Item 2.01. Completion of Acquisition or Disposition of Assets
As previously reported on a Current Report on Form 8-K that was filed with the
The closing of the Merger took place on
Splash, a corporation incorporated under the laws of
In connection with the Merger, Splash entered into Lock-Up Agreements with
officers, directors, employees, consultants and beneficial owners of more than
10% of the outstanding shares of Splash prior to the Merger (the "Lock-Up
Holder"). Pursuant to the Lock-Up Agreements, the Lock-Up Holder agreed that for
a period of 180 days ("Lock-Up Period") from the Merger the Lock-Up Holder will
not offer, pledge, sell or otherwise transfer or dispose of any shares of the
common stock of the Company that the Lock-Up Holder receives in connection with
the Merger( the "
The Lock-Up Agreements apply to approximately 4,734,334 shares of the common stock of the Company.
In connection with the Merger, Splash entered into Promissory Note Conversion
Agreements with approximately eighteen (18) holders who held approximately
In connection with the Merger, Splash entered into Preferred Stock Conversion
Agreements with the three (3) holders of 1,000,000 shares of its Series A
Convertible Preferred Stock and thirty-eight (38) holders of 3,913,418 shares of
its Series B Convertible Preferred Stock. Pursuant to the conversion agreements
the holders agreed to convert their Preferred Stock into 13,930,413 shares (the
"Preferred Stock Conversion Shares") of the common stock of Splash. Pursuant to
the Preferred Stock Conversion Agreements, the holders were given piggyback
rights with respect to the Preferred Stock Conversion Shares, which would
require that the Preferred Stock Conversion Shares are included on a
registration statement that the Company files with the
Item 3.02 Unregistered Sales of
As described in Section 2.01, the Company became obligated to issue an aggregate of 67,720,853 shares of common stock in connection with the Merger as well became obligated to issue warrants to purchase 19,067,337 shares of the Company's common stock, which are included of the 85% fully diluted amount discussed above. The shares issued in connection with the Merger will be issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended since among other things the transactions did not involve a public offering.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On the Closing and pursuant to the Merger Agreement,
On the Closing and pursuant to the Merger Agreement,
On the Closing and pursuant to the Merger Agreement,
There are no family relationships with any of the executive officers or directors of the Company and the above referenced individuals. Other than as set forth in the Merger Agreement there are no arrangements or understandings between the above referenced individuals and any other persons pursuant to which he was selected as a director, and there are no transactions in which he has an interest requiring disclosure under Item 404(a) of Regulation S-K.
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Item 7.01 Regulation FD Disclosure
On
Item 8.01 Risk Factors
The Company is subject to all the same risks that all companies in its business, and all companies in the economy, are exposed to. These include risks relating to economic downturns, political and economic events and technological developments (such as hacking and the ability to prevent hacking). Additionally, early-stage companies are inherently more risky than more developed companies.
The risk factors summarized below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, reputation, financial condition and/or operating results.
An occurrence of an uncontrollable event such as the COVID-19 pandemic may negatively affect our operations and our ability to raise capital.
The occurrence of an uncontrollable event such as the COVID-19 pandemic may
negatively affect our operations. A pandemic typically results in social
distancing, travel bans and quarantine, and this may limit access to our
facilities, customers, management, support staff and professional advisors. This
event may also limit our ability to raise capital which as noted above could
trigger certain rescission rights which could result in the Company's incurring
additional debt and preferred holders who may take preference over other common
holders. These factors, in turn, may not only impact our operations, financial
condition and demand for our products but our overall ability to react timely to
mitigate the impact of this event. Also, it may hamper our efforts to comply
with our filing obligations with the
Demand for our products may be adversely affected by changes in consumer preferences or any inability on our part to innovate, market or distribute our products effectively, and any significant reduction in demand could adversely affect our business, financial condition or results of operations..
Our beverage portfolio is comprised of a number of unique brands with reputations and consumer imagery that have been built over time. Our investments in marketing as well as our strong commitment to product quality are intended to have a favorable impact on brand image and consumer preferences. Unfavorable publicity, or allegations of quality issues, even if false or unfounded, could tarnish our reputation and brand image and may cause consumers to choose other products. In addition, if we do not adequately anticipate and react to changing demographics, consumer and economic trends, health concerns and product preferences, our financial results could be adversely affected.
Competition.
The beverage industry is extremely competitive. Our products compete with a broad range of beverage products, most of which are manufactured and distributed by companies with substantially greater financial, marketing and distribution resources. In order to generate future revenues and profits, we must continue to sell products that appeal to our customers and consumers. Discounting and other actions by our competitors may make it more difficult to sustain revenues and profits.
Volatility in the price or availability of the inputs we depend on, including raw materials, packaging, energy and labor, could adversely impact our financial results.
Our financial results could be adversely impacted by changes in the cost or availability of raw materials and packaging. Continued growth would require us to hire, retain and develop a highly skilled workforce and talented management team. Any unplanned turnover or our failure to develop an adequate succession plan for current positions could erode our competitiveness. In addition, our financial results could be adversely affected by increased costs due to increased competition for employees, higher employee turnover or increased employee benefit costs.
Governmental regulation.
Our business and properties are subject to various federal, state and local laws and regulations, including those governing the production, packaging, quality, labeling and distribution of beverage products. In addition, various governmental agencies have enacted or are considering additional taxes on soft drinks and other sweetened beverages. Changes in existing laws or regulations could require material expenses and negatively affect our financial results through lower sales or higher costs.
Dependence on key personnel.
Our performance significantly depends upon the continued contributions of our executive officers and key employees, both individually and as a group, and our ability to retain and motivate them. Our officers and key personnel have many years of experience with us and in our industry and it may be difficult to replace them. If we lose key personnel or are unable to recruit qualified personnel, our operations and ability to manage our business may be adversely affected.
Because our officers and directors serve as officers and directors of other companies engaged in the beverage industry, a potential conflict of interest could negatively impact our ability to run our business.
Some of our directors and officers work for other companies in the beverage industry. Due to time demands placed on our directors and officers, and due to the competitive nature of the beverage industry, the potential exists for conflicts of interest to occur from time to time that could adversely affect our ability to conduct our business. The officers and directors' employment and affiliations with other entities limits the amount of time they can dedicate to us as a director or officer and cannot be certain that a conflict of interest will not arise in the future. To date, there have not been any conflicts of interest between any of our directors or officers and the Company.
If our products become adulterated, misbranded or mislabeled, we might need to recall those items and we may experience product liability claims if consumers are injured or become sick.
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Product recalls or safety concerns could adversely impact our market share and financial results. We may be required to recall certain of our products should they be mislabeled, contaminated or damaged. We also may become involved in lawsuits and legal proceedings if it is alleged that the consumption of any of our products causes injury or illness. A product recall or an adverse result in any such litigation could have an adverse effect on our operating and financial results. We may also lose customer confidence for our entire brand portfolio.
Our distribution network relies on relationships with our distributors, and such reliance could affect our ability to efficiently and profitably distribute and market products, maintain existing markets and expand business into other geographic markets.
Our business relies upon distribution relationships for the sale and distribution of our products. There can be no assurance that we will be able to mitigate the risks related to all or any of these factors in any of the current or prospective geographic areas of distribution. To the extent that any of these factors have an adverse effect on the relationships with consultants, companies or retailers in a particular geographic area and, thus, limit our ability to maintain and expand the sales market, revenues and financial results may be adversely impacted. There also is no assurance that we will be able to maintain distribution relationships or establish and maintain successful relationships in new geographic distribution areas. There is the possibility that we will have to incur significant expenses to attract and maintain relationships in one or more geographic distribution areas in order to profitably expand geographic markets. The occurrence of any of these factors could result in a significant decrease in sales volume of our branded products and the products which we distribute for others and harm our business and financial results.
We will need significant additional capital, which we may be unable to obtain.
Our current liquidity position raises substantial doubt about our ability to
continue as a going concern. If we are unable to raise additional capital and/or
obtain financing sufficient to meet current and future obligations, we may not
be able to continue as a going concern. Additionally, if the Company shall fail
to raise
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired
In accordance with Item 9.01(a), the following are filed as exhibits to this Current Report on Form 8-K:
Audited financial statements of
Audited financial statements of
(b) Pro Forma Financial Information In accordance with Item 9.01(b), the following is filed as an exhibit to this Current Report on Form 8-K: The unaudited pro forma consolidated financial statements giving effect to the Merger Agreement transaction betweenCanfield Medical Supply, Inc. andSplash Beverage Group, Inc. are filed as Exhibit 99.4 hereto. Exhibits.
Exhibit No. Description
2.1 Agreement and Plan of Merger among Registrant, Merger Sub and Splash datedDecember 31, 2019 (1) 4.1 Form of Replacement Promissory Note(2) 10.1 Form of Lock-Up Agreement(2) 10.2 Form of Promissory Note Conversion Agreement(2) 10.3 Form of Preferred Stock Conversion Agreement(2) 10.4 Form of SBG Warrant(2) 10.5 Form of New warrant(2) 99.1 Press Release, datedApril 6, 2020 (2) 99.2 Audited financial statements ofSplash Beverage Group, Inc. for the year endedDecember 31, 2019 99.3 Audited financial statements ofSplash Beverage Group, Inc. for the years endedDecember 31, 2018 and 2017 99.4 Unaudited pro forma consolidated financial statements giving effect to the Merger Agreement transaction betweenCanfield Medical Supply, Inc. andSplash Beverage Group, Inc.
(1) Incorporated by reference to the Current Report on Form 8-K filed on
(2) Incorporated by reference to the Current Report on Form 8-K filed on
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