ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This quarterly report contains forward-looking statements relating to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "intends", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential", or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors which may cause our or our industry's actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. You should not place undue reliance on these statements, which speak only as of the date that they were made. These cautionary statements should be considered with any written or oral forward-looking statements that we may issue in the future. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results, later events or circumstances or to reflect the occurrence of unanticipated events.
In this report unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to "common shares" refer to the common shares of our capital stock.
The management's discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").
As used in this quarterly report, the terms "we", "us", "our", and "our company" means Kelvin Medical, Inc., unless otherwise indicated.
Corporate Information
The address of our principal executive office is
10930 Skyranch Place, Nevada City, CA 95959
. Our telephone number is
(530) 388-8706.
Kelvin Medical, Inc. (the "Company") was incorporated in the State of Nevada on May 5, 2016. The Company, a recently organized company, is an early participant in medical device and telehealth wearables with a focus on the development of artificial intelligence driven physical therapeutic technologies.
The Company is developing solutions that empower consumers ranging from aging users seeking to live pain-free, to competitive athletes seeking to maximize their performance.
Our business model aims to provide medical device and telehealth wearables directly to consumers, either single purchase or on a reoccurring subscription basis, to medical clinics for use with patients, as well as license our full eco-system to physical therapy clinics, corporate wellness program administrators, and sports teams, both professional and youth groups.
Kelvin Medical's medical device and telehealth wearables platform has been devised to capture meaningful market share of both the consumer medical device market, as well as in the $30.5 billion global wearables market, along with the multi-billion-dollar physical therapy and corporate wellness industries.
The Company's medical device, telehealth platform of wearables and machine learning software, will enable consumer users, therapy clinics, and corporate wellness program administrators, to maximize results through real-time self- and distance- monitored activity and therapeutic treatments.
The Company was only recently incorporated in 2016; we have finalized our business plan, our marketing plan for our product is in place, and we are in the research and development phase of our business life-cycle. However, we have not commenced substantive operations. While we believe that our limited reporting requirements will satisfy most investors seeking transparency in any potential investment, we still caution that simply because we have a registration statement declared effective the Company will not become a "fully reporting" company, but rather, we will be only subject to the reporting requirements of Section 15(d) of the Securities Exchange Act of 1934. Accordingly, except during the year that our registration statement becomes effective, these reporting obligations may be automatically suspended under Section 15(d) if we have less than 300 shareholders at the beginning of our fiscal year and our required disclosure is less extensive than the disclosures required of "smaller reporting" companies. For example, we are not subject to disclose in our Form 10K risk factors, unresolved staff comments, or selected financial data, pursuant to Items 1A, 1B and 6, respectively. We have filed a Form 8-A12G with the Securities and Exchange Commission indicating our intention to remain a fully reporting company.
Since inception, our operations have consisted of formulating and finalizing our business plan, and escalating our research and development activities.
We successfully obtained a listing on the OTC Pink Markets under the symbol "KVMD", and have commenced trading of our shares. In the current emerging growth phase, we anticipate we will continue to incur operating losses.
Other than as set out herein, we have not been involved in any bankruptcy, receivership or similar proceedings, nor have we been a party to any material reclassification, merger, consolidation or purchase or sale of a significant amount of assets not in the ordinary course of our business.
Results of Operations
Three months ended March 31, 2018 and 2017
The following disclosures set forth certain items from our unaudited interim statements of operations for the three months ended March 31, 2018 and 2017:
We did not earn any income in the three months ended March 31, 2018 and 2017. We continue to incur administrative and development costs related to the execution of our business plan. We recorded a loss from operations of $55,465 and $8,129 respectively in the three month periods ended March 31, 2018 and 2017. Professional fees including legal fees, audit and accounting and Edgar filing fees totaled $14,175 during the three months ended March 31, 2018 and $2,093 in the same period ended March 31, 2017. The substantive increase in expenditures period over period is due to the fact that in the prior comparative period the Company had only recently filed its initial offering documents on Form S-1, the costs for which were included as a flat fee expensed in a subsequent period. During the current three month period the Company also retained the professional services of an investor relations consultant, further increasing our quarterly expenditures period over period. During the three months ended March 31, 2018 we incurred patent license fees of $1,750, and management fees of $8,000, as compared to $1,750 in patent licensing fees and $3,000 in management fees during the prior comparative three month period. The increase in management fees is due to contracts with our officers and directors which call for increased monthly fees commencing January 1, 2018 as compared to fiscal 2017 results. Further, we incurred $17,068 in research and development fees in the current period with no comparable expenditure during the prior three month period ended March 31, 2017. General and administrative costs were $14,472 and $1,286 respectively in the three months ended March 31, 2018 and 2017. Increases to administrative costs include new fees incurred with respect to our transfer agent and other associated listing and maintenance costs during the three months ended March 31, 2018.
Nine months ended March 31, 2018 and 2017
The following disclosures set forth certain items from our unaudited interim statements of operations for the nine months ended March 31, 2018 and 2017:
We did not earn any income in the three months ended March 31, 2018 and 2017. We continue to incur administrative and development costs related to the execution of our business plan. We recorded a loss from operations of $92,605 and $17,659 respectively in the nine month periods ended March 31, 2018 and 2017. Professional fees including legal fees, audit and accounting and Edgar filing fees totaled $38,675 during the nine months ended March 31, 2018 and $2,093 in the same period ended March 31, 2017. The substantive increase in expenditures period over period is due to the fact that in the prior comparative period the Company had only recently filed its initial offering documents on Form S-1, the professional costs for which were included as a flat fee expensed in a subsequent period. During the current nine month period the Company also retained the professional services of an investor relations consultant, further increasing our expenditures period over period. During the nine months ended March 31, 2018 we incurred patent license fees of $5,250, and management fees of $14,000, as compared to $5,250 in patent licensing fees and $9,000 in management fees during the prior comparative nine month period. The increase in management fees is due to contracts with our officers and directors which call for increased monthly fees commencing January 1, 2018 as compared to fiscal 2017 results. Further, we incurred $17,068 in research and development fees in the current nine month period with no comparable expenditure during the prior comparative period ended March 31, 2017. General and administrative costs were $17,612 and $1,316 respectively in the nine months ended March 31, 2018 and 2017. Increases to administrative costs include new fees incurred with respect to our transfer agent and other associated listing and maintenance costs during the current nine months ended March 31, 2018.
Liquidity and Capital Resources
The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited financial statements for the nine months ended March 31, 2018, and audited financial statements for the year ended June 30, 2017, along with the accompanying notes.
Current assets include cash on hand of $36,549 (June 30, 2017 – $17,280) and other receivables of $Nil (June 30, 2017 - $3,000). Current liabilities include accounts payable of $4,790 (June 30, 2017 - $4,500), accounts payable – related parties of $33,318 (June 30, 2017 - $19,039), advances from related parties of $4,614 (June 30, 2017 - $5,309), and customer deposits of $120 (June 30, 2017 - $120).
Cash used in operating activities is predominantly related to ongoing operations resulting in a net loss of $92,605 in the nine months ended March 31, 2018. This amount was offset by non cash expenses of $3,000 relative to the issuance of shares for services provided. Changes in operating assets and liabilities in the current nine month period includes increases to both accounts payable and accounts payable related parties, which amounts were reduced by $3,000 due to the collection of other receivables. During the nine months ended March 31, 2017, operating activities consisted primary of losses from operations of $17,659 which amount was predominantly offset by increases to accounts payable related parties of $14,250. Net cash used in operating activities totaled $70,036 and $3,030 respectively during the nine month periods ended March 31, 2018 and 2017, respectively. During the nine months ended March 31, 2018 the Company received proceeds from a private placement of 3,000,000 shares at $0.03 per share of $90,000 as well as advances of $10,483 from related parties. These amounts were offset by repayments to related parties of $11,178. During the nine months ended March 31, 2017, the Company received advances of only $3,060 from related parties.
Off-Balance Sheet Arrangements
We have no 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 of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Critical Accounting Policies and Estimates
The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments which are based on historical experience and on various other factors that are believed to be reasonable under the circumstances. The results of their evaluation form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions and circumstances. Our significant accounting policies are more fully discussed in the Notes to our unaudited Financial Statements, included herein (ref: Note 1).
Recent 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 has reviewed all other recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements will have a material impact on its financial condition or the results of its operations.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
A smaller reporting company is not required to provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Management's Report on Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our president and chief financial officer (our principal executive officer, principal financial officer and principal accounting officer) to allow for timely decisions regarding required disclosure.
As of the end of the quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president and chief financial officer (our principal executive officer, principal financial officer and principal accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president and chief financial officer (our principal executive officer, principal financial officer and principal accounting officer) concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this quarterly report. Our company is in the process of adopting specific internal control mechanisms with our board and officers' collaboration to ensure effectiveness as we grow. We have engaged an outside consultant to assist in adopting new measures to improve upon our internal controls. Future controls, among other things, will include more checks and balances and communication strategies between the management and the board to ensure efficient and effective oversight over company activities as well as more stringent accounting policies to track and update our financial reporting.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarterly period covered by this report 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
We know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest averse to our company.
A smaller reporting company is not required to provide the information required by this Item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
IT
EM 5. OTHER INFORMATION
On January 22, 2018, the Company entered into an Equity Purchase Agreement ("EPA"), and Registrations Rights Agreement with a Third Party, Phenix Ventures, LLC, wherein, Phenix Ventures committed to purchasing 10,000,000 shares of the Company's Common Stock. Under the Equity Purchase Agreement, Phenix would not, at any one time, hold any more than 9.99% of the issued and outstanding shares and funding would come by way of Put Notices as outlined in the EPA. As at the date of this report the Company is not proceeding with the EPA, and the Registration Statement relative to the EPA was withdrawn due to the fact that the Securities and Exchange Commission does not consider the Pink an existing publicly trading market.
The Company filed an application with the OTC to be moved up to the QB; however, they will not proceed with the review of the application until the Company is trading again. The Company is in the process of getting a Form 15c2-11 filed, which is required prior to the Company's stock being traded again.