UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
| [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the quarterly period ended September 30, 2017 | |
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from __________ to __________ | |
| 000-55856 | |
| Commission File Number | |
| KELVIN MEDICAL, INC. | |
| (Exact name of registrant as specified in its charter) | |
| Nevada | 81-2552488 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
10930 Skyranch Place Nevada City, CA | 95959 |
| (Address of principal executive offices) | (Zip Code) |
| (530) 388-8706 | |
| (Registrant's telephone number, including area code) | |
| (Former name, former address and former fiscal year, if changed since last report) | |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
| Yes [X] No [ ] |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
| Yes [X] No [ ] |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer [ ] | Accelerated filer [ ] |
| Non-accelerated filer [ ] (Do not check if a smaller reporting company) | Smaller reporting company [X] |
| Emerging growth company [X] |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| Yes [ ] No [ X ] |
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
| Yes [ ] No [ ] |
APPLICABLE ONLY TO CORPORATE ISSUERS
| 64,097,500 common shares outstanding as of November 3, 2017 |
(Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.) |
KELVIN MEDICAL, INC.
Table of Contents
| Page | ||
| PART I – Financial Information | ||
| Item 1. | Financial Statements | 3 |
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 4 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 6 |
| Item 4. | Controls and Procedures | 6 |
| PART II – Other Information | ||
| Item 1. | Legal Proceedings | 7 |
| Item 1A. | Risk Factors | 7 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 7 |
| Item 3. | Defaults Upon Senior Securities | 7 |
| Item 4. | Mine Safety Disclosures | 7 |
| Item 5. | Other Information | 7 |
| Item 6. | Exhibits | 7 |
| Signatures | 8 |
2
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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.
REPORTED IN UNITED STATES DOLLARS
| Page | |
| Balance Sheets as of September 30, 2017 (Unaudited) and June 30, 2017 | F-1 |
| F-2 | |
| Interim Unaudited Statement of Cash Flows for the three months ended September 30, 2017 and 2016 | F-3 |
| Notes to Financial Statements (Unaudited) | F-4 to F-7 |
3
KELVIN MEDICAL, INC.
BALANCE SHEETS
| September 30, | June 30, | |||||||
| 2017 | 2017 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| $ | 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) | ||||||||
| 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.
F-1
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.
F-2
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: | ||||||||
| 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.
F-3
KELVIN MEDICAL, INC.
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.
F-4
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.
| 2. | GOING CONCERN |
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.
F-5
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).
| 4. | CONSULTING AGREEMENT |
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.
| 5. | CUSTOMER DEPOSITS |
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.
| 6. | COMMON STOCK |
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.
F-6
KELVIN MEDICAL, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2017
| 7. | RELATED PARTY TRANSACTIONS |
| a. | Management services: |
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.
| b. | Advances |
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).
| 8. | INCOME TAXES |
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.
| 9. | SUBSEQUENT EVENTS |
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.
F-7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
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. We are a recently organized company that is engaged in the development, eventual production, and sale of a medical device. The Company was founded to develop the product called Therm-N-Ice. The Therm-N-Ice is a programmable device to be strapped on externally to a body part that can maintain a certain temperature, whether hot or cold. Hot and cold treatment options are commonplace and used routinely as a therapy in medical and non-medical locations. The Company's device looks to help reduce the tasks of applying hot and cold therapy and help people remain mobile rather than pausing life activities in order to obtain repetitive hot/cold therapy.
To date, our activities have been limited to formation and the development of a business plan. 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.
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.
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 three months ended September 30, 2017 and audited financial statements for the year ended June 30, 2017, along with the accompanying notes.
4
Working Capital
At September 30, 2017 | At June 30, 2017 | |||||||
| Current Assets | $ | 9,375 | $ | 20,280 | ||||
| Current Liabilities | $ | 36,343 | $ | 28,968 | ||||
| Working Capital (Deficit) | $ | (26,968 | ) | $ | (8,688 | ) | ||
Current assets include cash on hand of $6,375 (June 30, 2017 – $17,280) and other receivables of $3,000 (June 30, 2017 - $3,000). Current liabilities include accounts payable of $8,999 (June 30, 2017 - $4,500), accounts payable – related parties of $21,290 (June 30, 2017 - $19,039), advances from related parties of $5,934 (June 30, 2017 - $5,309) and customer deposits of $120.
Cash Flows
Three Months ended September 30, | ||||||||
| 2017 | 2016 | |||||||
| Net cash (used) in operating activities | $ | (11,530 | ) | $ | (3,030 | ) | ||
| Net cash provided by financing activities | $ | 625 | $ | 3,060 | ||||
| Net increase (decrease) in cash during period | $ | (10,905 | ) | $ | 30 | |||
Results of Operations
The following disclosures set forth certain items from our unaudited interim statements of operations for the three months ended September 30, 2017 and 2016:
We did not earn any income in the three months ended September 30, 2017 and 2016. We continue to incur administrative costs related to the execution of our business plan. Professional fees including legal fees, audit and accounting and Edgar filing fees totaled $13,500 during the three months ended September 30, 2017 and $nil in the same period ended September 30, 2016. The substantive increase in expenditures period over period is due to the fact that in the prior comparative period the Company had only filed its initial offering documents on Form S-1, the costs for which were included in a flat fee expensed in a subsequent period. In addition, during the three months ended September 30, 2017 we incurred patent license fees of $1,750, and management fees of $3,000, which costs were unchanged from the costs incurred in the prior comparative three month period in 2016.
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.
5
A smaller reporting company is not required to provide the information required by this Item.
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.
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PART II – OTHER INFORMATION
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.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
Not Applicable.
None.
ITEM 6. EXHIBITS
| Exhibit Number | Description | |
*Filed herewith
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Kelvin Medical, Inc. | |||
| Date: | November 6, 2017 | By: | /s/ William Mandel |
| Name: | William Mandel | ||
| Title: | President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer & Director | ||
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