The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 210 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature. Operating results for the three months ended September 30, 2017, are not necessarily indicative of the results that may be expected for the year ending June 30, 2018. For further information, refer to the financial statements and footnotes thereto included in our company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission on October 13, 2017.
KELVIN MEDICAL, INC.
BALANCE SHEETS
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2017
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
6,375
|
|
|
$
|
17,280
|
|
Other receivable
|
|
|
3,000
|
|
|
|
3,000
|
|
Total current assets
|
|
|
9,375
|
|
|
|
20,280
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
9,375
|
|
|
$
|
20,280
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
9,000
|
|
|
$
|
4,500
|
|
Accounts payable, related parties
|
|
|
21,289
|
|
|
|
19,039
|
|
Advances, related parties
|
|
|
5,934
|
|
|
|
5,309
|
|
Customer deposit
|
|
|
120
|
|
|
|
120
|
|
Total current liabilities
|
|
|
36,343
|
|
|
|
28,968
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
36,343
|
|
|
|
28,968
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity (deficit)
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value: shares authorized 100,000,000;
64,097,500 and shares issued and outstanding as September 30, 2017 and June 30, 2017
|
|
|
64,098
|
|
|
|
64,098
|
|
Additional paid in capital
|
|
|
77,852
|
|
|
|
77,852
|
|
Retained deficit
|
|
|
(168,918
|
)
|
|
|
(150,638
|
)
|
Total stockholders' equity (deficit)
|
|
|
(26,968
|
)
|
|
|
(8,688
|
)
|
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
|
|
$
|
9,375
|
|
|
$
|
20,280
|
|
The accompanying notes are an integral part of these unaudited financial statements.
KELVIN MEDICAL, INC.
STATEMENTS OF OPERATIONS
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
Net sales
|
|
$
|
-
|
|
|
$
|
-
|
|
Cost of goods sold
|
|
|
-
|
|
|
|
-
|
|
Gross profit
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Management fees
|
|
|
3,000
|
|
|
|
3,000
|
|
Patent license fees
|
|
|
1,750
|
|
|
|
1,750
|
|
Professional fees
|
|
|
13,500
|
|
|
|
-
|
|
General and administrative expenses
|
|
|
30
|
|
|
|
30
|
|
Total operating expenses
|
|
|
18,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18,280
|
)
|
|
|
(4,780
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(18,280
|
)
|
|
|
(4,780
|
)
|
|
|
|
|
|
|
|
|
|
Provision for income tax expense
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
|
|
$
|
(18,280
|
)
|
|
$
|
(4,780
|
)
|
|
|
|
|
|
|
|
|
|
Net (loss) per common share (basic and diluted)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - Basic and diluted
|
|
|
64,097,500
|
|
|
|
63,000,000
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited financial statements.
KELVIN MEDICAL, INC.
STATEMENT OF CASH FLOWS
(unaudited)
|
|
Three Months ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
Net loss
|
|
$
|
(18,280
|
)
|
|
$
|
(4,780
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
4,500
|
|
|
|
(3,000
|
)
|
Accounts payable, related parties
|
|
|
2,250
|
|
|
|
4,750
|
|
Net cash used in operating activities
|
|
|
(11,530
|
)
|
|
|
(3,030
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
Net cash provided from (used by) investing activities
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
Advances, related parties
|
|
|
625
|
|
|
|
3,060
|
|
Net cash provided from (used by) financing activities
|
|
|
625
|
|
|
|
3,060
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
(10,905
|
)
|
|
|
30
|
|
Cash and cash equivalents at beginning of period
|
|
|
17,280
|
|
|
|
1,076
|
|
Cash and cash equivalents at end of period
|
|
$
|
6,375
|
|
|
$
|
1,106
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
|
|
Cash paid (received) during year for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
The accompanying notes are an integral part of these unaudited financial statements.
KELVIN MEDICAL, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2017
1.
|
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Business Activity:
Kelvin Medical, Inc. (the "Company") was incorporated in the State of Nevada on May 5, 2016. We are a recently organized company that intends to engage in the sale of medical devices. The Company was founded to market the product called Therm-N-Ice. Therm-N-Ice is a device that applies hot or cold externally to the body part upon which it has been placed. The use of hot and cold applied externally to a body part is found in medical and even non-medical locations. The Company suggests a simple solution that will reduce the burden of these tasks and allow people to remain mobile rather than pausing life activities. Our headquarters are located at 10930 Skyranch Place, Nevada City, California 95959.
To date, our activities have been limited to formation and the development of a business plan. During the year ended June 30, 2017 we concluded a registration statement to offer up to 30,000,000 shares at $0.02 per share. We have successfully obtained a listing on the OTC Pink Markets under the symbol "KVMD", but have not yet commenced trading of our shares. Our offering was completed during the year and we are now exploring other sources of capital to fund our operations so that we can fully implement our business plan. In the current emerging growth phase, we anticipate we will continue to incur operating losses.
Financial Statement Presentation:
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").
Fiscal year end:
The Company has selected June 30 as its fiscal year end.
Use of Estimates:
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based upon amounts that differ from these estimates.
Cash Equivalents:
The Company considers all highly liquid investments with maturities of 90 days or less from the date of purchase to be cash equivalents.
Revenue recognition and related allowances:
Revenue from the sale of goods is recognized when the risks and rewards of ownership have been transferred to the customer, which is usually when title passes. Revenue is measured at the fair value of the consideration received, net of trade discounts and sales taxes.
Accounts Receivable and Allowance for Doubtful Accounts:
Accounts receivable are stated at the amount that management expects to collect from outstanding balances. Bad debts and allowances are provided based on historical experience and management's evaluation of outstanding accounts receivable. Management evaluates past due or delinquency of accounts receivable based on the open invoices aged on due date basis. The allowance for doubtful accounts at September 30, 2017 and June 30, 2017 is $Nil, respectively.
Inventories:
Presently the Company has no inventory. We intend to maintain an inventory of Therm-N-Ice medical devices once our business plan is complete. Inventories will be measured at lower of cost and net realizable value after providing for obsolescence, if any. Cost of inventories includes cost of purchase, including manufacturing overheads and transportation to bring them to their location of distribution.
Warranty:
Products will be shipped to customers and retail locations from our warehouse facility. All products will be covered by a limited one-year warranty for defects and non-performance. Upon commencement of sales we will provide a provision for any obligations which may arise under our warranty policy which will be tested against actual warranty returns on an annual basis. Our products will carry a manufacturer's warranty for parts and assembly that will address defects in production or parts which will be recoverable from the original manufacturers in those circumstances.
KELVIN MEDICAL, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2017
1.
|
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
|
Advertising and Marketing Costs:
Advertising and marketing costs are expensed as incurred and were $Nil during the three months ended September 30, 2017 and 2016, respectively.
Income taxes:
The Company has adopted ASC Topic 740, "Income Taxes". ASC Topic 740 requires the use of the asset and liability method of accounting for income taxes. Under the asset and liability method of ASC Topic 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Basic and Diluted Loss Per Share
: In accordance with ASC Topic 280 – "Earnings Per Share", the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.
New Accounting Pronouncements:
In August 2017, the FASB issued ASU 2017-12,
Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities
("ASU 2017-12"). The objective of the ASU is to improve the financial reporting of hedging relationships in order to better portray the economic results of an entity's risk management activities in its financial statements and to make certain targeted improvements to simplify the application of hedge accounting guidance. ASU 2017-12 is effective for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. The Company is currently evaluating the impact of ASU 2017-12 on the Company's financial statements.
The Company has experienced net losses to date, and it has not generated revenue from operations. The Company will need additional working capital to service debt and for ongoing operations, which raises substantial doubt about its ability to continue as a going concern. Management of the Company has developed a strategy to meet operational shortfalls which may include equity funding, short-term or long-term financing or debt financing, to enable the Company to reach profitable operations. If the Company fails to generate positive cash flow or obtain additional financing, when required, it may have to modify, delay, or abandon some or all of its business and expansion plans.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amount and classification of liabilities that might cause results from this uncertainty.
3.
|
PATENT LICENSE AGREEMENT
|
On May 10, 2016, the Company entered into a patent license agreement with Oasis Medical Solutions, a sole proprietorship controlled by our board of directors and organized in the State of California ("Licensor") under which the Licensor desires to grant and the Company desires to accept an exclusive license of the Patent for the building of, and use of, machines incorporating the Patent's technology under certain terms and conditions. Both of the parties agree that the ownership of the Patent and the goodwill relating thereto, and any associated improvements, whether developed by the Company, or both parties jointly, shall remain vested in Licensor both during the term of the agreement and thereafter, and the Company further agrees never to challenge, contest or question the validity of the Licensor's ownership of the Patent or any associated registrations therewith.
KELVIN MEDICAL, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2017
3.
|
PATENT LICENSE AGREEMENT (cont'd)
|
As consideration for the exclusive license granted, the Company shall pay to Licensor the following fees:
(a)
|
An ongoing maintenance fee of $500 per month plus an additional annual fee of $1,000;
|
(b)
|
Royalty fees of 6% per machine sold or leased under this license, payable within thirty (30) days of agreement reached with the customer/lessee. Payments can be grouped on a monthly occurring basis;
|
(c)
|
This license shall be considered null and void if production is not obtained within a 5-year period of the date stated above and the license, and all rights thereunder, will return to the Licensor.
|
The term of the license agreement shall be for 15 years, but will not extend beyond the full term of the patent. Within a year from the ending of the patent term, parties may negotiate an ongoing arrangement.
During the three months ended September 30, 2017, the Company incurred $1,750 in license fees (September 30, 2016 - $1,750).
On June 1, 2016, the Company entered into a consulting agreement with a consultant who is in the business of assisting private companies in the process of going public and getting listed on the OTC Pink through the Form S-1 Registration. Under the terms of the consulting agreement, the Consultant shall provide certain services with respect to the Form S-1 Registration Statement, from commencement and preparation of the Form S-1 to receipt of Notice of Effectiveness, retention and payment of the required legal and accounting professionals, and thereafter to work with a market maker to provide a completed and accepted Form 15c2-11 with FINRA, DTC eligibility, a trading symbol and listing on OTC Pink. As compensation under the consulting agreement S-1 Services LLC, the consultant, received 3,000,000 shares of the Company's common stock at $0.02 per share for a value of $60,000.
The $60,000 in costs relating to such Registration Statement was expensed during the fiscal year ended June 30, 2017 as the offering was not deemed successful. Further, a balance of $3,000 is included on the balance sheet as "Other receivable", in respect to amounts advanced to service providers by the Company which are required to be reimbursed by the Consultant under this agreement.
As at September 30, 2017 and June 30, 2017 the Company has received a customer deposit of $120 in respect to the sale of three units of the Therm-N-Ice arm band. The deposit represents a one-third deposit for each of the three units ordered.
There were no shares issued during the three months ended September 30, 2017.
During the fiscal year ended June 30, 2017, the Company received proceeds totaling $21,950 from various parties subscribing for a total of 1,097,500 shares at $0.02 per share under our Form S-1 registration statement.
KELVIN MEDICAL, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2017
7.
|
RELATED PARTY TRANSACTIONS
|
On May 15, 2016, the Company entered into a twelve-month agreement for management services with Mr. William Mandel, our President, Secretary, Treasurer and member of the Board of Directors. Under the terms of the agreement the Company issued 30,000,000 shares as a bonus to Mr. William Mandel valued at $30,000 or par value, and shall pay $1,000 monthly in cash consideration. There has been $3,000 (September 30, 2016- $3,000) accrued and recorded as Accounts Payable, Related party, in relation to services rendered for the three months ended September 30, 2017 by Mr. Mandel. A total of $17,000 (as of June 30, 2017 - $14,000) remains payable at September 30, 2017. The contract was extended for a further twelve month term during fiscal 2017.
During the three months ended September 30, 2017 Oasis Medical Solutions, a sole proprietorship controlled by our board of directors, advanced a total of $625 (2016 - $3,060). As at September 30, 2017 a total of $5,934 remained due and payable (2017 - $5,309) to this related entity.
During fiscal 2017 an amount advanced in the prior fiscal year totaling $456 by Kelvin Medical LLC, a company controlled by our board of directors, was assigned to Mr. William Mandel directly for repayment when Kelvin Medical LLC was dissolved. This amount is included in Accounts payable – related party on our balance sheets.
Advances received were used to provide working capital as required by the Company for ongoing operations.
c. License fees
The Company accrues patent license fees in respect to a patent license agreement with Oasis Medical Solutions (ref: Note 3 above). As at September 30, 2017 and June 30, 2017 a total $3,833 and $4,583 remained payable under the terms of this agreement, respectively. A total of $1,750 was incurred as new charges in the period ended September 30, 2017 (2016 - $1,750) and the Company paid a total of $2,500 to reduce the outstanding account (2016 - $nil).
Deferred income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company's assets and liabilities. Deferred income taxes are measured based on the tax rates expected to be in effect when the temporary differences are included in the Company's tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.
Operating loss carry-forwards generated during the period from May 5, 2016 (date of inception) through September 30, 2017 of approximately $168,918, will begin to expire in 2036. The Company applies a statutory income tax rate of 34%.
The Company had deferred income tax assets as of September 30, 2017 and June 30, 2017 as follows:
|
|
September 30,
2017
|
|
|
June 30,
2017
|
|
Loss carryforwards
|
|
$
|
57,432
|
|
|
$
|
51,217
|
|
Less – accrued management fees
|
|
|
(5,780
|
)
|
|
|
(4,760
|
)
|
Less - valuation allowance
|
|
|
(51,652
|
)
|
|
|
(46,457
|
)
|
Total net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
Tax years from inception to fiscal year ended June 30, 2017 are not yet filed and are open for examination by the taxation authorities.
The Company has no tax positions at June 30, 2017 and 2016 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
The Company has filed for extensions in the applicable periods and is not expecting any penalties or interest charges with respect to their accumulated losses to date.
The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company has no accruals for interest and penalties since inception.
The Company has evaluated subsequent events from the balance sheet date through the date that the financial statements were issued and determined that there are no additional subsequent events to disclose.