Company Quick10K Filing
Quick10K
Bare Metal Standard
10-Q 2019-07-31 Quarter: 2019-07-31
10-Q 2019-04-30 Quarter: 2019-04-30
10-Q 2019-01-31 Quarter: 2019-01-31
10-K 2018-10-31 Annual: 2018-10-31
10-Q 2018-07-31 Quarter: 2018-07-31
10-Q 2018-04-30 Quarter: 2018-04-30
10-Q 2018-01-31 Quarter: 2018-01-31
10-K 2017-10-31 Annual: 2017-10-31
10-Q 2017-07-31 Quarter: 2017-07-31
10-Q 2017-04-30 Quarter: 2017-04-30
10-Q 2017-01-31 Quarter: 2017-01-31
8-K 2018-04-10 Amendment
8-K 2018-01-05 Other Events, Exhibits
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BRRM 2019-07-31
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 2019-07-31

BRRM 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 p91619210q.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 JULY 31, 2019
   
  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: 31,845,000 shares of common stock as of September 17, 2019.

 

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 July 31, 2019 (unaudited) and October 31, 2018 3
     
 

Unaudited Consolidated Statements of Operations for the three and nine months ended July 31, 2019 and
2018

4
     
 

Unaudited Consolidated Statements of Stockholders’ Equity (Deficit) for the three and nine months ended
July 31, 2019 and 2018

5
     
  Unaudited Consolidated Statements of Cash Flows for the nine months ended July 31, 2019 and 2018   6
     
   Notes to Interim Consolidated Financial Statements (unaudited) 7
     
ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 12
     
ITEM 3 Quantitative and Qualitative Disclosures about Market Risk 15
     
ITEM 4 Controls and Procedures 15
     
PART II OTHER INFORMATION 16
     
ITEM 1A Risk Factors 16
     
ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds 16
     
ITEM 6  Exhibits 16
     
INDEX TO EXHIBITS 16
   
SIGNATURES   17

 

 2  
  

 

PART I. - FINANCIAL INFORMATION

 

ITEM 1 FINANCIAL STATEMENTS

Bare Metal Standards, Inc.

Consolidated Balance Sheets

(unaudited)

 

   July 31   October  31 
   2019   2018 
         
Assets          
Current assets          
Cash  $17,080   $11,643 
Accounts receivable   40,424    33,705 
Accounts receivable - related parties   78,960    51,538 
Inventory   14,790    9,209 
Prepaid expense   18,153    - 
Total current assets   169,407    106,095 
           
Total assets  $169,407   $106,095 
           
 Liabilities and Stockholders' Equity (Deficit)          
           
Current liabilities          
Accounts payable and accrued liabilities  $36,596   $35,904 
Accounts payable related party   3,375    19,000 
Bank line of credit   28,709    32,520 
Related party note payable - current portion   12,229    1,853 
Promissory note payable - current portion   6,275    17,217 
Total current liabilities   87,184    106,494 
           
Long term liabilities          
    Deferred revenue   4,125    - 
    Related party note payable   6,260    2,642 
    Promissory note payable, net of discount   43,395    32,941 
Total long term liabilities   53,780    35,583 
Total Liabilities   140,964    142,077 
           
           
Stockholders' equity (deficit)          
Preferred stock, $0.001 par value; 20,000,000 shares authorized;          
none issued and outstanding as of July 31, 2019 and October 31, 2018 respectively   -    - 
Common stock, $0.001 par value; 80,000,000 shares authorized;          
31,845,000 shares issued and outstanding as of July 31, 2019 and          
October 31, 2018, respectively   31,845    31,845 
Additional paid-in capital   371,705    371,705 
Accumulated deficit   (375,107)   (439,532)
Total stockholders' equity (deficit)   28,443    (35,982)
           
Total liabilities and stockholders' equity (deficit)  $169,407   $106,095 

  

(see accompanying notes to unaudited consolidated financial statements) 

  

 3  
  

  

Bare Metal Standard, Inc.

Consolidated Statements of Operations

(unaudited)

 

   Three Months   Three Months   Nine Months   Nine Months 
   Ended   Ended   Ended   Ended 
   July 31, 2019   July 31, 2018   July 31, 2019   July 31, 2018 
                 
Revenue                    
Product sales and services  $111,007   $138,479   $357,290   $461,190 
Product sales and services - related parties   130,770    102,760    489,153    221,299 
Total revenue   241,777    241,239    846,443    682,489 
Cost of revenue   45,780    66,760    196,729    223,423 
Gross income   195,997    174,479    649,714    459,066 
                     
Operating expenses                    
General and administrative expenses   70,678    57,359    212,508    201,173 
Administrative and officer compensation   121,894    118,002    357,386    348,496 
Total operating expenses   192,572    175,361    569,894    549,669 
                     
Income (loss) from operations   3,425    (882)   79,820    (90,603)
                     
Other expense                    
Other income   -    -    1,250    - 
Interest expense   (5,513)   (2,890)   (16,645)   (4,095)
Total other expense   (5,513)   (2,890)   (15,395)   (4,095)
                     
Net income (loss)  $(2,088)  $(3,772)  $64,425   $(94,698)
                     
Basic and diluted net income (loss) per common share  $(0.00)  $(0.00)  $0.00   $(0.00)
                     
Weighted average common shares outstanding                    
Basic and diluted   31,845,000    31,679,432    31,845,000    31,645,000 

   

(see accompanying notes to unaudited consolidated financial statements) 

 

 4  
  

 

 Bare Metal Standard, Inc.

Consolidated Statements of Changes in Stockholders' Equity (Deficit)

For the Three and Nine Months Ended July 31, 2019 and 2018

(Unaudited)

 

    Preferred           Common           Additional Paid     Accumulated     Stockholders'  
    Shares     Par     Shares     Par     In Capital     Deficit     Equity (Deficit)  
                                           
                                                         
Balances 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  
Net loss     -       -       -       -       -       (25,085 )     (25,085 )
                                                         
Balances as of April 30, 2019                     31,845,000       31,845       371,705       (373,019 )     30,531  
Net loss                                             (2,088 )     (2,088 )
                                                         
Balances as of July 31, 2019           $         31,845,000     $ 31,845     $ 371,705     $ (375,107 )   $ 28,443  
                                                         
Balance as of October 31, 2017     -     $ -       31,645,000     $ 31,645     $ 321,905     $ (314,061 )   $ 39,489  
Net loss     -       -       -       -       -       (37,085 )     (37,085 )
                                                         
Balances as of January 31, 2018     -       -       31,645,000       31,645       321,905       (351,146 )     2,404  
Net loss     -       -       -       -       -       (53,841 )     (53,841 )
                                                         
Balances as of April 30, 2018     -     $ -       31,645,000     $ 31,645     $ 321,905     $ (404,987 )   $ (51,437 )
Common shares issued as collateral for note payable     -       -       200,000       200       (200 )     -       -  
Warrants issued in connection with debt discount     -       -       -       -       50,000       -       50,000  
Net loss     -       -       -       -       -       (3,772 )     (3,772 )
                                                         
Balances as of July 31, 2018           $ -       31,845,000     $ 31,845     $ 371,705     $ (408,759 )   $ (5,209 )

 

(See accompanying notes to unaudited consolidated financial statements)

 

 5  
  

 

Bare Metal Standard, Inc.

Consolidated Statements of Cash Flows

(unaudited) 

 

   Nine Months   Nine Months 
   Ended   Ended 
   July 31, 2019   July 31, 2018 
         
Cash flows from operating activities          
Net income (loss)  $64,425   $(94,698)
Adjustments to reconcile net income (loss) to net cash used in operating activities          
Amortization of debt discount   3,750    659 
Changes in operating assets and liabilities:          
Decrease in accounts receivable   (6,719)   (8,250)
(Increase) in accounts receivable - related parties   (27,422)   (65,910)
(Increase) in prepaid expenses   (18,153)   - 
(Increase) decrease in inventory   (5,581)   23,812 
Increase in accounts payable   692    19,902 
(Decrease) in accounts payable - related parties   (15,625)   - 
Increase in deferred revenue   4,125    - 
Net cash used in operating activities   (508)   (124,485)
           
Cash flows from financing activities          
Proceeds received from notes payable - related party   21,000    5,000 
Repayment of note payable - related party   (7,006)   (125)
Proceeds from bank line of credit   -    36,000 
Repayment of line of credit   (3,811)   (2,293)
Proceeds from note payable   -    100,000 
Repayment of notes payable   (4,238)   (435)
Net cash provided by financing activities   5,945    138,147 
           
Increase in cash   5,437    13,662 
Cash, beginning balance   11,643    6,509 
Cash, ending balance  $17,080   $20,171 
           
Supplementary information          
Cash paid during the nine months:          
Interest  $12,896   $3,436 
Income taxes  $-   $- 
           
Non-cash investing and financing activities          
Debt discount from warrants issued with note payable  $-   $50,000 
Common stock issued as collateral on note payable  $-   $200 

  

(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, 2018 contained in the Company’s Form 10K originally filed with the Securities and Exchange Commission on August 16, 2019.  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, 2018, 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 July 31, 2019 and October 31, 2018.

 

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.

 

 8  
  

 

The following table presents disaggregated revenue for the three and nine months ended July 31, 2019:

 

   Three months ended July
31, 2019
   Nine months ended July
31, 2019
 
         
Royalty revenue  $142,578   $427,640 
Training and consulting   47,418    231,953 
Equipment and truck sales   32,576    129,889 
Other service revenue   19,205    56,961 
Total revenue  $241,777   $846,443 

 

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. As of July 31, 2019, the Company had a total of $4,625 in deferred revenue, with $500 included in accounts payable and accrued expenses and $4,125 included in deferred revenue on the consolidated balance sheet. The Company expects to recognize $500 in revenue related to unsatisfied performance obligations over the next 12 months.

 

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 were included in the calculation of diluted earnings per share as the impact would have been anti-dilutive for the three and nine months ended July 31, 2019 and 2018. 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. 2016-02, 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. The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements.

 

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 and the Company is currently evaluating the potential impact on its 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 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.

 

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 and nine months ended July 31, 2019 and 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 July 31, 2019, Bare Metal Standard invoiced royalties and sold product and services, including freight, totaling $130,770 or 54% of total revenue to one related company, Taylor Brothers, Inc. and had one non-related party that accounted for 19% of total revenue. During the nine months ended July 31, 2019, Bare Metal Standard invoiced royalties and sold product and services, including freight, totaling $489,153 or 58% of total revenue to one related company, Taylor Brothers, Inc. and had one non-related party that accounted for 16% of total revenue.

 

During the three months ended July 31, 2018 Bare Metal Standard (successor) invoiced royalties and sold product and services, including freight, totaling $102,760 or 43% of its total revenue, to Taylor Brothers and $138,479 of non-related party revenue or (33%, 13%, and 12%), respectively, to three non-related parties. During the nine months ended July 31, 2018 Bare Metal Standard (successor) invoiced royalties and sold product and services, including freight, totaling $221,299 or 32% of its total revenue, to Taylor Brothers and $461,190 of non-related party revenue or (39%,15%,14% and 11%), respectively, to four non-related parties.  

 

Concentration of accounts receivable and related party accounts receivable-

 

Receivables arising from sales of the Company's products are not collateralized. As of July 31, 2019, total accounts receivable was $119,384 of which $78,960 or 66% was owed by a related party.  As of October 31, 2018, total accounts receivable was $85,243 of which $51,538 or 60% was owed by Taylor Brothers. 

 

NOTE 5 – NOTES AND 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 July 31, 2019 and October 31, 2018 there was $28,709 and $32,520 outstanding, respectively.

 

On June 13, 2018, the Company borrowed $100,000 from a non-related investor. The note is repayable, in equal monthly instalments, over 120 months with payments of $1,438 at an interest cost of 12%. The note is not convertible, but, is 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. $50,000 of debt discount was recognized in connection with the note related to the warrants and is being amortized in equal annual instalments over the life of the note. The $50,000 fair value of the warrants was determined based on the relative fair value of the warrants and debt, assuming a maximum value based on the most recent sale price of common stock for cash of $0.50 per share, due to the lack of active trading market for the Company’s common stock. On July 31, 2019 and October 31, 2018, the principal balance was $93,997 and $98,235, respectively. Unamortized discount was $44,327 and $48,077 as of July 31, 2019 and October 31, 2018, respectively.

 

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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, 2019 and October 31, 2018, the balance was $3,314 and $4,495, respectively.

 

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. On July 31, 2019 the principal balance was $15,175.

 

NOTE 6 - RELATED PARTY TRANSACTIONS

 

We consider all who own more than 10% 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, 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 nine months ended July 31, 2019. 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.

 

NOTE 8 – COMMON STOCK WARRANTS 

 

A summary of our stock warrant activity for the nine months ended July 31, 2019 is as follows:

 

   Warrants   Weighted
Average
Exercise
Price
   Weighted
Average
Remaining
Life
 
             
Outstanding at beginning of period – October 31, 2018   240,000   $2.00    1.37 
Expired during the nine months ended July 31, 2019   (40,000)  $2.00    - 
Outstanding at end of period – July 31, 2019   200,000   $2.00    0.87 
                
Exercisable at end of period – July 31, 2019   200,000   $2.00    0.87 

  

The warrants outstanding and exercisable as of July 31, 2019 had no intrinsic value.

 

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 July 31, 2019, total revenue from services and product sales, from all franchisees was flat compared to the three months ended July 31, 2018. Related party revenue from Taylor Brothers increase by $28,010, which was mostly offset by a decrease in non related party revenue of $27,472. The increase in related party revenue was primarily due to ongoing recurring project work. An increase of $21,518 or 12% in gross income compared to the prior year was driven by reduced costs of revenue in the current period of 31%

 

During the nine months ended July 31, 2019, total revenue from services and product sales, from all franchisees, increased by $163,954 or 24% compared to the nine months ended July 31, 2018. This was driven by increase related party revenue from Taylor Brothers of $267,854, partially offset by a decrease in non related party revenue of $103,900. The increase in related party revenue was primarily due to ongoing recurring project work and continued increase in royalty revenue. This increase in revenue coupled with a decrease in cost of revenue of 12% generated an increase of $190,648 or 42% in gross income compared to the comparable period last year.

 

     

Expenses

For the three months ended July 31, 2019, the Company’s total operating expenses increased by $17,211 or 10%, and interest expense increased by $2,623 due to increased debt. Net loss was $2,088 during the three months ended July 31, 2019 compared to $3,772 in the comparable period last year.

 

For the nine months ended July 31, 2019, the Company’s total operating expenses increased by $20,225 or 4%, and interest expense increased by $12,550 due to increased debt. Net income was $64,425 during the nine months ended July 31, 2019 compared to a net loss of $94,698 in the comparable period last year.

 

Bare Metal generated total revenues of $846,443 (of which $489,153 was from related party) for the nine months ended July 31, 2019. At July 31, 2019, Bare Metal had an accumulated deficit of $375,107. 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 July 31, 2019, the Company had 31,845,000 shares of common stock issued and outstanding. As of July 31, 2019, the Company had current assets of $169,407 and current liabilities of $87,184. 

 

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 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 July 31, 2019 had current assets of $169,407 and current liabilities of $87,184 or working capital of $82,223 compared to current assets of $106,095 and current liabilities of $106,494 or a working capital deficit of $399, at October 31, 2018. The increase in working capital resulted from the increased revenue during the current period generating higher accounts receivable.

 

Cash Flows - Operating Activities

 

During the nine months ended July 31, 2019, the Company used cash in the amount of $508 for operating activities, compared to $124,485 of cash used in the nine months ended July 31, 2018.

 

Cash Flows - Investing Activities

 

The Company did not generate any funds from investing activities during the nine months ended July 31, 2019 or 2018.

 

Cash Flows - Financing Activities 

 

During the nine months ended July 31, 2019 the Company received $5,945 of cash from financing activities, compared to $138,147 during the nine months ended July 31, 2018. The Company received a loan from related party of $21,000 and made total repayments on debt of $15,055 during the nine months ended July 31, 2019 and received $100,000 from a note payable and $36,000 in proceeds from its bank line of credit during the prior period.

 

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 July 31, 2019, we had $17,080 cash on hand and accounts receivable of $40,424 plus $78,960 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, 2018 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.

 

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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 July 31, 2019, 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. 

 

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.

 

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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.

 

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:

 

Exhibit

No.

Document Description
   
31.1 Certification of Principal Executive, Financial and Accounting Officer pursuant Section 302 of the Sarbanes-Oxley Act of 2002
   
32.1 Certification of Principal Executive, Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
   
101* Interactive data files pursuant to Rule 405 of Regulation S-T

 

 

*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 17th day of September, 2019. 

 

 

 

 

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

 

 

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