Endovia Health Sciences, Inc. 10-K

Item 1. Business. Company Overview Splash is a portfolio company managing multiple brands across several growth segments within the consumer beverage industry. Splash has built organizational capabilities and an infrastructure enabling it to incubate and/or acquire brands with the intention of efficiently accelerating them to higher volumes. The management team has proven capabilities in building consumer franchises and marketing and distributing multiple brands of beverages within the non-alcoholic and alcoholic segments. Manufacturing is typically outsourced to third party co-packers and distillers, or in select cases for a brand such as Copa Di Vino wines, performed within our own facility in Oregon. We believe the distribution landscape in the beverage industry is changing rapidly as tech-enabled e-commerce business models are thriving. Direct to consumer, office or home solutions are projected to continue to gain traction in the future. To address this opportunity Splash continues to shape its operating model to be vertically integrated building an e-commerce platform, Qplash, which purchases local and regional brands for developing a direct line of sales to small retail stores. Splash’s wholly owned subsidiary, Splash Beverage Group II, Inc. was originally 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). Splash has license rights to the TapouT Performance brand in North America (Including US Territories and Military Bases), United Kingdom, Brazil, South Africa, Scandinavia, Peru, Colombia, Chile and Guatemala. In addition, Splash has a joint venture with SALT Naturally Flavored Tequila, Copa Di Vino wines and Pulpoloco, sangrias that comes in a biodegradable can. The Company leadership understand the importance of infusing beverage brands with strong pop culture and lifestyle elements which drives trial, belief and, most importantly, repeat purchases. 2 The management team led by Robert Nistico has over 28 years of experience in all levels of the three-tier distribution system used in the beverage industry working on brands such as Red Bull and companies such as Gallo Winery and RNCC Texas. The President & CMO, Bill Meissner, has led major beverage brands as Sparkling Ice, Fuze, Sweet Leaf Tea and Jones Soda. The CFO, Ron Wall, has over 25 years of experience in the alcohol beverage industry with Diageo and William Grant & Sons. The Senior Vice President of Sales, James Allred, has 25+ years’ experience in the beverage industry predominately with Anheuser-Busch. Our Strategy Our strategy is to combine the traditional approach of manufacturing, distributing, and marketing of beverages, with early-stage brands that have a reasonable level of pre-existing brand awareness and market presence, or have attributes that we believe to be purely innovative. We believe this allows us to break through the clutter of numerous brand introductions and dilute risk. This philosophy is applied regardless of whether the brand is 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/or growing category capitalizing on consumer trends ● Innovation to an existing attractive category (such as flavored tequila) ● A near term clear path to profitability We believe this 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. This platform allows us to significantly reduce development expense while simultaneously increasing efficiencies for all brands in our portfolio. Our management team has over 120 years of combined experience in the beverage industry, including decades of successful brand introductions by our management team (Gallo, Red Bull, Bacardi, Diageo, Sparkling Ice, Jones Soda, FUZE Beverage, NOS Energy, SoBe Beverages, Muscle Milk, Marley Beverages), we believe our ability to break through the distribution and retail bottlenecks makes us an attractive joint venture partner to many new brand owners. Splash has the ability to fully own a brand or be flexible to engage in business ventures structured with a revenue split, or an equity position. The benefit to Splash in these shared brand ownerships is the ability to avoid the development costs for new products. This model spreads our risk over several brands, contributes to our economies of scale, and improves our relationship with distributors and reduces the overall cost of infrastructure. The Company also believe the distribution landscape in the beverage category is changing rapidly. Tech-enabled business models are thriving and direct to consumer, office or home solutions are projected to continue to gain traction as beverage alcohol regulations evolve. A core strategy for us is to build onto the early success we’re seeing with the Qplash online platform, our consumer-packaged goods retail division and our first entry point into the growing e-commerce channel. Products We currently produce, distribute and market SALT Naturally Flavored Tequila (“SALT”), a 100% agave 80 proof line of flavored tequilas, “TapouT Performance,” a line of performance beverages that complete in the hydration and energy categories, Copa Di Vino single serve wine by the glass and import Pulpoloco Sangria in 3 flavors. 3 The following is a description of these products. SALT Flavored Tequila We oversee production, distribute, and market the following flavors under the brand name SALT Naturally Flavored Tequila: ● Citrus flavor ● Berry flavor ● Chocolate flavor Vodka, rum, and brown spirits have experienced significant growth when flavors are introduced, and we expect this growth of flavors to continue, as the tequila category continues to rapidly expand. SALT is currently being distributed by Republic National Distribution Co., various Anheuser-Busch & Miller-Coors distributorships, and other distributors in multiple U.S. states. Additionally, SALT is for sale in Mexico. Several South American countries are expected to launch SALT during 2023. SALT is a business venture between the Company and SALT USA, LLC. All aspects of manufacturing, logistics, distribution and marketing are our responsibility. TapouT Performance Isotonic Sports Drinks We will produce, market, sell and distribute the following sports beverages under the brand name TapouT: ● TapouT Performance: ● TapouT Energy: Launching in 2023 4 TapouT Performance Beverages are a line of unique advanced performance beverages containing ingredients known for various functional benefits including, focus, cognition, energy, recuperative and cell regeneration which promotes better absorption of nutrients, increase hydration and cellular recovery. They are exclusively formulated with GRAS (FDA Designation “Generally Regarded As Safe”) ingredients versus controversial ingredients often used in many competitive products. TapouT Performance Beverages are all natural with a highly innovative proprietary blends designed to enhance physical and or mental performance. TapouT, formally associated with the UFC and mixed martial arts has been producing branded clothing and light equipment for over 23 years and has a high level of aided and unaided brand awareness. TapouT License Agreement We have the rights under a License Agreement with ABG TapouT (the “License Agreement”) to produce, market, sell and distribute TapouT sports beverages in North America (including US Territories and Military Bases), United Kingdom, Brazil, South Africa, Australia, Scandinavia, Peru, Colombia, Chile and Guatemala. The beverages covered by the License Agreement include sports drinks, energy drinks, energy shots, electrolyte chews, energy bars, water, protein, and teas. We pay a 6% royalty of net sales or a guaranteed minimum annual royalty of $660,000, whichever is greater. The License Agreement will expire on December 31, 2025 with a renewal option through December 31, 2028 at which time will be reviewed and renegotiated if necessary. We have the right to use the TapouT brand to market, advertise and promote for sale our TapouT beverages and branded products. As part of the alliance, Splash commits to investing 2% of sales in marketing to the TapouT Performance Brand. TapouT provides marketing collateral for advertising and promotion and has influential relationships with select celebrity and athletic talent. TapouT agrees to use reasonable efforts to request its retained celebrities and/or athletes be present at autograph signings, tradeshows and other similar events. Copa di Vino Wine Group, Inc. and Related Financing On December 24, 2020, the Company entered into an Asset Purchase Agreement with CdV, pursuant to which the Company purchased certain assets and assumed certain liabilities that comprise the CdV business for a total purchase price of $5,980,000, payable in the combination of $2,000,000 in cash, a $2,000,000 convertible promissory note to CdV and a variable number of shares of the Company’s common stock based on an attainment of revenue hurdles. In conjunction with the acquisition, the Company also entered into a Revenue Loan and Security Agreement (the “Loan and Security Agreement”) by and among the Company, Robert Nistico, additional Guarantor and each of the subsidiary guarantors from time-to-time party thereto (each a “Guarantor”, and, collectively, the “Guarantors”), and Decathlon Alpha IV, L.P. (the “Lender”). The Loan and Security Agreement provided for a revenue-based credit facility of $1,578,237 (the “Gross Amount”) with the Lender (the “Credit Facility”). 5 Copa di Vino Wine Group, Inc. Copa Di Vino is the leading producer of premium wine by the glass in the United States. The Copa-di-Vino product line is highly innovative as a ready to drink wine glass capable to go anywhere without the need for a bottle, corkscrew or glass. Through our acquisition of Copa di Vino Corporation, we are now able to offer nine varietals of wine: Pinot Grigio, Riesling, Merlot, Chardonnay, White Zinfandel, Moscato, Red Blend, Sauvignon Blanc and Cabernet Sauvignon. In addition to its wine varietals, Copa di Vino also procures Pulpoloco, a sangria which is encased in an eco-friendly fiber based can from Spain. The rights to utilize this packaging for multiple categories were conveyed to SBG in conjunction with the distribution rights. 6 E-commerce “Qplash” is a wholly owned division of Splash. It is our first entry point into the growing e-commerce channel. The division sells beverages online through www.qplash.com , and third-party storefronts such as Amazon.com. Inside of the division, there are two primary customer groups: business to business retailers, which in turn offer the products to their customers, and business to consumer, selling direct to end users. This program allows businesses to control inventory, order with payment terms, and offer the convenience of delivery directly to each store. Currently Qplash offers over 1,500 listings and have warehouses that ship from both California and Pennsylvania. Discontinued Business - Canfield Medical Supply, Inc. Canfield Medical Supply, Inc. (“CMS”) 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. CMS is a legacy segment of the business and in December 2020, management discontinued operations and the business was sold in the second Quarter of 2022. Our Competitive Strengths We believe the following competitive strengths contribute to Company’s success and differentiate us from our competitors: ● An established distribution network through global sales channels; ● A hybrid distribution model that leverages multiple routes to market, including national chains, independent local markets and regional chains, and specialty food and C-Stores ● Long-term relationships with retailers and the establishment of chains; ● Premium customer service; ● Dynamic and sustainable product offerings of natural quality and freshness with health benefits; ● A highly experienced management team; ● Strategically selected, dedicated sales professionals; ● Qplash, our e-commerce platform, which provides us an integrated distribution platform for our non-alcoholic brands; ● Ability to execute and distribute across many geographies, on behalf of our licensed brand portfolio; ● Strong brand awareness through partnerships and acquisitions of brands with pre-existing brand awareness or viewed as truly innovative; and ● Celebrity and professional athlete endorsement of our brands. 7 Manufacturing and Co-packing We are responsible for the manufacturing of Copa di Vino, TapouT Performance and SALT. The Copa di Vino product line is bottled at our manufacturing facility in The Dalles, Oregon. Pulpoloco is imported from Spain as a finished product. Although we are responsible for manufacturing TapouT Performance and SALT, we do not directly manufacture these products, but instead outsource such manufacturing to third party bottlers and contract packers. Our TapouT Performance and Salt products are manufactured in the United States and Mexico under separate arrangements with each party. Our co-packaging arrangements are terminable upon request and do not obligate us to produce any minimum quantities of products within specified periods. We purchase concentrates, flavors, dietary ingredients, cans, bottles, caps, labels, and other components and ingredients for our beverage products from our suppliers, which are delivered to our manufacturing operations and 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. Distribution We operate within what is referred to as a “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 and call on every store in a given area such as major cities or regions. Our management team has extensive experience working within this channel and believes that we will 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. Most notably, SBG executed a distribution agreement with AB-InBev, for distribution with their owned operations, AB ONE. This provides SBG very effective distribution capabilities. Employees We have 40 full-time employees, including non-officer employees and our executive officers. None of our employees are represented by a labor union. We have not experienced any work stoppages and consider our relations with our employees to be good. Listing on the NYSE American Our common stock and warrants are listed on the NYSE American exchange under the ticker symbols “SBEV” and “SBEV WT,” respectively. 8 Corporate Information Splash was originally 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) for the right to use the TapouT brand in connection with manufacturing and selling certain beverages. Splash executed a reverse merger with a fully reporting, public entity called Canfield Medical Supply, Inc. and became a wholly-owned subsidiary of Canfield Medical Supply Inc. on March 31, 2020. At the time of the merger Canfield state of incorporation was Colorado. At the time of the merger Canfield’s common stock was quoted on the OTCQB. On July 31, 2021, we changed our name from Canfield Medical Supply, Inc. to Splash Beverage Group, Inc. On June 11, 2021, our common stock and warrants to purchase common stock began trading on the NYSE American under the symbols “SBEV” and SBEV WT,” respectively On November 8, 2021, we changed our state of incorporation from Colorado to Nevada. Our principal offices are located at 1314 E. Las Olas Blvd, Suite 221, Fort Lauderdale, Florida 33301. Our main telephone number is (954) 745-5815. Our website address is www.splashbeveragegroup.com . We have not incorporated by reference into this Annual Report on Form 10-K the information that can be assessed through our website and you should not consider it to be part of this Annual Report on Form 10-K.