Cautionary Statement Regarding Forward-Looking Statements
The information in this discussion may contain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements involve risks and uncertainties, including statements
regarding our capital needs, business strategy and expectations. Any statements
that are not of historical fact may be deemed to be forward-looking statements.
These forward-looking statements involve substantial risks and uncertainties. In
some cases you can identify forward-looking statements by terminology such as
"may," "will," "should," "expect," "plan," "intend," "anticipate," "believe,"
"estimate," "predict," "potential," or "continue", the negative of the terms or
other comparable terminology. Actual events or results may differ materially
from the anticipated results or other expectations expressed in the
forward-looking statements. In evaluating these statements, you should consider
various factors, including the risks included from time to time in other reports
or registration statements filed with the United States Securities and Exchange
Commission. These factors may cause our actual results to differ materially from
any forward-looking statements. We disclaim any obligation to publicly update
these statements or disclose any difference between actual results and those
reflected in these statements.
Unless the context otherwise requires, references in this Form 10-Q to "we,"
"us," "our," or the "Company" refer to Canfield Medical Supply, Inc.
The following discussion and analysis should be read in conjunction with the
Condensed Financial Statements (unaudited) and Notes to Condensed Financial
Statements (unaudited) filed herewith.
Canfield Medical Supply, Inc. (the "CMS"), was incorporated in the State of Ohio
on September 3, 1992, and changed domicile to Colorado on April 18, 2012. CMS 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.
On December 31, 2019, CMS entered into an Agreement and Plan of Merger (the
"Merger Agreement") with SBG Acquisition Inc. ("Merger Sub"), a Nevada
Corporation wholly-owned by CMS, and Splash Beverage Group, Inc. a Nevada
corporation ("Splash") pursuant to which Merger Sub merged with and into Splash
(the "Merger") with Splash as the surviving company and a wholly-owned
subsidiary of CMS. The Merger was consummated on March 31, 2020.
As the owners and management of Splash have voting and operating control of CMS
following the Merger, the Merger transaction was accounted for as a reverse
acquisition (that is with Splash as the acquiring entity), followed by a
Splash specializes in the manufacturing, distribution, and sales & marketing of
various beverages across multiple channels. Splash operates in both the
non-alcoholic and alcoholic beverage segments. Additionally, Splash operates its
own vertically integrated B2B and B2C e-commerce distribution platform called
Qplash, further expanding its distribution abilities and visibility.
Results of Operations for the Three Months Ended March 31, 2020 compared to
Three Months Ended March 31, 2019.
Revenues for the three months ended March 31, 2020 were $112,003 compared to
revenues of $2,665 for the three months ended March 31, 2019. The $109,338
increase in sales is due to an increase within our vertically integrated B2B and
B2C e-commerce distribution platform called Qplash. This platform sells goods on
both Amazon and Shopify. Cost of goods sold for the three months ended March 31,
2020 were $107,214 compared to cost of goods sold for the three months ended
March 31, 2019 of $13,102. The $94,112 increase in cost of goods sold for the
three-month period ended March 31, 2020 is primarily due to our increased sales,
and as our sales increased, our cost of sales for those sales correspondingly
Operating expenses for the three months ended March 31, 2020 were $1,553,933
compared to $438,043 for the three months ended March 31, 2019. The $1,115,890
increase in our operating expenses was primarily a result of recording $500,000
in consulting fees for one of our investors, $188,053 in professional fees,
$132,453 in consulting fees relating to the Qplash business, $100,000 for stock
based compensation and $108,516 of payments made for our TapouT license. The net
loss for the three months ended March 31, 2020 was $3,446,630 as compared to a
net loss of $703,624 for the three months ended March 31, 2020. The increase in
net loss is due to our increase in operating expenses slightly offset by our
increase in revenues.
Interest expenses for the three months ended March 31, 2020 were $1,897,486
compared to $255,144 for the three months ended March 31, 2019. The $1,642,342
increase in our interest expenses was primarily a result of recording a finance
charge of $1,657,805 associated with warrants issued to one of our note holders.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is the ability of a company to generate funds to support its current
and future operations, satisfy its obligations, and otherwise operate on an
ongoing basis. Significant factors in the management of liquidity are funds
generated by operations, levels of accounts receivable and accounts payable and
As of March 31, 2020, we had total cash and cash equivalents of $620,014, as
compared with $42,639 at December 31, 2019. The increase is primarily due to
issuances of notes payable.
Net cash used for operating activities during the three months ended March 31,
2020 was $924,860 as compared to the net cash used by operating activities for
the three months ended March 31, 2019 of $718,420. The primary reasons for the
change in net cash used is due to losses sustained and increases in inventory,
offset by non-cash expenses.
Net cash used for investing activities during the three months ended March 31,
2020 was $79,977. There were no cash flows from investing activities during the
three months ended March 31, 2019. The net cash used in the first quarter of
2020 was primarily due to the $150,000 payment made to SALT Tequila USA, offset
by $72,422 of cash obtained in the acquisition of Canfield Medical Supply, Inc.
Net cash provided by financing activities during the three months ended March
31, 2020 was $1,582,212 compared to $62,123 provided from financing activities
for the three months ended March 31, 2019. During the three months ended March
31, 2020, we received $1,740,000 from investors and related parties, which was
offset by repayments to shareholders of $120,000 and a settlement payment of
Minimum Royalty Payments:
As stated in Note 5, we have a licensing agreement with ABG TapouT, LLC
("TapouT"). Under the licensing agreement, we have minimum royalty payments to
TapouT for the next three years.
· 2020 $540,000
· 2021 $594,000
· 2022 $653,400
Inventory Purchase Commitments:
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.
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