The accompanying footnotes are an integral part
of these unaudited condensed financial statements.
The accompanying footnotes are an integral part
of these unaudited condensed financial statements.
The accompanying footnotes are an integral part
of these unaudited condensed financial statements.
The accompanying footnotes are an integral part
of these unaudited condensed financial statements.
CONDENSED NOTES
TO FINANCIAL STATEMENTS
For the Nine Months
Ended September 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 Company.
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 nine months ended
September 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 September 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.
NOTE 1. ORGANIZATION, OPERATIONS AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
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 nine months ended September 30, 2019 and 2018, respectively.
At September 30, 2019 and December 31, 2018, the Company has determined that no allowance for doubtful accounts is necessary.
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 nine months ended September 30, 2019 and 2018 of $7,860 and $13,386, respectively.
CANFIELD MEDICAL
SUPPLY, INC.
CONDENSED NOTES
TO FINANCIAL STATEMENTS
For the Nine Months
Ended September 30, 2019 and 2018 (Unaudited)
NOTE 1. ORGANIZATION, OPERATIONS AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
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.
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 nine months ended September 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.
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.
CANFIELD MEDICAL
SUPPLY, INC.
CONDENSED NOTES
TO FINANCIAL STATEMENTS
For the Nine Months
Ended September 30, 2019 and 2018 (Unaudited)
NOTE 1. ORGANIZATION,
OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
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, “Leases (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 nine months ended September 30, 2019 and 2018 was $43,210 and $44,929, respectively. Accumulated
depreciation totaled $100,078 and $92,907 at September 30, 2019 and December 31, 2018, respectively.
NOTE 3. LINE
OF CREDIT
At September 30, 2019 and December 31,
2018, the Company owed a bank $71,724 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 $4,202 and $3,256 during the nine months ended September 30, 2019 and 2018, respectively. During
the nine months ended September 30, 2019 and 2018, the Company made net borrowings and (principal payments) of $5,543 and ($5,395),
respectively.
CANFIELD MEDICAL
SUPPLY, INC.
CONDENSED NOTES
TO FINANCIAL STATEMENTS
For the Nine Months
Ended September 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, a former 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 September 30, 2019 the loan has a balance of
$197,878.
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:
|
|
September 30,
2019
|
|
December 31,
2018
|
|
|
|
|
|
3.53% installment note payable $352 monthly, including interest, through July 2019
|
|
$
|
0
|
|
|
$
|
2,782
|
|
|
|
|
|
|
|
|
|
|
3.79% installment note payable $299 monthly, including
|
|
|
|
|
|
|
|
|
interest, through July 2021
|
|
|
6,057
|
|
|
|
8,532
|
|
|
|
|
|
|
|
|
|
|
2.99% installment note payable $350 monthly, including interest, through August 2019
|
|
|
0
|
|
|
|
2,425
|
|
Total
|
|
|
6,057
|
|
|
|
13,739
|
|
Less principal due within one year
|
|
|
(3,122
|
)
|
|
|
(8,241
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LONG-TERM DEBT
|
|
$
|
2,935
|
|
|
$
|
5,498
|
|
CANFIELD MEDICAL
SUPPLY, INC.
CONDENSED NOTES
TO FINANCIAL STATEMENTS
For the Nine Months
Ended September 30, 2019 and 2018 (Unaudited)
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.
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 $20,700 in lease expense during the nine months ended September 30, 2019.
Remaining lease term at September 30, 2019 (in years)
|
|
|
|
|
1.
|
0
|
Discount rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
%
|
|
|
|
Nine Months Ended September 30, 2019
|
Operating lease expense
|
|
$
|
20,700
|
|
Cash paid for amounts included in measurement of lease liability
|
|
$
|
20,700
|
|
|
|
|
|
|
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
|
|
|
(18,719
|
)
|
ROU Asset, September 30, 2019
|
|
$
|
24,958
|
|
|
|
|
|
|
Maturities of the Company’s lease liabilities are as
follows:
Year Ending
|
|
Payments
|
|
2019
|
|
|
$
|
6,876
|
|
|
2020
|
|
|
|
20,628
|
|
|
Total lease payments
|
|
|
|
27,504
|
|
|
Less: Imputed interest/present value discount
|
|
|
|
(2,546
|
)
|
|
Present value of lease liability at September 30, 2019
|
|
|
$
|
24,958
|
|
CANFIELD MEDICAL
SUPPLY, INC.
CONDENSED NOTES
TO FINANCIAL STATEMENTS
For the Nine Months
Ended September 30, 2019 and 2018 (Unaudited)
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 has entered
into a non-binding letter of intent with Splash Beverage Group, Inc., an innovative beverage company
that markets naturally flavored tequilas under the “Salt” brand as well as performance drinks, under the “TapouT”
brand, containing a proprietary blend of essential vitamins, minerals and electrolytes.
Pursuant to the letter
of intent, the Company will acquire all issued and outstanding shares of Splash resulting in Splash becoming a wholly-owned subsidiary
of the Company. Upon completion of the acquisition shareholders of Splash are expected to own about 85% of the Company. The Company
expects to implement a reverse stock split in a range of not less than 1 for 3 nor more than 1 for 3.5 shares. Closing of the acquisition
will be subject to customary closing conditions that include but are not limited to negotiation and execution of definitive transaction
documents, obtaining needed shareholder consents and regulatory approvals and satisfactory completion of business, technical and
legal due diligence as well as to the satisfaction of other pre-closing terms and conditions. No assurance can be given that the
execution of the non-binding letter of intent by the parties will result in a closing or completion of the proposed transaction.
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.