UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

☒ QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  FOR THE QUARTERLY PERIOD ENDED JULY 31, 2018
   
  OR                
   
☐ 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 ☐     NO ☒

 

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   ☐      NO ☒

 

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  ☐        Accelerated filer  ☐     
Non-accelerated filer     ☒           Smaller reporting company  ☒
    Emerging growth company ☒
       

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.  ☐

 

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

YES ☐ NO þ

 

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 31,845,000 shares of common stock as of August 14, 2019.

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol   Name of each exchange on which registered
Common stock, par value $0.001 per share   BRMT   OTC Markets

 

 

 

    1  
 

 

BARE METAL STANDARD, INC.

FINANCIAL STATEMENTS

JULY 31, 2018

 

 

TABLE OF CONTENTS

PART I. - FINANCIAL INFORMATION  
     Page
     
ITEM 1 FINANCIAL STATEMENTS  3
     
  Balance Sheets as of July 31, 2018 (unaudited) and October 31, 2017 3
     
  Unaudited Statements of Operations for the three and nine months ended July
31, 2018 (Successor) and for the five months ended July 31, 2017
(Successor) and for the four months ended February 28, 2017 (Predecessor) 		4
     
  Unaudited Statements of Cash Flows for the nine months ended July 31, 2018
(Successor) and for the five months ended July 31, 2017 (Successor) and for the four months
ended February 28, 2017 (Predecessor) 		5
     
  Notes to Interim Financial Statements (unaudited) 6
     
ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 15
     
ITEM 3 Quantitative and Qualitative Disclosures about Market Risk 18
     
ITEM 4 Controls and Procedures 19
     
PART II OTHER INFORMATION 19
     
ITEM 1A Risk Factors 19
     
ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds 19
     
ITEM 6  Exhibits 19
     
INDEX TO EXHIBITS 19
   
SIGNATURES   20

 

    2  
 

 

Part I. Financial Information 

Item 1. Financial Statements

Bare Metal Standards, Inc.

Consolidated Balance Sheets

(unaudited)

 

    July 31,     October  31,  
    2018     2017  
             
Assets            
Current assets                
Cash   $ 20,171     $ 6,509  
Accounts receivable     39,254       31,004  
Accounts receivable - related parties     82,265       16,355  
Inventory     8,159       31,971  
Total current assets     149,849       85,839  
                 
Total assets   $ 149,849     $ 85,839  
                 
 Liabilities and Stockholders' Equity (Deficit)                
                 
Current liabilities                
Accounts payable and accrued liabilities   $ 66,252     $ 46,350  
Bank line of credit     33,707       -  
Related party note payable - current portion     1,853       -  
Note payable - current portion     17,217       -  
Total current liabilities     119,029       46,350  
                 
Long term liabilities                
Related party note payable     3,022       -  
Note payable, net of unamortized discount of $49,341     33,007       -  
Total long term liabilities     36,029       -  
                 
Total liabilities     155,058       46,350  
Stockholders' equity (deficit)                
Preferred stock, $0.001 par value;  20,000,000 shares authorized;                
none issued and outstanding as of July 31, 2018 and October 31 , 2017, respectively     -       -  
Common stock, $0.001 par value; 80,000,000 shares authorized;                
31,845,000 and 31,675,000  shares issued and outstanding as of July 31, 2018 and                
October 31, 2017, respectively     31,845       31,645  
Additional paid-in capital     371,705       321,905  
Accumulated deficit     (408,759 )     (314,061 )
Total stockholders' equity (deficit)     (5,209 )     39,489  
                 
Total liabilities and stockholders' equity (deficit)   $ 149,849     $ 85,839  

 

(see accompanying notes to unaudited consolidated financial statements)

 

    3  

 

Bare Metal Standard, Inc.

Consolidated Statements of Operations

(unaudited)

 

    Three Months     Three Months     Nine Months     Five Months     Four Months  
  Ended     Ended     Ended     Ended     Ended  
  July 31, 2018     July 31, 2017     July 31, 2018     July 31, 2017     February 28, 2017  
    Successor     Successor     Successor     Successor     Predecessor  
                      Restated        
Revenue                              
Product sales and services   $ 138,479     $ 100,420     $ 461,190     $ 155,866     $ 87,925  
Product sales and services - related parties     102,760       89,592       221,299       124,295       59,363  
Total revenue     241,239       190,012       682,489       280,161       147,288  
Cost of revenue     66,760       23,884       223,423       31,904       -  
Gross  income     174,479       166,128       459,066       248,257       147,288  
                                         
Operating expenses                                        
General and administrative expenses     57,359       87,816       201,173       80,505       76,905  
Depreciation and amortization     -       -       -       -       4,638  
Administrative and officer compensation     118,002       76,041       348,496       198,043       129,819  
Total operating expenses     175,361       163,857       549,669       278,548       211,362  
                                         
Income (Loss) from operations     (882 )     2,271       (90,603 )     (30,291 )     (64,074 )
                                         
Other expense                                        
Interest expense     (2,890 )     -       (4,095 )     -       (2,867 )
Total other expense     (2,890 )     -       (4,095 )     -       (2,867 )
                                         
Net Income (loss)   $ (3,772 )   $ 2,271     $ (94,698 )   $ (30,291 )   $ (66,941 )
                                         
Basic and diluted income (loss) per common share   $ (0.00 )   $ 0.00     $ (0.00 )   $ (0.00 )   $ (55.78 )
                                         
Weighted average common shares outstanding                                        
Basic and diluted     31,679,432       31,515,000       31,645,000       31,515,000       1,200  

 

(see accompanying notes to unaudited consolidated financial statements)

 

    4  
 

 

Bare Metal Standard, Inc.

Consolidated Statements of Cash Flows

(unaudited)

 

    Nine Months     Five Months     Four Months  
    Ended     Ended     Ended  
    July 31, 2018     July 31, 2017     February 28, 2017  
    Successor     Successor     Predecessor  
          Restated        
Cash flows from operating activities                        
Net (loss) income   $ (94,698 )   $ (30,291 )   $ (66,941 )
Adjustments to reconcile net loss to net cash (used                        
in) operating activites                        
Depreciation     -       -       4,639  
Amortization of debt discount     659       -       -  
Changes in operating assets and liabilities:                        
(Increase) decrease in accounts receivable     (8,250 )     (29,786 )     14,580  
(Increase) decrease in accounts receivable - related parties     (65,910 )     (15,097 )      177  
(Increase) decrease in inventory     23,812       (1,309 )     -  
Increase (decrease) in accounts payable     19,902       28,140       29,592  
Net cash used in operating activities     (124,485 )     (48,343 )     (17,953 )
                         
                         
Cash flows from financing activities                        
Proceeds received from note payable - related party     5,000       -       2,250  
Repayment of note payable - related party     (125 )     -       (34,587 )
Bank line of credit     36,000       -       -  
Repayment of line of credit     (2,293 )     -       -  
Note payable     100,000       -       -  
Repayment of note payable     (435 )     -       (2,839 )
Net cash provided by financing activities     138,147       -       (35,176 )
                         
Increase in cash and cash equivalents     13,662       (48,343 )     (53,129 )
Cash, beginning balance     6,509       51,547       55,456  
Cash, ending balance   $ 20,171     $ 3,204     $ 2,327  
                         
Supplementary information                        
Cash paid during the nine months:                        
Interest   $ 3,436     $ -     $ 2,856  
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)

 

    5  
 

 

BARE METAL STANDARD, INC.

Notes to Consolidated Financial Statements

(Unaudited)

 

NOTE 1 – ORGANIZATION, BASIS OF PRESENTATION AND RESTATEMENT

 

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 free license agreement with Taylor Brothers Holdings Inc. with the right to sublease, the use of Trade Name Bare Metal Standard and related industry know-how including proprietary software in exchange for a monthly fee of $2,000 paid in arrears. As a result of the above transactions with Taylor Brothers Holdings Inc., under Regulation S-X for reporting purposes Taylor Brother Holdings, Inc. is considered a business. Thus, Taylor Brothers Holdings, Inc. is viewed as Predecessor entity for reporting purposes, and Bare Metal is viewed as a Successor entity.

 

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

 

Basis of Presentation

 

The unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the United States Securities and Exchange Commission. Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited financial statements contain all the adjustments necessary (consisting only of normal recurring adjustments) to present the financial position of the Company as of July 31, 2018 and the results of operations and cash flows for the periods presented. The results of operations for the three and nine months ended July 31, 2019 are not necessarily indicative of the operating results for the full fiscal year. These financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended October 31, 2018. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent year ended October 31, 2017 have been omitted.

 

For periods after the commencement of the Management Agreement (March 1, 2017), the Company is referred to as the Successor and its results of operations includes, the results of operations from Bare Metal Standard for the nine months subsequent to October 31, 2017.   For periods previous to the inception of the Management Agreement ,  the Company is referred to as the Predecessor and its results of operations includes only Taylor Brothers Holdings Inc.  operations .  A black line separates the nine months ended July 31, 2018 successor results and the five months successor from the four months (predecessor) for the comparable four months ended period ended February 28, 2017, to highlight the lack of comparability between these periods.

 

    6  
 

 

BARE METAL STANDARD, INC.

Notes to Consolidated Financial Statements

(Unaudited)

 

Principles of Consolidation

 

The Company prepares its consolidated financial statements on the accrual basis of accounting. The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, all of which have 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.

 

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 accumulated losses and shareholders’ 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. 

 

Restatement

 

During the year ended October 31, 2018, the Company determined that as a result of the above transactions with Taylor Brothers Holdings Inc., under Regulation S-X for reporting purposes Taylor Brother Holdings, Inc. is considered a business. Thus, Taylor Brothers Holdings, Inc. is viewed as Predecessor entity for reporting purposes, and Bare Metal is viewed as a Successor entity. Therefore, the previously reported results of operations and cash flows for the nine months ended July 31, 2017 must be separated between Successor and Predecessor periods. The table below summarizes previously reported amounts and the restated presentation of the statement of operations and statement of cash flows:

 

    7  
 

 

BARE METAL STANDARD, INC.

Notes to Consolidated Financial Statements

(Unaudited)

 

    As Previously Reported     As Restated           As Restated  
    Nine Months     Five Months           Four Months  
    Ended     Ended           Ended  
Statements of Operations   July 31, 2017     July 31, 2017           February 28, 2017  
          (Successor)           (Predecessor)  
Revenue                        
Product sales and services   $ 220,282     $ 155,866           $ 87,925  
Product sales and services - related parties     148,418       124,295             59,363  
Total revenue     368,700       280,161             147,288  
Cost of revenue     80,756       31,904             -  
Gross  income     287,944       248,257             147,288  
                               
Operating expenses                              
General and administrative expenses     319,581       80,505             76,905  
Depreciation and amortization     -       -             4,638  
Administrative and officer compensation     -       198,043             129,819  
Total operating expenses     319,581       278,548             211,362  
                               
Income (Loss) from operations     (31,637 )     (30,291 )           (64,074 )
                               
Other expense                              
Interest expense     -       -             (2,867 )
Total other expense     -       -             (2,867 )
                               
Net Income (loss)   $ (31,637 )   $ (30,291 )         $ (66,941 )
                               
Basic and diluted income (loss) per common share   $ (0.00 )   $ (0.00 )         $ (55.78 )
                               
Weighted average common shares outstanding                              
Basic and diluted     31,515,000       31,515,000             1,200  

 

 

    8  
 

 

BARE METAL STANDARD, INC.

Notes to Consolidated Financial Statements

(Unaudited)

 

    As Previously Reported     As Restated     As Restated  
    Nine Months     Five Months     Four Months  
    Ended     Ended     Ended  
    July 31, 2017     July 31, 2017     February 28, 2017  
Statements of Cash Flows   Successor     Successor     Predecessor  
                   
Cash flows from operating activities                        
Net (loss) income   $ (31,637 )   $ (30,291 )   $ (66,941 )
Adjustments to reconcile net loss to net cash (used                        
in) operating activites                        
Depreciation     -       -       4,639  
Amortization of debt discount     -       -       -  
Changes in operating assets and liabilities:                        
(Increase) decrease in accounts receivable     (39,465 )     (29,786 )     14,580  
(Increase) decrease in accounts receivable - related parties     (49,765 )     (15,097 )     177  
(Increase) decrease in inventory     (12,876 )     (1,309 )     -  
Increase (decrease) in accounts payable     29,459       28,140       29,592  
Net cash used in operating activities     (104,284 )     (48,343 )     (17,953 )
                         
Cash flows from financing activities                        
Proceeds received from note payable - related party     -       -       2,250  
Repayment of note payable - related party     -       -       (34,587 )
Repayment of note payable     -       -       (2,839 )
Cash received from sale of common stock     20,000       -       -  
Net cash provided by financing activities     20,000       -       (35,176 )
                         
Increase in cash and cash equivalents     (84,284 )     (48,343 )     (53,129 )
Cash, beginning balance     87,488       51,547       55,456  
Cash, ending balance   $ 3,204     $ 3,204     $ 2,327  
                         
Supplementary information                        
Cash paid during the nine months:                        
Interest   $ 3,436     $ -     $ 2,856  
Income taxes   $ -     $ -     $ -  

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES 

 

This summary of significant accounting policies is presented to assist the reader in understanding and evaluating the Company's financial statements.  These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements. 

 

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.  

 

    9  
 

 

BARE METAL STANDARD, INC.

Notes to Consolidated Financial Statements

(Unaudited)

 

Accounts Receivable and Allowance for Doubtful Accounts 

 

The Company's accounts receivable consists, of amounts  owing by franchisees for monthly royalty commitments and for product sales to customers, including the cost of freight incurred to ship the product and other services provided by virtue of the management agreement with Taylor Brothers. Accounts receivable are stated at the amount  management expects to collect from the outstanding balances. Accounts receivable as of July 31, 2018, (successor), consists of $39,254 due from non-related parties and $82,265 due from Taylor Brothers, Inc. a related party. Receivables at October 31, 2017 successor consists of $31,004 due from non-related parties and $16,355 from Taylor Brothers, Inc. a related party.

 

An allowance for doubtful accounts will be provided for those accounts receivable considered to be uncollectable based on historical experience, and management's evaluation at the end of the period.  Bad debts are written off against the allowance when identified. Bare Metal successor determined that no allowance was necessary as of July 31, 2018 or October 31, 2017.  

Concentrations of Credit Risk 

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivables.  The Company places its cash with high credit quality financial institutions.  At times such amounts may exceed federally insure limits. 

 

Receivables arising from sales of the Company's products are not collateralized. As of July 31, 2018 successor, total accounts receivable were $121,519 of which $82,265 was owed by a related party.  Four unrelated customers represented approximately 90% (43%, 18%, 18%, and 11%) of non-related accounts receivable.   As of October 31, 2017 successor, total accounts receivable were $47,359 of which $16,355 was owed by a related party. Four unrelated customers represented approximately 96% (40%, 25%, 16%, and 11%) of non-related accounts receivable. (See note 3) 

 

Fair Value of Financial Instruments 

 

The Company's financial instruments consist of cash and cash equivalents, accounts payable and accrued expenses and shareholder loans.  The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.

 

Accounting for Derivative Liabilities 

 

The Company evaluates stock options, stock warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under the relevant sections of ASC Topic 815-40,  Derivative Instruments and Hedging: Contracts in Entity's Own Equity .  The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative instrument and is marked-to-market at each balance sheet date and recorded as a liability.  In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or other expense.  Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.  Financial instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815-40 are reclassified to a liability account at the fair value of the instrument on the reclassification date.  The Company determined that it has no financial instruments that meet the criteria for derivative accounting as of July 31, 2018 successor nor as of October 31, 2017 successor. 

 

Beneficial Conversion Features 

 

The Company, may, from time to time issue convertible notes that may have conversion prices that create an embedded liability pursuant to accounting guidance.  A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of any attached equity instruments, if any related equity instruments were granted with the debt. In accordance with this guidance, the intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital.  The debt discount is amortized to interest expense over the life of the note using the effective interest method. The Company determined that it has no financial instruments that meet the criteria for beneficial conversion as of July 31, 2018 and October 31, 2017.

 

    10  
 

 

BARE METAL STANDARD, INC.

Notes to Consolidated Financial Statements

(Unaudited)

 

Share-Based Compensation 

 

The Company accounts for stock-based compensation to employees in accordance with FASB ASC 718 compensation—Stock Compensation.  Stock-based compensation to employees is measured at the grant date, based on the fair value of the award, and is recognized as expense over the requisite employee service period.  The Company accounts for stock-based compensation to other than employees in accordance with FASB ASC 505-50.  Equity instruments issued to other than employees are valued at the earlier of a commitment date or upon completion of the services, based on the fair value of the equity instruments and is recognized as expense over the service period.  The Company estimates the fair value of stock-based payments using the Black-Scholes option-pricing model for common stock options and warrants and the latest fair market price of the Company's common stock for common share issuances.

 

Revenue Recognition 

 

The Company's revenue is derived from the sale of products, services and training to support the franchisees under its Management agreement with Taylor Brothers, as a percentage of franchisees’ revenue invoiced to their clients, plus specific charges for software usage, sale of consumables and consulting services.  The Company recognizes revenue when it is realized or realizable and earned, and therefore only recognizes revenue when a franchise agreement has been entered into and the franchise fee received. The Company recognizes revenue from the sale of products, royalties, and services when the product has been shipped or the services have been provided in accordance with the contract entered into with the customer. Payments received in advance of satisfaction of the relevant criteria for revenue recognition are recorded as advances from customers. The Company has no responsibility for collections, of trade debt, owed to a franchisee by the franchisees’ clients and therefore will not create an allowance for potential uncollectable obligations owing to it by the franchisee, unless it is determined that the franchisee will default on its obligation the Company. In accordance with the guidance in FASB Topic ASC 605,  Revenue Recognition , the Company recognizes revenue when (a) persuasive evidence of an arrangement exists, (b) delivery has occurred or services have been rendered, (c) the fee is fixed or determinable, and (d) collectability is reasonable assured. 

     

Cost of Goods Sold  

 

The Company derives its revenue, primarily, from services and consulting. Therefore there are no direct costs, other than labor, associated with those activities. The cost of consumables, which are provided to promote consistency amongst franchisees consists of expendable materials and equipment, designed to provide consistency within operations. Costs are recognized when the related revenue is recorded.  Shipping and handling costs for all sales transactions are billed to the franchisee and are included in cost of goods sold for all periods presented. 

 

New Accounting Pronouncements 

 

The Financial Accounting Standards Board, or FASB, has issued Accounting Standards Update No. 2014-09,  Revenue from contracts with Customers (Topic 606), or ASU 606. ASU 606 provides guidance outlining a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers in an amount that supersedes most current revenue recognition guidance. This guidance requires us to recognize revenue when we transfer promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We are required to adopt ASU 606 at the beginning of our first quarter of fiscal 2019. The new guidance requires enhanced disclosures, including revenue recognition policies to identify performance obligations to customers and significant judgments in measurement and recognition. The new guidance may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of the adoption. The Company adopted this guidance on November 1, 2018. The primary impact expected on the Company’s financial statements at adoption is that future franchise license fees received will initial be deferred and revenue recognized ratably over the expected license period. The Company expects to utilize the cumulative effect approach of adopting ASC 606, but does not expect a material impact to the Company’s financial statements due to the Company currently earning revenues from the products, services and training to support the franchisees under its Management agreement with Taylor Brothers, as a percentage of franchisees’ revenue invoiced to their clients, plus specific charges for software usage, sale of consumables and consulting services. These revenue streams are not expected to have a material change in accounting method from adopting ASC 606.  

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02). Under ASU No. 2016-2, an entity will be required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU No. 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, ASU No. 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim reporting periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements.

In August 2016, the FASB issued Accounting Standards Update No. 2016-15,  Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)  (“ASU 201615”). The amendments in ASU 2016-15 address eight specific cash flow issues and apply to all entities that are required to present a statement of cash flows under ASC Topic 230,  Statement of Cash Flows. The amendments in ASU 2016-15 are effective for the Company on November 1, 2018. The Company has not yet completed the analysis of how adopting this guidance will affect its consolidated financial statements.

 

    11  
 

 

BARE METAL STANDARD, INC.

Notes to Consolidated Financial Statements

(Unaudited)

 

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other Than Inventory. This new standard eliminates the exception for an intra-entity transfer of an asset other than inventory. Under the new standard, entities should recognize the income tax consequences on an intra-entity transfer of an asset other than inventory when the transfer occurs. This new standard will be effective for the Company on November 1, 2018 and will be applied on a modified retrospective basis through a cumulative effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company has adopted this guidance.

 

In November 2016, the FASB issued Accounting Standards Update No. 2016-18,  Restricted Cash (a consensus of the FASB Emerging Issue Task Force)  (“ASU 2016-18”). This new standard addresses the diversity that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. The amendments in ASU 2016-18 require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows. This guidance is effective for after the Company on November 1, 2018. The Company does not expect that the adoption of ASU 2016-18 will have a material impact on its 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. This new standard will be effective for the Company on November 1, 2018 and is not expected to have a material impact

 

In January 2017, the FASB issued Accounting Standards Update No. 2017-04,  Simplifying the Test for Goodwill Impairment  (“ASU 2017-04”). ASU 2017-04 simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. ASU 2017-04 is effective and has been adopted by the Company for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019 and should be applied on a prospective basis. The Company does not anticipate the adoption of ASU 2017-04 will have a material impact on its financial statements for both annual and interim reporting periods, if applicable. Management also is required to evaluate and disclose whether its plans alleviate that doubt. The standard is effective for the Company on November 1, 2018 and will be implemented using the modified retrospective approach. The Company does not expect the adoption of this guidance to have a material effect on 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. 

 

    12  
 

 

BARE METAL STANDARD, INC.

Notes to Consolidated Financial Statements

(Unaudited)

 

NOTE 3 – MAJOR CUSTOMERS

 

Bare Metal Standard (successor) has unrelated customers and one related party customer, whose revenue, during the nine months ended July 31, 2018 represented in excess of 10% of the total revenue and in excess of 10% of total accounts receivable.

 

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 one related company, Taylor Brothers Inc. and $138,479 of non-related party revenue or (33%, 13%, and 12%), respectively, to three non-related parties. During the three months ended July 31, 2017 Bare Metal Standard (successor) invoiced royalties and sold product and services, including freight, totaling $89,592 or 47% of its total revenue, to one related company, Taylor Brothers Inc. and $100,420 of non-related party revenue or (38%, 21%, and 20%), 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 one related company, Taylor Brothers Inc. and $461,190 of non-related party revenue or (39%,15%,14% and 11%), respectively, to four non-related parties. During the five months ended July 31, 2017, Bare Metal invoiced $191,866 of non-related party revenue, or (32%, 19%, 16% and 15%), respectively, to four unrelated parties, and $124,295 or 40% to one related party. During the four months ended February 28, 2017, Taylor Brothers Inc. (predecessor) invoiced $87,925 non-related party revenue, or (14%, 11%, and 10%), respectively, to three unrelated parties, and $59,363 or 41% to one related party.

 

NOTE 4 – NOTES PAYABLE 

 

On June 13, 2018 the Company borrowed $100,000 from a non-related investor. The note is repayable over 120 months with payments of $1,434 at an interest cost of 12%. The note is not convertible, but, is collateralized by 200,000 issued units of the Company’s common stock, which consist of one share of common stock and one warrant to purchase common stock for $2 per share for a period of two years. The estimated value of the warrants of $50,000 was recorded as debt discount and is being amortized over the maturity period of the debt. On July 31, 2018 the note had been reduced by $435.

 

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%. On July 31, 2018 there was $33,707 outstanding. During the nine months ended July 31, 2018 the Company borrowed $36,000 and repaid $2,293.

 

NOTE 5 – RELATED PARTY DEBT AND TRANSACTIONS 

 

On July 10, 2018 the Company borrowed $5,000 from a related party. The note is unsecured, bears interest at 7%, and is repayable by 36 equal monthly payments of $154 principal and interest. On July 31, 2018 the balance was reduced by $125.

 

We have entered into an agreement with Taylor Brothers Inc. (a Company with common officers and directors) to use their offices. The rent will be $5,000 per month, when Bare Metal Standard completes required funding to support ongoing operations.

 

NOTE 6 – STOCKHOLDER'S EQUITY 

 

Successor

 

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. During the year ended October 31, 2017, the Company (successor) sold, for cash, 60,000 of its common shares, at a cost of $0.50 per share for total proceeds of $30,000, and issued 70,000 common shares for services with a value $35,000 and accounted for as stock based compensation. 

 

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.

 

    13  
 

 

BARE METAL STANDARD, INC.

Notes to Consolidated Financial Statements

(Unaudited)

 

NOTE 7 – COMMON STOCK WARRANTS 

 

Between March 1, 2017 and October 31, 2017 the Company (successor) did not sell any common stock units. On July 13, 2018, the Company issued 200,000 common stock units as collateral for a 10 year note payable. Each unit outstanding as of July 31, 2018 consists of one share of our common stock, and one warrant to purchase, for $2.00 and within 24 months of issuance, one share of common stock. The warrants vested upon grant date and will expire between February 8, 2018 and August 1, 2020. None expired during the eight months ended October 31, 2017. 240,000 expired between November 1, 2017 and July 31, 2018.

 

The estimated value of the 200,000 warrants issued in connection with the note payable was $50,000 and was recorded as debt discount and is being amortized over the maturity period of the debt. This value was estimated using a Black Scholes model with the following inputs: dividend yield 0%; expected term of two years’ risk-free rate, and a stock price of $0.50 based on the most recent cash sale price due to the lack of public trading of the Company’s stock. This resulted in a maximum value of the warrants of $50,000.

 

A summary of our stock warrant activity for the period from November 1, 2017 through July 31, 2018 is as follows:

 

  Warrants     Weighted
Average
Exercise
Price 		    Weighted
Average
Remaining
Life 		 
                   
Outstanding at beginning of period - October 31, 2017   515,000     2.00     0.73  
Expired during the nine months ended July 31, 2018   (240,000)     2.00     -  
Issued during the nine months ended July 31, 2018   200,000     2.00     2.00  
Outstanding at end of period - July 31, 2018   475,000     2.00     0.90  
                   
Exercisable at end of period - July 31, 2018   475,000     2.00     0.90  

 

 

The warrants outstanding and exercisable as of July 31, 2018 had no intrinsic value.

 

NOTE 8 – COMMITMENTS AND CONTINGENCIES 

 

Management agreement 

 

On March 1, 2017, the Company entered into a management agreement with Taylor Brothers Holdings, Inc. to provide all of the services and to conduct all of the activities that were agreed to be undertaken by Taylor Brothers under the Franchise Agreements for providing certain administrative support, including Franchisee training, development of operations manuals and other materials for use by Taylor Brothers’ franchisees; and develop and establish support infrastructures that the Company determines are necessary and appropriate to satisfy Taylor Brothers obligations under the Franchise Agreements. In consideration of the services provided Bare Metal shall be responsible to invoice and collect, per the terms of the Franchise Agreements, under management. All fees so collected will constitute the fees owing under the management agreement. The Agreement does not have a termination date but may be cancelled by either party with appropriate notice.

 

NOTE 9 – SUBSEQUENT EVENTS

 

On December 24, 2018, our chief executive officer loaned the Company $21,000. The loan has a maturity date of December 20, 2020, and bears interest at 7%, with monthly payments of $940. The Company has made payments of $4,117 against this note payable to date

 

    14  
 

 

ITEM 2.        MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

 

This section of this report includes a number of forward- looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.

 

Results of Operations

 

Successor and Predecessor Financial Presentation

 

The following discussion of the financial condition and results of operations should be read in conjunction with the financial statements included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future.

 

For the three months and nine months ended July 31, 2018, Bare Metal Standard Inc. (Successor) and the three and five months ended July 31, 2017, Bare Metal Standard, Inc. (Successor) and four months ended February 28, 2017 Taylor Brothers Holdings (Predecessor):

 

On March 1, 2017, we entered into a management agreement with Taylor Brothers Holdings Inc., which is an operating company and has common majority shareholders and directors. The officers and directors of Bare Metal Standard were officers and directors of Taylor Brothers Holdings. 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 party. As a result of the management agreement, Bare Metal Standard is to provide, on behalf of Taylor Brothers Holdings, certain management services, having full authorization, on behalf of Taylor Brothers Holdings to provide all the services and all the activities, normally provided by Taylor Brothers Holdings, under the Taylor Brothers Holdings franchise agreements, previously entered into by Taylor Brothers Holdings and the franchisees. Bare Metal Standard 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 Standard 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 Holdings. Additionally, on November 1, 2017 Bare Metal Standard, entered into a royalty free license agreement with Taylor Brothers Holdings Inc. with the right to sublease, the use of Trade Name Bare Metal Standard and related industry know-how including proprietary software in exchange for a monthly fee of $2,000 paid in arrears. As a result of the above transactions with Taylor Brothers Holdings Inc., under Regulation S-X for reporting purposes Taylor Brother Holdings Inc. is considered a business. Thus, Taylor Brothers Holdings Inc. is viewed as Predecessor entity for reporting purposes, and Bare Metal Standard is viewed as a Successor entity. For purposes of the following discussion, we compare the results of Bare Metal Standard Inc. for the nine months ended July 31, 2018 to the combined results of Bare Metal Standard Inc for the five months ended July 31, 2017 and Taylor Brothers Holdings for the four months ended February 28, 2017.  A black line separates the Predecessor and Successor financial statements to highlight the lack of comparability between these periods.

 

Revenue  

 

During the three months and nine months ended July 31, 2018, Bare Metal (Successor) generated franchise fee revenue, from non-related parties of $138,479 and $461,190, respectively, compared to $155,866 generated by Bare Metal Standard (successor) during the five months ended July 31, 2017 and $87,925 generated by Taylor Brothers Holdings (Predecessor) during the four months ended February 28, 2017 and $100,420 for the three months ended July 31, 2017. During the three months and nine months ended July 31, 2018, Bare Metal Standard (Successor) generated $102,760 and 221,299, respectively, from related party franchisees while Bare Metal Standard (Successor) generated $124,295 from related parties during the five months ended July 31, 2017 and Taylor Brothers Holdings (Predecessor) generated $59,363 from related parties during the four months ended February 28, 2017, and $89,592 for the three months ended July 31, 2017. Total revenue from franchise fees, from all franchisees, totaled $241,239 and $682,489 for the three months and nine months ended July 31, 2018 compared to $280,161 for the five months ended July 31, 2017 and $147,288 Taylor Brothers Holdings (Predecessor) for the four months ended February 28, 2017 and $190,012 for the three months ended July 31, 2017. Both revenue from related party franchisees and organic growth from other franchisees increased.

 

    15  
 

 

For the three months and nine months ended July 31, 2018, Bare Metal Standard (Successor) experienced a net loss of $3,772 and $94,698, respectively, as compared to a Bare Metal Standard (Successor) net loss of $30,291 for the five months ended July 31, 2017 and a Taylor Brothers Holdings (Predecessor) net loss of $66,941 for the four months ended February 28, 2017 and $2,271 profit for the three months ended July 31, 2017. This primarily resulted from higher revenues more than offsetting higher general & administrative expenses. The higher level of general and administrative expense is likely to continue given the costs of maintaining the company as a public company.

   

Bare Metal Standard (Successor) generated total revenues of $241,239 and $682,489 for the three months and nine months ended July 31, 2018 compared to $281,161 of total revenue generated by Bare Metal Standard (Successor) during the five months ended July 31, 2017 and $147,288 total revenue generated by Taylor Brothers Holdings (Predecessor) during the four months ended February 28, 2017 and $190,012 for the three months ended July 31, 2017. At July 31, 2018, Bare Metal Standard (Successor) had an accumulated deficit of $408,100. 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, 2018, the Company has 31,845,000 shares of common stock issued and outstanding. As of July 31, 2018, the Company had current assets of $149,849 and current liabilities of $119, 029.

 

 The Company has limited financial resources available, which has had an adverse impact on the Company's liquidity, activities and operations. In order for the Company to remain a going concern it will need to find additional capital or generate revenues. Additional working capital may be sought through additional debt or equity private placements, additional notes payable to banks or related parties (officers, directors or stockholders), or from other available funding sources at market rates of interest, or a combination of these. The ability to raise necessary financing will depend on many factors, including the nature and prospects of any business to be acquired and the economic and market conditions prevailing at the time financing is sought. No assurances can be given that any necessary financing can be obtained on terms favorable to the Company, or at all.

 

 Management believes the Company has sufficient cash assets, coupled with Managements’ ability to provide additional funds through the sale of equity securities, to fund its operations and keep the Company fully reporting for the next twelve (12) months.

 

Working Capital

 

Bare Metal Standard (Successor) as of July 31, 2018 had current assets of $149,849 and current liabilities of $119,029 or working capital of $30,820 compared to current assets of $85,839 and current liabilities of $46,350 or working capital of $39,489, at October 31, 2017. The reduction in working capital results from an increase in current assets being more than offset by an increase in the amount of short term borrowings, including a bank line of credit.

 

Operating Activities

 

During the nine months ended July 31, 2018, Bare Metal Standard (Successor) utilized cash in the amount of $124,485, to pay for operating activities, compared to $48,343 of cash used in the five months ended July 31, 2017 by Bare Metal Standard (Successor) and the $17,953 used by Taylor Brothers Holdings (Predecessor) operations during the four months ended February 28, 2017.

 

Investing Activities

 

Bare Metal Standard (Successor) nor Taylor Brothers Holdings (Predecessor) generated any funds from investing activities during the nine months ended July 31, 2018 nor the four months ended February 28, 2017 (Predecessor).

 

    16  
 

 

Financing Activities  

 

During the nine months ended July 31, 2018 Bare Metal Standard (Successor) received $138,147 of cash from financing activities, compared to net cash received of $0during the five months ended July 31, 2017 (Successor), and a net cash out flow of $35,176 by Taylor Brothers Holdings (Predecessor) during the four months ended February 28, 2017. Bare Metal Standard (Successor) cash flow from financing activities during the nine months ended July 31, 2018 was mostly from a $100,000 note issuance and a $36,000 bank line of credit.. During the four months ended February 28, 2017, the negative cash flow from financing activities resulting almost entirely from repayment of $34,587 of a related party note payable.

 

Plan of Operation

 

Bare Metal Standard’s (Successor) plan of operation is to provide franchise opportunities in the services of commercial kitchen grease exhaust systems (GES) as well as providing franchisee management systems in other industries. As of July 31, 2018, we had $20,171 cash on hand and accounts receivable of $39,254 plus $82,265 accounts receivable from a related party. Management believes, without any additional funding or revenues, the Company has to continue to sell equity securities to finance its operations and continued growth. We will apply any proceeds from future revenues to help cover our expenditures. At this time, management anticipates it will be required to seek outside funding to keep its business operational for the next twelve months, and will continue its efforts to seek additional funding.

 

Future funding could result in potentially dilutive issuances of equity securities, the incurrence of debt, contingent liabilities and/or amortization expenses related to goodwill and other intangible assets, which could materially adversely affect the Company's business, results of operations and financial condition. Any future acquisitions of other businesses, technologies, services or product(s) might require the Company to obtain additional equity or debt financing, which might not be available on terms favorable to the Company, or at all, and such financing, if available, might be dilutive.

 

  Going Concern

 

Our independent auditors included an explanatory paragraph in their report on the October 31, 2017 audited financial statements regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors. Our ability to continue as a going concern is contingent upon the successful completion of additional financing arrangements and our ability to achieve and maintain profitable operations.

 

Therefore, management plans to raise equity capital to finance the operating and capital requirements of the Company. While the Company is devoting its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds that will be available for operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern.

 

Summary of any product research and development that we will perform for the term of our plan of operation.

 

We do not anticipate performing any product research and development under our current plan of operation.

 

Expected purchase or sale of plant and significant equipment.

 

We do not anticipate the purchase or sale of any plant or significant equipment; as such items are not required by us at this time.

 

Significant changes in the number of employees.

 

As of July 31, 2018, Bare Metal Standard (Successor) had four full time employees and two officers. We are dependent upon our two officers for our future business development. As our operations expand we anticipate the need to hire additional employees, consultants and professionals; however, the exact number is not quantifiable at this time. 

 

    17  
 

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results or operations, liquidity, capital expenditures or capital resources that is material to investors. 

 

Critical Accounting Policies and Estimates

 

Revenue Recognition: The Company's revenue is derived from the sale of franchises, and products, services and the training necessary to support the franchisees under its Management agreement with Taylor Brothers Holdings, and a percentage of franchisees’ revenue invoiced to their clients, plus specific charges for software usage, sale of consumables and consulting services. 

 

The Company recognizes revenue when it is realized or realizable and earned, and therefore only recognizes revenue when a franchise agreement has been entered into and the franchise fee received. The Company recognizes revenue from the sale of products, royalties, and services when the product has been shipped or the services have been provided in accordance with the contract entered into with the customer. Payments received in advance of satisfaction of the relevant criteria for revenue recognition are recorded as advances from customers. The Company has no responsibility for collections, of trade debt, owed to a franchisee by the franchisees’ clients and therefore will not create an allowance for potential uncollectable obligations owing to it by the franchisee, unless it is determined that the franchisee will default on its obligation the Company. In accordance with the guidance in FASB Topic ASC 605,  Revenue Recognition , the Company recognizes revenue when (a) persuasive evidence of an arrangement exists, (b) delivery has occurred or services have been rendered, (c) the fee is fixed or determinable, and (d) collectability is reasonable assured.

 

New Accounting Standards

 

The Company's management has evaluated all the recently issued accounting pronouncements through the filing date of these financial statements and does not believe that any of these pronouncements will have a material impact on the Company's financial position and results of operations.

 

Summary of Significant Accounting Policies

 

Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States ("GAAP"). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our consolidated financial statements.

 

Our significant accounting policies are summarized in Note 2 of our consolidated financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our consolidated financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our results of operations, financial position or liquidity for the periods presented in this report.

 

ITEM 3.        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK.

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

    18  
 

 

ITEM 4.        CONTROLS AND PROCEDURES.

 

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report.  Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures during such period were not effective.

 

 

 

Changes in Internal Control over Financial Reporting 

 

Other than as set forth above, there have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II. OTHER INFORMATION

 

ITEM 1A.     RISK FACTORS

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None 

 

ITEM 6.        EXHIBITS.

 

The following documents are included herein:

 

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 14 th day of August, 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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