Index to Exhibits and are incorporated herein by this reference.

EXHIBIT

 

No.		Description
31.1		Certification of Chief Executive Officer/CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer/CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Dated December 5, 2016
	Daniels Corporate Advisory Company, Inc.
	(Registrant)
	By:	/s/ Arthur D. Viola
	Arthur D. Viola
	Chief Executive Officer
	and  Chief Financial Officer

 

 

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