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MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Item 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations

 

 

This Quarterly Report on Form 10-Q contains forward-looking statements. When used in this Quarterly Report on Form 10-Q, the words "anticipate," "believe," "estimate," "will," "plan," "seeks," "intend," and "expect" and similar expressions identify forward-looking statements. Although we believe that our plans, intentions, and expectations reflected in any forward-looking statements are reasonable, these plans, intentions, or expectations may not be achieved. Our actual results, performance, or achievements could differ materially from those contemplated, expressed, or implied, by the forward-looking statements contained in this Quarterly Report on Form 10-Q. Important factors that could cause actual results to differ materially from our forward-looking statements are set forth in this Quarterly Report on Form 10-Q All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth in this Quarterly Report on Form 10-Q. Except as required by federal securities laws, we are under no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise.

 

 

There have been no material changes to our critical accounting policies and estimates from the information provided in, "Management's Discussion and Analysis and Results of Operations", included in our Annual Report on Form S-1/A for the period ended October 31, 2016.

 

 

 

Bare Metal Standard, Inc. was incorporated in the State of Idaho on November 12, 2015, under the name Bare Metal Standard, Inc. We consider ourselves to be an emerging growth company under applicable federal securities laws and will be subject to reduced public company reporting requirements. From our inception to date, we have generated no revenues, and our operations have been limited to organizational, start-up, and capital formation activities. Our plan of operation is to engage in the business of commercial kitchen grease exhaust system cleaning.

       

 

 

Bare Metal Standard provides franchise opportunities in the services of commercial kitchen grease exhaust systems (GES).

Bare Metal Standard intends to support all its franchises through a centralized workflow system named Shifts Software that the company created and owns. This application will be capable of managing hundreds of franchisees and thousands of customer locations. The workflow system exists on redundant servers throughout the USA to ensure connectivity. The company intends to purchase consumables to leverage its buying power and maintain its uniformity. Our franchisees will purchase from us directly the same quality products to maintain uniformity in our cleaning process.

The Company’s business model comes from the traditional franchise model that has proven to be successful for many service focused offerings. The primary value of our business model is to leverage the knowledge, capital and passion, equipment and processes to build a national brand to deliver a consistent level of services throughout the United States and beyond. Once we are operational with clients the business model is secure with recurring revenue from the required service (by code NFPA 96) on a quarterly basis (quarterly is typical, some potential customers are monthly, every 2, 4, 6 months to a few who go annually). The NFPA (National Fire Protection Associations) guidelines are adopted by insurance companies and local fire departments for the safety of the public. It has become mandatory for industrial kitchens maintain a monthly, quarterly or semiannual cleaning schedule depending on what they cook. A barbecue restaurant would be required to clean their hoods monthly compared to a nursing homes semiannual cleaning Local authority departments monitor these schedules with on site inspections. Our mission is to transform this business sector into a rationalized national brand that will have the strength to expand throughout the United States and beyond.

Our principal service is providing support and training for our franchisees helping them to become successful with our proven track record. We do not own any patents or trademarks but we are licensed in the appropriate states that we offer under the franchising laws of that State.

We are registered in all the States in the United States to sell and operate our franchises except the following 10 States; California, Hawaii, Illinois, Maryland, Michigan, New York, North Dakota, South Dakota, Rhode Island, and Wisconsin. We intend to register in the remaining States as needed.

We have entered into a verbal agreement with Taylor Brothers to use two of their offices until we raise 66% of our offering. At that time we will begin paying $5,000 a month to Taylor Brothers. We have no intention to acquire or carry on Taylor Brothers operations as they have been in business for over 25 years very successfully. We intend to be in the business of selling and supporting our own franchises in the same industry. Our Franchisees will never be involved with Taylor Brothers.

       

 

The officers and directors of Bare Metal Standard are currently officers and directors of Taylor Brothers. James Bedal and Mike Taylor will resign their positions with Taylor Brothers and work full time for Bare Metal Standard. Bare Metal Standard will rely upon the business network and relationships built by Mr. Bedal and Mr. Taylor over their many years in business. It is the intention of Bare Metal Standard to assume the support and maintenance of the existing franchise agreements of the current Taylor Brothers franchisees from Taylor Brothers, as Taylor Brothers has ceased selling franchises. At that point Bare Metal Standard will inherit franchises in Kansas City, Wichita Kansas, Tulsa Oklahoma, East Texas, Des Moines Iowa, Portland Oregon, Boise Idaho and Salt Lake City Utah. All discussions leading to the propose transaction has been with the principals of Taylor Brothers and Bare Metal Standard only. We will be exercising “14.1 General Provision” in all the franchisee contracts our franchisees have with Taylor Brothers;

14.1.1 This Agreement shall inure to the benefit of the successors and assigns of Franchisor. Franchisor shall have the right to transfer or assign this Agreement to any person or legal entity who assumes its terms and agrees to comply with Franchisor’s obligations contained herein, but who meets the qualifications and requirements of Franchisor. Any transfer must be approved in writing by Franchisor. Franchisor shall have no liability for the performance of any obligations contained in this Agreement after the effective date of such transfer or assignment. As of this date there are no written or verbal agreements between Taylor Brothers and Bare Metal, Inc. Additionally there is no agreement with the franchisees between Taylor Brothers and Bare Metal Standard, Inc. and one is not needed to execute this transaction because of General Provision 14.1. Taylor Brothers and Bare Metal Standard will retain legal counsel to seamlessly execute this transaction not to affect franchisee operations. In exchange Bare Metal Standard, Inc. will continue to support their franchisees and receive their 10% royalty for continued support. Thus, there is, in the opinion of management, limited chance of Taylor Brothers competing with Bare Metal Standard’s potential franchisees.

We believe that our potential customers understand the financial and reputational risks associated with inadequate maintenance of their kitchen hoods and that our high quality, professional services are low-cost expenditures when compared to the alternative of failing to perform essential maintenance. We strive to be the service provider of choice and believe our customers have recognized our value proposition, as evidenced by our long-standing customer relationships our management team has and the high rate at which our potential customers renew their contracts from year to year.

Our focus on attracting and retaining new customers for our franchisees begins with our associates in the field, who interact with prospective customers every day. Our associates bring a strong level of passion and commitment to the Bare Metal brand. We have extensive experience to bring to our new company. Our field organization is supported by dedicated customer service and call center personnel. Our culture of continuous improvement drives an intense focus on the quality of the services delivered, which we believe produces high levels of customer satisfaction and, ultimately, customer retention and referrals.

Our expansion, both in existing markets of potential franchisees, where we have capacity to increase our local market position with franchises, and in new markets through detailed assessments of local economic conditions and demographics, we have identified target markets where we see opportunities. We intend to grow our presence through strategic franchise expansions and additional licensing agreements

       

 

COMPETITION

 

We may not have the resources to compete with our existing competitors or with any new competitors. We intend to compete with many other competitors who perform wheelchair repairs, all of which have significantly greater personnel, financial, and managerial resources than we do. This competition from other companies with greater resources and reputations may result in our failure to maintain or expand our business.

 

Moreover, as the demand for the servicing of commercial kitchen grease exhaust systems increases, new companies may enter the market and the influx of added competition will pose an increased risk to our Company. Increased competition may lead to price wars, which would harm us since we would be unable to compete with companies with greater resources. In addition, increased competition and increased demand may create a stress on the wheelchair manufacturers, output capabilities, which may lead to increased prices, which would also harm our ability to compete in the wheelchair market.

 

INTELLECTUAL PROPERTY

 

We rely or plan to rely on a combination of trademark, copyright, trade secret and patent laws in the United States, as well as confidentiality procedures and contractual provisions to protect our commercial kitchen grease exhaust system maintenance methodologies and any new methodologies we might develop in the future. We currently have no pending patents nor trademarks.

 

From time to time, we expect that we may encounter disputes over rights and obligations concerning intellectual property. Also, the efforts management has taken to protect its proprietary rights may not be sufficient or effective. Any significant impairment of its intellectual property rights could harm the existing business, the brand and reputation, and the ability of the business to compete on a going forward basis. Also, protecting our intellectual property rights could be costly and time consuming.

 

 

We currently has no employees, our CEO performs all duties related to the operations of this business. We also plan to utilize additional independent contractors on a part-time/as needed basis.

 

 

Our corporate headquarters are located at: 3604 S. Banner Street, Boise, Idaho 83709. We do not own any real property. Management believes that its current facilities are adequate for its needs through the next twelve months, and that, should it be needed, suitable additional space will be available to accommodate expansion of the Company's operations on commercially reasonable terms, although there can be no assurance in this regard.

       

 

 

During the six month period ended April 30, 2017, the Company generated total revenues of $178,688, of which $58,826 is from services and products sold to a related party. In addition, the Company does not expect to generate any profit for the next twelve months.

 

For the six months ending April 30, 2017, we experienced a net loss of $33,908, as compared to a net loss of $121,558 for the period from November 12, 2015 (Inception) through April 30, 2016. The net loss for the six months ending April 30, 2017 was attributed to $155,724 in general & administrative expenses, as compared to $121,558 in general & administrative expenses for the period from November 12, 2015 (Inception) through April 30, 2016.  The $121,558 consisted of the cost of issuing 30,000,000 common restricted shares to founders for services previously rendered and services to be rendered during the start-up period, plus the cost of issuing 1,000,000 common restricted shares to a consultant for services provided during the S-1 approval process, as well as an increase in accounts payable of $73,045.  The $155,724 is comprised of $10,500 for professional fees related to preparation of financial statements and $145,244 of other general and administrative costs.

  

 

The Company has generated total revenues of $178,688 for the six months ended April 30, 2017 of which $58,826 was for products sold to Taylor Brothers, a Company owned by the Company’s President. As of April 30, 2017, the Company had an accumulated deficit of $231,219. 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.

 

 

The Company’s plan of operation is to provide franchise opportunities in the services of commercial kitchen grease exhaust systems (GES). As of April 30, 2017, we had $26,662 cash on hand and total accounts receivable of $60,210 plus $19,872 due from a related party for products and services provided to two entities controlled by Taylor Brothers, a Company owned by Bare Metal’s President. Management believes, without any additional funding or revenues, the Company has sufficient cash to finance its operations, for a period of twelve months, which estimate includes the additional expenses the Company will incur as a reporting company. We will apply any proceeds from future revenues to help cover our expenditures. At this time, management does not anticipate it will be required to seek outside funding to keep its business operational for the next twelve months. However, does not preclude management from seeking funding in the future.

       

 

If we experience losses in our first year of business operations, we do not believe such losses would prevent us from continuing our operations for our first year, based on our current cash reserves. If and when the time comes that we seek funding, we plan to rely on equity sales of our common shares in order to continue to fund our business operations. And, we would have to issue equity or enter into a strategic arrangement with a third party. Issuances of additional shares will result in dilution to our existing shareholders. There is no assurance that we will achieve any of additional sales of our equity securities or other financing to fund our business operations. We currently have no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources.

 

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.

 

 

Our independent auditors included an explanatory paragraph in their report on the October 31, 2016 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.

 

 

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

       

 

 

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.

 

 

As of April 30, 2017, we did not have any employees. 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.

 

 

The Company is authorized to issue 80,000,000 shares of its $0.001 par value common stock. As of April 30, 2017, the Company has 31,515,000 shares of common stock issued and outstanding. As of April 30, 2017, the Company had current assets of $122,045 and current liabilities of $64,714.

 

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 to fund its operations and keep the Company fully reporting for the next twelve (12) months, without seeking additional outside funding.

       

 

 

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.

 

 

 

Revenue Recognition: We recognize revenue from product sales once all of the following criteria for revenue recognition have been met: pervasive evidence that an agreement exists; the services have been rendered; the fee is fixed and determinable and not subject to refund or adjustment; and collection of the amount due is reasonable assured.

 

 

 

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.

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

Not applicable.

 

 

Item 4. Controls and Procedures

 

 

Our disclosure controls and procedures, as defined in Rule 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in rules and forms adopted by the SEC, and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.

       

 

Management, with the participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, our disclosure controls and procedures were not effective. Our disclosure controls and procedures were not effective because of material weaknesses.

 

 

 

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

       

 

PART II. OTHER INFORMATION

 

Item 1 -- Legal Proceedings

 

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

 

We are not presently a party to any material litigation, nor to the knowledge of management is any litigation threatened against us, which may materially affect us.

 

Item 1A - Risk Factors

 

See Risk Factors set forth in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2016 and the discussion in Item 1, above, under "Liquidity and Capital Resources."

 

Item 2 -- Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3 -- Defaults upon Senior Securities

 

None.

 

Item 4 -- Submission of Matters to a Vote of Security Holders

 

None.

 

Item 5 -- Other Information

 

None.

       

 

Item 6 -- Exhibits

 

   

 

SIGNATURES

 

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