SEC Company Response from SPLASH BEVERAGE GROUP, INC. (EDVA) (CIK 0001553788) (EDVA) — Oct 2, 2012
SPLASH BEVERAGE GROUP, INC. (EDVA) (CIK 0001553788)
Date: Oct. 2, 2012 · CIK: 0001553788 · Accession: 0001437904-12-000078
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 333-182639
Referenced dates: August 8, 2012
Letter
Division of Corporation Finance United States Securities and Exchange Commission Canfield Medical Supply, Inc. Registration Statement on Form S-1 Filed July 12, 2012 File No. 333-182639
Dear Mr. Reynolds:
This letter will serve as a response and/or explanation with respect to the comments in your letter dated August 8, 2012 (the "Comment Letter") regarding Canfield Medical Supply, Inc. ("Canfield" or the "Company"). The entire text of the comments contained in your comment letter has been reproduced in this letter for ease of reference. A response to each comment is set forth immediately below the text of the comment.
General
1.
Since you appear to qualify as an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, please disclose on your prospectus cover page that you are an emerging growth company, and revise your prospectus to:
•
Describe how and when a company may lose emerging growth company status;
•
Briefly describe the various exemptions that are available to you, such as exemptions from Section 404(b) of the Sarbanes-Oxley Act of 2002 and Section 14A(a) and (b) of the Securities Exchange Act of 1934; and
•
State your election under Section 107(b) of the JOBS Act:
o
If you have elected to opt out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b), include a statement that the election is irrevocable; or
o
If you have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1), provide a risk factor explaining that this election allows you to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. Please state in your risk factor that, as a result of this election, your financial statements may not be comparable to companies that comply with public company effective dates. Include a similar statement in your critical accounting policy disclosures.
In addition, consider describing the extent to which any of these exemptions are available to you as a Smaller Reporting Company.
Please supplementally provide us with any written materials that you or anyone authorized to do so on your behalf provides in reliance on Section 5(d) of the Securities Act to potential investors that are qualified institutional buyers or institutional accredited investors. Similarly, please supplementally provide us with any research reports about you that are published or distributed in reliance upon Section 2(a)(3) of the Securities Act of 1933 added by Section 105(a) of the Jumpstart Our Business Startups Act by any broker or dealer that is participating or will participate in your offering.
We have added the JOBS disclosure on the cover page and we have added the other requested information in the risk factors on pages 18 through 20. We have also added the requested statement in the critical accounting policy disclosures on pages 57-58. Our disclosure includes a statement regarding the extent to which these exemptions are available as a Smaller Reporting Company.
The Company will not be providing any written materials to anyone in reliance on Section 5(d), and no research reports about the Company have been published or distributed in reliance on Section 2(a)(3) and there are no broker dealers who will participate in the offering.
2.
Please provide supplemental support for your factual assertions. Clearly mark the supplemental materials to highlight the specific information you believe supports the statement referenced. For example only, we note the following statements:
•
“[O]n average, it costs $50 per day to create an in home hospital room versus approximately $1,500 per day for in-patient hospital care,” page 30;
•
“The home healthcare market, which is estimated to have generated revenues of approximately $66 billion in the United States in 2011” page 30;
•
“’[A]nd is expected to grow at a compounded annual growth rate of 5% from 2011 through 2016,” page 30;
•
“Our industry is highly fragmented with no player in the industry accounting for more than 3% of industry revenue,” page 30;
•
According to the U.S. Census Bureau projection, the U.S. population aged 65 and over…,” page 30;
•
“Between 2010 and 2020, the nation’s healthcare spending is projected to increase to $4.6 trillion…,”
•
“These improvements have allowed for earlier patient discharge and have lengthened the portion of the recuperation period…,” page 30;
•
“Many patients prefer the convenience and typical cost-advantages of home healthcare…,” page 31;
•
“Mahoning Valley with an estimated population of 1-1.25 million persons,” page 31;
•
“The Medicare regulations have established a 30% target for small supplier participation, which improves our chances of winning small bids from Medicare,” page 31;
•
As competitive bidding is phased in… we will experience a reduction in reimbursement, as will most if not all other DMEPOS suppliers in the impacted areas, page 36.
We have attached support for the 5th, 9th and 10th bullet points in your letter, and we have revised or deleted the remaining items including several other items which involved factual assertions.
Fee Table
3.
We note you indicate that the company is calculating the fee pursuant to Rule 457(o). Given that the company is registering a given number of securities for the company and for the selling shareholders of the company it appears that the company should rely on 457(a) as it should be registering a specific amount of securities. Please revise or advise as appropriate.
We have revised the Fee Table to indicate that the Company is relying on Rule 457(a).
Prospectus Cover Page
4. Please confirm that your prospectus cover page will be printed on a single page.
We confirm that the final prospectus cover page will be printed on a single page.
5.
Please revise to highlight your cross reference to your Risk Factors with boldface type. See Item 501(b)(5) of Regulation S-K.
The cross reference to Risk Factors has been highlighted in boldface type.
6.
Please revise the offering proceeds table to indicate the amount of proceeds to the selling shareholders assuming a public offering price of $0.25.
The offering proceeds table has been revised as requested.
7.
Please supplementally confirm to us that the selling shareholders cannot commence their offering until the offering by the company has closed and the unsold company shares have been deregistered.
We confirm that the selling shareholders cannot commence their offering until the offering by the Company has closed and the unsold company shares have been deregistered.
Table of Contents
8.
Please revise to include disclosure of the Dealer Delivery Obligations as required by Item 502(b) of Regulation S-K or advise us why you believe the disclosure is not required.
We have added the disclosure of the Dealer Delivery Obligations just below the Table of Contents.
Summary of Prospectus, page 5
9.
We note your statement that “we provide home medical equipment, supplies and services to patients in… Northeastern Ohio, Western Pennsylvania and Northern West Virginia.” Please revise to provide more detail regarding the medical equipment, supplies and services provided by the company.
We have added additional disclosure in the Summary regarding the equipment, supplies and services provided by the Company.
10. We note your investor suitability requirements section on page 6 contains blanks for locations where your offering is to be made. With your next amendment, please revise to add this information to your prospectus. See Rule 430A of Regulation C.
We have added the additional states.
Risk Factors, page 5
11.
Please substantially revise your risk factor subheadings to concisely state the specific material risk each risk factor presents to your company or investors in the offering. Your subheadings should be revised so that they adequately describe the specific risk being addressed.
We have substantially revised the risk factor subheadings to more specifically describe the risks being addressed.
12.
We note that your registered certified public accountant has expressed substantial doubt about your ability to continue as a going concern. Please add a risk factor which describes your going concern opinion and place it at the beginning of your risk factors. Please add similar disclosure to your MD&A.
We have added a new risk factor regarding the going concern issue and placed it first. We also added this to the MD & A just before the Plan of Operations section.
We have a history of limited operations, page 7
13.
We note your statement that “our business was adversely affected by a January 2011 change in Medicare’s reimbursement policy for power wheel chairs when Medicare quit reimbursing the purchase of power wheel chairs and started only reimbursing the rental of such wheel chairs.” Please revise to clarify the percentage of the company’s revenues derived from the sale of power wheel chairs for the fiscal year ended December 31, 2010.
We have added the percentage of the company’s revenues derived from the sale of power wheelchairs.
We may need to raise additional funds, and these funds may not be available when we need them, page 8
14.
We note the disclosure that “we believe that we can operate near breakeven for the fiscal year ending December 31, 2013, because we are making extra efforts to increase our revenues by attempting to increase private pay business and we have a relatively low overhead which we can control.” We also note your statement that “should we be awarded one or more competitive bids by Medicare we are confident that our current facility in Canfield, Ohio will be sufficient to handle any additional business that may result as we are currently operating well below our capacity for providing service.” Please revise to delete the mitigating language from this risk factor. You may address these factors in another location in your prospectus. Please revise your risk factor section so it does not contain mitigating language. We may have further comment.
We have deleted the mitigating language from this risk factor and from the remaining risk factors.
15.
We note your statement that “we believe that we can control our expenses which are closely tied to our level of business activity so that cash generated from operations is expected to be sufficient for the foreseeable future to fund our operations at our currently forecasted levels.” We note that the company has used cash in its operating activities for the fiscal year ended December 31, 2011 and for the three months ended March 31, 2012. We also note that as of March 31, 2012 the company had a working capital deficit of $108,427. It appears to us that the company will need to raise funds to continue operations. Please revise your disclosure as appropriate. We may have further comment.
We have revised the language in this risk factor to address this comment.
16.
Please revise your disclosure to indicate that the company had a working capital deficit of $108,427 as of March 31, 2012.
We have added the amount of the working capital deficit as of June 30, 2012 in this risk factor.
Because we are small and do not have much capital…, page 8
17.
Please revise this risk factor disclosure to clarify the risk to the company or investors being addressed.
We have revised the disclosure in this risk factor to clarify the risk.
18.
We note your disclosure on page 31 that you have recently completed the second round of bidding for additional Ohio markets. This appears inconsistent with this risk factor which states that you do not anticipate expansion. Please revise for consistency.
We have revised the disclosure in this risk factor to explain this inconsistency.
Expanded Government Auditing and Oversight of Medicare and Medicaid Suppliers …, page 13
19.
Please revise to indicate the number of audits that the company has been subject to during the fiscal year ended December 31, 2011 and the three months ended March 31, 2012. Also indicate the dollar amount of company supplies or services in question in connection with the audits.
We have added the number of audits and the dollar amount in question.
Our Directors Have the Ability to Significantly Influence any Matters…, page 17
20.
Please revise to identify the directors who beneficially own in the aggregate 90.5% of the company’s common stock. Please also revise to clarify all of their positions held with the company.
We have identified the directors who own the 90.5% and clarified their positions.
Use of Proceeds, page 10
21.
Please revise your second paragraph to clarify that the total proceeds from the offering assuming all shares are sold is $300,000.
We have made the correction in the second paragraph.
22.
We note your disclosure that a substantial portion of the proceeds from the sale of your shares will be used for general working capital. Please revise to provide more detailed disclosure of the principal purposes for which the net proceeds are intended to be used and the approximate amount intended to be used for each such purpose. Please revise to describe the amounts of proceeds you intend to allocate to the various uses presented in footnote (3) to your use of proceeds table.
We have added more detail on the purposes for which the proceeds are intended to be used in the footnotes.
23.
We note your statement on page 20 that you will have the discretion to apply the available net proceeds of the offering to various indicated uses. Please revise to specifically describe the potential contingencies regarding your use of proceeds or remove the reference to the use of discretion. Please note that you may reserve the right to change the use of proceeds, provided that such reservation is due to certain contingencies that are discussed specifically and the alternatives to such uses are indicated. See Instruction 7 to Item 504 of Regulation S-K.
We have removed the statement regarding discretion and tried to more specifically describe what the Company plans to do.
Selling Shareholders, page 22
24.
Please revise to include a column indicating the amount of securities to be offered by the selling shareholders.
We have added the column indicating the amount of securities to be offered by the selling shareholders.
Plan of Distribution, page 23
25.
We note your assertion that Michael West and Stephen West meet the requirements of the safe harbor provided under Rule 3a4-1 under the Securities Exchange Act of 1934. We also note your assertion that these individuals will meet all of the elements of Rule 3a4-1(a)(4)(ii). Please add a description the facts upon which you are relying in order to make this assertion.
We have aded the description of the facts upon which we are relying for the assertion that they meet the safe harbor requirements.
26.
We note your reference to three individuals meeting all of the elements of Rule 3a4-1(a)(4)(ii). We also note that you only identify Michael West and Stephen West as officers relying on the safe harbor from broker dealer registration. Please revise or advise.
We corrected the typo regarding 3 persons.
27.
We note your statement that “[t]he shares will be sold at the fixed price of $0.25 per Share until the completion of this offering … After the closing of this offering, our selling shareholders may sell
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filename1.htm
Converted by EDGARwiz
600 17th Street, Suite 2700, Denver, Colorado 80202
Main: (720) 889-2211 Fax: (720) 889-2222
October 2, 2012
John Reynolds, Assistant Director
Division of Corporation Finance
United States Securities and Exchange Commission
100 F Street
Washington, DC 20549
Re:
Canfield Medical Supply, Inc.
Registration Statement on Form S-1
Filed July 12, 2012
File No. 333-182639
Dear Mr. Reynolds:
This letter will serve as a response and/or explanation with respect to the comments in your letter dated August 8, 2012 (the "Comment Letter") regarding Canfield Medical Supply, Inc. ("Canfield" or the "Company"). The entire text of the comments contained in your comment letter has been reproduced in this letter for ease of reference. A response to each comment is set forth immediately below the text of the comment.
General
1.
Since you appear to qualify as an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, please disclose on your prospectus cover page that you are an emerging growth company, and revise your prospectus to:
•
Describe how and when a company may lose emerging growth company status;
•
Briefly describe the various exemptions that are available to you, such as exemptions from Section 404(b) of the Sarbanes-Oxley Act of 2002 and Section 14A(a) and (b) of the Securities Exchange Act of 1934; and
•
State your election under Section 107(b) of the JOBS Act:
o
If you have elected to opt out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b), include a statement that the election is irrevocable; or
o
If you have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1), provide a risk factor explaining that this election allows you to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. Please state in your risk factor that, as a result of this election, your financial statements may not be comparable to companies that comply with public company effective dates. Include a similar statement in your critical accounting policy disclosures.
In addition, consider describing the extent to which any of these exemptions are available to you as a Smaller Reporting Company.
Please supplementally provide us with any written materials that you or anyone authorized to do so on your behalf provides in reliance on Section 5(d) of the Securities Act to potential investors that are qualified institutional buyers or institutional accredited investors. Similarly, please supplementally provide us with any research reports about you that are published or distributed in reliance upon Section 2(a)(3) of the Securities Act of 1933 added by Section 105(a) of the Jumpstart Our Business Startups Act by any broker or dealer that is participating or will participate in your offering.
We have added the JOBS disclosure on the cover page and we have added the other requested information in the risk factors on pages 18 through 20. We have also added the requested statement in the critical accounting policy disclosures on pages 57-58. Our disclosure includes a statement regarding the extent to which these exemptions are available as a Smaller Reporting Company.
The Company will not be providing any written materials to anyone in reliance on Section 5(d), and no research reports about the Company have been published or distributed in reliance on Section 2(a)(3) and there are no broker dealers who will participate in the offering.
2.
Please provide supplemental support for your factual assertions. Clearly mark the supplemental materials to highlight the specific information you believe supports the statement referenced. For example only, we note the following statements:
•
“[O]n average, it costs $50 per day to create an in home hospital room versus approximately $1,500 per day for in-patient hospital care,” page 30;
•
“The home healthcare market, which is estimated to have generated revenues of approximately $66 billion in the United States in 2011” page 30;
•
“’[A]nd is expected to grow at a compounded annual growth rate of 5% from 2011 through 2016,” page 30;
•
“Our industry is highly fragmented with no player in the industry accounting for more than 3% of industry revenue,” page 30;
•
According to the U.S. Census Bureau projection, the U.S. population aged 65 and over…,” page 30;
•
“Between 2010 and 2020, the nation’s healthcare spending is projected to increase to $4.6 trillion…,”
•
“These improvements have allowed for earlier patient discharge and have lengthened the portion of the recuperation period…,” page 30;
•
“Many patients prefer the convenience and typical cost-advantages of home healthcare…,” page 31;
•
“Mahoning Valley with an estimated population of 1-1.25 million persons,” page 31;
•
“The Medicare regulations have established a 30% target for small supplier participation, which improves our chances of winning small bids from Medicare,” page 31;
•
As competitive bidding is phased in… we will experience a reduction in reimbursement, as will most if not all other DMEPOS suppliers in the impacted areas, page 36.
We have attached support for the 5th, 9th and 10th bullet points in your letter, and we have revised or deleted the remaining items including several other items which involved factual assertions.
Fee Table
3.
We note you indicate that the company is calculating the fee pursuant to Rule 457(o). Given that the company is registering a given number of securities for the company and for the selling shareholders of the company it appears that the company should rely on 457(a) as it should be registering a specific amount of securities. Please revise or advise as appropriate.
We have revised the Fee Table to indicate that the Company is relying on Rule 457(a).
Prospectus Cover Page
4. Please confirm that your prospectus cover page will be printed on a single page.
We confirm that the final prospectus cover page will be printed on a single page.
5.
Please revise to highlight your cross reference to your Risk Factors with boldface type. See Item 501(b)(5) of Regulation S-K.
The cross reference to Risk Factors has been highlighted in boldface type.
6.
Please revise the offering proceeds table to indicate the amount of proceeds to the selling shareholders assuming a public offering price of $0.25.
The offering proceeds table has been revised as requested.
7.
Please supplementally confirm to us that the selling shareholders cannot commence their offering until the offering by the company has closed and the unsold company shares have been deregistered.
We confirm that the selling shareholders cannot commence their offering until the offering by the Company has closed and the unsold company shares have been deregistered.
Table of Contents
8.
Please revise to include disclosure of the Dealer Delivery Obligations as required by Item 502(b) of Regulation S-K or advise us why you believe the disclosure is not required.
We have added the disclosure of the Dealer Delivery Obligations just below the Table of Contents.
Summary of Prospectus, page 5
9.
We note your statement that “we provide home medical equipment, supplies and services to patients in… Northeastern Ohio, Western Pennsylvania and Northern West Virginia.” Please revise to provide more detail regarding the medical equipment, supplies and services provided by the company.
We have added additional disclosure in the Summary regarding the equipment, supplies and services provided by the Company.
10. We note your investor suitability requirements section on page 6 contains blanks for locations where your offering is to be made. With your next amendment, please revise to add this information to your prospectus. See Rule 430A of Regulation C.
We have added the additional states.
Risk Factors, page 5
11.
Please substantially revise your risk factor subheadings to concisely state the specific material risk each risk factor presents to your company or investors in the offering. Your subheadings should be revised so that they adequately describe the specific risk being addressed.
We have substantially revised the risk factor subheadings to more specifically describe the risks being addressed.
12.
We note that your registered certified public accountant has expressed substantial doubt about your ability to continue as a going concern. Please add a risk factor which describes your going concern opinion and place it at the beginning of your risk factors. Please add similar disclosure to your MD&A.
We have added a new risk factor regarding the going concern issue and placed it first. We also added this to the MD & A just before the Plan of Operations section.
We have a history of limited operations, page 7
13.
We note your statement that “our business was adversely affected by a January 2011 change in Medicare’s reimbursement policy for power wheel chairs when Medicare quit reimbursing the purchase of power wheel chairs and started only reimbursing the rental of such wheel chairs.” Please revise to clarify the percentage of the company’s revenues derived from the sale of power wheel chairs for the fiscal year ended December 31, 2010.
We have added the percentage of the company’s revenues derived from the sale of power wheelchairs.
We may need to raise additional funds, and these funds may not be available when we need them, page 8
14.
We note the disclosure that “we believe that we can operate near breakeven for the fiscal year ending December 31, 2013, because we are making extra efforts to increase our revenues by attempting to increase private pay business and we have a relatively low overhead which we can control.” We also note your statement that “should we be awarded one or more competitive bids by Medicare we are confident that our current facility in Canfield, Ohio will be sufficient to handle any additional business that may result as we are currently operating well below our capacity for providing service.” Please revise to delete the mitigating language from this risk factor. You may address these factors in another location in your prospectus. Please revise your risk factor section so it does not contain mitigating language. We may have further comment.
We have deleted the mitigating language from this risk factor and from the remaining risk factors.
15.
We note your statement that “we believe that we can control our expenses which are closely tied to our level of business activity so that cash generated from operations is expected to be sufficient for the foreseeable future to fund our operations at our currently forecasted levels.” We note that the company has used cash in its operating activities for the fiscal year ended December 31, 2011 and for the three months ended March 31, 2012. We also note that as of March 31, 2012 the company had a working capital deficit of $108,427. It appears to us that the company will need to raise funds to continue operations. Please revise your disclosure as appropriate. We may have further comment.
We have revised the language in this risk factor to address this comment.
16.
Please revise your disclosure to indicate that the company had a working capital deficit of $108,427 as of March 31, 2012.
We have added the amount of the working capital deficit as of June 30, 2012 in this risk factor.
Because we are small and do not have much capital…, page 8
17.
Please revise this risk factor disclosure to clarify the risk to the company or investors being addressed.
We have revised the disclosure in this risk factor to clarify the risk.
18.
We note your disclosure on page 31 that you have recently completed the second round of bidding for additional Ohio markets. This appears inconsistent with this risk factor which states that you do not anticipate expansion. Please revise for consistency.
We have revised the disclosure in this risk factor to explain this inconsistency.
Expanded Government Auditing and Oversight of Medicare and Medicaid Suppliers …, page 13
19.
Please revise to indicate the number of audits that the company has been subject to during the fiscal year ended December 31, 2011 and the three months ended March 31, 2012. Also indicate the dollar amount of company supplies or services in question in connection with the audits.
We have added the number of audits and the dollar amount in question.
Our Directors Have the Ability to Significantly Influence any Matters…, page 17
20.
Please revise to identify the directors who beneficially own in the aggregate 90.5% of the company’s common stock. Please also revise to clarify all of their positions held with the company.
We have identified the directors who own the 90.5% and clarified their positions.
Use of Proceeds, page 10
21.
Please revise your second paragraph to clarify that the total proceeds from the offering assuming all shares are sold is $300,000.
We have made the correction in the second paragraph.
22.
We note your disclosure that a substantial portion of the proceeds from the sale of your shares will be used for general working capital. Please revise to provide more detailed disclosure of the principal purposes for which the net proceeds are intended to be used and the approximate amount intended to be used for each such purpose. Please revise to describe the amounts of proceeds you intend to allocate to the various uses presented in footnote (3) to your use of proceeds table.
We have added more detail on the purposes for which the proceeds are intended to be used in the footnotes.
23.
We note your statement on page 20 that you will have the discretion to apply the available net proceeds of the offering to various indicated uses. Please revise to specifically describe the potential contingencies regarding your use of proceeds or remove the reference to the use of discretion. Please note that you may reserve the right to change the use of proceeds, provided that such reservation is due to certain contingencies that are discussed specifically and the alternatives to such uses are indicated. See Instruction 7 to Item 504 of Regulation S-K.
We have removed the statement regarding discretion and tried to more specifically describe what the Company plans to do.
Selling Shareholders, page 22
24.
Please revise to include a column indicating the amount of securities to be offered by the selling shareholders.
We have added the column indicating the amount of securities to be offered by the selling shareholders.
Plan of Distribution, page 23
25.
We note your assertion that Michael West and Stephen West meet the requirements of the safe harbor provided under Rule 3a4-1 under the Securities Exchange Act of 1934. We also note your assertion that these individuals will meet all of the elements of Rule 3a4-1(a)(4)(ii). Please add a description the facts upon which you are relying in order to make this assertion.
We have aded the description of the facts upon which we are relying for the assertion that they meet the safe harbor requirements.
26.
We note your reference to three individuals meeting all of the elements of Rule 3a4-1(a)(4)(ii). We also note that you only identify Michael West and Stephen West as officers relying on the safe harbor from broker dealer registration. Please revise or advise.
We corrected the typo regarding 3 persons.
27.
We note your statement that “[t]he shares will be sold at the fixed price of $0.25 per Share until the completion of this offering … After the closing of this offering, our selling shareholders may sell