UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2018 |
| | |
| | OR |
| | |
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number 000-1658880
| BARE METAL STANDARD, INC. |
| (Exact name of registrant as specified in its charter) |
| IDAHO |
| (State or other jurisdiction of incorporation or organization) |
3604 S. Banner Street Boise, ID 83709 |
| |
| (Address of principal executive offices, including zip code.) |
| |
| 208-898-9379 |
| (telephone number, including area code) |
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 last 90 days. YES o NO x
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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).
YES o NOx
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 the definitions of “large accelerated filer, “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer o | Accelerated filer o |
| Non-accelerated filer x | Smaller reporting company x |
| | Emerging growth company x |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES o NO x
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 31,845,000 shares of common stock as of August 14, 2019.
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | | Trading Symbol | | Name of each exchange on which registered |
| Common Stock, par value $0.001 per share | | BRMT | | OTC Markets |
BARE METAL STANDARD, INC.
FINANCIAL STATEMENTS
JANUARY 31, 2018
TABLE OF CONTENTS
PART I. - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
Bare Metal Standards, Inc.
Balance Sheets
(unaudited)
| | | January 31 | | | October 31 | |
| | | 2018 | | | 2017 | |
| | | Successor | | | Successor | |
| | | | | | | |
| Assets |
| Current assets | | | | | | | | |
| Cash | | $ | 10,510 | | | $ | 6,509 | |
| Accounts receivable | | | 30,168 | | | | 31,004 | |
| Accounts receivable - related parties | | | 20,046 | | | | 16,355 | |
| Inventory | | | 21,316 | | | | 31,971 | |
| Prepaid expense | | | 8,500 | | | | - | |
| Total current assets | | | 90,540 | | | | 85,839 | |
| | | | | | | | | |
| Total assets | | $ | 90,540 | | | $ | 85,839 | |
| | | | | | | | | |
| Liabilities and Stockholders' Equity | | | | | | | | |
| | | | | | | | | |
| Current liabilities | | | | | | | | |
| Accounts payable and accrued liabilities | | $ | 65,439 | | | $ | 46,350 | |
| Line of credit | | | 22,697 | | | | - | |
| Total current liabilities | | | 88,136 | | | | 46,350 | |
| | | | | | | | | |
| Stockholders' equity | | | | | | | | |
| Preferred stock, $0.001 par value; 20,000,000 shares authorized; | | | | | | | | |
| none issued and outstanding as of January 31, 2018 and October 31, 2017 respectively | | | - | | | | - | |
| Common stock, $0.001 par value; 80,000,000 shares authorized; | | | | | | | | |
| 31,645,000 shares issued and outstanding as of January 31, 2018 and | | | | | | | | |
| October 31, 2017, respectively | | | 31,645 | | | | 31,645 | |
| Additional paid-in capital | | | 321,905 | | | | 321,905 | |
| Accumulated deficit | | | (351,146 | ) | | | (314,061 | ) |
| Total stockholders' equity | | | 2,404 | | | | 39,489 | |
| | | | | | | | | |
| Total liabilities and stockholders' equity | | $ | 90,540 | | | $ | 85,839 | |
(see accompanying notes to unaudited financial statements)
Bare Metal Standard, Inc.
Statements of Operations
(unaudited)
| | | Three Months | | | Three Months | |
| | | Ended | | | Ended | |
| | | January 31, 2018 | | | January 31, 2017 | |
| | | Successor | | | Predecessor | |
| | | | | | Restated | |
| Revenue | | | | | | |
| Product sales and services | | $ | 195,157 | | | $ | 63,979 | |
| Product sales and services - related parties | | | 66,996 | | | | 44,266 | |
| Total revenue | | | 262,153 | | | | 108,245 | |
| Cost of revenue | | | 110,825 | | | | - | |
| Gross income | | | 151,328 | | | | 108,245 | |
| | | | | | | | | |
| Operating expenses | | | | | | | | |
| General and administrative expenses | | | 73,948 | | | | 53,148 | |
| Administrative and officer compensation | | | 114,228 | | | | 102,511 | |
| Total operating expenses | | | 188,176 | | | | 155,659 | |
| | | | | | | | | |
| Loss from operations | | | (36,848 | ) | | | (47,414 | ) |
| | | | | | | | | |
| Other expense | | | | | | | | |
| Interest expense | | | (237 | ) | | | (2,136 | ) |
| Total other expense | | | (237 | ) | | | (2,136 | ) |
| | | | | | | | | |
| Net loss | | $ | (37,085 | ) | | $ | (49,550 | ) |
| | | | | | | | | |
| Basic and diluted net loss per common share | | $ | (0.00 | ) | | $ | (41.29 | ) |
| | | | | | | | | |
| Weighted average common shares outstanding | | | | | | | | |
| Basic and diluted | | | 31,645,000 | | | | 1,200 | |
(see accompanying notes to unaudited financial statements)
Bare Metal Standard, Inc.
Statements of Cash Flows
(unaudited)
| | | Three Months | | | Three Months | |
| | | Ended | | | Ended | |
| | | January 31, 2018 | | | January 31, 2017 | |
| | | Successor | | | Predecessor | |
| | | | | | Restated | |
| Cash flows from operating activities | | | | | | | | |
| Net loss | | $ | (37,085 | ) | | $ | (49,550 | ) |
| Adjustments to reconcile net loss to net cash (used | | | | | | | | |
| in) operating activites | | | | | | | | |
| Depreciation | | | - | | | | 10,773 | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Decrease in accounts receivable | | | 836 | | | | 20,932 | |
| (Increase) in accounts receivable - related parties | | | (3,691 | ) | | | (7,700 | ) |
| (Increase) in prepaid expenses | | | (8,500 | ) | | | - | |
| Decrease in inventory | | | 10,655 | | | | - | |
| Increase (decrease) in accounts payable | | | 19,089 | | | | (18,800 | ) |
| Increase (decrease) in accounts payable - related parties | | | - | | | | (1,924 | ) |
| Net cash used in operating activities | | | (18,696 | ) | | | (46,269 | ) |
| | | | | | | | | |
| Cash flows from financing activities | | | | | | | | |
| Bank line of credit | | | 23,000 | | | | - | |
| Repayment of line of credit | | | (303 | ) | | | (2,119 | ) |
| Net cash provided by financing activities | | | 22,697 | | | | (2,119 | ) |
| | | | | | | | | |
| Increase (decrease) in cash and cash equivalents | | | 4,001 | | | | (48,388 | ) |
| Cash, beginning balance | | | 6,509 | | | | 55,456 | |
| Cash, ending balance | | $ | 10,510 | | | $ | 7,068 | |
| | | | | | | | | |
| Supplementary information | | | | | | | | |
| Cash paid during the nine months: | | | | | | | | |
| Interest | | $ | 237 | | | $ | 2,136 | |
| Income taxes | | $ | - | | | $ | - | |
(see accompanying notes to unaudited financial statements)
BARE METAL STANDARD, INC.
Notes to Financial Statements
(unaudited)
NOTE 1 - ORGANIZATION AND OPERATIONS
The Company was incorporated, as Bare Metal Standard, Inc., (the Company) on November 12, 2015 under the laws of the State of Idaho. Bare Metal Standard provides management services for franchisees who perform fire prevention and mitigation services to commercial kitchens by cleaning their exhaust systems on a mandated schedule enforced by insurance and fire and safety prevention codes.
On March 1, 2017, Bare Metal Standard, Inc. entered into a Management Agreement with Taylor Brothers Holdings, Inc. which is an operating company and has common majority shareholders and directors. The officers and directors of Bare Metal Standard were officers and directors of Taylor Brothers. James Bedal and Mike Taylor have resigned their positions with Taylor Brothers and work full time for Bare Metal Standard. The agreement term has no expiration and can be terminated by the Company at any time with written notice to the other partner. As a result of the management agreement, Bare Metal is to provide, on behalf of Taylor Brothers, certain management services, having full authorization, on behalf of Taylor Brothers to provide all the services and all the activities, normally provided by Taylor Brothers, under the Taylor Brothers franchise agreements, previously entered into by Taylor Brothers and the franchisees Bare Metal became responsible for servicing franchisee agreements and receiving 100% of the revenues associated with those agreements assumed for the support and maintenance of the preexisting franchise agreements of Taylor Brothers Holdings franchisees as Taylor Brothers Holdings has ceased selling franchises. Bare Metal is due all collections from franchisees. Bare Metal Standard assumed the business operations of the existing franchise agreements while potential liabilities arising from said agreements will remain with Taylor Brothers. Additionally, on November 1, 2017 Bare Metal, entered into a royalty fee license agreement with Taylor Brothers Holdings Inc. with the right to sublease, the use of Trade Name Bare Metal Standard and related industry know-how including proprietary software in exchange for a monthly fee of $2,000 paid in arrears. As a result of the above transactions with Taylor Brothers Holdings Inc., under Regulation S-X for reporting purposes Taylor Brother Holdings, Inc. is considered a business. Thus, Taylor Brothers Holdings, Inc. is viewed as Predecessor entity for reporting purposes, and Bare Metal is viewed as a Successor entity.
Bare Metal Standard is currently seeking the same management opportunities in other industries. The Company intends to sell franchises in the commercial kitchen fire prevention and mitigation services environment, but, in addition, is looking for the same opportunities in other discipline.
NOTE 2 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited interim financial statements of Bare Metal Standard, Inc. have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto for the period ended October 31, 2017 contained in the Company’s Form 10K originally filed with the Securities and Exchange Commission on September 26, 2018. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the period ended October 31, 2017, as reported in the Company’s Form 10K, have been omitted.
BARE METAL STANDARD, INC.
Notes to Financial Statements
(unaudited)
For periods after the commencement of the Management Agreement (March 1, 2017), the Company is referred to as the Successor and its results of operations includes, the results of operations from Bare Metal Standard for the three months subsequent to October 31, 2017. For periods previous to the inception of the Management Agreement, the Company is referred to as the Predecessor and its results of operations includes only Taylor Brothers Holdings Inc. operations. A black line separates the three months ended January 31, 2018 successor results from the three months predecessor for the comparable three month period ended January 31, 2017, to highlight the lack of comparability between these periods.
Use of Estimates
The preparation of the financial statements in conformity with U.S. generally accepted accounting principles 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 revenue and expenses during the reporting period. Actual results could differ from those estimates. The more significant estimates and assumptions made by management include allowance for doubtful accounts, inventory valuation, and provision for excess or expired inventory, depreciation of property and equipment, realization of long-lived assets and fair market value of equity instruments issued for goods or services.
Accounts Receivable and Allowance for Doubtful Accounts
The Company's accounts receivable consists, of amounts owing by franchisees for monthly royalty commitments and for product sales to customers, including the cost of freight incurred to ship the product and other services provided by virtue of the management agreement with Taylor Brothers. Accounts receivable are stated at the amount management expects to collect from the outstanding balances. Accounts receivable as of January 31, 2018, (successor) consists of $30,168 due from non-related parties and $20,046 due from Taylor Brothers, Inc. a related party. Receivables at October 31, 2017 successor consists of $31,004 due from non-related parties and $16,335 from Taylor Brothers, Inc. a related party.
An allowance for doubtful accounts will be provided for those accounts receivable considered to be uncollectable based on historical experience, and management's evaluation at the end of the period. Bad debts are written off against the allowance when identified. Bare Metal (successor) determined that no allowance was necessary for the three months ended January 31, 2018 (successor), nor the year ended October 31, 2017.
Restatement
During the year ended October 31, 2018, the Company determined that as a result of the above transactions with Taylor Brothers Holdings Inc., under Regulation S-X for reporting purposes Taylor Brother Holdings, Inc. is considered a business. Thus, Taylor Brothers Holdings, Inc. is viewed as Predecessor entity for reporting purposes, and Bare Metal is viewed as a Successor entity. Therefore, the previously reported results of operations and cash flows for the three months ended January 31, 2017 must be separated between Successor and Predecessor periods. The table below summarizes previously reported amounts and the restated presentation of the statement of operations and statement of cash flows:
BARE METAL STANDARD, INC.
Notes to Financial Statements
(unaudited)
| | | As Previously Reported | | | As Restated | |
| | | Three Months | | | Three Months | |
| | | Ended | | | Ended | |
| Statement of Operations | | January 31, 2017 | | | January 31, 2017 | |
| | | | | | Predecessor | |
| Revenue | | | | | | |
| Product sales and services | | $ | 2,661 | | | $ | 63,979 | |
| Product sales and services - related parties | | | 6,078 | | | | 44,266 | |
| Total revenue | | | 8,739 | | | | 108,245 | |
| Cost of revenue | | | 7,225 | | | | - | |
| Gross income | | | 1,514 | | | | 108,245 | |
| | | | | | | | | |
| Operating expenses | | | | | | | | |
| General and administrative expenses | | | 26,522 | | | | 53,148 | |
| Administrative and officer compensation | | | - | | | | 102,511 | |
| Total operating expenses | | | 26,522 | | | | 155,659 | |
| | | | | | | | | |
| Loss from operations | | | (25,008 | ) | | | (47,414 | ) |
| | | | | | | | | |
| Other expense | | | | | | | | |
| Interest expense | | | - | | | | (2,136 | ) |
| Total other expense | | | - | | | | (2,136 | ) |
| | | | | | | | | |
| Net loss | | $ | (25,008 | ) | | $ | (49,550 | ) |
| | | | | | | | | |
| Basic and diluted net loss per common share | | $ | (0.00 | ) | | $ | (41.29 | ) |
| | | | | | | | | |
| Weighted average common shares outstanding | | | | | | | | |
| Basic and diluted | | | 31,497,174 | | | | 1,200 | |
BARE METAL STANDARD, INC.
Notes to Financial Statements
(unaudited)
| | | As Previously Reported | | | As Restated | |
| | | Three Months | | | Three Months | |
| | | Ended | | | Ended | |
| | | January 31, 2017 | | | January 31, 2017 | |
| | | | | | Predecessor | |
| Cash flows from operating activities | | | | | | | | |
| Net loss | | $ | (25,008 | ) | | $ | (49,550 | ) |
| Adjustments to reconcile net loss to net cash (used in) operating activities | | | | | | | | |
| Depreciation | | | - | | | | 10,773 | |
| Changes in operating assets and liabilities: | | | | | | | | |
| (Increase) decrease in accounts receivable | | | (2,662 | ) | | | 20,932 | |
| (Increase) decrease in accounts receivable - related parties | | | (6,077 | ) | | | (7,700 | ) |
| Decrease in inventory | | | (5,250 | ) | | | - | |
| (Decrease) in accounts payable | | | (8,884 | ) | | | (18,800 | ) |
| (Decrease) in accounts payable - related parties | | | - | | | | (1,924 | ) |
| Net cash used in operating activities | | | (47,881 | ) | | | (46,269 | ) |
| | | | | | | | | |
| Cash flows from financing activities | | | | | | | | |
| Cash received from sale of common stock | | | 20,000 | | | | - | |
| Repayment of line of credit | | | - | | | | (2,119 | ) |
| Net cash provided by financing activities | | | 20,000 | | | | (2,119 | ) |
| | | | | | | | | |
| Increase (decrease) in cash and cash equivalents | | | (27,881 | ) | | | (48,388 | ) |
| Cash, beginning balance | | | 87,488 | | | | 55,456 | |
| Cash, ending balance | | $ | 59,607 | | | $ | 7,068 | |
| | | | | | | | | |
| Supplementary information | | | | | | | | |
| Cash paid during the period for: | | | | | | | | |
| Interest | | $ | 237 | | | $ | 2,136 | |
| Income taxes | | $ | - | | | $ | - | |
Revenue Recognition
The Company's revenue is derived from the sale of products, services and training to support the franchisees under its Management agreement with Taylor Brothers, as a percentage of franchisees’ revenue invoiced to their clients, plus specific charges for software usage, sale of consumables and consulting services. The Company recognizes revenue when it is realized or realizable and earned, and therefore only recognizes revenue when a franchise agreement has been entered into and the franchise fee received. The Company recognizes revenue from the sale of products, royalties, and services when the product has been shipped or the services have been provided in accordance with the contract entered into with the customer. Payments received in advance of satisfaction of the relevant criteria for revenue recognition are recorded as advances from customers. The Company has no responsibility for collections, of trade debt, owed to a franchisee by the franchisees’ clients and therefore will not create an allowance for potential uncollectable obligations owing to it by the franchisee, unless it is determined that the franchisee will default on its obligation the Company. In accordance with the guidance in FASB Topic ASC 605, Revenue Recognition, the Company recognizes revenue when (a) persuasive evidence of an arrangement exists, (b) delivery has occurred or services have been rendered, (c) the fee is fixed or determinable, and (d) collectability is reasonable assured.
BARE METAL STANDARD, INC.
Notes to Financial Statements
(unaudited)
Recently Adopted Accounting Pronouncements
The Financial Accounting Standards Board, or FASB, has issued Accounting Standards Update No. 2014-09, Revenue from contracts with Customers (Topic 606), or ASU 606. ASU 606 provides guidance outlining a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers in an amount that supersedes most current revenue recognition guidance. This guidance requires us to recognize revenue when we transfer promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We are required to adopt ASU 606 at the beginning of our first quarter of fiscal 2019. The new guidance requires enhanced disclosures, including revenue recognition policies to identify performance obligations to customers and significant judgments in measurement and recognition. The new guidance may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of the adoption. The Company adopted this guidance on November 1, 2018. The primary impact expected on the Company’s financial statements at adoption is that future franchise license fees received will initial be deferred and revenue recognized ratably over the expected license period. The Company expects to utilize the cumulative effect approach of adopting ASC 606, but does not expect a material impact to the Company’s financial statements due to the Company currently earning revenues from the products, services and training to support the franchisees under its Management agreement with Taylor Brothers, as a percentage of franchisees’ revenue invoiced to their clients, plus specific charges for software usage, sale of consumables and consulting services. These revenue streams are not expected to have a material change in accounting method from adopting ASC 606.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02). Under ASU No. 2016-2, an entity will be required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU No. 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, ASU No. 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim reporting periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” The amendments in this update simplify several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. The Company adopted the new guidance on November 1, 2017, with no material impact to the Company’s financial statements.
BARE METAL STANDARD, INC.
Notes to Financial Statements
(unaudited)
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. This new standard clarifies the definition of a business and provides a screen to determine when an integrated set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. The Company adopted this standard on November 1, 2018 and there was no material impact to the Company’s financial statements.
In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting, which aligns the accounting for share-based payment awards issued to employees and nonemployees. Under ASU No. 2018-07, the existing employee guidance will apply to nonemployee share-based transactions (as long as the transaction is not effectively a form of financing), with the exception of specific guidance related to the attribution of compensation cost. The cost of nonemployee awards will continue to be recorded as if the grantor had paid cash for the goods or services. In addition, the contractual term will be able to be used in lieu of an expected term in the option-pricing model for nonemployee awards. This standard will be effective for the Company on November 1, 2019, with early adoption permitted and the Company is currently evaluating the potential impact on its financial statements.
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 3 – GOING CONCERN
The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. The Company has reoccurring losses and negative cash flows used in operations These matters, among others, raise substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustment relating to the recoverability and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
The Company is taking appropriate action to provide the necessary capital to continue its operations. These steps include, but are not limited to: 1) implementation of new business plan 2) focus on sales to minimize the need for capital at this stage; 3) raising equity financing; 4) continuous focus on reductions in cost, where possible.
NOTE 4 – MAJOR CUSTOMERS AND ACCOUNTS RECEIVABLE
Bare Metal Standard has unrelated customers and one related party customer, whose revenue, during the three months ended January 31, 2018 represented in excess of 10% of the total revenue and in excess of 10% of total accounts receivable.
Concentration of revenue and related party revenue-
During the three months ended January 31, 2018 Bare Metal Standard invoiced royalties and sold product and services, including freight, totaling $66,996 or 26% of its total revenue, to one related company, Taylor Brothers Inc. and $79,848 of non-related party revenue or 30 % to one non-related parties. During the three months ended January 31, 2017, Bare Metal invoiced $37,714 of non-related party revenue, or 14%, and 11%, respectively, to two unrelated parties, and $44,266 or 41% to one related party.
BARE METAL STANDARD, INC.
Notes to Financial Statements
(unaudited)
Concentration of accounts receivable and related party accounts receivable-
Receivables arising from sales of the Company's products are not collateralized. As of January 31, 2018, total accounts receivable were $50,214 of which $20,046 was owed by a related party. As of January 31, 2018, four customers represented approximately 44%, 22%, 14% and 12% of non-related accounts receivable. As of October 31, 2017, total accounts receivable were $47,359 of which $16,355 was owed by a related party.
NOTE 5 – LOAN PAYABLE
On November 14, 2017 the Company opened a line of credit with a bank in the amount of $40,000 bearing interest at the bank prime rate plus 8.5%. The Company is required to make monthly minimum payments based on the current balance outstanding on the line of credit. On January 31, 2018 there was $22,697 outstanding.
NOTE 6 - RELATED PARTY TRANSACTIONS
We consider all who own more than 5% shares to be related parties and record any transactions between them and the Company to be related party transactions and disclose such transactions on notes to the Financial Statements.
The Company has revenue transactions with related parties, and accounts receivable balances from those related parties. See Note 2 and 4. Additionally, the Company has no written employee agreement with its officers or directors. From time to time, the Company may award bonuses to those officers or directors for performance.
We have entered into an agreement with Taylor Brothers Inc. (a company with common officers and shareholders) to use three of their offices. The rent will be $5,000 per month, when Bare Metal Standard completes required funding to support ongoing operations.
The related party payable, in the amount of $1,924, Taylor Brothers Holdings, (Predecessor) resulted from the acquisition of supplies and products from two related companies. A total of $1,760 owing to Taylor Brothers Distributing, Inc. was repaid in two installments on November 11 and November 16, 2016. The remaining total, of $164, was repaid to a Taylor Brothers, Inc. a franchisee on November 14, 2016.
NOTE 8 – STOCKHOLDER'S EQUITY
Preferred Stock
The Company is authorized to issue 20,000,000 shares of preferred stock, par value of $0.001. There are none issued.
Common Stock
The Company is authorized to issue 80,000,000 shares of common stock, $0.001 par value. None were issued during the three months ended January 31, 2018.
BARE METAL STANDARD, INC.
Notes to Financial Statements
(unaudited)
NOTE 9 – COMMON STOCK WARRANTS
Between March 1, 2017 and October 31, 2017 the Company did not sell any commons stock units, each unit outstanding as of October 31, 2017 consists of one share of our common stock, and one warrant to purchase one share of common stock within 24 months of issuance, for $2.00.The warrants vested upon grant date and will expire between February 8, 2018 and October 31, 2018. None expired during the three months ended January 31, 2018.
A summary of our stock warrant activity for the period from November 30, 2017 through January 31, 2018 is as follows:
| | | Warrants | | | Weighted
Average
Exercise
Price | | | Weighted
Average
Remaining
Life | |
| | | | | | | | | | |
| Outstanding at beginning of period - November 1, 2017 | | 515,000 | | | $ 2.00 | | | 0.65 | |
| Outstanding at end of period -January 31, 2018 | | 515,000 | | | $ 2.00 | | | 0.41 | |
| | | | | | | | | | |
| Exercisable at end of period - January 31, 2018 | | 515,000 | | | $ 2.00 | | | 0.41 | |
The warrants outstanding and exercisable as of January 31, 2018 had no intrinsic value.
NOTE 8 – COMMITMENTS AND CONTINGENCIES
Management agreement
On March 1, 2017, the Company entered into a management agreement with Taylor Brothers Holdings, Inc. to provide all of the services and to conduct all of the activities that were agreed to be undertaken by Taylor Brothers under the Franchise Agreements for providing certain administrative support, including Franchisee training, development of operations manuals and other materials for use by Taylor Brothers’ franchisees; and develop and establish support infrastructures that the Company determines are necessary and appropriate to satisfy Taylor Brothers obligations under the Franchise Agreements. In consideration of the services provided Bare Metal shall be responsible to invoice and collect, per the terms of the Franchise Agreements, under management. All fees so collected will constitute the fees owing under the management agreement. The Agreement does not have a termination date but may be cancelled by either party with appropriate notice.
BARE METAL STANDARD, INC.
Notes to Financial Statements
(unaudited)
NOTE 9 – SUBSEQUENT EVENTS
In March 2018, the Company formed BRMT Franchising, LLC, a Texas limited liability company that is a wholly-owned subsidiary of the Company.
On June 13, 2018 the Company borrowed $100,000 from a non-related investor. The note is repayable over ten years with payments of $1,434 at an interest cost of 12%. The note is collateralized by 200,000 units of the Company’s common stock, which consist of one share of common stock and one warrant to purchase a share of common stock at $2 per share with a term of two years. On July 31, 2018 the note had been reduced by $435.
On July 10, 2018 the Company borrowed $5,000 from a related party. The note is unsecured, bears interest at 7%, and is repayable by 36 equal monthly payments of $154 principal and interest. On July 31, 2018 the balance was reduced by $125.
On December 24, 2018, our chief executive officer loaned the Company $21,000. The loan has a maturity date of December 20, 2020, and bears interest at 7%, with monthly payments of $940. The Company has made payments of $4,117 against this note payable to date.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
This section of this report includes a number of forward- looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.
Results of Operations
Successor and Predecessor Financial Presentation
The following discussion of the financial condition and results of operations should be read in conjunction with the financial statements included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future.
For the three months ended January 31, 2018, Bare Metal Inc. (Successor) and three months ended January 31, 2017 (Predecessor):
On March 1, 2017, we entered into a management agreement with Taylor Brothers Holdings Inc., which is an operating company and has common majority shareholders and directors. The officers and directors of Bare Metal Standard were officers and directors of Taylor Brothers. James Bedal and Mike Taylor have resigned their positions with Taylor Brothers and work full time for Bare Metal Standard. The agreement term has no expiration and can be terminated by the Company at any time with written notice to the other partner. As a result of the management agreement, Bare Metal is to provide, on behalf of Taylor Brothers, certain management services, having full authorization, on behalf of Taylor Brothers to provide all the services and all the activities, normally provided by Taylor Brothers, under the Taylor Brothers franchise agreements, previously entered into by Taylor Brothers and the franchisees. Bare Metal became responsible for servicing franchisee agreements and receiving 100% of the revenues associated with those agreements assumed for the support and maintenance of the preexisting franchise agreements of Taylor Brothers Holdings franchisees as Taylor Brothers Holdings has ceased selling franchises. Bare Metal is due all collections from franchisees. Bare Metal Standard assumed the business operations of the existing franchise agreements while potential liabilities arising from said agreements will remain with Taylor Brothers. Additionally, on November 1, 2017 Bare Metal, entered into a royalty free license agreement with Taylor Brothers Holdings Inc. with the right to sublease, the use of Trade Name Bare Metal Standard and related industry know-how including proprietary software in exchange for a monthly fee of $2,000 paid in arrears. As a result of the above transactions with Taylor Brothers Holdings Inc., under Regulation S-X for reporting purposes Taylor Brother Holdings Inc. is considered a business. Thus, Taylor Brothers Holdings Inc. is viewed as Predecessor entity for reporting purposes, and Bare Metal is viewed as a Successor entity. For purposes of the following discussion, we compare the results of Bare Metal Standard Inc. for the three months ended January 31, 2018 to the results of Taylor Brothers Holdings for the three months ended January 31, 2017. A black line separates the Predecessor and Successor financial statements to highlight the lack of comparability between these periods.
Revenue
During the three months ended January 31, 2018, Bare Metal (Successor) generated revenue, from non-related parties of $195,157, compared to $63,979 generated by Taylor Brothers Holdings (Predecessor) during the three months ended January 31, 2017. During the three months ended January 31, 2018, Bare Metal (Successor) generated $66,996 from related party while Taylor Brothers Holdings (Predecessor) generated $44,266 from related parties during the three months ended January 31, 2017. Total revenue from services and product sales, from all franchisees, totaled $262,153 for the three months ended January 31, 2018 compared to $108,245 for the three months ended January 31, 2017. Both revenue from related party franchisees and organic growth from other franchisees increased.
For the three months ended January 31, 2018, Bare Metal (Successor) experienced a net loss of $37,085, as compared to a Taylor Brothers Holdings (Predecessor) net loss of $49,550 for the three months ended January 31, 2017. This primarily resulted from higher revenues more than offsetting higher general & administrative expenses. The higher level of general and administrative expense is likely to continue given the costs of maintaining the company as a public company.
Bare Metal (Successor) generated total revenues of $262,153 for the three months ended January 31, 2018 compared to $108,245 total revenue generated by Taylor Brothers (Predecessor) during the three months ended January 31, 2017. At January 31, 2018, Bare Metal (Successor) had an accumulated deficit of $351,146. There can be no assurances that the Company can achieve or sustain profitability or that the Company's operating losses will not increase in the future.
Liquidity and Capital Resources
The Company is authorized to issue 80,000,000 shares of its $0.001 par value common stock. As of January 31, 2018, the Company had 31,645,000 shares of common stock issued and outstanding. As of January 31, 2018, the Company had current assets of $90,540 and current liabilities of $88,136.
The Company has limited financial resources available, which has had an adverse impact on the Company's liquidity, activities and operations. In order for the Company to remain a going concern it will need to find additional capital or generate revenues. Additional working capital may be sought through additional debt or equity private placements, additional notes payable to banks or related parties (officers, directors or stockholders), or from other available funding sources at market rates of interest, or a combination of these. The ability to raise necessary financing will depend on many factors, including the nature and prospects of any business to be acquired and the economic and market conditions prevailing at the time financing is sought. No assurances can be given that any necessary financing can be obtained on terms favorable to the Company, or at all.
Management believes the Company has sufficient cash assets, coupled with Managements’ ability to provide additional funds through the sale of equity securities, to fund its operations and keep the Company fully reporting for the next twelve (12) months.
Working Capital
Bare Metal (Successor) as of January 31, 2018 had current assets of $90,540 and current liabilities of $88,136 or working capital of $2,404 compared to current assets of $85,839 and current liabilities of $46,350 or working capital of $39,489, at October 31, 2017. The reduction in working capital results from an increase in current assets being more than offset by an increase in the amount of short term borrowings, including a bank line of credit.
Operating Activities
During the three months ended January 31, 2018, Bare Metal (Successor) utilized cash in the amount of $18,696 to pay for operating activities, compared to $46,269 of cash used in the three months ended January 31, 2017 by Taylor Brothers (Predecessor).
Investing Activities
Neither Bare Metal (Successor) nor Taylor Brothers (Predecessor) generated any funds from investing activities during the three months ended January 31, 2018 or the three months ended January 31, 2017 (Predecessor).
Financing Activities
During the three months ended January 31, 2018 Bare Metal (Successor) received $22,697 of cash from financing activities, compared to a net repayment of $2,119 by Taylor Brothers (Predecessor) during the three months ended January 31, 2017. The Bare Metal (Successor) cash flow from financing activities during the three months ended January 31, 2018 was from its bank line of credit. During the three months ended January 31, 2017, the negative cash flow from financing activities resulted almost entirely from repayment of the bank line of credit.
Plan of Operation
Bare Metal’s (Successor) plan of operation is to provide franchise opportunities in the services of commercial kitchen grease exhaust systems (GES) as well as providing franchisee management systems in other industries. As of January 31, 2018, we had $10,510 cash on hand and accounts receivable of $30,168 plus $20,046 accounts receivable from a related party. Management believes, without any additional funding or revenues, the Company has to continue to sell equity securities to finance its operations and continued growth. We will apply any proceeds from future revenues to help cover our expenditures. At this time, management anticipates it will be required to seek outside funding to keep its business operational for the next twelve months, and will continue its efforts to seek additional funding.
Future funding could result in potentially dilutive issuances of equity securities, the incurrence of debt, contingent liabilities and/or amortization expenses related to goodwill and other intangible assets, which could materially adversely affect the Company's business, results of operations and financial condition. Any future acquisitions of other businesses, technologies, services or product(s) might require the Company to obtain additional equity or debt financing, which might not be available on terms favorable to the Company, or at all, and such financing, if available, might be dilutive.
Going Concern
Our independent auditors included an explanatory paragraph in their report on the October 31, 2017 audited financial statements regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors. Our ability to continue as a going concern is contingent upon the successful completion of additional financing arrangements and our ability to achieve and maintain profitable operations.
Therefore, management plans to raise equity capital to finance the operating and capital requirements of the Company. While the Company is devoting its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds that will be available for operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern.
Summary of any product research and development that we will perform for the term of our plan of operation.
We do not anticipate performing any product research and development under our current plan of operation.
Expected purchase or sale of plant and significant equipment.
We do not anticipate the purchase or sale of any plant or significant equipment; as such items are not required by us at this time.
Significant changes in the number of employees.
As of January 31, 2018, Bare Metal (Successor) had four full time employees and two officers. We are dependent upon our two officers for our future business development. As our operations expand we anticipate the need to hire additional employees, consultants and professionals; however, the exact number is not quantifiable at this time.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results or operations, liquidity, capital expenditures or capital resources that is material to investors.
Critical Accounting Policies and Estimates
Revenue Recognition: The Company's revenue is derived from the sale of franchises, and products, services and the training necessary to support the franchisees under its Management agreement with Taylor Brothers, and a percentage of franchisees’ revenue invoiced to their clients, plus specific charges for software usage, sale of consumables and consulting services.
The Company recognizes revenue when it is realized or realizable and earned, and therefore only recognizes revenue when a franchise agreement has been entered into and the franchise fee received. The Company recognizes revenue from the sale of products, royalties, and services when the product has been shipped or the services have been provided in accordance with the contract entered into with the customer. Payments received in advance of satisfaction of the relevant criteria for revenue recognition are recorded as advances from customers. The Company has no responsibility for collections, of trade debt, owed to a franchisee by the franchisees’ clients and therefore will not create an allowance for potential uncollectable obligations owing to it by the franchisee, unless it is determined that the franchisee will default on its obligation the Company. In accordance with the guidance in FASB Topic ASC 605, Revenue Recognition, the Company recognizes revenue when (a) persuasive evidence of an arrangement exists, (b) delivery has occurred or services have been rendered, (c) the fee is fixed or determinable, and (d) collectability is reasonable assured.
New Accounting Standards
The Company's management has evaluated all the recently issued accounting pronouncements through the filing date of these financial statements and does not believe that any of these pronouncements will have a material impact on the Company's financial position and results of operations.
Summary of Significant Accounting Policies
Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States ("GAAP"). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our consolidated financial statements.
Our significant accounting policies are summarized in Note 2 of our consolidated financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our consolidated financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our results of operations, financial position or liquidity for the periods presented in this report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES.
Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures during such period were not effective.
Changes in Internal Control over Financial Reporting
Other than as set forth above, there have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1A. RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 6. EXHIBITS.
The following documents are included herein:
*Pursuant to applicable securities laws and regulations, we are deemed to have complied with the reporting obligation relating to the submission of interactive data files in such exhibits and are not subject to liability under any anti-fraud provisions of the federal securities laws as long as we have made a good faith attempt to comply with the submission requirements and promptly amend the interactive data files after becoming aware that the interactive data files fail to comply with the submission requirements. Users of this data are advised that, pursuant to Rule 406T, these interactive data files are deemed not filed and otherwise are not subject to liability.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant and in the capacities on this 14th day of August, 2019.
| | BARE METAL STANDARD INC. |
| | | |
| | | |
| | BY: | James Bedal |
| | | |
| | /s/ | James Bedal |
| | | Principal Executive Officer |
| | | Principal Financial Officer and |
| | | Principal Accounting Officer |
20
