Endovia Health Sciences, Inc. 10-K

Item 1. Business. Overview Canfield Medical Supply, Inc. (“CMS”) was incorporated in the State of Ohio on September 3, 1992, and changed domicile to Colorado on April 18, 2012. CMS was 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, Canfield entered into an Agreement and Plan of Merger (the “ Merger Agreement ”) with SBG Acquisition Inc. (“ Merger Sub ”), a Nevada Corporation wholly-owned by Canfield, and Splash Beverage Group, Inc. a Nevada corporation (“ Splash ” or “ SBG “) pursuant to which Merger Sub merged with and into Splash (the “ Merger” ) with Splash as the surviving company and a wholly-owned subsidiary of Canfield. The Merger was consummated on March 31, 2020. As the owners and management of Splash had 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 recapitalization. On July 31, 2020, CMS changed its name to Splash Beverage Group, Inc. (“SBG”). On December 24, 2020, SBG consummated an Asset Purchase Agreement(the “APA”) with Copa di Vino Corporation (“CdV”), to purchase certain assets and assume certain liabilities that comprise the Copa di Vino business for a total purchase price of $5,980,000, payable in the combination of $2,000,000 in cash (“Cash Consideration”), $2,000,000 convertible promissory note (the “Convertible Note”) to Seller and a variable number of shares of the Company’s common stock based on a attainment of revenue hurdles. CdV is one of the leading producers of premium wine by the glass in the United States with its primary offices and facilities in The Dalles, Oregon. The Company’s common stock is quoted on the OTCQB under the symbol SBEV. 1 Company Overview and History Splash was incorporated in the State of Nevada under the name TapouT Beverages, Inc. for the purpose of acquiring the rights under a license agreement with TapouT, LLC (Authentic Brands Group and now the WWE) for the right to use the TapouT brand in connection with manufacturing and selling certain beverages. Robert Nistico was hired as CEO and the name was changed to Splash Beverage Group, Inc. (SBG) to reflect the revised business plan of being a manufacturer and distributor of several brands of beverages including both non-alcoholic and spirits brands. Robert Nistico has over 28 years of experience in all levels of the three-tier distribution system used in the beverage industry. Prior to joining the Company, he led the Marley Beverage Company from startup to over $47 million in annual revenues and ultimately profitability in three and one-half years. Before that he was the 5th employee at Red Bull North America, Inc. and served as General Manager, VP of Field Marketing and Sr. Vice President & General Manager during his 11 years there. He was instrumental in building the Red Bull brand in North and Central America and the Caribbean from $0 revenue to $1.6 billion in annual revenues. Nistico began his career with the Gallo Winery, quickly ascending within that system between winery and senior positions in distribution with Premier Beverage and RNDC Texas. Mr. Nistico has assembled a team of experienced beverage industry professionals with the goal of replicating the business model of companies like Diageo of owning some brands and managing others where there are synergies among a distribution standpoint. SBG however, has an additional strategic advantage of “brand incubation” with its own ecommerce platform. SBG has license rights to the TapouT brand for the United States and several other countries and we have joint venture with SALT Flavored Tequila. Mr. Nistico and SBG understand the proven strategy of infusing beverage brands with strong pop culture and lifestyle elements which drives trial, belief and most importantly repeat purchase. Our Strategy Our strategy is to combine the traditional approach of manufacturing, distributing, and marketing of beverages, but with brands that have a reasonable level of pre-existing brand awareness (market presence) or have attributes that we believe to be purely innovative. These are SBG’s core values. We believe this allows SBG to break through the clutter of numerous brand introductions and dilute risk. This philosophy is applied regardless as to whether the brand is to be 100% owned or a joint venture. For acquisition or joint venture consideration, we prefer to work with brands that already have one or more of the following in place: ● Some level of preexisting brand awareness ● Regional presence that can be expanded ● Licensing an existing brand name (TapouT for example) ● Add to an underdeveloped and growing category ● Innovation to an existing attractive category (Flavored Tequila) We believe offering brand founders access to our shared services model, provides us with two paths to success: one, developing our wholly owned core brands and two the ability to tap into high growth early stage brands ready to scale. By managing joint venture brands, we can significantly reduce their development expense while simultaneously increasing efficiencies for all brands in the SBG portfolio. Most new single beverage brands have limited access to distribution and thus find it extremely difficult to obtain meaningful retail shelf presence. With decades of successful brand introductions (Gallo, Red Bull, Bacardi, DIAGEO, Sparkling Ice, Jones Soda, FUZE Beverage, NOS Energy, SoBe Beverages, Muscle Milk, Marley Beverages) our ability to break through the distribution and retail bottlenecks makes us an attractive joint venture partner to many new brand owners. Our business ventures are typically structured with a revenue split, a marketing spend commitment from the brand founder and an earned equity position that constitutes control. Most are happy to award an equity position in their brand in exchange for distribution, sales and marketing management within the distribution network which eliminates their need to invest in infrastructure. Our partners only need to manage a small base of corporate operations. 2 We benefit by avoiding the development costs for new products. This model spreads our risk over several brands, contributes to our economies of scale, and it improves our relationship with distribution because we can provide them with a broader line of proven beverage products. Since our inception we have seen very good deal flow having been offered over 20 brands. SBG is only engaging with brands that fit comfortably within the above guidelines and are in some way complementary to each other categorically or from a distribution standpoint. We also believe the distribution landscape in the beverage category is changing rapidly and see that tech-enabled business models are thriving. Direct to consumer, office or home solutions are projected to continue to gain traction in the future. A core strategy for SBG is to build onto the early success we’re seeing with the Qplash online platform. Products We produce, distribute and market two beverages brands, “TapouT Performance”, a hydration & recovery isotonic sport drink and SALT Naturally Flavored Tequila, a 100% agave 80 proof line of flavored tequilas. The following is a description of these products. SALT Flavored Tequila We produce, distribute, and market the following flavors under the brand name SALT Naturally Flavored Tequila: ● Citrus flavor ● Berry flavor ● Chocolate flavor SALT Tequila is the first line of 100% agave 80-proof flavored tequilas. Tequila, vodka, rum, and now even brown spirits have experienced significant growth when flavors were introduced, and we expect significant growth as the tequila category is already growing at double digits. SALT is currently being launched and distributed by RNDC, Youngs Market and Major Brands to Walmart and Total Wine to date in 6 U.S. states and is for sale in Mexico. Several South American countries will also launch SALT during spring 2021. 3 SALT is a business venture between SBG and SALT USA, LLC. All aspects of manufacturing, logistics, distribution and marketing are the responsibility of SBG. TapouT Isotonic Sports Drinks SBG will produce, market, sell and distribute the following sports beverages under the brand name TapouT in the coming two years: ● TapouT Performance: Flavors completed Flavor Cherry Lemonade Orange Citrus Kick Some Sugar / 120 Calories 2021 2021 In Production Zero Sugar / 10 Calories In Production In Production 2021 ● TapouT Elite: In development for 2022 ● TapouT Energy: Under consideration also for 2022 TapouT Performance is a unique advanced performance functional beverage that has recuperative and cell regeneration capabilities that increase hydration and cellular recovery. It is formulated with all GRAS (FDA Designation “Generally Regarded As Safe) ingredients versus controversial ingredients used in many competitive products. It can be taken before, during or after activity to enhance activation, hydration, and recovery. TapouT Performance is all natural and is perfectly balanced with a proprietary blend of 5 electrolytes, amino acids and a proprietary specialized ingredient blend of minerals and nutrients. TapouT, formally associated with the UFC and mixed martial arts (MMA) has been producing branded clothing and light equipment for over 23 years and has a very high level of aided and unaided brand awareness. 4 Now associated with the WWE, Authentic Brands Group, LLC (“ABG TapouT”), the original owner of the TapouT brand IP, represents the biggest WWE stars, produces reality TV shows, Pod Casts, and other media and TapouT is the official training partner of the WWE. TapouT License Agreement We have the rights under a License Agreement to North, Central and South America, US military bases, Australia, South Africa and the EU. The beverages covered by the License Agreement include sports drinks, energy drinks, energy shots, water, protein, teas, etc. We pay a 6% royalty of net sales or a guaranteed minimum royalty of $540,000 whichever is greater. This agreement goes through December 31, 2022. We have the right to use the TapouT brand to market, advertise and promote for sale our TapouT beverages, and TapouT agrees to provide us with certain materials which we can use in connection with our advertising and promotion. We are required to spend 2% of our net sales on marketing expenditures such as expenses attributable to trade shows, catalogs and websites, point-of-sale advertising featuring TapouT products and other retail advertising. TapouT has certain relationships with certain celebrity and athletic talent and, if requested, it agrees to use its reasonable efforts to request the celebrities and/or athletes to be present at autograph signings, tradeshows and other similar events. Manufacturing and Distribution SBG is responsible for the manufacturing of the TapouT Performance Beverage and SALT Naturally Flavored Tequila. Although we are responsible for manufacturing TapouT and SALT, we do not directly manufacture these products, but instead we outsource such manufacturing to third party bottlers and contract packers. 5 We purchase concentrates, flavors, dietary ingredients, cans, bottles, caps, labels, and other ingredients for our beverage products from our suppliers, which are delivered to our various third-party bottlers and co-packers. In some cases, certain common supplies may be purchased by our various third-party bottlers and co-packers. Depending on the product, the third-party bottlers or packers add filtered water and/or other ingredients (including dietary ingredients) for the manufacture and packaging of the finished products into our approved containers in accordance with our formulas. The Copa di Vino and Pulpoloco brands are manufactured at our manufacturing facility in The Dalles, Oregon. Co-Packing Arrangements Our TapouT products are manufactured by various third-party bottlers and co-packers situated throughout the United States under separate arrangements with each party. Our co-packaging arrangements are generally on a month-to-month basis or are terminable upon request and do not typically obligate us to produce any minimum quantities of products within specified periods. In some instances, subject to agreement, certain equipment may be purchased by us and installed at the facilities of our co-packers to enable them to produce certain of our products. In general, such equipment remains our property and is returned to us upon termination of the packing arrangements with such co-packers, unless we are reimbursed by the co-packer via a per-case credit over a predetermined number of cases that are produced at the facilities concerned. We are generally responsible for arranging for the purchase and delivery to our third-party bottlers and co-packers the containers in which our beverage products are packaged. We pack some of our products in multiple locations to enable us to produce finished goods closer to the markets where they are sold, with the objective of reducing freight costs as well as transportation-related product damages. As distribution volumes increase, we will continue to source additional packing arrangements closer to such markets to further reduce logistics costs. Our ability to estimate demand for our products is imprecise, particularly with new products, and may be less precise during periods of rapid growth, particularly in new markets. If we materially underestimate demand for our products and/or are unable to secure sufficient ingredients or raw materials including, but not limited to aluminum cans, PET plastic bottles, labels, flavors, juice concentrates, dietary ingredients, and other ingredients, and/or procure adequate packing arrangements and/or obtain adequate or timely shipment of our products, we might not be able to satisfy demand on a short-term basis. Our production arrangements are generally of short duration or are terminable upon our request. For some of our products, there may be limited co-packing facilities in our domestic market with adequate capacity and/or suitable equipment to package our products. We believe a short disruption or delay in production would not significantly affect our revenues; however, as alternative co-packing facilities in our domestic market with adequate long-term capacity may not be available for such products, either at commercially reasonable rates and/or within a reasonably short time period, if at all, a lengthy disruption or delay in production of any of such products could significantly affect our revenues. We continue to actively seek alternative and/or additional advantageously located co-packing facilities with adequate capacity and capability for the production of our various products to minimize transportation costs and transportation-related damages as well as to create redundancies to mitigate the risk of a disruption in production and/or importation. Distribution In the United States we operate within what is referred to as the “Three Tier Distribution System” where manufacturers do not typically sell directly to retailers, but instead contract for local and regional distribution with independent distributors. These distributors typically have geographic rights to distribute major beverage brands such as Budweiser, Pepsi, and Red Bull and call on every store in a given area such as major cities or regions. However, due to increasing costs over the last 20 years for these distributors to call on every store (sometimes referred to in the industry as “DSD” or direct store delivery), there has been a great deal of consolidation which has limited the options for new brands to gain distribution and retail shelf presence. Our management team believes that their history of success and experience working within this channel will allow SBG to be successful in building a strong network of these distributors. In addition to working with these independent distributors, we also have distribution arrangements with national retail accounts to distribute some of our products directly through their warehouse operations. 6 E-commerce “Qplash” is the consumer-packaged goods retail division of Splash Beverage Group and our first entry point into the growing e-commerce channel. The division sells beverages & groceries online through qplash.com, and third-party storefronts such as Amazon.com and Walmart.com. Inside of the division, there are two primary customer groups, B-to-B retail businesses, which in turn offer the products to their customers, and B-to-C, selling direct to end users. Qplash sells to retailers through www.qplash.com. These retailers, generally in the high-end apparel space, are working to enhance their customers in store shopping experience. They offer high end beverages to for customers to enjoy while shopping or to take on the go. This program allows businesses to control inventory, order with payment terms, and the convenience of delivery directly to each store. To the end user, we ship orders from our warehouses direct to their home or office. We offer competitive pricing, an easy & convenient transactional process, and a wide selection of products. Consumers can order from qplash.com, from our storefront on Amazon, or other third-party platforms. Amazon is a valuable revenue source as it allows us to access their loyal customer base and a high conversion rate as they are comfortable navigating and checking out. Currently we offer over 350 listings and ship from Ontario, California. Later this year, we plan to activate additional warehouse partnerships, thus reducing shipping costs and the transit times while gaining access to several thousand additional items. Our objective is to offer 1,500 items by the spring of 2021. Additionally, this vertically integrated platform affords SBG a unique opportunity to incubate, accelerate and ultimately migrate brands to traditional distribution. Canfield Medical Supply, Inc. Canfield Medical Supply, Inc. is a provider of home medical equipment, supplies and services (which relate to the equipment sales) in Ohio’s Mahoning Valley, Western Pennsylvania and Northern West Virginia, with an emphasis on providing for patients with mobility-related limitations who have had strokes, hip or knee replacements, and other surgeries after they are discharged from a hospital or rehab center. 7 Copa di Vino Wine Group, Inc. Products : Copa Di Vino is the leading producer of premium wine by the glass in the United States. Founder and owner, James Martin discovered the concept on a bullet train adventure through the south of France. A year later he brought the technology to his hometown of The Dalles, Oregon located in the majestic Columbia River Gorge. His passion for wine led to Copa Di Vino – wine in a glass – a ready to drink wine glass that could go anywhere without the need for a bottle, corkscrew or glass. Just open and enjoy! Wine is no longer trapped in the bottle! We currently have seven varietals of wine: Pinot Grigio, Riesling, Merlot, Chardonnay, White Zinfandel, Moscato, and Cabernet Sauvignon. Pulpoloco is a sangria which is encased in a 100% biodegradable can made from paper.