CONDENSED
NOTES TO FINANCIAL STATEMENTS
For
the Six Months Ended June 30, 2019 and 2018 (Unaudited)
NOTE
1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Canfield
Medical Supply, Inc. (the “Company”), was incorporated in the State of Ohio on September 3, 1992, and changed domicile
to Colorado on April 18, 2012. The Company is in the business of home health services, primarily the selling of durable medical
equipment and medical supplies to the public, nursing homes, hospitals and other end users.
Effective
June 21, 2019 WesBev LLC, a Nevada limited liability company ("WesBev"), acquired 8,000,000 shares of common stock
from Michael J. West, a founder, director and former principal shareholder of the Company, consisting of approximately 69.7% of
the issued and outstanding shares of the Company at the time of the purchase. As part of his agreement with WesBev, Mr. West undertook
to appoint or cause the appointment of up to three persons nominated by WesBev to the board of directors of the Company. Effective
June 21, 2019 the Company sold 336,000 shares of common stock to WesBev for $100,000. Following these stock purchases WesBev beneficially
owns 8,336,000 shares, or approximately 71% of the issued and outstanding shares of the Company and may be deemed to be in control
of the registrant.
The
accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and
cash flows for the six months ended June 30, 2019 and 2018 have been made.
Certain
information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or omitted. It is suggested that these financial statements
be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2018 audited
financial statements. The results of operations for the periods ended June 30, 2019 and 2018 are not necessarily indicative of
the operating results for the full year.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect reported amounts of assets and liabilities and 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. Actual results
could differ from those estimates.
Cash
and cash equivalents
The
Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents.
Accounts
receivable
The
majority of the Company’s revenues are received from Medicare, Medicaid, and private insurance companies. As such, the Company
records revenues at allowable amounts, net of estimated allowances and discounts based on contracted prices and historical collection
rates. The Company reviews accounts receivable periodically for collectability and establishes an allowance for doubtful accounts
and records bad debt expense when deemed necessary. The Company wrote off bad debts of $15,101 and $0 for the six months ended
June 30, 2018 and 2017, respectively. At June 30, 2019 and December 31, 2018, the Company has determined that no allowance for
doubtful accounts is necessary.
CANFIELD
MEDICAL SUPPLY, INC.
CONDENSED
NOTES TO FINANCIAL STATEMENTS
For
the Six Months Ended June 30, 2019 and 2018 (Unaudited)
NOTE
1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
Property
and equipment
Property
and equipment are recorded at cost and depreciated under straight line methods over each item's estimated useful life.
Inventory
The
Company carries inventory of durable medical equipment and medical supplies for resale. Inventory is accounted for on
a first–in first-out basis.
Revenue
recognition
It
is the Company’s policy that revenues from product sales is recognized in accordance with ASC 606 "Revenue Recognition."
Five basic steps must be followed before revenue can be recognized; (1) Identifying the contract(s) with a customer that
creates enforceable rights and obligations; (2) Identifying the performance obligations in the contract, such as promising to
transfer goods or services to a customer; (3) Determining the transaction price, meaning the amount of consideration in a contract
to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer; (4) Allocating
the transaction price to the performance obligations in the contract, which requires the company to allocate the transaction price
to each performance obligation on the basis of the relative standalone selling prices of each distinct good or services promised
in the contract; and (5) Recognizing revenue when (or as) the entity satisfies a performance obligation by transferring a promised
good or service to a customer. The amount of revenue recognized is the amount allocated to the satisfied performance obligation.
For sales of our Company products, a purchase arrangement is evidenced by a written order, with delivery considered
as made after physical customer acceptance. Although rare, defective products may be returned, with other return issues considered
on a case by case basis. Services such as periodic scheduled deliveries are contracted in writing, and generally billed monthly.
Any service revenue earned by the Company for services such as safety and set up consulting or claims processing is recorded after
the service is performed. Rental of durable home medical equipment is evidenced by written contract, with revenue recognized when
rent is earned.
Advertising
costs
Advertising
costs are expensed as incurred. The Company had advertising costs during the six months ended June 30, 2019 and 2018 of $1,047
and $8,637, respectively.
Income
tax
The
Company accounts for income taxes pursuant to ASC 740. Under ASC 740, deferred taxes are provided for using the liability method
whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred
tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported
amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion
of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
CANFIELD
MEDICAL SUPPLY, INC.
CONDENSED
NOTES TO FINANCIAL STATEMENTS
For
the Six Months Ended June 30, 2019 and 2018 (Unaudited)
NOTE
1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
Net
income (loss) per share
The
net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common outstanding.
Warrants, stock options, and common stock issuable upon the conversion of the Company's convertible debt or preferred stock (if
any), are not included in the computation if the effect would be anti-dilutive and would increase the earnings or decrease loss
per share.
There
were no potentially dilutive debt or equity instruments issued or outstanding during the six months ended June 30, 2019 or 2018.
Financial
Instruments
The
carrying value of the Company’s financial instruments, as reported in the accompanying balance sheets, approximates fair
value.
Concentrations
Financial
instruments that potentially subject the Company to concentrations of credit risk include cash and cash equivalents. The Company
places its cash and cash equivalents at well-known financial institutions, where at times, such balances may exceed FDIC insurance
limits.
The
Company receives a significant amount of its revenues in reimbursements from Medicare and Medicaid thru competitive bidding processes.
There is no guarantee that the Company will be selected as a winning contract supplier under future bidding rounds.
CANFIELD
MEDICAL SUPPLY, INC.
CONDENSED
NOTES TO FINANCIAL STATEMENTS
For
the Six Months Ended June 30, 2019 and 2018 (Unaudited)
NOTE 1. ORGANIZATION,
OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
Long-Lived
Assets
In
accordance with ASC 350, the Company regularly reviews the carrying value of intangible and other long-lived assets for the existence
of facts or circumstances, both internally and externally, that suggest impairment. If impairment testing indicates a lack of
recoverability, an impairment loss is recognized by the Company if the carrying amount of a long-lived asset exceeds its fair
value.
Products
and services, geographic areas and major customers
The
Company’s business of medical supply sales constitutes one operating segment. All revenues each year were domestic and to
external customers.
Leases
In
February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02,
“Lease (Topic 842),”
a new lease standard requiring lessees to recognize lease assets and lease liabilities for most leases classified as operating
leases under previous U.S. GAAP. A lessee should recognize in the statement of financial position a liability to make lease payments
(the lease liability) and a right-of-use asset (“ROU” asset) representing its right to use the underlying asset for
the lease term. The guidance is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The
Company has adopted this standard effective January 1, 2019. The Company elected the optional transition method that permits adoption
of the new standard prospectively, as of the effective date, without adjusting comparative periods presented. See Note 6 for disclosure
required by ASC 842.
NOTE 2. EQUIPMENT
Fixed
assets are comprised of office equipment, vehicles, and the wheelchair and hospital bed rental pool, which consists of wheelchairs
and hospital beds rented to customers over the shorter of the 13-month rental period mandated by Medicaid and Medicare, or the
period over which the customer requires use of the wheelchair or hospital bed. At the end of the use period, the wheelchair or
hospital bed is transferred to the customer. Depreciation is computed over the estimated useful life of the assets, ranging from
13 months to 7 years, on the straight-line basis. Depreciation expense for the six months ended June 30, 2019 and 2018 was $25,730
and $30,375, respectively. Accumulated depreciation totaled $94,145 and $92,907 at June 30, 2019 and December 31, 2018, respectively.
NOTE 3. LINE
OF CREDIT
At
June 30, 2019 and December 31, 2018, the Company owed a bank $74,463 and $66,181, respectively, under a revolving line of credit.
The line of credit is secured by all Company assets, is capped at $100,000, is due on demand, and bears interest at variable rates
approximating 7% on average . Interest expense under the note totaled $2,798 and $4,140 during the six months ended June 30, 2019
and 2018, respectively. During the six months ended June 30, 2019 and 2018, the Company made net (borrowings) and principal
payments of ($8,282) and $3,650, respectively.
CANFIELD
MEDICAL SUPPLY, INC.
CONDENSED
NOTES TO FINANCIAL STATEMENTS
For
the Six Months Ended June 30, 2019 and 2018 (Unaudited)
NOTE
4. RELATED PARTY LOAN
On
June 21, 2019, the Company entered into a short-term loan with Michael West, an officer of the company. The loan has a one-year
term and bears interest at a rate of 2.5% per annum. There are no mandatory payments, interest shall accrue and all outstanding
principal and interest is due at maturity. As of June 30, 2019 the loan has a balance of $267,878 with accrued interest
of $167.
NOTE 5. LONG-TERM
DEBT
Long-term
debt consists of the following vehicle loans, which are collateralized by their underlying vehicles with net carrying values exceeding
the outstanding loan amounts
:
|
|
June
30, 2019
|
|
December
31, 2018
|
|
|
|
|
|
3.53% installment
note payable $352 monthly, including interest, through July 2019
|
|
$
|
702
|
|
|
$
|
2,782
|
|
|
|
|
|
|
|
|
|
|
3.79% installment note payable
$299 monthly, including
|
|
|
|
|
|
|
|
|
interest, through July 2021
|
|
|
6,890
|
|
|
|
8,532
|
|
|
|
|
|
|
|
|
|
|
2.99%
installment note payable $350 monthly, including interest, through August 2019
|
|
|
696
|
|
|
|
2,425
|
|
Total
|
|
|
8,288
|
|
|
|
13,739
|
|
|
|
|
|
|
|
|
|
|
Less
principal due within one year
|
|
|
(4,491
|
)
|
|
|
(8,241
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL
LONG-TERM DEBT
|
|
$
|
3,797
|
|
|
$
|
5,498
|
|
NOTE 6. COMMON
STOCK
In
June 2019, the Company received net proceeds of $100,000 from the sale of 336,000 shares of no-par value common stock at $0.298
per share.
CANFIELD
MEDICAL SUPPLY, INC.
CONDENSED
NOTES TO FINANCIAL STATEMENTS
For
the Six Months Ended June 30, 2019 and 2018 (Unaudited)
NOTE 7. LEASE
COMMITMENTS
The
Company rents office space under a non-cancellable lease through September 2020 with monthly payments of approximately $2,292.
Pursuant to ASC 842, an operating lease right-of-use (“ROU”) asset and liability were recognized at January 1, 2019
based on the present value of lease payments over the remaining lease term. The ROU asset represents the Company’s right
to use the underlying office space asset for the lease term, and the lease liability represents the Company’s obligation
to make lease payments arising from the lease. Generally, the implicit rate of interest in arrangements is not readily determinable
and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The operating lease
ROU asset includes any lease payments made and excludes lease incentives. The Company recognized $13,800 in lease expense during
the six months ended June 30, 2019.
Remaining lease term at June 30, 2019 (in years)
|
|
|
1.2
|
|
Discount rate
|
|
|
5
|
%
|
|
|
|
Six
Months Ended June 30, 2019
|
Operating lease expense
|
|
$
|
13,800
|
|
Cash paid for amounts included in measurement
of lease liability
|
|
$
|
13,800
|
|
|
|
|
|
|
The
supplemental balance sheet information related to leases for the period is as follows:
Right-of-Use Asset
|
|
|
ROU Asset, January 1, 2019
|
|
$
|
43,677
|
|
Amortization of
ROU Asset
|
|
|
(12,479
|
)
|
ROU Asset, June
30, 2019
|
|
$
|
31,198
|
|
|
|
|
|
|
Maturities
of the Company’s lease liabilities are as follows:
Year Ending
|
|
Payments
|
|
2019
|
|
|
$
|
13,752
|
|
|
2020
|
|
|
|
20,628
|
|
|
Total
lease payments
|
|
|
|
34,380
|
|
|
Less:
Imputed interest/present value discount
|
|
|
|
(3,182
|
)
|
|
Present
value of lease liability at June 30, 2019
|
|
|
$
|
31,198
|
|
NOTE 8. GOING
CONCERN
The
Company has suffered losses from operations and has working capital and stockholders’ equity deficits. In all likelihood,
the Company will be required to make significant future expenditures in connection with marketing efforts along with general administrative
expenses. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
Following
the change in control of the Company on June 21, 2019; WesBev LLC, the majority shareholder, has indicated that it will seek
to transition the Company into a different line of business which may offer greater revenue growth and increased shareholder values
than those which may be available from the historic and current operations of the Company. No assurance can be given that any
transaction may result from these efforts or if consummated that any such transaction may prove successful. The Company
may raise additional capital through the sale of its equity securities, through an offering of debt securities, or through borrowings
from financial institutions or related parties. Management believes that actions presently being taken provide the opportunity
for the Company to continue as a going concern.
NOTE 9. SUBSEQUENT
EVENTS
The
Company has evaluated subsequent events through the date these financial statements were issued and determined that there are
no reportable subsequent events.