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EX-32.2 - EXHIBIT 32.2 - Canfield Medical Supply, Inc.ex32x2.htm
EX-32.1 - EXHIBIT 32.1 - Canfield Medical Supply, Inc.ex32x1.htm
EX-31.2 - EXHIBIT 31.2 - Canfield Medical Supply, Inc.ex31x2.htm
EX-31.1 - EXHIBIT 31.1 - Canfield Medical Supply, Inc.ex31x1.htm
 


U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _________

Commission File No. 000-55114

CANFIELD MEDICAL SUPPLY, INC.
(Name of registrant in its charter)

Colorado
 
34-1720075
(State or other jurisdiction of incorporation or formation)
  
(I.R.S. employer identification number)

4120 Boardman-Canfield Road, Canfield, Ohio 44406
(Address of principal executive offices)
 
(330) 533-1914
(Registrant's telephone number, including area code) 

Not Applicable
(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     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     No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting 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 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
  Yes     No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.  As of October 27, 2016, there were 10,527,200 shares of Common Stock issued and outstanding.
 
 

CANFIELD MEDICAL SUPPLY, INC.
FORM 10-Q

TABLE OF CONTENTS

PART I.  FINANCIAL INFORMATION
 
Page
 
 
 
 
Item 1.
Financial Statements
 
3
 
     
 
  Condensed Balance Sheets (Unaudited)
 
3
 
  Condensed Statements of Operations (Unaudited)
 
4
 
  Condensed Statements of Cash Flows (Unaudited)
 
5
 
  Notes to Condensed Financial Statements (Unaudited)
 
6-12
 
 
 
 
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
13
 
 
 
 
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
 
14
 
 
 
 
Item 4.
Controls and Procedures
 
15
 
 
 
 
PART II.  OTHER INFORMATION
 
16
 
 
 
 
Item 1.
Legal Proceedings
 
16
 
 
 
 
Item 1A.
Risk Factors
 
16
 
 
 
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
16
 
 
 
 
Item 3.
Defaults Upon Senior Securities
 
16
 
 
 
 
Item 4.
Mine Safety Disclosures
 
16
 
 
 
 
Item 5.
Other Information
 
16
 
 
 
 
Item 6.
Exhibits
 
16
 
 
 
 
 
Signatures
 
17
 
 
 
 
 
 
 
2

PART I—FINANCIAL INFORMATION

Item 1.  Financial Statements.

CANFIELD MEDICAL SUPPLY, INC.
CONDENSED BALANCE SHEETS
(Unaudited)

     
September 30,
   
December 31,
 
ASSETS
 
2015
   
2014
 
             
Current Assets
           
 Cash
 
$
6,499
   
$
24,908
 
Accounts receivable
   
89,138
     
80,183
 
Inventory
   
12,656
     
14,314
 
Total Current Assets
   
108,293
     
119,405
 
                 
Equipment, net of accumulated depreciation of $34,954 and $24,465
   
40,467
     
47,309
 
                 
         Total Assets
 
$
148,760
   
$
166,714
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
Current Liabilities
               
Accounts payable
 
$
96,113
   
$
71,275
 
Line of credit
   
78,000
     
80,252
 
Current portion of long-term debt
   
7,540
     
7,053
 
Total Current Liabilities
   
181,653
     
158,580
 
                 
Long-term debt
   
23,094
     
28,772
 
                 
          Total Liabilities
   
204,747
     
187,352
 
                 
Stockholders' Equity (Deficit)
               
Preferred stock, no par value; 5,000,000 shares authorized; no shares issued and outstanding
   
-
     
-
 
                 
Common stock, no par value; 100,000,000 shares
               
authorized;10,027,200 shares issued and outstanding
   
118,515
     
118,515
 
Accumulated deficit
   
(174,502
)
   
(139,153
)
Total Stockholders' Equity (Deficit)
   
(55,987
)
   
(20,638
)
Total Liabilities and Stockholders' Equity (Deficit)
 
$
148,760
   
$
166,714
 

The accompanying footnotes are an integral part of these financial statements.
 
 
3

CANFIELD MEDICAL SUPPLY, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)

    
Three months
   
Three months
   
Nine months
   
Nine months
 
    
ended
   
ended
   
ended
   
ended
 
    
September 30, 2015
   
September 30, 2014
   
September 30, 2015
   
September 30, 2014
 
                         
Sales (net of returns)
 
$
219,105
   
$
139,738
   
$
620,060
   
$
411,853
 
Cost of goods sold
   
119,075
     
53,782
     
314,054
     
185,344
 
Gross profit
   
100,030
     
85,956
     
306,006
     
226,509
 
                                 
Operating expenses:
                               
Salaries and wages
   
59,551
     
38,220
     
183,475
     
116,772
 
Professional fees
   
17,895
     
7,072
     
34,340
     
30,489
 
Depreciation
   
6,498
     
2,705
     
20,798
     
5,197
 
Other selling, general and administrative
   
35,853
     
44,136
     
102,830
     
95,104
 
Total operating expenses
   
119,797
     
92,133
     
341,443
     
247,562
 
                                 
Income (loss) from operations
   
(19,767
)
   
(6,177
)
   
(35,437
)
   
(21,053
)
                                 
Other income (expense):
                               
Interest expense
   
(907
)
   
(467
)
   
(3,904
)
   
(3,994
)
Gain on disposal of fixed assets
   
1,757
     
-
     
3,992
     
-
 
Total other income (expense)
   
850
     
(467
)
   
88
     
(3,994
)
                                 
Income (loss) before provision for income taxes
   
(18,917
)
   
(6,644
)
   
(35,349
)
   
(25,047
)
Provision for income tax
   
-
     
-
     
-
     
-
 
                                 
Net income (loss)
 
$
(18,917
)
 
$
(6,644
)
 
$
(35,349
)
 
$
(25,047
)
                                 
Net income (loss) per share (basic and fully diluted)
 
$
(0.00
)
 
$
(0.00
)
 
$
(0.00
)
 
$
(0.00
)
                                 
Weighted average number of
                               
  common shares outstanding
   
10,027,200
     
10,027,200
     
10,027,200
     
9,928,193
 
                                 

 The accompanying footnotes are an integral part of these financial statements.
 
 

4

CANFIELD MEDICAL SUPPLY, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)

    
Nine months ended
   
Nine months ended
 
    
September 30,
   
September 30,
 
   
2015
   
2014
 
Cash Flows From Operating Activities:
           
  Net loss
 
$
(35,349
)
 
$
(25,047
)
Adjustments to reconcile net loss to net cash
         
(used for) operating activities:
               
   Gain on disposal of fixed assets
   
(3,992
)
   
-
 
   Depreciation
   
20,798
     
5,197
 
Change in operating assets and liabilities:
               
   (Increase) decrease in accounts receivable
   
(8,955
)
   
14,859
 
   (Increase) decrease in inventory
   
1,658
     
(22,875
)
   Increase in accounts payable
   
24,838
     
9,872
 
      Net cash (used for) operating activities
   
(1,002
)
   
(17,994
)
                 
Cash Flows From Investing Activities:
               
Purchases of property and equipment
   
(9,964
)
   
-
 
     Net cash (used for) investing activities
   
(9,964
)
   
-
 
                 
Cash Flows From Financing Activities:
               
Net payments on line of credit
   
(2,252
)
   
(2,000
)
Payments on notes payable – related party
   
-
     
(8,500
)
Payments on long-term debt
   
(5,191
)
   
(2,835
)
Proceeds from sales of common stock.
   
-
     
69,100
 
       Net cash provided by (used for) financing activities
   
(7,443
)
   
55,765
 
                 
Net Increase (Decrease) in Cash
   
(18,409
)
   
37,771
 
Cash At The Beginning Of The Period
   
24,908
     
669
 
                 
Cash At The End Of The Period
 
$
6,499
   
$
38,440
 
                 
Schedule Of Non-Cash Investing And Financing Activities
               
Purchase of equipment with long-term debt
 
$
-
   
$
19,446
 
                 
Supplemental Disclosure
               
Cash paid for interest
 
$
3,904
   
$
3,994
 
Cash paid for income taxes
 
$
-
   
$
-
 
                 

The accompanying footnotes are an integral part of these financial statements.
 
 
5

CANFIELD MEDICAL SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2015 and 2014 (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.

Certain items in the accompanying comparative financial statements have been reclassified to conform to current period presentation.

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, 2015 and 2014 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, 2014 audited financial statements.  The results of operations for the periods ended September 30, 2015 and 2014 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. At September 30, 2015 and December 31, 2014, the Company has determined that no allowance for doubtful accounts is necessary.

 
 
6

CANFIELD MEDICAL SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2015 and 2014 (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

The Company's primary source of revenue is reimbursement from Medicare, Medicaid and private insurance companies for the sale of medical equipment and supplies to patients. Revenue from product sales is recognized subsequent to a patient (customer) ordering a product at an agreed-upon price, and when delivery has occurred and collectability is reasonably assured. 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, 2015 and 2014 of $2,329 and $3,202, 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.

 
 
7


CANFIELD MEDICAL SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2015 and 2014 (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 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, 2015 or 2014.
 
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 through competitive bidding processes.  There is no guarantee that the Company will continue to be selected as a winning contract supplier under future bidding rounds.

 
 
8

CANFIELD MEDICAL SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2015 and 2014 (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.

NOTE 2.  EQUIPMENT

Fixed assets are comprised of office equipment, vehicles, and the wheelchair rental pool, which consists of wheelchairs 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.  At the end of the use period, the wheelchair is either returned to the pool to be rented to another customer, or title of the chair 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, 2015 and 2014 was $20,798 and $5,197, respectively.  Accumulated depreciation totaled $34,954 and $24,465 at September 30, 2015 and December 31, 2014, respectively.

NOTE 3.  LINE OF CREDIT

At September 30, 2015 and December 31, 2014, the Company owed a bank $78,000 and $80,252, respectively, under a line of credit note payable. 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 4% on average. Interest expense under the note approximated $2,250 during each of the nine months ended September 30, 2015 and 2014.  During the nine months ended September 30, 2015 and 2014, the Company made principal payments of $2,252 and $2,000, respectively.

 
 
9

CANFIELD MEDICAL SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2015 and 2014 (Unaudited)


NOTE 4.  NOTES PAYABLE, RELATED PARTIES

 The Company entered into a note agreement with an officer and shareholder in the amount of $1,000 bearing interest at the rate of 6% per year, secured by 125,000 shares of the Company's no-par value common stock, maturing August 24, 2013. In March 2013, the Company entered into three separate loan agreements with shareholders and an officer, for $2,500 each ($7,500 total), bearing interest at the rate of 10% per year, each secured by 10,000 shares (30,000 total), of the Company's no-par value common stock and maturing September 11, 2014. The loans were for working capital advances and were repaid in full during 2014, along with accrued interest of $816.

NOTE 5.  LONG-TERM DEBT

Long-term debt consists of the following:

   
September 30,
2015
   
December 31,
2014
 
             
3.53% installment note payable $352 monthly, including interest, through July 2019, collateralized by vehicle with
    carrying value of $13,212
 
$
15,140
   
$
17,870
 
2.99% installment note payable $350 monthly, including interest, through August 2019, collateralized by vehicle
    with carrying value of $14,585
   
15,494
     
17,955
 
     
30,634
     
35,825
 
                 
Less principal due within one year
   
(7,540
)
   
(7,053
)
                 
     TOTAL LONG-TERM DEBT
 
$
23,094
   
$
28,772
 
                 

 
 
 
10

CANFIELD MEDICAL SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2015 and 2014 (Unaudited)

NOTE 6.  COMMON STOCK

 In March and April 2014, the Company received net proceeds of $69,100 from the sale of 276,400 shares of no-par value common stock at $0.25 per share.  

NOTE 7.  LEASE COMMITMENTS

The Company rents office space under a non-cancellable lease through May 2017 with monthly payments of approximately $2,700 plus costs.

Lease expense incurred for each of the nine months ended September 30, 2015 and 2014 was approximately $24,300. Subsequent to September 30, 2015, future minimum payments under the leases total approximately $54,600 including:  2015 (balance) $8,100, 2016 - $33,000, and 2017 - $13,500.

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.

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. By doing so, the Company hopes to generate sufficient capital to execute its business plan of selling medical supplies on an ongoing basis. Management believes that actions presently being taken to obtain additional funding provide the opportunity for the Company to continue as a going concern.

NOTE 9.  SUBSEQUENT EVENTS

During the period of January through March 2016, the Company underwent a stock offering of 500,000 shares at $.10 per share for total proceeds of $50,000 to primarily unaffiliated individuals and entities.

On July 11, 2016, the Company purchased a delivery vehicle for $17,913 pursuant to a 3.79% simple finance charge agreement.  The loan term is five years with a monthly payment of $299.

The Company has evaluated subsequent events through the date these financial statements were available to be issued and determined that there are no other reportable subsequent events.

 
 
11

CANFIELD MEDICAL SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2015 and 2014 (Unaudited)


NOTE 10.  RESTATEMENT

The Company overstated revenues earned for the nine month period ended September 30, 2014.  A $27,726 revenue overstatement for the six months ended June 30, 2014 identified in NOTE 10 of the financials included in the June 30, 2015 quarterly report on Form 10Q was perpetuated to the September 30, 2014 financial statements.  This misstatement impacts the September 30, 2014 balance sheet and statements of operations and cash flows for the nine months then ended. An additional overstatement of revenue in the amount of $25,450 was noted in the statement of operations for the 9 months ended September 30, 2014, for total misstatement of $53,176.  The statement of operations for the three months ended September 30, 2014 was correct as originally reported. As such, the accompanying comparative statements of operations and cash flows for the nine months ended September 30, 2014, as well as the balance sheet as of September 30, 2014 (not presented in the accompanying financial statements) have been restated to correct the overstatement of revenue as follows:


 
 
Amount as
             
 
 
Originally
   
Restatement
   
Restated
 
 
 
Filed
   
Adjustment
   
Amount
 
September 30, 2014 
                 
Accounts receivable
 
$
69,238
   
$
(25,450
)
 
$
43,788
 
Total current assets
 
$
143,095
   
$
(25,450
)
 
$
117,645
 
Total assets
 
$
181,201
   
$
(25,450
)
 
$
155,751
 
Accumulated deficit
 
$
(108,661
   
$
(25,450
)
 
$
(134,111
)
Total stockholders' equity (deficit)
 
$
9,854
   
$
(25,450
)
 
$
(15,596
)
Total liabilities and stockholders' equity (deficit)
 
$
181,201
   
$
(25,450
)
 
$
155,751
 
                         
Nine months ended September 30, 2014
                 
Statement of Operations
                       
Revenue
 
$
465,029
   
$
(53,176
)
 
$
411,853
 
Gross profit
 
$
279,685
   
$
(53,176
)
 
$
226,509
 
Income (Loss) from operations
 
$
32,123
   
$
(53,176
)
 
$
(21,053
)
Net income (loss)
 
$
28,129
   
$
(53,176
)
 
$
(25,047
)
Net loss per share
 
$
0.00
   
$
(0.00
)
 
$
(0.00
)
Weighted Ave Shares
   
9,928,193
             
9,928,193
 
                         
Statement of Cash Flows
                       
Net income (loss)
 
$
28,129
   
$
(53,176
)
 
$
(25,047
)
(Increase) decrease in accounts receivable
 
$
(38,317
   
$
53,176
   
$
14,859
 


 
 
12

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with the Financial Statements (unaudited) and Notes to Financial Statements (unaudited) filed herein.

BUSINESS OVERVIEW

We provide services to the rehabilitation market, which consists primarily of home medical equipment and supplies.  More than 50% of our revenues are derived from the sale and rental of durable home medical equipment including such items as wheeled walkers, manual and power wheelchairs, hospital beds, ramps, bedside commodes, and miscellaneous bathroom equipment.  The balance of our revenue is from the sale of various home medical supplies including diabetic testing, incontinence, ostomy, wound care, and catheter care.  Our emphasis is on helping patients with mobility related limitations, but our overall business is aimed at helping patients remain in their homes instead of having to go to hospitals, rehab centers and other similar facilities.  Most of the equipment and supplies that we sell are prescribed by a physician as part of an overall care plan.

RESULTS OF OPERATION FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2015 AS COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2014.

Revenues for the three months ended September 30, 2015 were $219,105 as compared to the revenues of $139,738 for the three months ended September 30, 2014.  The 57% increase in sales is primarily due to winning the Medicare competitive bidding for wheel chairs and a few other items in our local market as well as a shift in customer focus away from Medicare and Medicaid towards private pay/private insurance customers due to continually decreasing Medicare and Medicaid reimbursement rates.
 
Cost of goods sold for the three months ended September 30, 2015 were $119,075 as compared to cost of goods sold for the three months ended September 30, 2014 of $53,782.  The 121% increase in the latest three month period was due to the increase in the sales volume, combined with the fact that Medicare has reduced the amount it is paying the Company for its products. 
 
Operating expenses for the three months ended September 30, 2015 were $119,797 as compared to $92,133 for the three months ended September 30, 2014.  The 30% increase was due to a significant increase in hours worked by six hourly employees and two more part-time employees, resulting in a $21,331 increase in salaries and wages.

The net loss for the three months ended September 30, 2015 was $18,917 as compared to a net loss of $6,644 for the three months ended September 30, 2014.  The primary reason for the $12,273 increase in the net loss was the $21,331 increase in salaries and wages.

RESULTS OF OPERATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 AS COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2014.

Revenues for the nine months ended September 30, 2015 were $620,060 as compared to the revenues of $411,853 for the nine months ended September 30, 2014.  The 51% increase in sales is primarily due to winning the Medicare competitive bidding for wheel chairs and a few other items in our local market as well as a shift in customer focus away from Medicare and Medicaid towards private pay/private insurance customers due to continually decreasing Medicare and Medicaid reimbursement rates.

 
 
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Cost of goods sold for the nine months ended September 30, 2015 were $314,054 as compared to cost of goods sold for the nine months ended September 30, 2014 of $185,344.  The 69% increase in the latest nine month period was due to the increase in the sales volume, combined with the fact that Medicare has reduced the amount it is paying the Company for its products.  The Company has also recently been forced to carry more inventory of certain products in order to accommodate the patient demand.

Operating expenses for the nine months ended September 30, 2015 were $341,443 as compared to $247,562 for the nine months ended September 30, 2014.  The 38% increase was due to a significant increase in hours worked by six hourly employees and two more part-time employees, resulting in a $66,703 increase in salaries and wages.

The net loss for the nine months ended September 30, 2015 was $35,349 as compared to a net loss of $25,047 for the nine months ended September 30, 2014.  The primary reasons for the $10,302 increase in the net loss was the $66,703 increase in salaries and wages and increases in depreciation and other general and administrative expenses offset by a $79,497 increase in gross profit.

LIQUIDITY AND CAPITAL RESOURCES
 
As of September 30, 2015, we had negative working capital of ($73,360) compared to negative working capital of ($39,175) as of December 31, 2014.
 
Net cash used for operating activities during the nine months ended September 30, 2015 was ($1,002) as compared to net cash used for operating activities in the nine months ended September 30, 2014 of ($17,994). The largest reason for the change was the $24,533 decrease in inventory.

Net cash used for investing activities during the nine months ended September 30, 2015 was ($9,964) for the purchase of equipment, and there was no cash provided by or used for investing activities during the nine months ended September 30, 2015.

Net cash used for financing activities during the nine months ended September 30, 2015 was ($7,443) as compared to $55,765 provided by financing activities in the nine months ended September 30, 2014.  The Company sold shares of its common stock during the nine months ended September 30, 2014 to raise $69,100 to help pay for the costs associated with being a public company.

CONTRACTUAL OBLIGATIONS

None.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements (as that term is defined in Item 303 of Regulation S-K) that are reasonably likely to have a current or future material effect on our financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk. 

Not applicable.

 
 
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Item 4.  Controls and Procedures.

(a)  Evaluation of Disclosure Controls and Procedures.

Our Chief Executive Officer and Principal Financial Officer have evaluated the effectiveness of the design and operations of our disclosure controls and procedures as of the end of the period covered by this quarterly report, and have concluded that our disclosure controls and procedures are adequate.

(b)  Changes in Internal Control over Financial Reporting.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.




 
 
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PART II – OTHER INFORMATION

Item 1.    Legal Proceedings.

None.

Item 1A.  Risk Factors.

Not applicable.

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.

Item 5.    Other Information.

None.

Item 6.    Exhibits.

(a)  Exhibits required by Item 601 of Regulation S-K.

Exhibits
Description

31.1
Certification of CEO and Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) - Filed herewith electronically

31.2
Certification of CFO and Principal Financial and Accounting Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) - Filed herewith electronically

32.1
Certification of CEO and Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Filed herewith electronically

32.2
Certification of CFO and Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Filed herewith electronically

101
XBRL Exhibits


 
 
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SIGNATURES

Pursuant to the requirements 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.

 
 
CANFIELD MEDICAL SUPPLY, INC.
 
 
 
 
 
 
Date:  October 27, 2016
By:
/s/ Michael J. West
 
 
Michael J. West, President and CEO
(Principal Executive Officer)
 
 
 
 
 
 
Date:  October 27, 2016
By:
/s/ Stephen H. West
 
 
Stephen H. West, CFO
(Principal Financial Officer and Principal Accounting Officer)

 
 
 
 
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