The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – NATURE OF BUSINESS
BRK, Inc. (“we”, “our” “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. During the year ended April 30, 2017, the Company terminated the blind repair business and wrote off the equipment related to the line of business.
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. All share and per share amounts herein have been retroactively adjusted to reflect the forward stock split.
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 received the RefCam helmets produced by a third party and used the devises to broadcast various hockey events.
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. Since their usage the helmets and their transmitting devices have been held without permission by ISee Automation.
As of April 30, 2017 ISee Automation was holding the Helmets and transmission equipment. Based on the lack of access to the Equipment the Company has elected to impair the assets related to the ISee Automation agreement resulting is an amortization charge of $105,133 and impairment of intangible assets of $1,494,867 for the intellectual property.
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.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
This summary of significant accounting policies is presented to assist in understanding the Company’s financial statements. These accounting policies conform to accounting principles generally accepted in the United States of America, and have been consistently applied in the preparation of the financial statements.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheet. Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements of the Company include the Company and its wholly-owned subsidiary ISee Sports, Inc. All material intercompany balances and transactions have been eliminated.
Cash and Cash Equivalents
BRK considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Inventories
Inventories consisting of finished goods, are stated at the lower of cost of market using the first-in; first-out (FIFO) cost method of accounting.
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 are 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.
Impairment of long-lived assets
The Company reviews the carrying value of its long-lived assets annually or whenever events or changes in circumstances indicate that the historical-cost carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the asset by comparing the undiscounted future net cash flows expected to result from the asset to its carrying value. If the carrying value exceeds the undiscounted future net cash flows of the asset, an impairment loss is measured and recognized. An impairment loss is measured as the difference between the net book value and the fair value of the long-lived asset. Fair value is estimated based upon either discounted cash flow analysis or estimated salvage value. (See Note 9–Impairment of Assets)
Basic and diluted net income per share
Basic and diluted net income per share calculations are calculated on the basis of the weighted average number of common shares outstanding during the year. They include the dilutive effect of common stock equivalents in years with net income. Basic and diluted net income per share is the same due to the net loss in each year.
Income Taxes
BRK recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. BRK provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not.
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.
Financial assets and liabilities recorded at fair value in our consolidated balance sheets are categorized based upon a fair value hierarchy established by GAAP, which prioritizes the inputs used to measure fair value into the following levels:
Level 1— Quoted market prices in active markets for identical assets or liabilities at the measurement date.
Level 2— Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable and can be corroborated by observable market data.
Level 3— Inputs reflecting management’s best estimates and assumptions of what market participants would use in pricing assets or liabilities at the measurement date. The inputs are unobservable in the market and significant to the valuation of the instruments.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The Company analyzed the conversion option for derivative accounting and beneficial conversion features consideration and noted one variable convertible note qualified as a derivative and thus tainted the fixed conversion notes requiring the notes to accounted for as derivative liabilities
Financial assets and liabilities measured at fair value on a recurring basis are summarized below as of April 30, 2017 and 2016:
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
As of April 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
As of April 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,444,137
|
|
|
$
|
2,444,137
|
|
Beneficial Conversion Features
The intrinsic value of a beneficial conversion feature inherent to a convertible note payable, which is not bifurcated and accounted for separately from the convertible note payable and may not be settled in cash upon conversion, is treated as a discount to the convertible note payable. This discount is amortized over the period from the date of issuance to the date the note is due using the effective interest method. If the note payable is retired prior to the end of its contractual term, the unamortized discount is expensed in the period of retirement to interest expense. In general, the beneficial conversion feature is measured by comparing the effective conversion price, after considering the relative fair value of detachable instruments included in the financing transaction, if any, to the fair value of the common shares at the commitment date to be received upon conversion.
Recently Issued Accounting Pronouncements
In July 2017, the FASB issued ASU No. 2017-11,
”Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception”.
The ASU was issued to address the complexity associated with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and equity. The ASU, among other things, eliminates the need to consider the effects of down round features when analyzing convertible debt, warrants and other financing instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. The amendments are effective for fiscal years beginning after December 15, 2018, and should be applied retrospectively. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the implementation date and the impact of this amendment on its financial statements.
NOTE 3 – GOING CONCERN
As shown in the accompanying financial statements, BRK has an accumulated deficit of $1,368,401 and negative working capital of $3,104,550 as of April 30, 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 April 30, 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 4 – CONCENTRATION OF REVENUE
The Company relies on one customer which is a related party, as its sole source of revenue. Should the Company lose that customer, the Company may lose its only source of revenue. (See Note 14–Commitment and Contingencies regarding the current dispute with iSee Automation)
NOTE 5 – INCOME TAXES
The Company follows Accounting Standards Codification 740, Accounting for Income Taxes. During 2017, there was a change in control of the Company.
Under section 382 of the Internal Revenue Code such a change in control negates much of the tax loss carry forward and deferred income tax. Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carry forwards. For federal income tax purposes, the Company uses the accrual basis of accounting, the same that is used for financial reporting purposes.
The Company did not have taxable income for the years ended April 30, 2017 or 2016.The Company’s deferred tax assets consisted of the following as of April 30, 2017 and 2016:
|
|
2017
|
|
|
2016
|
|
Total deferred tax asset
|
|
|
244,274
|
|
|
|
138,536
|
|
Valuation allowance
|
|
|
(244,274
|
)
|
|
|
(138,536
|
)
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
The Company had a net loss of $972,583 for the year ended April 30, 2017 and $71,228 for the same period in 2016. As of April 30, 2017, the Company’s net operating loss carry forward was $697,927 that will begin to expire in the year 2034. The Company has not filed any tax returns which leaves the years from inception to date open for IRS inspection.
NOTE 6 – RELATED PARTY TRANSACTION
On June 15, 2015 the Company issued a note for $18,000 in cash to a related party. The note is on demand and bears interest at 12% per annum.
On April 25, 2016 the Company issued a note for $4,000 in cash to a related party. The note is on demand and bears no interest.
During the year ended April 30, 2016 the Company received an advance from the officer of the Company of $1,000. The advance is on demand and bears no interest.
During the year ended April 30, 2016 the Company issued four notes for $11,000 in cash to an entity controlled by an officer of the Company. The notes are demand notes and bear no interest. During the year ended April 30, 2017, the Company repaid $11,000 to the related party leaving a balance of zero due to the related party as of April 30, 2017.
During the year ended April 30, 2017 a related party advanced the Company $94,025 and repaid the related party $93,750 leaving a balance due to the related party for $63,815.
During the year ended April 30, 2017 the Company repaid $125 to a related party leaving a balance due to the related party for $8,875.
During the year ended April 30, 2017 an officer of the Company advanced the Company $500 and repaid the related party $500 leaving a balance due to the related party for $3,000.
As of April 30, 2017 and 2016, $75,690 and $86,540, respectively, was due to the related parties.
These notes are unsecured; bear interest between 0% and 12%, and due on demand.
The total compensation for the CEO for the fiscal years ended April 30, 2017 and 2016 was $30,325 and $30,000, respectively. As of April 30, 2017, and 2016, the Company has accrued $125,340 and $99,950, respectively, in unpaid fees to the officer.
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 but were not considered a related party as of yearend as their number of shares in the Company was less than 10%. (See Note -9: Impairment of Fixed Assets and Patent; See Note -15: Commitment and Contingencies)
As of April 30, 2017, the balance of convertible notes payable to related parties was $7,089. The notes are convertible at $0.005, bears no interest, and are due on demand.
During the year ended April 30, 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. The receivable was subsequently repaid to the Company in May 2017.
NOTE 7 – EQUITY
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. All share and per share amounts herein have been retroactively adjusted to reflect the forward stock split.
On May 6, 2016 the Company acquired a patent application from ISee Automation for 5,000,000 shares of common stock with a value of $1,600,000. On May 17, 2016, the Company paid $10,000 to said company in consideration of an agreement to develop a new Wi-Fi broadcasting camera. (See Note 14–Commitment and Contingencies regarding the current dispute with iSee Automation)
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 year ended April 30, 2017 the Company recorded amortization of $105,133. (See Note 9–Impairment of Assets)
On October 20, 2016, the Company completed two separate consulting agreements 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 year ended April 30, 2017
On November 11, 2016, the Company issued 250,000 shares of common stock as an inducement for the issuance of notes to two individuals with a relative fair value of $18,805 and was accounted for as debt discounts.
On February 7, 2017 the Company issued 50,000 shares of common stock to one individual as an inducement to extend one loan with a relative fair value of $15,000 which was accounted for as a loss on debt extinguishment. The loan was extended to May 20, 2017 and is currently in default.
NOTE 8 – FIXED ASSETS
The Company developed a machine to manufacture repair parts to repair hanging venetian blinds. In addition, the Company has purchased molds from an outside vendor for $3,700 to extrude the product necessary to manufacture their product. As the machine and mold are ready to be put into production, the assets have been classified as a fixed asset and will be depreciated over the estimated useful life of 3 years. The Company incurred depreciation of $21,900 and $3,031 as of April 30, 2017 and 2016, respectively.
The net fixed asset related to the repair kit machine as of April 30:
|
|
Equipment
|
|
|
|
2017
|
|
|
2016
|
|
Equipment
|
|
|
23,890
|
|
|
|
23,890
|
|
Depreciation
|
|
|
(23,890
|
)
|
|
|
(18,835
|
)
|
Net
|
|
|
--
|
|
|
|
5,055
|
|
During the year ended April 30, 2017, Company acquired assets which included helmets with cameras, receiving devises which the Company had paid for their development and production for a total value of $152,508. The Company incurred depreciation of these fixed assets of $16,845 during the year ended April 30, 2017. As the Company was not in possession of the assets as of April 30, 2017, they elected to impair the assets resulting in an impairment cost of $134,644. (See Note 9 Impairment of Fixed Assets)
The net fixed asset related to the acquired assets as of April 30:
|
|
Equipment
|
|
|
|
2017
|
|
|
2016
|
|
Equipment
|
|
|
152,508
|
|
|
|
--
|
|
Depreciation
|
|
|
(16,845
|
)
|
|
|
--
|
|
Write-down of the machine not being used
|
|
|
(1,019
|
)
|
|
|
--
|
|
Impairment
|
|
|
(134,644
|
)
|
|
|
--
|
|
Net
|
|
|
--
|
|
|
|
--
|
|
NOTE 9 – IMPAIRMENT OF FIXED ASSETS AND PATENT
The Company reviewed the status of its assets which included helmets with cameras, receiving devises which the Company had paid for their development and production. As of April 30, 2017 the Company was not in possession of the equipment and it was being unlawfully held by ISee Automation pending the outcome of their disagreement with the latter. Based on the lack of physical possession and non-control of these assets the Company elected as of April 30, 2017 to impair the assets resulting in an impairment cost of $134,644.
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. The assets were carried at cost, less accumulated amortization. Amortization is provided principally on the straight-line basis method over the estimated useful lives of 15 years. Based on the status of the asset as a provisional patent application and the ongoing development of the asset by the Company, the Company elected as of April 30, 2017 to impair the assets resulting in an impairment cost of $1,494,867.
NOTE 10 – CONVERTIBLE NOTES PAYABLE
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. 1,451,905 shares of common stock have been issued subsequent to year end at the request of debt holder. (See Note 16 – Subsequent Events.)
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. If the value of the Company’s common stock falls below $0.155 and or the Company’s common stock is chilled by the DTC, the 55% is reduced to 40% and if the common stock is not deliverable via DTC an additional 5% discount is added. The holder of the note can convert the note up to 4.9% of Company’s outstanding common stock. The note is secured by 22,174,347 shares of common stock in book entry with the Transfer Agent to be cancelled if the note is paid back per the agreement. 2,660,000 shares of common stock have been issued subsequent to year end at the request of debt holder. See Note 16 – Subsequent Events. The reserve amount will be increase by a factor of 2 each time the Company enters into a subsequent convertible note. Under ASC 815, this note requires liability classification and must be measured at fair value at the end of each reporting period. (See Note 12 – Fair Value Measurements)
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 55% multiplied by the lowest trading price during the previous 25 days prior to the date of this note or 55% of the lowest sales price during the 25 preceding days prior to the conversion date. The holder of the note can convert the note up to 4.99% 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 $5,000.
On March 4, 2017, the Company issued a convertible note to Crown Bridge Partners, LLC with a face value of $50,000 bearing interest at 8%. The net proceeds to the Company was $43,000 with legal and due diligence fees of $7,000. The note is due on March 2, 2018 and is convertible 180 days after the issuance of the note at 58% multiplied by the lowest trading price during the previous 20 days prior to the conversion date. The holder of the note can convert the note up to 4.9% of Company’s outstanding common stock. The note is secured by 6,269,592 shares of common stock in book entry with the Transfer Agent to be cancelled if the note is paid back per the agreement.
As of April 30, 2017 and 2016 the Company owes $115,500 and $115,500, respectively, to multiple convertible promissory note holders for proceeds received during fiscal year April 30, 2012. These notes bear interest at 0%, are due on demand and are unsecured. The notes are convertible into the Company’s common stock. The notes have a conversion price as follows:
|
$
|
68,000
|
|
|
$
|
0.005
|
|
|
|
$
|
10,000
|
|
|
$
|
0.05
|
|
|
|
$
|
37,500
|
|
|
$
|
0.20
|
|
|
As of April 30, 2017 and 2016 the Company owed $368,500 ($292,433 net of discount) and $115,500, respectively, in non-related party convertible promissory notes.
The Company analyzed the conversion option for derivative accounting and beneficial conversion features consideration under ASC 815-15 “Derivatives and Hedging” and ASC 470-20 “Convertible Securities with Beneficial Conversion Features” and noted the conversion feature on one note for $75,000 triggered derivative accounting. In addition, the variable note tainted the notes with fixed conversion rates created a derivative liability of $4,064,004 on date of initial measurement. (See Note 12 - Fair Value Measurement)
NOTE 11 – CONVERTIBLE NOTES TO RELATED PARTY
As of April 30, 2017 and 2016, the Company owes $7,089 in convertible related party notes. The notes bear interest at 0%, are due on demand and are unsecured. The notes are convertible at $0.005 into the Company’s common stock.
The Company analyzed the conversion option for derivative accounting and beneficial conversion features consideration under ASC 815-15 “Derivatives and Hedging” and ASC 470-20 “Convertible Securities with Beneficial Conversion Features” and noted one variable convertible note qualified plus tainted the fixed conversion notes requiring the notes to accounted for as derivative liabilities. (See Note 12 - Fair Value Measurement)
NOTE 12 – FAIR VALUE MEASUREMENTS AND DERIVATIVE LIABILITIES
As defined in (Financial Accounting Standards Board ASC 820), fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilized the market data of similar entities in its industry or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. FASB ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).
The three levels of the fair value hierarchy are as follows:
Level 1 –
|
Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.
|
|
|
Level 2 –
|
Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date and includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.
|
|
|
Level 3 –
|
Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.
|
The Company analyzed the conversion option for derivative accounting and beneficial conversion features consideration and noted one variable convertible note qualified as a derivative and thus tainted the fixed conversion notes requiring the notes to accounted for as derivative liabilities
The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value as April 30, 2017 and 2016.
Recurring Fair Value Measures
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities as of April 30,2017
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
2,444,137
|
|
|
$
|
2,444,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities as of April 30, 2016
|
|
$
|
--
|
|
|
$
|
-
|
|
|
$
|
--
|
|
|
$
|
--
|
|
As of April 30, 2017 and April 30, 2016, the aggregate fair value of the outstanding derivative liabilities was $2,444,137 and $0, respectively. For the year ended April 30, 2017 and 2016, the net gain on the change of fair value was $1,694,867 and $0, respectively.
The Company estimated the fair value of the derivative liabilities using the Black Scholes option pricing model using the following key assumptions during the year ended April 30, 2017:
Expected Dividend
|
|
0%
|
|
Expected terms
|
|
.50
|
|
Volatility
|
|
243.54% -260.97%
|
|
Risk free rate
|
|
.98% -1.09%
|
|
The following table represents the change in the fair value of the derivative liabilities during the year ended April 30, 2017:
Fair value of derivative liabilities as of April 30, 2016
|
|
$
|
--
|
|
Derivative labilities reclassified from equity upon tainting
|
|
|
4,064,004
|
|
Derivative liability recognized as debt discount
|
|
|
75,000
|
|
Change in fair value of derivatives
|
|
|
(1,694,867
|
)
|
Fair value of derivative liabilities as of April 30, 2017
|
|
$
|
2,444,137
|
|
NOTE 13 – NOTES PAYABLE
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 matured 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 issued 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. The note is currently in default and the shares 2,500,000 shares securing the note mentioned above have not been issued as of the date of this filing.
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. On February 7, 2017 the Company issued 50,000 shares of common stock as an inducement extending the notes maturity date to May 20, 2017. The shares were measured to have a relative fair value of $15,000 which was accounted for as a debt extinguishment. The note is currently in default and the 2,500,000 shares securing the note have not been issued as of the date of this filing.
As of April 30, 2017 and 2016, the company's total notes payable to non-related parties was $144,900 and $44,900, respectively. The notes are unsecured; bear no interest and due on demand.
NOTE 14 – 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 April 30, 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, “[any 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 15 – SUBSEQUENT EVENTS
On May 18, 2017, the Company issued 3,000,000 shares of common stock at $0.0005 to the convertible note holder 0832322 BC, Ltd. for $1,500 of convertible debt. Per the note agreement 300,000 shares were to be issued at $0.005 per share for the $1,500 conversion, however 3,000,000 shares were issued due to the forward 10:1 split of the Company common stock on December 21, 2015 which occurred subsequent to date of the note issuance.
On May 18, 2017, the Company issued 1,451,905 shares of common stock at $0.013775 to the convertible note holder JSJ for $20,000 of convertible debt.
On June 8, 2017, the Company issued 2,660,000 shares of common stock at $0.01102 to the convertible note holder EMA Financial for $29,313 of Convertible debt.
On June 15, 2017, the Company increased its number of authorized shares to 2,001,000,000 with 1,000,000 designated as preferred shares with a par value of $0.001 and 2,000,000,000 designated as common stock with a par value of $0.001.
On June 15, 2017, the Company designated one share of preferred stock as Series A preferred at a par value of $0.001. The series A preferred carries a voting right equal to 110% of the total voting rights of the outstanding common stocks. In addition, the series A shareholders can elect a director. The Series A director must approve any future amendments of the Company’s articles and other activities of the Company. Brian Keasberry was granted one share of Series A preferred stock on June 15, 2017 and was elected the Series A Director on June 16, 2017.
On June 16, 2017 Brian Keasberry resigned as President of the Company, continued as the Secretary and Treasurer and was designed the Series A Director. On June 16, 2017 Danie Serruya was elected President, CEO and a Director of the Company.
On July 5, 2017, ISee Sports Inc., a wholly owned subsidiary of the Company issued a $20,000 convertible note to one individual for cash. The convertible note bears interest at 8% per annum, matures on July 4, 2019 and is convertible at the note holders option into shares of the subsidiary ISee sports, Inc at $1.00 per share or into shares of the parent BRK, Inc., at 60% of the average closing price of the common stock of BRK for 10 days immediately prior to conversion.