EX-99.1 3 exh_991.htm EXHIBIT 99.1

Exhibit 99.1

 

 

 

 

 

PARCUS MEDICAL, LLC

 

FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2018 AND SEPTEMBER 30, 2019

 

FOR THE YEAR ENDED DECEMBER 31, 2018

AND PERIOD ENDED SEPTEMBER 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PARCUS MEDICAL, LLC

TABLE OF CONTENTS

DECEMBER 31, 2018 AND SEPTEMBER 30, 2019

 

 

INDEPENDENT AUDITORS’ REPORT 1
   
FINANCIAL STATEMENTS  
   
Balance Sheet 2
   
Statement of Operations 3
   
Statement of Changes in Members’ Equity 4
   
Statement of Cash Flows 5
   
Notes to the Financial Statements 6

 

 

 

 

 

 

 

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To the Board of Directors and Members

Parcus Medical, LLC

 

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Parcus Medical, LLC (the Company) as of September 30, 2019 and December 31, 2018 and the related statements of operations, changes in members' equity, and cash flows for the nine month period ended September 30, 2019 and the year ended December 31, 2018, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2019 and December 31, 2018, and the results of its operations and its cash flows for the nine month period ended September 30, 2019 and the year ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the Board of Directors and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

 

The Company performed a roll-back of the physical inventory from September 30, 2019 to December 31, 2018 and January 1, 2018 that was challenging and complex and resulted in adjusting entries. In addition, the Company implemented standard costing procedures to value inventory which involved significant judgement. Management was able to provide all the necessary support and substantiate their methodology in order for us to complete our audit.

 

 

 

We have served as the Company's auditor since 2019.

Tampa, Florida

December 11, 2019

Reissued December 18, 2019

 

 

1

 

PARCUS MEDICAL, LLC

BALANCE SHEETS

DECEMBER 31, 2018 AND SEPTEMBER 30, 2019

 

 

ASSETS
   2018  2019
CURRENT ASSETS          
Cash  $334,179   $366,062 
Accounts receivable, net of allowance for doubtful accounts of $30,023 and 40,549, respectively   1,535,054    2,133,516 
Inventories   3,052,638    3,397,674 
Prepaid expenses and other current assets   225,469    143,272 
Total current assets   5,147,340    6,040,524 
           
PROPERTY AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION   839,484    1,284,769 
           
           
OTHER ASSETS          
Deposits   24,176    27,892 
Intangibles, net   605,910    204,195 
Total other assets   630,086    232,087 
           
           
   $6,616,910   $7,557,380 
           
LIABILITIES AND MEMBERS' EQUITY
           
CURRENT LIABILITIES          
Accounts payable  $820,341   $1,112,835 
Accrued expenses   143,268    255,648 
Line of credit   564,968    964,968 
Current portion of term loans   170,370    192,370 
Current portion of capital leases   152,492    272,643 
Guaranteed Payments   942,500    942,500 
Total current liabilities   2,793,939    3,740,964 
           
LONG-TERM LIABILITIES          
           
Term loans, less current portion   104,487    234,219 
Capital leases, less current portion   236,926    540,161 
Total long-term liabilities   341,413    774,380 
           
MEMBER EQUITY   3,481,558    3,042,036 
           
   $6,616,910   $7,557,380 

 

 

See notes to the financial statements.

 

2

 

PARCUS MEDICAL, LLC

STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2018

AND THE PERIOD ENDED SEPTEMBER 30, 2019

 

 

   2018  2019
       
REVENUE  $10,820,442   $9,601,808 
           
COST OF GOODS SOLD   4,086,653    3,985,342 
           
GROSS PROFIT   6,733,789    5,616,466 
           
OPERATING EXPENSES          
Research and development   709,865    568,840 
           
Selling, general and administrative   5,710,273    5,399,976 
           
Total operating expenses   6,420,138    5,968,816 
           
INCOME (LOSS) FROM OPERATIONS   313,651    (352,350)
           
OTHER EXPENSE, NET   85,965    87,172 
           
NET INCOME (LOSS)  $227,686   $(439,522)

 

 

See notes to the financial statements.

 

3

 

PARCUS MEDICAL, LLC

STATEMENTS OF CHANGES IN MEMBERS’ EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2018

AND THE PERIOD ENDED SEPTEMBER 30, 2019

 

 

 

   Member's  Retained  Total
Member's
   Equity  Earnings  Equity
          
BALANCE AT JANUARY 1, 2018  $9,128,500   $(5,874,628)  $3,253,872 
                
Net income   -    227,686    227,686 
                
BALANCE AT DECEMBER 31, 2018   9,128,500    (5,646,942)   3,481,558 
                
Net (loss)   -    (439,522)   (439,522)
                
BALANCE AT SEPTEMBER 30, 2019  $9,128,500   $(6,086,464)  $3,042,036 

 

 

 

 

See notes to the financial statements.

 

4

 

PARCUS MEDICAL, LLC

STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2018

AND THE PERIOD ENDED SEPTEMBER 30, 2019

 

 

 

   2018  2019
CASH FLOWS FROM OPERATING ACTIVITIES          
Net income (loss)  $227,686   $(439,522)
Adjustments to reconcile net income (loss) to net cash and cash equivalents provided by (used in) operating activities:          
Depreciation and amortization   197,251    185,697 
Loss on impairment of patent   -    410,417 
(Increase) decrease in:          
Accounts receivable   (847,920)   (598,462)
Inventories   540,861    (345,036)
Prepaid expenses and other current assets   (95,392)   82,197 
Increase (decrease) in:          
Accounts payable   (56,511)   292,494 
Accrued expenses   51,836    112,380 
Total adjustments   (209,875)   139,687 
Net cash provided by (used in) operating activities   17,811    (299,835)
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Purchase of intangible assets   (11,280)   (44,434)
Purchase of property and equipment   (95,120)   (16,538)
Net cash used in investing activities   (106,400)   (60,972)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Borrowings from line of credit   -    400,000 
Payments on capital leases   (116,514)   (159,042)
Payments on term notes   (161,192)   (148,268)
Borrowings from term notes   -    300,000 
Payment of member distributions   (200,000)   - 
Net cash (used in) provided by financing activities   (477,706)   392,690 
           
NET (DECREASE) INCREASE IN CASH   (566,295)   31,883 
           
CASH AT BEGINNING OF YEAR / PERIOD   900,474    334,179 
           
CASH AT END OF YEAR / PERIOD  $334,179   $366,062 
           
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION AND NONCASH INVESTING AND FINANCING ACTIVITIES          
Cash paid during the year / period for interest  $74,321   $81,698 
Fixed assets financed through debt  $252,430   $582,428 

 

During 2017, the Company accrued $200,00 for distributions that was declared, which are reflected in the opening retained earnings balance at January 1, 2018.  

 

See notes to the financial statements.

 

5

PARCUS MEDICAL, LLC

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2018 AND SEPTEMBER 30, 2019

 

1.       DESCRIPTION OF BUSINESS

 

Parcus Medical, LLC (hereinafter referred to as the “Company”) was formed and incorporated in Wisconsin on April 13, 2007. The Company is engaged in the business of manufacturing and sales of medical devices, instruments and supplies. The Company services the orthopedic surgery market throughout the United States and internationally. The corporate headquarters for the Company is located in Sarasota, Florida.

 

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Accounting

The financial statements of the Company are prepared under the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP).

 

Use of Management Estimates

Management uses estimates and assumptions in preparing these financial statements in accordance with U.S. GAAP. These estimates and assumptions affect the 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 vary from the estimates that were used.

 

Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid investments with maturities of 90 days or less at the time of purchase.

 

Cash and cash equivalents are maintained at major financial institutions and, at times, balances may exceed federally insured limits of $250,000. The Company has never experienced any losses related to these balances. The Company’s deposits did not exceed federally insured limits at December 31, 2018. At September 30, 2019, the Company had approximately $92,600 in excess of federally insured limits.

 

Accounts Receivable

Accounts receivable principally consist of amounts due from customers for the sale of medical devices, instruments and supplies. The Company records an allowance for doubtful accounts to allow for any amounts that may not be recoverable, which is based on an analysis of the Company’s prior collection experience, customer creditworthiness, and current economic trends. Based on management’s review of accounts receivables, an allowance for doubtful accounts of approximately $30,000 and $40,500 is considered adequate at December 31, 2018 and September 30, 2019, respectively. Interest is not typically charged on past due receivables. The Company determines receivables to be past due based on the payment terms of original invoices.

 

6

PARCUS MEDICAL, LLC

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2018 AND SEPTEMBER 30, 2019

 

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

 

Inventories

Inventories include merchandise and materials held for resale, work in progress and raw materials. The Company provides reserves for inventory that management believes to be obsolete or slow moving. Based on management’s review of obsolete or slow-moving inventory, no inventory reserve was necessary at December 31, 2018 and September 30, 2019, respectively. Inventories for the Company are stated at the lower of cost, determined on the first in first out method, or net realizable value.

 

Property and Equipment

Property and equipment are recorded at cost. Depreciation is calculated by the straight-line method over the estimated useful lives of the assets, ranging from 3 to 15 years. Leasehold improvements are amortized over the estimated useful life of the assets or the lease term. Maintenance and repairs are charged to operations when incurred. Betterments and renewals are capitalized. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in operations.

 

Long-Lived Assets

The Company reviews its long-lived assets for impairment in accordance with Accounting Standards Codification Topic 360, Property, Plant, and Equipment (ASC Topic 360), whenever events or changes in circumstances indicate that the carrying amount of its assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted cash flows expected to be generated by the asset. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. At December 31, 2018 the Company determined that its long-lived assets were not impaired. At September 30, 2019 the Company determined that a license was impaired and the Company recognized an impairment loss of approximately $410,400.

 

Income Taxes

The Company, with the consent of the stockholders, has elected under the Internal Revenue Code to be treated as a partnership. In lieu of corporate income taxes, the stockholders of a partnership are taxed on their proportionate shares of the Company's taxable income. Therefore, no liability or provision for income taxes has been included in these financial statements.

 

The Company follows ASC Topic 740, Income Taxes. This standard prescribes a recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. There was no material impact on the Company’s financial position or results of operations as a result of the adoption of this standard. The Company has evaluated its tax positions and determined that there are none that need to be recognized as of December 31, 2018 and September 30, 2019.

 

Revenue Recognition

The Company derives revenues from the sale of surgical equipment used by orthopedic surgeons in procedures to repair shoulder, knee, hip and distal extremities. In order for revenue and related cost of sales to be recognized, there must be persuasive evidence that an arrangement exists, delivery has occurred, the price to the buyer is fixed or determinable, and the collectability of the related receivable is reasonably assured, The Company’s standard terms are FOB shipping point, but a portion of its customers have FOB destination terms. Based on the above criteria, revenue is recognized depending on the specific terms of the arrangement; either at the pint of shipment for those sales under FOB shipping point terms or when it is received by the customer for sales under FOB destination terms. For those transactions that are shipped at or near the end of the reporting period for which the sales terms are FOB destination, the Company confirms receipt of the shipment; and, if delivery has not occurred, then revenue is not recognized.

 

7

PARCUS MEDICAL, LLC

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2018 AND SEPTEMBER 30, 2019


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

 

Shipping and Handling Costs

Costs incurred by the Company for shipping and handling are included in cost of sales.

 

Sales Taxes

Amounts collected on behalf of governmental authorities for sales taxes and other similar taxes are reported on a net basis.

 

Trade Show Costs

The Company expenses trade show costs as incurred. Trade show expense was approximately $160,700 and $168,300 for the year ended December 31, 2018 and the period ended September 30, 2019, respectively.

 

Impact of Recently issued Accounting Pronouncements

Effective January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which provides accounting guidance on the recognition of revenues from contracts and requires gross presentation of certain costs that were previously offset against revenue. The Company has applied ASU 2014-09 retrospectively which requires that the cumulative effect of initial application be recognized as an adjustment to beginning retained earnings. The Company’s sales contain a single delivery element and revenue is recognized at a single point in time when ownership, risks and rewards transfer. There was no beginning balance effect on the financial statements for the period ended December 31, 2018 as the adoption of ASU 2014-09 did not result in a change of timing of the Company’s revenue recognition.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Under ASU No. 2016-02, an entity will be required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU No. 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. ASU No. 2016-02 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. The Company is currently in the process of evaluating the impact of adoption of this ASU on its financial statements.

 

8

PARCUS MEDICAL, LLC

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2018 AND SEPTEMBER 30, 2019

 

3.       INVENTORIES

 

Inventories at December 31, 2018 and September 30, 2019 consist of the following:

 

   2018  2019
       
Raw materials  $315,464   $453,350 
Work in progress   1,589,703    1,853,238 
Finished goods   1,147,471    1,091,086 
   $3,052,638   $3,397,674 

 

4.       PROPERTY AND EQUIPMENT

 

Property and equipment at December 31, 2018 and September 30, 2019 consist of the following:

 

   2018  2019
       
Machinery and equipment  $1,696,475   $1,753,857 
Furniture and fixtures   48,250    48,250 
Leasehold improvements   30,914    58,266 
Leased equipment   790,048    1,372,476 
    2,565,687    3,232,849 
Less accumulated depreciation   1,726,203    1,948,080 
   $839,484   $1,284,769 

 

As of December 31, 2018 and September 30, 2019, the Company had machinery and equipment under capital lease obligations totaling approximately $790,000 and $1,372,500, respectively, with related accumulated depreciation of approximately $222,400 and $259,400, respectively.

 

Depreciation expense, including depreciation on capital lease assets, amounted to approximately $154,000 and $154,000 for the year ended December 31, 2018 and the period ended September 30, 2019, respectively.

 

9

PARCUS MEDICAL, LLC

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2018 AND SEPTEMBER 30, 2019

 

5.      TRADEMARKS, PATENTS AND LICENCES

 

Trademarks, patents and licenses at December 31, 2018 and September 30, 2019 consist of the following:

 

   2018  2019
       
Licences  $500,000   $- 
Patents   275,545    316,263 
Trademarks   24,577    24,577 
    800,122    340,840 
Less accumulated amortization   194,212    136,645 
   $605,910   $204,195 

 

Amortization expense amounted to approximately $43,000 and $32,000 for the year ended December 31, 2018 and the period ended September 30, 2019, respectively. Annual amortization expense over the next five years is expected to be approximately $34,000.

 

6.       LINE OF CREDIT

 

The Company has a $1,150,000 unsecured line of credit agreement with a bank, guaranteed by one of the Company’s members. At December 31, 2018 and September 30, 2019 the balance outstanding on the line of credit was approximately $565,000 and $965,000, respectively. Interest on borrowings is payable monthly at prime plus 1% (6.50% and 6.00% at December 31, 2018 and September 30, 2019, respectively). Principal and all accrued interest is due on June 12, 2020. The maturity of the line of credit is June 12, 2020. There is no automatic provision for renewal.

 

7.       TERM LOANS

 

The Company has unsecured term loans payable to a bank, guaranteed by one of the Company’s members. At December 31, 2018 and September 30, 2019, the balances outstanding on the notes were approximately $275,000 and $426,600, respectively. Principal and interest on borrowings is payable in monthly installments of $5,813 at an interest rate of 5.25% and 6.00% at December 31, 2018 and September 30, 2019, respectively. One of the notes matures in July 2020 while the other matures in April 2024. The future principal payments on the term notes are as follows:

 

Year Ending   
December 31,   
2020  $192,370 
2021   48,892 
2022   54,059 
2023   59,773 
2024   71,495 
Total   426,589 

 

 

10

PARCUS MEDICAL, LLC

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2018 AND SEPTEMBER 30, 2019

 


7.       TERM LOANS – CONTINUED

 

The term loans require the Company to maintain certain financial covenants. At December 31, 2018 and September 30, 2019, the Company was not in compliance with the financial covenants, and received a covenant waiver from the bank.

 

8.       CAPITAL LEASES

 

The Company leases equipment under capital lease obligations which mature through 2024. The balances ate December 31, 2018 and September 30, 2019 are as follows:

 

   2018  2019
       
7.47% capital lease obligation, due in monthly installments of $3,811 through September 2020  $77,752   $46,898 
           
4.85% capital lease obligation, due in monthly installments of $1,448 through September 2020   30,271    18,405 
           
3.87% capital lease obligation, due in monthly installments of $1,414 through September 2020   29,610    17,711 
           
4.96% capital lease obligation, due in monthly installments of $2,339 through April 2020   42,581    22,782 
           
4.93% capital lease obligation, due in monthly installments of $1,828 through September 2020   43,331    28,239 
           
4.29% capital lease obligation, due in monthly installments of $630 through June 2021   17,823    12,692 
           
5.65% capital lease obligation, due in monthly installments of $2,827 through October 2023   148,050    126,317 
           
4.90% capital lease obligation, due in monthly installments of $10,968 through April 2024   -    539,760 
    389,418    812,804 
Less current portion   152,492    272,643 
   $236,926   $540,161 

 

 

11

PARCUS MEDICAL, LLC

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2018 AND SEPTEMBER 30, 2019

 

8.       CAPITAL LEASES – CONTINUED

 

Scheduled future minimum payments under capital lease obligations are as follows:

 

Year Ending   
December 31,   
2020  $291,997 
2021   156,824 
2022   158,830 
2023   171,327 
2024   76,092 
Total minimum lease payments   855,070 
Less amount representing interest   42,266 
   $812,804 

 

Interest expense for the year ended December 31, 2018 and period ended September 30, 2019 was approximately $17,350 and $37,800 for capital leases.

 

9.       GUARANTEED PAYMENTS

 

Member managers performed services for the Company in prior years without compensation. There is $942,500 due to member managers for these services as of December 31, 2018 and September 30, 2019 which is expected to be paid during 2019.

 

10.       COMMITMENTS AND CONTINGENCIES

 

The Company currently leases real property for operations under non-cancellable operating leases expiring at various dates through 2024. Total rental expense for the year ended December 31, 2018 and the period ended September 30, 2019 was approximately $327,000 and $261,000, respectively. This is composed of common area maintenance fees of approximately $97,000 and $84,000 and rental expenses of approximately $230,000 and $236,000 for the year ended December 31, 2018 and the period ended September 30, 2019, respectively.

 

Scheduled future minimum payments under non-cancellable operating leases of real property are as follows:

 

Year Ending   
December 31,   
2019  $59,612 
2020   243,462 
2021   250,866 
2022   258,480 
2023   157,800 
Thereafter   134,740 
   $1,104,960 

 

12

PARCUS MEDICAL, LLC

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2018 AND SEPTEMBER 30, 2019

 


10.       COMMITMENTS AND CONTINGENCIES – CONTINUED

 

From time to time, the Company is a party as Plaintiff or Defendant to various legal proceedings related to normal business operations. In the opinion of management, although the outcome of any legal proceedings cannot be predicted with certainty, the ultimate liability of the Company in connection with its legal proceedings will not have a material effect on its financial position, but could be material to the results of operations in any one future accounting period.

 

11.       CONCENTRATIONS

 

During the year ended December 31, 2018 and period ended September 30, 2019 the Company sales to one customer approximated 17% and 14%, respectively of total revenue. Accounts receivable from this customer amounted to approximately $83,400 and $112,400 for the year ended December 31, 2018 and period ended September 30, 2019, respectively.

 

The Company purchased inventory from two supplier totaling approximately $1,288,600, or 64% of purchases for the year ended December 31, 2018. Accounts payable to these suppliers totaled approximately $297,300, or 36% of accounts payable at December 31, 2018. For the period ended September 30, 2019, the Company had purchases from three vendors totaling approximately $1,515,200 or 99% of the total purchases for the period ended September 30, 2019. Accounts payable to these suppliers totaled approximately $445,000, or 40% of accounts payable at September 30, 2019.

 

12.       REVENUES FROM CONTRACTS WITH CUSTOMERS

 

Revenue from contracts with customers is recognized when, or as, the Company satisfies performance obligations by transferring the promised goods or services to the customers. A good or service is transferred to a customer when, or as, the customer obtains control of that good or service. A performance obligation may be satisfied over time or at a point in time. Revenue from a performance obligation satisfied over time is recognized by measuring progress in satisfying the performance

 

13.       REVENUES FROM CONTRACTS WITH CUSTOMERS

 

obligation in a manner that depicts the transfer of the goods or services to the customer. Revenue from a performance obligation satisfied at a point in time is recognized at the point in time when it is determined the customer obtains control over the promised goods or services. The amount of revenue recognized reflects the consideration the Company expects to be entitled to in exchange for those promised goods or services (i.e., the “transaction price”). In determining the transaction price, the Company considers multiple factors, including the effects of variable consideration. Variable consideration is included in the transaction price only to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainties with respect to the amount are resolved. In determining when to include variable consideration in the transaction price, the Company considers the range of possible outcomes, the predictive value of past experiences, the time period of when uncertainties expect to be resolved, and the amount of consideration that is susceptible to factors outside of the Company’s influence, such as market volatility or the judgment and actions of third parties.

 

13

PARCUS MEDICAL, LLC

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2018 AND SEPTEMBER 30, 2019

 

13.       REVENUES FROM CONTRACTS WITH CUSTOMERS – CONTINUED

 

Various economic factors affect revenues and cash flows. The surgical products are sold to retail resellers or large medical surgery institutions. Domestic sales are usually collected within 2 months but international sales may take up to 4 months to collect.

 

The Company recognizes revenue at a point in time when control passes to the customer. For the year ended December 31, 2018, international sales were approximately $5,408,200 while domestic sales were approximately $5,412,200. For the period ended September 30, 2019, international sales were approximately $4,704,800 while domestic sales were approximately $4,897,000.

 

The Company sometimes receives advances or deposits from customers, particularly on international contracts, before revenue is recognized, resulting in contract liabilities. These deposits are liquidated when revenue is recognized. At December 31, 2018 and September 30, 2019, the Company had no contract liabilities.

 

The Company’s performance obligations relates to contracts all due within one year or less. As a result, they have elected not to separately disclose amounts of unsatisfied performance obligations as of December 31, 2018 and September 30, 2019.

 

14.       SUBSEQUENT EVENTS

 

Management has evaluated subsequent events through December 11, 2019, the date on which the financial statements were available to be issued.

 

 

 

 

 

 

 

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