Company Quick10K Filing
Bare Metal Standard
Price-0.00 EPS0
Shares32 P/E-0
MCap-0 P/FCF0
Net Debt0 EBIT0
TEV0 TEV/EBIT0
TTM 2019-07-31, in MM, except price, ratios
10-Q 2020-01-31 Filed 2020-03-09
10-K 2019-10-31 Filed 2020-01-22
10-Q 2019-07-31 Filed 2019-09-17
10-Q 2019-04-30 Filed 2019-09-17
10-Q 2019-01-31 Filed 2019-09-16
10-K 2018-10-31 Filed 2019-08-16
10-Q 2018-07-31 Filed 2019-08-14
10-Q 2018-04-30 Filed 2019-08-14
10-Q 2018-01-31 Filed 2019-08-14
10-K 2017-10-31 Filed 2018-09-26
10-Q 2017-07-31 Filed 2017-09-13
10-Q 2017-04-30 Filed 2017-06-14
10-Q 2017-01-31 Filed 2017-03-17
8-K 2018-04-10 Amendment
8-K 2018-01-05 Other Events, Exhibits

BRRM 10Q Quarterly Report

Part I. - Financial Information
Item 1 Financial Statements
Note 1 - Organization and Operations
Note 2 - Basis of Presentation and Significant Accounting Policies
Note 3 - Going Concern
Note 4 - Major Customers and Accounts Receivable
Note 5 - Notes and Loan Payable
Note 6 - Related Party Transactions
Note 7 - Stockholder's Equity
Note 8 - Common Stock Warrants
Note 9 - Commitments and Contingencies
Item 2.Management's Discussion and Analysis or Plan of Operation.
Item 3.Quantitative and Qualitative Disclosures About Marketrisk.
Item 4.Controls and Procedures.
Part II. Other Information
Item 1A.Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6.Exhibits.
EX-31.1 ex31_1.htm
EX-32.1 ex32_1.htm

Bare Metal Standard Earnings 2020-01-31

Balance SheetIncome StatementCash Flow
228375172412116449604864523-514402017201820192020
Assets, Equity
36771528340319909111477930467-538452017201820192020
Rev, G Profit, Net Income
1033956483726279-12279-50837-893952017201820192020
Ops, Inv, Fin

10-Q 1 r3420110q.htm

 

 

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, 2020
   
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 x     NO o

 

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   x     NO o

 

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: 31,195,000 shares of common stock as of March 9, 2020.

 

Securities registered pursuant to Section 12(b) of the Act: None

 

 

 

 1 
 

 

TABLE OF CONTENTS

 PART I. - FINANCIAL INFORMATION
     Page
     
ITEM 1 CONSOLIDATED FINANCIAL STATEMENTS   3
     
  Consolidated Balance Sheets as of January 31, 2020 (unaudited) and October 31, 2019 3
     
  Unaudited Consolidated Statements of Operations for the three months ended January 31, 2020 and 2019 4
     
  Unaudited Consolidated Statements of Stockholders’ Equity for the three months ended January 31, 2020
and 2019
5
     
  Unaudited Consolidated Statements of Cash Flows for the three months ended January 31, 2020 and 2019   6
     
  Notes to Interim Consolidated Financial Statements (unaudited) 7
     
ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 13
     
ITEM 3 Quantitative and Qualitative Disclosures about Market Risk 16
     
ITEM 4 Controls and Procedures 16
     
PART II OTHER INFORMATION 17
     
ITEM 1A Risk Factors 17
     
ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds 17
     
ITEM 6  Exhibits 17
     
INDEX TO EXHIBITS 17
   
SIGNATURES   18

 

 2 
 

 

PART I. - FINANCIAL INFORMATION

 

ITEM 1 FINANCIAL STATEMENTS

Bare Metal Standards, Inc.

Consolidated Balance Sheets

(unaudited)

 

   January 31   October  31 
   2020   2019 
         
Assets          
Current assets          
Cash  $39,438   $10,079 
Accounts receivable   55,346    50,645 
Accounts receivable - related parties   86,082    86,319 
Inventory   42,784    14,337 
Prepaid expense   10,658    16,972 
Total current assets   234,308    178,352 
           
Total assets  $234,308   $178,352 
           
 Liabilities and Stockholders' Equity          
           
Current liabilities          
Accounts payable and accrued liabilities  $49,160   $23,764 
Accounts payable related party   4,000    5,375 
Deferred revenue   39,000    - 
Bank line of credit   25,589    27,308 
Related party note payable - current portion   11,722    12,444 
Promissory note payable - current portion   9,383    11,822 
Total current liabilities   138,854    80,713 
           
Long term liabilities          
Deferred revenue   3,875    4,000 
Related party note payable   759    3,067 
Promissory note payable, net of discount   42,493    42,970 
Total long term liabilities   47,127    50,037 
Total Liabilities   185,981    130,750 
           
           
Stockholders' equity          
Preferred stock, $0.001 par value; 20,000,000 shares authorized;          
none issued and outstanding as of January 31, 2020 and October 31, 2019 respectively   -    - 
Common stock, $0.001 par value; 80,000,000 shares authorized;          
31,195,000 and 31,845,000 shares issued and outstanding as of January 31, 2020 and          
October 31, 2019, respectively   31,195    31,845 
Additional paid-in capital   372,355    371,705 
Accumulated deficit   (355,223)   (355,948)
Total stockholders' equity   48,327    47,602 
           
Total liabilities and stockholders' equity  $234,308   $178,352 

  

(see accompanying notes to unaudited consolidated financial statements) 

 

 3 
 

 

Bare Metal Standard, Inc.

Consolidated Statements of Operations

(unaudited)

 

   Three Months   Three Months 
   Ended   Ended 
   January 31, 2020   January 31, 2019 
         
Revenue          
Product sales and services  $115,476   $144,786 
Product sales and services - related parties   132,126    222,925 
Total revenue   247,602    367,711 
Cost of revenue   48,573    108,455 
Gross income   199,029    259,256 
           
Operating expenses          
General and administrative expenses   71,751    48,935 
Administrative and officer compensation   121,208    113,177 
Total operating expenses   192,959    162,112 
           
Income from operations   6,070    97,144 
           
Other expense          
Interest expense   (5,345)   (5,546)
Total other expense   (5,345)   (5,546)
           
Net income  $725   $91,598 
           
Basic and diluted net income per common share  $0.00   $0.00 
           
Weighted average common shares outstanding          
Basic and diluted   31,682,500    31,845,000 

  

(see accompanying notes to unaudited consolidated financial statements) 

 

 4 
 

 

 Bare Metal Standard, Inc.

Consolidated Statements of Changes in Stockholders' Equity (Deficit)

For the Three Months Ended January 31, 2020 and 2019

(Unaudited)

 

   Preferred       Common       Additional Paid   Accumulated   Stockholders' 
   Shares   Par   Shares   Par   In Capital   Deficit   Equity (Deficit) 
                             
                             
Balances as of October 31, 2019   -   $-    31,845,000   $31,845   $371,705   $(355,948)  $47,602 
Cancellation of common shares   -    -    (650,000)   (650)   650    -    - 
Net income   -    -    -    -    -    725    725 
                                    
Balances as of January 31, 2020   -   $-    31,195,000   $31,195   $372,355   $(355,223)  $48,327 
                                    
Balance as of October 31, 2018   -   $-    31,845,000   $31,845   $371,705   $(439,532)  $(35,982)
Net income   -    -    -    -    -    91,598    91,598 
                                    
Balances as of January 31, 2019   -   $-    31,845,000   $31,845   $371,705   $(347,934)  $55,616 

 

(See accompanying notes to unaudited consolidated financial statements)

 

 5 
 

 

Bare Metal Standard, Inc.

Consolidated Statements of Cash Flows

(unaudited) 

 

   Three Months   Three Months 
   Ended   Ended 
   January 31, 2020   January 31, 2019 
         
         
Cash flows from operating activities          
Net income  $725   $91,598 
Adjustments to reconcile net income to net cash used in operating activities          
Amortization of debt discount   1,264    1,264 
Changes in operating assets and liabilities:          
Accounts receivable   (4,701)   (8,863)
Accounts receivable - related parties   237    (105,499)
Prepaid expenses   6,314    (4,000)
Inventory   (28,447)   (3,831)
Accounts payable and accrued liabilities   25,396    23,012 
Accounts payable - related parties   (1,375)   (15,275)
Deferred revenue   38,875    4,375 
Net cash provided by (used in) operating activities   38,288    (17,219)
           
Cash flows from financing activities          
Proceeds received from notes payable - related party   -    21,000 
Repayment of note payable - related party   (3,030)   (1,205)
Repayment of bank line of credit   (1,719)   (1,118)
Repayment of notes payable   (4,180)   (1,371)
Net cash provided by (used in) financing activities   (8,929)   17,306 
           
Change in cash   29,359    87 
Cash, beginning balance   10,079    11,643 
Cash, ending balance  $39,438   $11,730 
           
Supplementary information          
Cash paid for:          
Interest  $4,102   $4,282 
Income taxes  $-   $- 

  

(see accompanying notes to unaudited consolidated financial statements)

 

 6 
 

 

BARE METAL STANDARD, INC.

Notes to Consolidated 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.

 

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 consolidated 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, 2019 contained in the Company’s Form 10K originally filed with the Securities and Exchange Commission on January 22, 2020.  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, 2019, as reported in the Company’s Form 10K, have been omitted.

 

Principles of Consolidation

 

The Company prepares its consolidated financial statements on the accrual basis of accounting based on an October 31 fiscal year end. The accompanying consolidated financial statements include the accounts of the Company and its single subsidiary which has a fiscal year end of December 31. All intercompany accounts, balances and transactions have been eliminated in the consolidation. In March 2018, the Company formed BRMT Franchising, LLC, a Texas limited liability company that is a wholly-owned subsidiary of the Company.

 

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.  

 

 7 
 

 

Inventories and Provision for Excess or Expired Inventory

 

Inventory consists of finished goods and consumables held for resale to franchisees and is valued on an average cost basis. Provisions for excess inventory are included in cost of goods sold and have historically been immaterial but adequate to provide for losses. Inventory is reviewed, at least, quarterly. The Company has determined that there was no need to reserve for obsolescence as of January 31, 2020 and October 31, 2019.

 

Revenue Recognition 

 

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which was adopted on November 1, 2018 using the modified retrospective method, with no impact to the Company’s comparative financial statements.

 

Revenue is recognized in accordance with a five-step revenue model, as follows: identifying the contract with the customer; identifying the performance obligations in the contract; determining the transaction price; allocating the transaction price to the performance obligations; and recognizing revenue when (or as) the entity satisfies a performance obligation.

 

A contract with commercial substance exists once the Company executes a franchise agreement with the franchisee. The initial license fee is due at the execution of the agreement. If collectability is not probable, the sale is deferred and not recognized until collection is probable or payment is received. Net revenues comprise gross revenues less customer discounts and allowances, actual and expected returns. Shipping charges billed to members are included in net sales. Various taxes on the sale of products and enrollment packages to members are collected by the Company as an agent and remitted to the respective taxing authority. These taxes are presented on a net basis and recorded as a liability until remitted to the respective taxing authority.

 

The Company generates revenue from franchise fees and royalty income, advertising fees and sales of supplies and other products as follows:

 

Franchise fees and royalty income

 

The Company sells individual franchises as well as territory agreements in the form of franchise agreements that grant the right to develop the business in designated areas. The franchise agreements typically require the franchisee to pay initial nonrefundable franchise fees prior to opening the business and continuing fees, or royalty income, on a monthly basis based upon a percentage of franchisee gross sales. The initial term of domestic franchise agreements is typically 10 years. Prior to the end of the franchise term or as otherwise provided by the Company, The Company may offer a renewal term of a franchise agreement and, if approved, the franchisee will typically pay a renewal fee upon execution of the renewal term. If approved, a franchisee may transfer a franchise agreement to a new or existing franchisee, at which point a transfer fee is paid.

 

Generally, the franchise license granted for each individual restaurant within an arrangement represents a single performance obligation. Therefore, initial franchise fees and market entry fees for each arrangement are allocated to each individual business and recognized over the term of the respective franchise agreement from the date of the restaurant opening. Royalty income is also recognized over the term of the respective franchise agreement based on the royalties earned each period as the underlying sales occur. Renewal fees are generally recognized over the renewal term for the respective restaurant from the start of the renewal period. Transfer fees are recognized over the remaining term of the franchise agreement beginning at the time of transfer.

 

Advertising fees

 

Franchise agreements typically require the franchisee to pay continuing advertising fees on a monthly basis based on a percentage of franchisee gross sales, which represents a portion of the consideration received for the single performance obligation of the franchise license. Continuing advertising fees are recognized over the term of the respective franchise agreement based on the fees earned each period as the underlying sales occur. Advertising fees are included in Other Service Revenue in the presentation of disaggregated revenue data below.

 

Sales of supplies and other products

 

We distribute supplies and other products to franchisees and licensees. Revenue from the sale of supplies and other products is recognized when title and risk of loss transfers to the buyer, which is generally upon delivery. Payment for supplies and other products is generally due within a relatively short period of time subsequent to delivery.

 

 8 
 

 

The following table presents disaggregated revenue for the years ended January 31, 2020 and 2019:

 

   Three months ended
January 31, 2020
   Three months ended
January 31, 2019
 
         
Royalty revenue  $143,229   $150,320 
Training and consulting   43,355    121,089 
Equipment and truck sales   41,565    76,871 
Other service revenue   19,453    19,431 
Total revenue  $247,602   $367,711 

 

Contract Costs

 

Costs incurred to obtain a customer contract are not material to the Company. The Company elected to apply the practical expedient to not capitalize contract costs to obtain contracts with a duration of one year or less, which are expensed and included within cost of goods and services.

 

Contract Liabilities

 

The Company receives payment up front for the sale of a franchise. The franchise fee is considered to be a contract liability to provide support and services over the period of the license agreement, and are recorded as deferred revenue, with the revenue being recognized ratably over the license period. Additionally, the Company recognizes a contract liability related to any other unsatisfied performance obligations. As of January 31, 2020, the Company had a total of $42,875 in deferred revenue, with $39,000 expected to be recognized in revenue over the next 12 months, and $3,875 expected to be recognized beyond 12 months over the remaining license period of approximately nine years.

 

Cost of Revenues

 

Cost of sales includes all of the costs to service the franchise agreements, and costs to purchase the supplies and products sold to franchisees. Additionally, shipping costs are included in Cost of Revenues in the Unaudited Consolidated Statements of Operations.

 

Net Income (Loss) Per Share

 

Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted-average common shares outstanding. Diluted net income per share is calculated by dividing net income by the weighted-average common shares outstanding during the period using the treasury stock method. No potentially dilutive securities, consisting of 200,000 outstanding common stock warrants, were included in the calculation of diluted earnings per share as the impact would have been anti-dilutive for the three months ended January 31, 2020 and 2019. Therefore, basic and dilutive net income (loss) per share were the same.

 

Recently Issued Accounting Pronouncements

 

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. The Company adopted this guidance on November 1, 2019 with no effect to the Company’s consolidated financial statements, due to the Company not being party to any lease agreements. The new standard provides a number of optional practical expedients in transition. The Company elected the ‘package of practical expedients’, which permitted the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs; and all of the new standard’s available transition practical expedients. The new standard also provides practical expedients for a company’s ongoing accounting. The Company elected the short-term lease recognition exemption for its leases. For those leases with a lease term of 12 months or less, the Company will not recognize ROU assets or lease liabilities. The Company also made an accounting policy election to combine lease and non-lease components of operating leases for all asset classes.

 

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. The Company adopted this guidance on November 1, 2019 with no impact to its consolidated financial statements.

 

 9 
 

 

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 an accumulated deficit. These matters, among others, raise substantial doubt about the Company's ability to continue as a going concern.

 

While the Company is attempting to increase sales and generate additional revenues, the Company's cash position may not be significant enough to support the Company's daily operations.  If the Company is unable to obtain additional financing through the issuance of debt or equity, the Company may be unable to continue as a going concern.  While the Company believes in the viability of its strategy to generate additional revenues and in its ability to raise additional funds, there can be no assurances to that effect.  The financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern. 

  

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, 2020 and 2019 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, 2020, Bare Metal Standard invoiced royalties and sold product and services, including freight, totaling $132,126 or 53% of total revenue to one related company, Taylor Brothers, Inc. (a company with common officers and shareholders) and had five non-related party that accounted for 39%, 17%, 14%, 13%, and 13% of non-related party revenue. One non-related party through the Taylor Brothers revenue represents approximately 35% of related party revenue for the three months ended January 31, 2020.

 

During the three months ended January 31, 2019, the Company invoiced royalties and sold product and services, including freight, totaling $222,925 or 61% of its total revenue, to one related company, Taylor Brothers Inc. and had four non-related parties that accounted for 31%, 26%, 14% and 12% of non-related party revenue. One non-related party through the Taylor Brothers revenue represents approximately 55% of related party revenue for the three months ended January 31, 2019.

 

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, 2020, total accounts receivable was $141,428 of which $86,082 was owed by a related party, and four customers represented 27%, 20%, 15% and 14% of non-related party accounts receivable. As of October 31, 2019, total accounts receivable was $136,964 of which $86,319 or 63% was owed by a related party. 

 

NOTE 5 – NOTES AND LOAN PAYABLE

 

The Company has the following notes payable outstanding as of January 31, 2020 and October 31, 2019:

 

  

January 31,

2020

  

October 31,

2019

 
Note payable dated June 13, 2018 in the original principal amount of $100,000, maturing June
13, 2028, bearing interest at 12% per year, collateralized by 200,000 units of the Company’s
common stock, which have been issued. Each common stock unit includes one common share
and the right, to purchase, for up to two years, at a cost of $2, one common share.
  $90,953   $92,498 
           
Note payable dated June 20, 2019 in the original principal amount of $10,812, maturing April
1, 2020, bearing interest at 16.24% per year, related to prepaid insurance premium, with
monthly payments of $1,163.
   2,722    5,357 
           
Note payable with a related party dated July 10, 2018 in the original principal amount of
$5,000, maturing July 10, 2021, bearing interest at 7% per year, unsecured, with monthly
payments of principal and interest of $154.
   2,492    2,906 
           
Note payable with a related party dated December 24, 2018 in the original principal amount
of $21,000, maturing December 20, 2020, bearing interest at 7% per year, unsecured, with
monthly payments of principal and interest of $940.
   9,989    12,605 
           
Total notes payable   106,156    113,366 
 Less: current portion   (21,105)   (24,266)
 Less: unamortized discount   (41,799)   (43,063)
 Total notes payable, net of discount and current portion  $43,252   $46,037 

 

 10 
 

 

On November 14, 2017, the Company opened an unsecured 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, 2020 and October 31, 2019, there was $25,589 and $27,308 outstanding, respectively.

 

NOTE 6 - RELATED PARTY TRANSACTIONS

 

The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions.

 

The Company has revenue transactions with related parties, and accounts receivable balances from those related parties, and notes payable with related parties. See Notes 4 and 5. 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 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.

 

NOTE 7 – 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, 2020. On July 13, 2018, the Company issued 200,000 non-convertible common share units, which included warrants, as collateral, to be exercised upon uncured default of the note payable described in Note 5.

 

On January 8, 2020, 650,000 shares of common stock of the Company were returned to the Company and cancelled for no consideration from one shareholder.

 

NOTE 8 – COMMON STOCK WARRANTS 

 

On July 13, 2018, the Company issued 200,000 common share units, which included common shares and warrants to be exercised within two years, as collateral for a $100,000 loan.

 

A summary of our stock warrant activity for the three months ended January 31, 2020 is as follows:

 

   Warrants   Weighted
Average
Exercise
Price
   Weighted
Average
Remaining
Life
 
             
Outstanding at beginning of period – October 31, 2019   200,000   $2.00    0.62 
Expired during the three months ended January 31, 2020   -    -    - 
Outstanding at end of period – January 31, 2020   200,000   $2.00    0.37 
                
Exercisable at end of period – January 31, 2020   200,000   $2.00    0.37 

  

The warrants outstanding and exercisable as of January 31, 2020 had no intrinsic value.

 

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NOTE 9 – COMMITMENTS AND CONTINGENCIES 

 

Management agreement 

 

On March 1, 2017, the Company entered into a management agreement with Taylor Brothers Holdings, Inc. (“Taylor Brothers”) 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. 

 

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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

 

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.

 

Revenue and Gross Income

 

During the three months ended January 31, 2020 total revenue from services and product sales, from all franchisees declined by $120,109 or 33% compared to the three months ended January 31, 2019, primarily driven by a decrease in related party revenue of $90,799 or 41% and a decrease in non-related party revenue of $29,310, or 20%. The decrease in related party revenue was primarily due to significant project work and a truck sale in the comparable period that did not occur in the current period. The decline in revenue led to a decline in gross income of $60,227 or 23%.

 

Expenses

For the three months ended January 31, 2020, the Company’s total operating expenses increased by $30,847 or 19%, primarily due to increase professional fees, and interest expense decreased by $201. Net income was $725 during the three months ended January 31, 2020 compared to $91,598 in the comparable period last year.

  

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, 2020, the Company had 31,195,000 shares of common stock issued and outstanding. As of January 31, 2020, the Company had current assets of $234,308 and current liabilities of $138,854. 

 

 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 and possible new debt financing, to fund its operations and keep the Company fully reporting for the next twelve (12) months.

 

Working Capital

 

Bare Metal as of January 31, 2020, had current assets of $234,308 and current liabilities of $138,854 or working capital of $95,454 compared to current assets of $178,352 and current liabilities of $80,713 or working capital of $97,639, at October 31, 2019.

 

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Cash Flows - Operating Activities

 

During the three months ended January 31, 2020, the Company generated cash in the amount of $38,288 from operating activities, compared to $17,219 of cash used in the three months ended January 31, 2019.

 

Cash Flows - Investing Activities

 

The Company did not generate any funds from investing activities during the three months ended January 31, 2020 or 2019.

 

Cash Flows - Financing Activities 

 

During the three months ended January 31, 2020 the Company used $8,929 of cash in financing activities, consisting of payments on the Company’s various notes payable, compared to $17,306 of cash proceeds during the three months ended January 31, 2019. The Company received a loan from related party of $21,000 and made total repayments on debt of $3,694 during the three months ended January 31, 2019.

 

Plan of Operation

 

Bare Metal’s 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, 2020, we had $39,438 cash on hand and accounts receivable of $55,346 plus $86,082 accounts receivable from a related party. Management believes, without any additional funding or revenues, the Company has to continue to sell equity securities and use additional debt 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, 2019 audited consolidated financial statements regarding concerns about our ability to continue as a going concern. Our consolidated 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 or additional debt 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, 2020, Bare Metal had three 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. 

 

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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 recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which was adopted on November 1, 2018 using the modified retrospective method, with no impact to the Company’s comparative financial statements.

 

Revenue is recognized in accordance with a five-step revenue model, as follows: identifying the contract with the customer; identifying the performance obligations in the contract; determining the transaction price; allocating the transaction price to the performance obligations; and recognizing revenue when (or as) the entity satisfies a performance obligation.

 

A contract with commercial substance exists once the Company executes a franchise agreement with the franchisee. The initial license fee is due at the execution of the agreement. If collectability is not probable, the sale is deferred and not recognized until collection is probable or payment is received. Net revenues comprise gross revenues less customer discounts and allowances, actual and expected returns. Shipping charges billed to members are included in net sales. Various taxes on the sale of products and enrollment packages to members are collected by the Company as an agent and remitted to the respective taxing authority. These taxes are presented on a net basis and recorded as a liability until remitted to the respective taxing authority.

 

The Company generates revenue from franchise fees and royalty income, advertising fees and sales of supplies and other products as follows:

 

Franchise fees and royalty income

 

The Company sells individual franchises as well as territory agreements in the form of franchise agreements that grant the right to develop the business in designated areas. The franchise agreements typically require the franchisee to pay initial nonrefundable franchise fees prior to opening the business and continuing fees, or royalty income, on a monthly basis based upon a percentage of franchisee gross sales. The initial term of domestic franchise agreements is typically 10 years. Prior to the end of the franchise term or as otherwise provided by the Company, The Company may offer a renewal term of a franchise agreement and, if approved, the franchisee will typically pay a renewal fee upon execution of the renewal term. If approved, a franchisee may transfer a franchise agreement to a new or existing franchisee, at which point a transfer fee is paid.

 

Generally, the franchise license granted for each individual restaurant within an arrangement represents a single performance obligation. Therefore, initial franchise fees and market entry fees for each arrangement are allocated to each individual business and recognized over the term of the respective franchise agreement from the date of the restaurant opening. Royalty income is also recognized over the term of the respective franchise agreement based on the royalties earned each period as the underlying sales occur. Renewal fees are generally recognized over the renewal term for the respective restaurant from the start of the renewal period. Transfer fees are recognized over the remaining term of the franchise agreement beginning at the time of transfer.

 

Advertising fees

 

Franchise agreements typically require the franchisee to pay continuing advertising fees on a monthly basis based on a percentage of franchisee gross sales, which represents a portion of the consideration received for the single performance obligation of the franchise license. Continuing advertising fees are recognized over the term of the respective franchise agreement based on the fees earned each period as the underlying sales occur.

 

Sales of supplies and other products

 

We distribute supplies and other products to franchisees and licensees. Revenue from the sale of supplies and other products is recognized when title and risk of loss transfers to the buyer, which is generally upon delivery. Payment for supplies and other products is generally due within a relatively short period of time subsequent to delivery.

 

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.

 

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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 unaudited 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 unaudited 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.

 

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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.

 

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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 9th day of March, 2020. 

 

 

 

  BARE METAL STANDARD INC.
     
     
  BY: James Bedal
     
  /s/ James Bedal
    Principal Executive Officer
    Principal Financial Officer and
    Principal Accounting Officer

 

 

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