The accompanying notes are an integral part of the unaudited consolidated financial statements.
The accompanying notes are an integral part of the unaudited consolidated financial statements.
The accompanying notes are an integral part of the unaudited consolidated financial statements.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION AND ORGANIZATION
BRK, Inc. (“BRK” or the “Company”) was incorporated on May 22, 2008 as a Nevada corporation. The Company has developed a product for the repair of hanging venetian blinds. As part of this development the Company has completed the development and is building a machine to make the parts for blind repair that it is selling. The development and testing of the machine was completed with limited production following and the Company reduced its work in the blind repair kit market space.
On May 6, 2016, the Company acquired intangible assets from ISee Automation for 5,000,000 shares of common stock with a fair market value of $1,600,000 based on the Company’s stock price at the date of issuance. The intangible assets consist of a patent application and related know-how, technology and plans to commercialization related to covers the placement of video cameras and supporting equipment into helmets used by various athletics such as hockey. Life video can then be transmitted from the player’s helmet in real time for display on sports events broadcasts. The Company is in the process of receiving models produced by a third party and developing a marketing strategy for the devise.
On September 28, 2016, the Company incorporated, in the state of Washington, a wholly owned subsidiary ISEE Sports Inc. Since inception, the subsidiary has not been operational or financially active.
Basis of Presentation
The accompanying unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information required to be included in a complete set of financial statements in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the nine months ended January 31, 2017 are not necessarily indicative of the results that may be expected for the fiscal year ending April 30, 2017. The accompanying unaudited financial statements should be read in conjunction with the financial statements and related notes included in the Company’s 2016 Annual Report filed with the SEC on July 29, 2016.
Forward Stock Split
On December 21, 2015, the Company filed, with the Secretary of State of the State of Nevada, a Certificate of Change, effecting a ten-for-one (10:1) forward split of the Company's issued and outstanding shares of common. The forward split took effect on the over-the counter markets on January 12, 2016. The number of shares, issued and outstanding and the weighted average for 2015 has been adjusted to reflect the forward stock split.
Revenue Recognition
The Company receives revenue though a related party for the use of the Company”s equipment on the broadcasting of hockey games from the ref cam, a camera worn on the helmet of the referees. The revenue is recognized first by a related party which holds the initial agreement with the broadcaster when the event being broadcasted is completed. The related party pays the Company upon receipt of payment from the broadcaster. The revenues is reported on a net basis with the deductions for directs costs being deducted from the revenue.
Property, Equipment and Intangible Assets
Property and equipment are carried at cost, less accumulated depreciation. Additions are capitalized and maintenance and repairs are charged to expense as incurred. Intangible assets consist of a patent application purchased and is carried at cost, less accumulated amortization. Depreciation and amortization is provided principally on the straight-line basis method over the estimated useful lives of the assets which is estimated at 36 months. Patent applications submitted after June 8, 1995 have duration of 20 years. Due to the potential changes in technology the Company has elected to amortize the patent application over 15 years.
NOTE 2 - GOING CONCERN
As shown in the accompanying financial statements, BRK has an accumulated deficit of $1,300,209 and negative working capital of $657,013 as of January 31, 2017. Unless profitability and increases in stockholders’ equity continues, these conditions raise substantial doubt as to BRK’s ability to continue as a going concern. The January 31, 2017 financial statements do not include any adjustments that might be necessary if BRK is unable to continue as a going concern. Management plans to continue to raise funds through debt and equity financing to grow the business to profitability.
NOTE 3 - CONCENTRATION OF REVENUE
The Company relies on one customer which is a related party, as its source of revenue. Should the Company lose that customer, the Company may lose its only source of revenue.
NOTE 4 - RELATED PARTY TRANSACTIONS
During the nine months ended January 31, 2017, the Company recorded $22,825 in compensation payable to the President. The president was paid $3,010 cash with the remaining $19,815 accrued for salary expense. As of January 31, 2017, $119,765 was due to the President.
On May 6, 2016, the Company acquired a patent application from ISee Automation for 5,000,000 shares of common stock with a fair value of $1,600,000. Upon the issuance of the shares ISee became a related party.
On May 18, 2016, the Company issued a note for $10,000 in cash to a related party. The note is due on demand and bears an interest rate of 8% per annum.
On July 1, 2016, the Company issued a note for $3,000 in cash to a related party. The note is due on demand and bears no interest.
On July 22, 2016, the Company issued a note for $5,000 in cash to a related party. The note is due on demand and bears no interest.
On August 26, 2016, the Company issued a note for $25,000 in cash to a related party. The note is due on demand and bears no interest.
On August 31, 2016, the Company issued a note for $16,500 in cash to a related party. The note is due on demand and bears no interest.
On September 14, 2016, the Company issued a note for $37,000 in cash to a related party. The note is due on demand and bears no interest.
On September 14, 2016, the Company issued a note for $29,000 in cash to a related party. The note is due on demand and bears no interest
On September 27, 2016, the Company issued a note for $4,675 in cash to a related party. The note is due on demand and bears no interest
On October 3, 2016, the Company issued a note for $1,000 in cash to a related party. The note is due on demand and bears no interest.
On December 1, 2016, the Company issued a note for $500 in cash to a related party. The note is due on demand and bears no interest.
During the quarter ended January 31, 2017 the Company repaid related parties $111,625 in notes payable.
As of January 31, 2017, the balance of notes payable due to related parties was $106,590 and convertible notes payable of $7,089.
As of January 31, 2017 and April 30, 2016 the amount due to related party was $5,200 and $3,200, respectively.
During the nine months ended January 31, 2017, the Company advanced $2,000 to an entity controlled by an acquaintance of the sole officer of the Company. The cash advance is unsecure, bears no interest and is due on demand.
NOTE 5 - EQUITY
On May 6, 2016, the Company acquired intangible assets from ISee Automation for 5,000,000 shares of common stock with a fair market value of $1,600,000 based on the Company’s stock price at the date of issuance.
The assets are carried at cost, less accumulated amortization. Amortization is provided principally on the straight-line basis method over the estimated useful lives of 15 years. For the nine months ended January 31, 2017 the Company recorded amortization of $78,466.
On October 20, 2016, the Company completed two separate consulting agreement with two entities. Both agreements are for a term of one year with the combined compensation being 2,000,000 shares of common stock issued at fair value of $0.33 per share for a total value of $660,000. Per the agreements, the shares were deemed earned at the date of the agreement and thus expensed in the nine month period ended January 31, 2017
On November 11, 2016, the Company issued 250,000 shares of common stock as an inducement for the issuance of a convertible note to two individuals with a relative fair value of $18,805 and was accounted for as debt discount.
NOTE 6 - NOTES
On November 10, 2016, the Company issued a secured promissory note to an individual for $50,000 with net proceeds after cost of $45,256 in cash. Debt issuances cost of $ 4,744 were recognized as a discount on the note. The note matures on February 10, 2017 with an 8% per month interest rate with interest payments of $4,000 payable on December 10, 2016, January 10, 2017, and February 10, 2017. As part of the note agreement the Company will issue 125,000 shares of common stock with a relative fair value of $9,402 to the note holder. The note is secured by 2,500,000 shares of common stock in book entry with the Transfer Agent to be cancelled if the note is paid back per the agreement.
On November 10, 2016, the Company issued a secured promissory note to an individual for $50,000 with net proceeds after cost of $45,256 cash. Debt discount costs of $4,744 were recognized as a discount to the note. The note matures on February 10, 2017 with an 8% per month interest rate with interest payments of $4,000 payable on December 10, 2016, January 10, 2017, and February 10, 2017. As part of the note agreement the Company will issue 125,000 shares of common stock with a relative fair value of $9,403 to the note holder. The note is secured by 2,500,000 shares of common stock in book entry with the Transfer Agent to be cancelled if the note is paid back per the agreement.
NOTE 7 - CONVERTIBLE NOTES
On November 28, 2016, the Company issued a convertible promissory note to an entity with a face value of $53,000 and bearing interest at 12% per annum. Debt issuance costs of $7,000 were recognized as a discount to the note. The note matures on August 28, 2017. The net proceeds to the Company was $46,000 net of legal fees of $2,000 and due diligence fees of $5,000. The note and accrued interest is convertible 180 days after the date of issuance of the note into common stock of the company at 50% discount to lowest trading price during the 20 days prior to the date of the conversion. The note is secured by 10,000,000 shares of common stock in book entry with the Transfer Agent to be cancelled if the note is paid back per the agreement.
On December 1, 2016, the Company issued a convertible note to an entity with a face value of $75,000 bearing interest at 10%. The net proceeds to the Company was $69,000 with legal and due diligence fees of $6,000. The note is due on December 1, 2017 and is convertible at or any time after March 3, 2017 at lower of closing price of the common on the trading day preceding the closing date or 55% of the lowest sales price during the 20 preceding days to conversion with a floor of $.00001. The holder of the note can convert the note up to 4.9% of Company’s outstanding common stock. The note is secured by 3,250,000 shares of common stock in book entry with the Transfer Agent to be cancelled if the note is paid back per the agreement. The reserve amount will be increase by a factor of 2 each time the Company enters into a subsequent convertible note.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
On February 21, 2016, the Company signed a worldwide license agreement to manufacture and distribute the O2Trainer. The product is used by individuals in physical training. The Company will pay a 10% royalty on all sales through February 21, 2026. As of January 31, 2017, there have been no sales of the product.
On July 25, 2016, the Company filed with the Securities and Exchange Commission a Current Report on Form 8-K, disclosing, among other things, that pursuant to the terms and conditions that certain Patent Assignment and Technology Transfer Agreement (the “Patent Assignment and Technology Transfer Agreement”), dated May 6, 2016, by and between BRK, Inc., a Nevada corporation (the “Company”) and iSee Automation Inc., a federal Canada corporation (“iSee Automation”), the Company purchased U.S. Patent Application No. 15/079,847, “Helmet System” (the “Patent”) and related technology for a helmet camera system, including intellectual property covered by the Patent. The Patent covers technology designed to wirelessly transmit video images from a small, mobile camera to live broadcast (the “Helmet Camera and Broadcast Technology”).
Pursuant to the terms and conditions of the Patent Assignment and Technology Transfer Agreement, the Company issued 5,000,000 shares of common stock to iSee Automation.
The U.S. U.S. Patent and Trademark Office subsequently published an Assignment of Abstract of Title, date record July 13, 2017, for conveyance of the Patent from iSee Automation Inc. to BRK, Inc.
In connection with the acquisition of the Patent, the Company also entered into that certain Revenue Assignment and Benefit Transfer Agreement, dated September 16, 2016, by and between the Company and iSee Automation (the “Revenue Assignment Agreement”). Under the Revenue Assignment Agreement, iSee Automation is obligated to “deliver to the Company any and all revenues obtained by iSee Automation based on the Helmet Camera patent application previously purchased by BRK from iSee Automation under the Patent Assignment and Technology Transfer Agreement via wire transfer or via direct delivery from customers.
Although we have clear title to and no restrictions to use our intellectual property, disputes may arise regarding the Revenue Transfer Agreement, including but not limited to, the scope and duration of payment of royalties other interpretation-related issues.
On May 17, 2016, the Company entered into that certain Agreement for Services, dated May 17, 2017, by and among the Company, iSee Automation Inc. (Ontario), and Christopher Stramacchia. Pursuant to the terms and conditions of the Agreement for Services, “[a]ny patents derived from the research done jointly and severally by all the above named parties shall be the property of BRK, Inc.,” in consideration for the Company paying $10,000 to iSee Automation (Michigan), which $10,000 the Company paid to iSee Automation (Michigan) on or about May 17, 2016.
On or about February 27, 2017, Christopher Stramacchia, President of iSee Automation, notified the Company that it believes that iSee Automation terminated the Agreement for Services. The Company believes that there is no basis in law or equity for iSee Automation to unilaterally decide to terminate the Agreement for Services and plans to enforce its rights thereunder.
On or about February 28, 2017, Christopher Stramacchia, President of iSee Automation, notified the Company that it believes that iSee Automation terminated the Revenue Assignment Agreement. The Company believes that there is no basis in law or equity for iSee Automation to unilaterally decide to terminate the Revenue Assignment Agreement and plans to enforce its rights thereunder.
NOTE 9 - SUBSEQUENT EVENTS
On February 3, 2017, the Company issued a convertible note to Auctus Fund LLC with a face value of $75,000 bearing interest at 12%. The net proceeds to the Company was $69,000 with legal and due diligence fees of $6,000. The note is due on November 3, 2017 and is convertible 180 days after the issuance of the note at lower of lower of 55% multiplied by the lowest trading price during the previous 25 days or 55% of the lowest sales price during the 25 preceding days. The holder of the note can convert the note up to 4.9% of Company’s outstanding common stock. The note is secured by 5,555,556 shares of common stock in book entry with the Transfer Agent to be cancelled if the note is paid back per the agreement. If the reserve is not maintained at the adequate amount the face value of the note may increase by $15,000.
On or about February 27, 2017, Christopher Stramacchia, President of iSee Automation, notified the Company that it believes that iSee Automation terminated the Agreement for Services. The Company believes that there is no basis in law or equity for iSee Automation to unilaterally decide to terminate the Agreement for Services and plans to enforce its rights.
On or about February 28, 2017, Christopher Stramacchia, President of iSee Automation, notified the Company that it believes that iSee Automation terminated the Revenue Assignment Agreement. The Company believes that there is no basis in law or equity for iSee Automation to unilaterally decide to terminate the Revenue Assignment Agreement and plans to enforce its rights.