SPLASH BEVERAGE GROUP, INC. The following discussion and analysis should be read in conjunction with the Financial Statements and Notes to Financial Statements filed herein.
10 Business Overview
We primarily 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.
Effective
On
Completion of the Merger is subject to customary closing terms and conditions including, among others:
? the adoption of the Merger Agreement by Splash's stockholders;
? the representations and warranties of the respective parties being true
and correct in all material respects as of the closing day of the Merger;
? since June 1, 2019 through the closing of the Merger, Splash shall have
raised from the aggregate sale of its equity securities not less than
$1,500,000 which shall be available or was utilized for inventory
purchases, reductions to accounts payable and for other general working
capital purposes;
? on the closing of the Merger liabilities of Splash debt shall not exceed
$500,000 ;
? Splash shall have entered into note conversion agreements with
substantially all holders of its debt pursuant to which such debt is
converted into shares Splash's common stock at a conversion price of $1.00
per share;
? designated shareholders of Splash shall have entered into lock-up/leak out
agreements by which they will agree to restrict post-Merger sales of
Canfield securities for a period of up to one year following the Merger,
as more particularly described within the Merger Agreement;
? the Company and Michael West , the Company's former Chief Executive
Officer, and a current director, shall have entered into a Business
Transfer and Indemnity Agreement pursuant to which all operations, assets
and liabilities of the Company's home health services business shall be
transferred and conveyed to Mr. West or an entity designated by Mr. West
in exchange for his indemnifying the Company for certain liabilities and
claims;
? the Company shall not have any liabilities exceeding $50,000 in the
aggregate;
? the Company's directors and officers shall have tendered their
resignations;
? Robert Nistico , Chief Executive Officer of Splash, shall be appointed as
chief executive officer of the Company; and
? the composition of the Company's board of directors shall be as set forth
in the Merger Agreement.
As of the date of this annual report, all conditions to closing have been completed, except for the fourth, and the seventh through eleventh bulleted conditions listed above. The items listed in the seventh, ninth and tenth bulleted conditions above have been finalized, but will not be delivered until the closing date.
At the closing of the Merger, each outstanding share of common stock, Series A Preferred Stock and Series B Preferred Stock of Splash, shall be converted into such amount of fully paid and non-assessable shares of common stock of the Company. Upon completion of the merger, shareholders of Splash as a group will own on a fully diluted basis approximately 85% of the Company and the current shareholders of the Company as a group will own on a fully diluted basis approximately 15% of the Company.
Results of Operation for the year ended
Revenues for the year ended
Cost of goods sold for the year ended
Operating expenses for the year ended
Our net loss for the year ended
11
Liquidity and Capital Resources
As of
Net cash used for operating activities during the year ended
Net cash used for investing activities during the year ended
Net cash provided by financing activities during the year ended
We believe that our recent public and private offerings will provide sufficient capital in the short term for our current level of operations. Additional resources will be needed to build our web store and to otherwise increase advertising and marketing.
Off-Balance Sheet Arrangements
We do not have any 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 is material to investors.
Critical Accounting Policies and Estimates
See Note 1 to the accompanying financial statements for complete disclosure of our critical accounting policies and estimates.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in
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
Revenue recognition
It is the Company's policy that revenues from product sales is recognized in accordance with ASC 606, "Revenue Recognition." Five basic steps must be followed before revenue can be recognized; (1) Identifying the contract(s) with a customer that creates enforceable rights and obligations; (2) Identifying the performance obligations in the contract, such as promising to transfer goods or services to a customer; (3) Determining the transaction price, meaning the amount of consideration in a contract to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer; (4) Allocating the transaction price to the performance obligations in the contract, which requires the Company to allocate the transaction price to each performance obligation on the basis of the relative standalone selling prices of each distinct good or services promised in the contract; and (5) Recognizing revenue when (or as) the entity satisfies a performance obligation by transferring a promised good or service to a customer. The amount of revenue recognized is the amount allocated to the satisfied performance obligation. For sales of our Company products, 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.
12 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.
Net Income (Loss) per Share
Basic net income per common share ("Basic EPS'') excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per common share ("Diluted EPS'') reflects the potential dilution that could occur if stock options or other contracts to issue shares of common stock were exercised or converted into common stock. The computation of Diluted EPS does not assume exercise or conversion of securities that would have an anti-dilutive effect on net income per common share.
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.
Leases
In
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