U.S. SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THEFor the quarterly period ended September 30, 2017
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THEFor the transition period from _______ to _________
Commission File No.000-55114
SPLASH BEVERAGE GROUP, INC.
| 34-1720075 | ||
| (State or other jurisdiction of incorporation or formation) | (I.R.S. employer identification number) |
| 1314 E Las Olas Blvd.Suite 221 |
| Fort Lauderdale, FL33301 |
| (Address of principal executive offices) (Zip code) |
(Address of principal executive offices)
Not Applicable
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒ Yes☒ ☐ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
☒ Yes☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of "large“large accelerated filer," "accelerated filer"” “accelerated filer,” “smaller reporting company” and "smaller reporting company"“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ | |
Non-accelerated | Smaller reporting company ☒ ☐Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Check whether the number of shares outstanding of eachregistrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the issuer's classesExchange Act after the distribution of common stock, as of the latest practicable date. securities under a plan confirmed by a court. ☐ Yes ☐ No
As of November 6, 2017,15, 2021, there were 11,277,100 shares of Common Stock issued and outstanding.outstanding.
| SPLASH BEVERAGE GROUP, INC. |
| FORM 10-Q |
| September 30, 2020 |
TABLE OF CONTENTS
| i |
ITEM 1. FINANCIAL STATEMENTS
Splash Beverage Group, Inc.
Condensed Consolidated Financial Statements.
September 30, 2021
| September 30, | December 31, | |||||||
| ASSETS | 2017 | 2016 | ||||||
| Current Assets | ||||||||
| Cash | $ | 37,281 | $ | 61,659 | ||||
| Accounts receivable | 231,010 | 206,254 | ||||||
| Inventory | 29,037 | 25,231 | ||||||
| Total Current Assets | 297,328 | 293,144 | ||||||
Property and equipment, net of accumulated depreciation of $87,184 and $76,197 | 56,155 | 62,190 | ||||||
| Total Assets | $ | 353,483 | $ | 355,334 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | 231,768 | $ | 209,069 | ||||
| Line of credit | 64,619 | 70,373 | ||||||
| Current portion of long-term debt | 10,973 | 10,918 | ||||||
| Total Current Liabilities | 307,360 | 290,360 | ||||||
| Long-term debt | 17,096 | 25,305 | ||||||
| Total Liabilities | 324,456 | 315,665 | ||||||
| Stockholders' Equity | ||||||||
| Preferred stock, no par value; 5,000,000 shares authorized; no shares | - | - | ||||||
| issued and outstanding | ||||||||
| Common stock, no par value; 100,000,000 shares authorized; | ||||||||
| 11,277,200 (September 30, 2017) and 10,927,200 (Dec. 31, 2016) shares | ||||||||
| issued and outstanding | 243,515 | 208,515 | ||||||
| Accumulated deficit | (214,488 | ) | (168,846 | ) | ||||
| Total Stockholders' Equity | 29,027 | 39,669 | ||||||
| Total Liabilities and Stockholders' Equity | $ | 353,483 | $ | 355,334 | ||||
| Splash Beverage Group, Inc. |
| Condensed Consolidated Balance Sheets |
| September 30, 2021 and December 31, 2020 |
| (Unaudited) |
| September 30, 2021 | December 31, 2020 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 8,144,171 | $ | 380,000 | ||||
| Accounts receivable, net | 811,674 | 484,858 | ||||||
| Prepaid expenses | 395,350 | 173,414 | ||||||
| Inventory. net | 1,491,073 | 798,273 | ||||||
| Other receivables | 102,838 | 90,919 | ||||||
| Assets from discontinued operations | 410,279 | 316,572 | ||||||
| Total current assets | 11,355,385 | 2,244,036 | ||||||
| Non-current assets: | ||||||||
| Deposits | $ | 324,259 | $ | 77,686 | ||||
| Goodwill | 5,672,823 | 5,672,823 | ||||||
| Investment in Salt Tequila USA, LLC | 250,000 | 250,000 | ||||||
| Right of use assets, net | 1,111,222 | 80,479 | ||||||
| Quart Vin License | 196,262 | 219,512 | ||||||
| Property and equipment, net | 561,505 | 681,352 | ||||||
| Total non-current assets | 8,116,071 | 6,981,852 | ||||||
| Total assets | $ | 19,471,456 | $ | 9,225,888 | ||||
| Liabilities and Stockholders’ Equity (Deficit) | ||||||||
| Liabilities: | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | 903,969 | $ | 1,521,818 | ||||
| Right of use liabilities - current | 313,982 | 57,478 | ||||||
| Sales tax payable | 11,688 | — | ||||||
| Due to related parties | 46,625 | 368,904 | ||||||
| Related party notes payable | 991,837 | 1,333,333 | ||||||
| Convertible loan payable | 100,000 | 100,000 | ||||||
| Notes payable, current portion | 1,638,754 | 999,736 | ||||||
| Shareholder advances | 834,500 | — | ||||||
| Accrued interest payable | 340,659 | 442,748 | ||||||
| Liabilities from discontinued operations | 410,279 | 591,642 | ||||||
| Total current liabilities | 5,592,293 | 5,415,659 | ||||||
| Long-term Liabilities: | ||||||||
| Related party notes payable - noncurrent | — | 666,667 | ||||||
| Notes payable - noncurrent | 1,148,751 | 1,240,044 | ||||||
| Liability to issue shares in APA | 1,980,000 | 1,980,000 | ||||||
| Right of use liability - noncurrent | 798,494 | 25,521 | ||||||
| Total long-term liabilities | 3,927,245 | 3,912,232 | ||||||
| Total liabilities | 9,519,538 | 9,327,891 | ||||||
| Common stock, (mezzanine shares) shares, contingently convertible to notes payable at December 31, 2020 | — | 9,248,720 | ||||||
| Stockholders’ equity (deficit): | ||||||||
| Common Stock, $par, shares authorized, and shares issued and outstanding, at September 30, 2021 and December 31, 2020, respectively | 32,619 | 21,157 | ||||||
| Additional paid in capital | 94,681,747 | 52,217,855 | ||||||
| Accumulated deficit | (84,762,448 | ) | (61,589,735 | ) | ||||
| Total stockholders’ equity (deficit) | 9,951,917 | (9,350,723 | ) | |||||
| Total liabilities, mezzanine shares and (deficit) stockholders’ equity | $ | 19,471,456 | $ | 9,225,888 | ||||
The accompanying footnotesnotes are an integral part of these unaudited condensed consolidated financial statements.
| Three months | Three months | Nine months | Nine months | |||||||||||||
| ended | ended | ended | ended | |||||||||||||
September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | |||||||||||||
| Sales (net of returns) | $ | 319,015 | $ | 236,059 | $ | 739,647 | $ | 695,697 | ||||||||
| Cost of goods sold | 148,664 | 113,572 | 343,034 | 348,686 | ||||||||||||
| Gross profit | 170,351 | 122,487 | 396,613 | 347,011 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Salaries and wages | 80,347 | 75,649 | 241,891 | 214,787 | ||||||||||||
| Professional Fees | 4,851 | 6,054 | 36,751 | 24,378 | ||||||||||||
| Depreciation | 14,421 | 17,125 | 51,720 | 40,281 | ||||||||||||
| Other selling, general and administrative | 37,664 | 35,891 | 116,009 | 101,495 | ||||||||||||
| Total operating expenses | 137,283 | 134,719 | 446,371 | 380,941 | ||||||||||||
| Income (loss) from operations | 33,068 | (12,232 | ) | (49,758 | ) | (33,930 | ) | |||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | (1,186 | ) | (1,258 | ) | (3,660 | ) | (3,156 | ) | ||||||||
| Gain on disposal of property and equipment | 3,526 | 1,636 | 7,776 | 4,063 | ||||||||||||
| 2,340 | 378 | 4,116 | 907 | |||||||||||||
| Income (loss) before provision for income taxes | 35,408 | (11,854 | ) | (45,642 | ) | (33,023 | ) | |||||||||
| Provision for income tax | - | - | - | - | ||||||||||||
| Net income (loss) | $ | 35,408 | $ | (11,854 | ) | $ | (45,642 | ) | $ | (33,023 | ) | |||||
| Net income (loss) per share (basic and fully diluted) | $ | 0.00 | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | |||||
| Weighted average number of common shares outstanding | 11,277,200 | 10,527,200 | 11,264,379 | 10,470,010 | ||||||||||||
| Splash Beverage Group, Inc. |
| Condensed Consolidated Statements of Operations |
| For the Three and Nine Months Ended September 30, 2021 and 2020 |
| (Unaudited) |
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net revenues | $ | 2,827,393 | $ | 692,974 | $ | 8,254,078 | $ | 1,217,709 | ||||||||
| Cost of goods sold | (2,007,544 | ) | (349,037 | ) | (6,011,755 | ) | (744,024 | ) | ||||||||
| Gross margin | 819,849 | 343,937 | 2,242,323 | 473,685 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Contracted services | 354,355 | 1,954,165 | 821,471 | 2,377,843 | ||||||||||||
| Salary and wages | 1,246,253 | 293,133 | 2,892,818 | 309,539 | ||||||||||||
| Salary and wages – non-cash share-based compensation | 1,315,261 | — | 3,688,453 | 590,283 | ||||||||||||
| Other general and administrative | 2,214,274 | 221,442 | 7,767,241 | 1,411,113 | ||||||||||||
| Other general and administrative – non-cash share-based compensation | 7,512,836 | — | 9,537,608 | — | ||||||||||||
| Sales and marketing | 249,100 | 38,551 | 465,705 | 85,793 | ||||||||||||
| Total operating expenses | 12,892,079 | 2,507,291 | 25,173,296 | 4,774,571 | ||||||||||||
| Loss from continuing operations | (12,072,230 | ) | (2,163,354 | ) | (22,930,973 | ) | (4,300,886 | ) | ||||||||
| Other income/(expense): | ||||||||||||||||
| Other Income | 3,632 | 16,351 | 3,632 | 16,351 | ||||||||||||
| Interest income | 527 | 16,354 | 642 | 32,710 | ||||||||||||
| Interest expense | (100,128 | ) | (23,110 | ) | (341,715 | ) | (1,958,601 | ) | ||||||||
| Gain /( loss) from debt extinguishment | (1,695 | ) | 1,521 | 95,701 | 36,483 | |||||||||||
| Total other income/(expense) | (97,664 | ) | 11,116 | (241,740 | ) | (1,873,057 | ) | |||||||||
| Provision for income taxes | — | — | — | — | ||||||||||||
| Net loss from continuing operations, net of tax | (12,169,894 | ) | (2,152,238 | ) | (23,172,713 | ) | (6,173,943 | ) | ||||||||
| Net (loss) income from discontinued operations, net of tax | (22,077 | ) | 68,132 | 218,410 | 68,132 | |||||||||||
| Net loss | $ | (12,191,971 | ) | $ | (2,084,106 | ) | $ | (22,954,303 | ) | $ | (6,105,811 | ) | ||||
| Income(loss) per share - continuing operations | ||||||||||||||||
| Basic | (0.40 | ) | (0112 | ) | (0.83 | ) | (0.34 | ) | ||||||||
| Dilutive | (0.40 | ) | (0.112 | ) | (0.83 | ) | (0.34 | ) | ||||||||
| Weighted average number of common shares outstanding - continuing operations | ||||||||||||||||
| Basic | 30,515,251 | 19,465,898 | 27,512,776 | 17,702,667 | ||||||||||||
| Dilutive | 30,515,251 | 19,465,898 | 27,512,776 | 17,702,667 | ||||||||||||
| Income(loss) per share - discontinued operations | ||||||||||||||||
| Basic | 0.00 | 0.00 | 0.01 | 0.00 | ||||||||||||
| Dilutive | 0.00 | 0.00 | 0.01 | 0.00 | ||||||||||||
| Weighted average number of common shares outstanding - discontinued operations | ||||||||||||||||
| Basic | 30,515,251 | 19,465,898 | 27,512,776 | 17,702,667 | ||||||||||||
| Dilutive | 30,515,251 | 21,410,019 | 30,809,267 | 19,001,271 | ||||||||||||
The accompanying footnotesnotes are an integral part of these unaudited condensed consolidated financial statements.
Splash Beverage Group, Inc.
Consolidated Statement of Changes in Stockholders’ Equity (Deficit)
For the Three and Nine months ended September 30, 2021 and 2020
(Unaudited)
| Nine months ended | Nine months ended | |||||||
| September 30, | September 30, | |||||||
| 2017 | 2016 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net income (loss) | $ | (45,642 | ) | $ | (33,023 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used for) operating activities: | ||||||||
| Gain on disposal of property and equipment | (7,776 | ) | (4,063 | ) | ||||
| Depreciation | 51,720 | 40,281 | ||||||
| (Increase) decrease in accounts receivable | (24,756 | ) | 15,887 | |||||
| (Increase) in inventory | (3,806 | ) | (5,252 | ) | ||||
| Decrease in accounts payable and accrued liabilities | 22,699 | 13,426 | ||||||
| Net cash provided by (used for) operating activities | (7,561 | ) | 27,256 | |||||
| Cash Flows From Investing Activities: | ||||||||
| Proceeds from sale of property and equipment | 10,290 | 4,958 | ||||||
| Purchases of property and equipment | (48,199 | ) | (43,194 | ) | ||||
| Net cash (used for) investing activities | (37,909 | ) | (38,236 | ) | ||||
| Cash Flows From Financing Activities: | ||||||||
| Net payments on line of credit | (5,754 | ) | (5,448 | ) | ||||
| Payments on long-term debt | (8,154 | ) | (6,173 | ) | ||||
| Proceeds from sales of common stock. | 35,000 | 50,000 | ||||||
| Net cash provided by financing activities | 21,092 | 38,379 | ||||||
| Net Increase (Decrease) in Cash | (24,378 | ) | 27,399 | |||||
| Cash At The Beginning Of The Period | 61,659 | 7,343 | ||||||
| Cash At The End Of The Period | $ | 37,281 | $ | 34,742 | ||||
| Schedule Of Non-Cash Investing And Financing Activities | ||||||||
| Purchase of equipment with long-term debt | $ | - | $ | 16,295 | ||||
| Supplemental Disclosure | ||||||||
| Cash paid for interest | $ | (3,660 | ) | $ | (3,156 | ) | ||
| Cash paid for income taxes | $ | - | $ | - | ||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Total stockholders’ equity (deficit), beginning balances | 12,999,888 | (1,779,516 | ) | (9,350,723 | ) | (9,756,083 | ) | |||||||||
| Common stock and additional paid-in capital | ||||||||||||||||
| Beginning balances | 85,592,443 | 34,955,643 | 52,239,012 | 22,139,424 | ||||||||||||
| Issuance of common stock for convertible debt | — | — | — | 145,579 | ||||||||||||
| Incremental beneficial conversion for preferred A | — | — | — | 240,770 | ||||||||||||
| Issuance of warrants on convertible instruments | — | 438,431 | — | 3,002,571 | ||||||||||||
| Issuance of warrants for services | 3,010,012 | — | 5,383,204 | — | ||||||||||||
| Issuance of common stock for services | 6,111,911 | 1,729,280 | 8,212,864 | 2,279,280 | ||||||||||||
| Issuance of common stock for cash | — | 1,700,321 | 19,630,565 | 1,842,887 | ||||||||||||
| Reclassification of Mezzanine shares | — | — | 9,248,720 | — | ||||||||||||
| Issuance of common stock for acquisition | — | — | — | 9,173,164 | ||||||||||||
| Ending balances | 94,714,365 | 38,823,675 | 94,714,365 | 38,823,675 | ||||||||||||
| Treasury stock | ||||||||||||||||
| Beginning balances | — | — | — | (50,000 | ) | |||||||||||
| Issuance of common stock for services | — | — | — | 50,000 | ||||||||||||
| Ending balances | — | — | — | — | ||||||||||||
| Accumulated deficit | ||||||||||||||||
| Beginning balances | (72,592,554 | ) | (36,735,159 | ) | (61,589,735 | ) | (31,845,506 | ) | ||||||||
| Incremental beneficial conversion for preferred A | — | — | — | (240,770 | ) | |||||||||||
| Issuance of warrants on convertible instruments | — | — | — | (828,903 | ) | |||||||||||
| Net loss | (12,169,894 | ) | (2,283,683 | ) | (23,172,713 | ) | (6,103,663 | ) | ||||||||
| Ending balances | (84,762,448 | ) | (39,018,842 | ) | (84,762,448 | ) | (39,018,842 | ) | ||||||||
| Net loss | (12,169,894 | ) | (2,283,683 | ) | (23,172,713 | ) | (6,103,663 | ) | ||||||||
| Total stockholders’ equity (deficit), ending balances | 9,951,917 | (195,167 | ) | 9,951,917 | (195,167 | ) | ||||||||||
The accompanying footnotesnotes are an integral part of these unaudited condensed consolidated financial statements.
| Splash Beverage Group, Inc. |
| Condensed Consolidated Statement Cash Flows |
| For the Nine Months Ended September 30, 2021 and 2020 |
| (Unaudited) |
| Nine months ended | Nine months ended | |||||||
| September 30, 2021 | September 30, 2020 | |||||||
| Net loss | $ | (23,172,713 | ) | $ | (6,105,811 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 119,847 | 26,339 | ||||||
| ROU assets, net | 86,699 | 61,341 | ||||||
| Gain from debt extinguishment | (95,701) | (36,483 | ) | |||||
| Interest on notes payable converted to common stock | — | — | ||||||
| Interest expense due to the issuance of warrants | — | — | ||||||
| Non-cash warrant expense | 5,383,204 | — | ||||||
| Share-based compensation | 8,212,864 | 2,329,280 | ||||||
| Other noncash changes | (222,317 | ) | 590,283 | |||||
| Changes in working capital items: | ||||||||
| Accounts receivable, net | (716,370 | ) | (243,369 | ) | ||||
| Inventory, net | (732,529 | ) | (269,172 | ) | ||||
| Prepaid expenses and other current assets | (168,622 | ) | (206,994 | ) | ||||
| Deposits | — | (4,174 | ) | |||||
| Accounts payable and accrued expenses | (207,570 | ) | (474,940 | ) | ||||
| Royalty payable | — | (39,000 | ) | |||||
| Accrued interest payable | (102,089 | ) | 61,530 | |||||
| Net cash used in operating activities - continuing operations | (11,615,297 | ) | (4,311,170 | ) | ||||
| Net cash used in operating activities - discontinued operations | (218,410 | ) | 28,816 | |||||
| Cash Flows from Investing Activities: | ||||||||
| Capital Expenditures | — | (9,693 | ) | |||||
| Proceeds from the sale of fixed assets | — | — | ||||||
| Investment in Salt Tequila USA, LLC | — | (150,000 | ) | |||||
| Net cash used in investing activities - continuing operations | — | (159,693 | ) | |||||
| Net cash used in investing activities - discontinued operations | — | 72,442 | ||||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from issuance of common stock | 19,630,565 | 3,574,002 | ||||||
| Cash advance from shareholder | 834,500 | 1,097,995 | ||||||
| Funds in escrow | — | (1,000,000 | ) | |||||
| Repayment of cash advance | (322,279 | ) | — | |||||
| Proceeds from issuance of debt | 928,000 | 1,470,099 | ||||||
| Principal repayment of debt | (1,384,944 | ) | — | |||||
| ROU liability, net | (87,965 | ) | (60,502 | ) | ||||
| Net cash provided by financing activities - continuing operations | 19,597,877 | 5,081,594 | ||||||
| Net cash provided by financing activities - discontinued operations | — | — | ||||||
| Net Change in Cash and Cash Equivalents | 7,764,170 | 711,989 | ||||||
| Cash and Cash Equivalents, beginning of year | 380,000 | 42,639 | ||||||
| Cash and Cash Equivalents, end of year | $ | 8,144,171 | $ | 754,628 | ||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||
| Cash paid for Interest | $ | 173,363 | $ | — | ||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities | ||||||||
| Notes payable and accrued interest converted to common stock ( shares) | — | 9,248,720 | ||||||
| Liability issued for investment in SALT Tequila USA, LLC | — | 100,000 | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
Splash Beverage Group, Inc.
Notes to the ThreeCondensed Consolidated Financial Statements
Note 1 – Business Organization and Nine Months Ended September 30, 2017 and 2016 (Unaudited)
Splash Beverage Group (“SBG” or “Splash”), f/k/a Canfield Medical Supply, Inc. (the “Company”“CMS”), was incorporated in the State of Ohio on September 3, 1992, and changed domicile to Colorado on April 18, 2012. The Company isCMS 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, 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 recapitalization.
As part of the recapitalization, previously issued shares of SBG preferred stock have been reflected as shares of common stock that were received in the Merger. These common shares have been retrospectively presented as outstanding for all periods.
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 B-to-B and B-to-C E-commerce distribution platform called Qplash, further expanding its distribution abilities and visibility.
In July 2020 the Company filed a Certificate of Amendment of Articles of Incorporation of CMS with the Secretary of State of the State of Colorado, pursuant to which the Company changed its name from CMS. to Splash Beverage Group, Inc. On July 31, 2020, we received approval from FINRA to change the Company’s name from CMS to Splash Beverage Group, Inc. Our new ticker symbol is SBEV.
On December 24, 2020, SBG consummated an Asset Purchase Agreement (the “Copa 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.
On February 2021, Management initiated a plan to divest its CMS business. As a result, the assets and operations of CMS have been retrospectively reflected as discontinued operations.
In coordination with uplisting to the NYSE on June 11, 2021 the Company consummated a 1.0 for 3.0 reverse stock split. All common stock shares stated herein have been adjusted to reflect the split.
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
These condensed consolidated financial statements include the accounts of Splash and its wholly owned subsidiaries, Holdings and Splash Mex, CMS (as discontinued operations), and Copa. All intercompany balances have been eliminated in consolidation.
Our investment in Salt Tequila USA, LLC is accounted for at cost, as the company does not have the ability to exercise significant influence.
Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America (GAAP).
The accompanying condensed consolidated financial statements have been prepared by the Companyus without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the three and nine months ended September 30, 20172021 and 20162020 have been made.
Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of AmericaGAAP have been condensed or omitted. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2016 audited financial statements. The results of operations for the periodsperiod ended September 30, 2017 and 20162021 are not necessarily indicative of the operating results for the full year.
Use of estimates
The preparation of condensed consolidated financial statements in conformity with generally accepted accounting principlesGAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosuredisclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash Equivalents and cash equivalents
We consider all highly liquid investmentssecurities with an original maturity of twelvethree months or less asto be cash equivalents.
Our cash in bank deposit accounts, at times, may exceed federally insured limits 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.$250,000. At September 30, 20172021 we had $7,403,481 over the federally insured limits.
Note 2 – Summary of Significant Accounting Policies, continued
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are carried at their estimated collectible amounts and are periodically evaluated for collectability based on past credit history with clients and other factors. We establish provisions for losses on accounts receivable on the basis of loss experience, known and inherent risk in the account balance, and current economic conditions. At September 30, 2021 and December 31, 2016,2020, our accounts receivable amounts are reflected net of allowances of $26,578 and $0, respectively.
Splash Beverage Group, Inc.
Notes to the Company has determined that no allowanceCondensed Consolidated Financial Statements
Inventory
Inventory is stated at the lower of cost or net realizable value, accounted for doubtful accounts is necessary.
Property and equipment
We record property and equipment are recorded at cost when purchased. Depreciation is recorded for property, equipment, and depreciated under straight line methodssoftware using the straight-line method over each item'sthe estimated economic useful life.
Depreciation expense totaled $44,465 and Nine Months Ended$10,750 for the three months ended September 30, 20172021 and 2016 (Unaudited)
| Schedule of property and equipment | ||||||||
| September 30, 2021 | December 31, 2020 | |||||||
| Property and equipment, at cost | 2,076,711 | 843,097 | ||||||
| Accumulated depreciation | (1,515,206 | ) | (161,745 | ) | ||||
| Property and equipment, net | 561,505 | 681,352 | ||||||
Excise taxes
The Company accountspays alcohol excise taxes based on product sales to both the Oregon Liquor Control Commission and to the U.S. Department of the Treasury, Alcohol and Tobacco Tax and Trade Bureau (TTB). The company also pays taxes to the State of Florida – Division of Alcoholic Beverages and Tobacco. The Company is liable for the taxes upon the removal of product from the Company’s warehouse on a per gallon basis. The federal tax rate is affected by a small winery tax credit provision which decreases based upon the number of gallons of wine production in a year rather than the quantity sold.
Paycheck Protection Program
The Company records Paycheck Protection Program (“PPP”) loan proceeds in accordance with Accounting Standards Codification (“ASC”) 470, Debt. Debt is extinguished when either the debtor pays the creditor or the debtor is legally released from being the primary obligor, either judicially or by the creditor. See note 11.
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Note 2 – Summary of Significant Accounting Policies, continued
Fair Value of Financial Instruments
Financial Accounting Standards (“FASB”) guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows:
| Level 1 - | Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed equities. |
| Level 2 - | Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (e.g., quoted prices of similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active). |
| Level 3 - | Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable. |
The liabilities and indebtedness presented on the consolidated financial statements approximate fair values at September 30, 2021 and December 31, 2020, consistent with recent negotiations of notes payable and due to the short duration of maturities.
Revenue Recognition
We recognize revenue under ASC 606, Revenue from Contracts with Customers (Topic 606). This guidance sets forth a five-step model which depicts the recognition of revenue in an amount that reflects what we expect to receive in exchange for the transfer of goods or services to customers.
We recognize revenue when our performance obligations under the terms of a contract with the customer are satisfied. Product sales occur once control of our products is transferred upon delivery to the customer. Revenue is measured as the amount of consideration that we expect to receive in exchange for transferring goods and is presented net of provisions for customer returns and allowances. The amount of consideration we receive and revenue we recognize varies with changes in customer incentives we offer to our customers and their customers. Sales taxes and other similar taxes are excluded from revenue.
Distribution expenses to transport our products, where applicable, and warehousing expense after manufacture are accounted for within operating expenses.
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Note 2 – Summary of Significant Accounting Policies, continued
Cost of Goods Sold
Cost of goods sold include the costs of products, packaging, transportation, warehousing, and costs associated with valuation allowances for expired, damaged or impaired inventory.
We measure stock-based awards at the grant-date fair value for employees, directors and consultants and recognizes compensation expense on a straight-line basis over the vesting period of the award. Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions, including the fair value of our common stock, and for stock options and warrants, the expected life of the option and warrant, and expected stock price volatility and exercise price. We used the Black-Scholes option pricing model to value its stock-based awards. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards. The expected life of stock options/warrants were estimated using the “simplified method,” which calculates the expected term as the midpoint between the weighted average time to vesting and the contractual maturity, we have limited historical information to develop reasonable expectations about future exercise patterns. The simplified method is based on the average of the vesting tranches and the contractual life of each grant. For stock price volatility, we use comparable public companies as a basis for its expected volatility to calculate the fair value of award. The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected life of the award. The estimation of the number of awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from the Company’s current estimates, such amounts are recognized as an adjustment in the period in which estimates are revised.
Stock-Based Compensation
We account for stock-based compensation in accordance with ASC 718, "Compensation - Stock Compensation”. Under the fair value recognition provisions, cost is measured at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period, which is generally the option vesting period. We use the Black-Scholes option pricing model to determine the fair value of stock options. We early adopted ASU 2018-07, “Improvements to Nonemployee Share-Based Payment Accounting”, which aligns accounting treatment for such awards to non-employees with the existing guidance on employee share-based compensation in ASC 718.
Income Taxes
We use the liability method of accounting for income taxes pursuant toas set forth in ASC 740.740, "Income Taxes”. Under ASC 740,the liability method, deferred taxes are provided for usingdetermined based on 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 amountsfinancial statement and tax basis of assets and liabilities and theirusing tax bases. Deferred tax assets are reduced byrates expected to be in effect during the years in which the basis differences reverse. We record a valuation allowance when init is not more likely than not that the opiniondeferred tax assets will be realized.
Company management assesses its income tax positions and records tax benefits for all years subject to examination based upon its evaluation of management, itthe facts, circumstances and information available at the reporting date. In accordance with ASC 740-10, for those tax positions where there is a greater than 50% likelihood that a tax benefit will be sustained, our policy is to record the largest amount of tax benefit that is more likely than not to be realized upon ultimate settlement with a taxing authority that some portion orhas full knowledge of all ofrelevant information.
For those income tax positions where there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit will be recognized in the deferredfinancial statements. Company management has determined that there are 0 material uncertain tax assets will not be realized. Deferred tax assetspositions at September 30, 2021 and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Note 2 – Summary of Significant Accounting Policies, continued
The net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common outstanding. Warrants, stock options, and common stock issuable upon the conversion of the Company'sCompany’s convertible debt or preferred stock (if any), are not included in the computation if the effect would be anti-dilutive.
Weighted average number of shares outstanding excludes anti-dilutive common stock equivalents, including warrants to purchase million shares of common stock for nominal consideration. The weighted average number of common shares calculation excludes 11,163,834 warrants which have been granted by our Board but have not been exercised.
Advertising
We conduct advertising for the promotion of our products. In accordance with ASC 720-35, advertising costs are charged to operations when incurred. We recorded advertising expense of $249,831and would increase$23,962 for the earnings or decrease loss per share.
Goodwill
Goodwill represents the excess of acquisition cost over the fair value of the net assets acquired and is not subject to amortization. The Company reviews goodwill annually in the fourth quarter for impairment or when circumstances indicate carrying value may exceed the fair value. This evaluation is performed at the reporting unit level. If a qualitative assessment indicates that it is more likely than not that the fair value is less than carrying value, a quantitative analysis is completed using either the income or market approach, or a combination of both. The income approach estimates fair value based on expected discounted future cash flows, while the market approach uses comparable public companies and transactions to develop metrics to be applied to historical and expected future operating results. At December 31, 2020, our management determined that an impairment charge of approximately $9.5 million, was necessary to reduce the goodwill relating to our Medical Device Segment. The impairment charge was primarily related to the net cash flow projection of that business unit.
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial instruments
Long-lived assets
The Company evaluates long-lived assets for impairment on an annual basis, when relocating or closing a facility, or when events or changes in circumstances may indicate the carrying amount of the asset group, generally an individual warehouse, may not be fully recoverable. For asset groups held and used, including warehouses to be relocated, the carrying value of the Company’s financial instruments, as reported inasset group is considered recoverable when the accompanying balance sheets, approximates fairestimated future undiscounted cash flows generated from the use and eventual disposition of the asset group exceed the respective carrying value.
Recent Accounting Pronouncements
Management does not believe that any other recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.
Note 3 – Liquidity, Capital Resources and Going Concern Considerations
At December 31, 2020, the Company ifhad liabilities in excess of assets in the carrying amount of approximately $9.4 million. During the nine-month period of 2021, the Company received approximately $19.6 million from the proceeds from the issuance common stock. These events served to mitigate the conditions that historically raised substantial doubt about the Company’s ability to continue as a long-lived asset exceeds its fair value.
Based on this analysis the Company concluded it has the ability to continue as a going concern for at least the next 12 months.
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Note 4 – Notes Payable, Related Party Notes Payable, Convertible Bridge Loans Payable, Revenue Financing Arrangements and services, geographic areasBridge Loan Payable
Notes payable are generally nonrecourse and major customers
| Interest Rate | September 30, 2021 | December 31, 2020 | ||||||||||
| Notes Payable | ||||||||||||
| In February 2014, we entered into a 12-month term loan agreement with an individual in the amount of $200,000. The note included warrants for 66,146 shares of common stock at $ per share. The warrants expired on February 28, 2017 and none were exercised at that date. The note was paid off in Q2 2021. | 15 | % | — | 150,000 | ||||||||
| In March 2014, we entered into a short-term loan agreement with an entity in the amount of $200,000. The note included warrants for 272,584 shares of common stock at $ per share. The warrants expired on February 28, 2017 and none were exercised at that date. The loan matured and remains in default. | 8 | % | 200,000 | 200,000 | ||||||||
| In May 2020, we entered into a two year loan with the SBA under the Paycheck Protection Program established by the CARES Act in the amount of $94,833. The note requires monthly payments of principal and interest starting in December 2020 and maturing in May 2021. We received 100% forgiveness in Q2 2021. See note 11. | 1 | % | — | 89,612 | ||||||||
| In June 2020, we entered into a six-month loan with an individual in the amount of $100,000. The loan matured in December 2020 with principal and interest due at maturity. The note remains in default. | 12 | % | — | 100,000 | ||||||||
| In August 2020, we entered into a nine-month loan with a company in the amount of $112,000. The loan requires 9 amortized payments of principal and interest in the amount of $12,246 with the final payment due May 2021. | 4.8 | % | — | 62,719 | ||||||||
| In September 2021, we entered into a twelve-month loan with a company in the amount of $208,000. The loan requires 12 amortized payments with the final payment due August 2022. | 4.8 | % | 208,000 | — | ||||||||
| Notes payable for license agreements due in 36 monthly payments of $10,000, interest imputed at 10%, matured in January 2021 and remains in default. | 10.0 | % | 10,000 | 59,212 | ||||||||
| In December 2020, we entered into a 56 month loan with a company in the amount of $1,578,237. The loan requires payments of 3.75% of the previous months’ revenue. | Various | 1,441,505 | 1,578,237 | |||||||||
| In April 2021, we entered into a six-month convertible note with an individual in the amount of $84,000. The note matured in October 2021. | 7 | % | 84,000 | — | ||||||||
| In April 2021, we entered into a six-month convertible note with an individual in the amount of $84,000. The note matured in October 2021. | 7 | % | 84,000 | — | ||||||||
| In May 2021, we entered into a six-month convertible note with an individual in the amount of $50,000. The note matured in October 2021. | 7 | % | 50,000 | — | ||||||||
| In May 2021, we entered into a six-month convertible note with an individual in the amount of $500,000. The note matured in October 2021. | 7 | % | 500,000 | — | ||||||||
| In May 2021, we entered into a six-month convertible note with an individual in the amount of $10,000. The note matured in October 2021. | 7 | % | 10,000 | — | ||||||||
| In May 2021, we entered into a six-month convertible note with an individual in the amount of $200,000. The note matured in October 2021. | 7 | % | 200,000 | — | ||||||||
| Total notes payable | $ | 2,794,751 | $ | 2,239,780 | ||||||||
| Less current portion | (1,638,754 | ) | (999,736 | ) | ||||||||
| Long-term notes payable | $ | 1,148,751 | $ | 1,240,044 |
Interest expense on notes payable was $82,871 and to external customers.
Interest expense on notes payable was $340,653 and the wheelchair and hospital bed rental pool, which consists of wheelchairs and hospital beds rented to customers over the shorter of the 13-month rental period mandated by Medicaid and Medicare, or the period over which the customer requires use of the wheelchair or hospital bed. At the end of the use period, the wheelchair or hospital bed is either returned to the pool to be rented to another customer, or title of the chair or bed is transferred to the customer. Depreciation is computed over the estimated useful life of the assets, ranging from 13 months to 7 years, on the straight-line basis. Depreciation expense$73,236 for the nine months ended September 30, 20172021 and 20162020, respectively. Accrued interest was $51,720 and $40,281, respectively. Accumulated depreciation totaled $87,184 and $76,197$145,445 at September 30, 2017 and December 31, 2016, respectively.
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Note 4 – Notes Payable, Related Party Notes Payable, Convertible Bridge Loans Payable, Revenue Financing Arrangements and Bridge Loan Payable, continued
| Schedule of debt | ||||||||||
| Interest Rate | September 30, 2021 | December 31, 2020 | ||||||||
| Related Parties Notes Payable | ||||||||||
| In December 2020, we entered into an 18 month loan with an individual in the amount of $2,000,000. The loan requires 18 monthly amortized payments of principal and interest in the amount of $114,444 with the final payment due June 2022. | 2.0% | 991,837 | 2,000,000 | |||||||
| Less current portion | (991,837 | ) | (1,333,333 | ) | ||||||
| Long-term notes payable | $ | — | $ | 666,667 | ||||||
Interest expense on related party notes payable was $5,995 and $0 for the three months ended September 30, 2021 and 2020, respectively. Interest expense on related party notes payable was $21,833 and $37,967 for the nine months ended September 30, 2021 and 2020, respectively. Accrued interest was $0 as of September 30, 2021.
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Note 4 – Notes Payable, Related Party Notes Payable, Convertible Bridge Loans Payable, Revenue Financing Arrangements and Bridge Loan Payable, continued
| Schedule of debt | ||||||||||
| Interest Rate | September 30, 2021 | December 31, 2020 | ||||||||
| Convertible Bridge Loans Payable | ||||||||||
| In May 2015, we entered into a 3-month term loan agreement with an individual in the amount of $100,000. The annual interest rate for this bridge loan was 32% for the first 90 days, and 4% thereafter, compounded monthly. | See left | $ | 100,000 | $ | 100,000 | |||||
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Note 4 – Notes Payable, Related Party Notes Payable, Convertible Bridge Loans Payable, Revenue Financing Arrangements and Bridge Loan Payable, continued
Interest expense on the convertible bridge loans payable was $8,000 and $8,000 for the three months ended September 30, 2021 and 2020, respectively. Interest expense on the convertible bridge loans payable was $24,000 and $109,785 for the nine months ended September 30, 2021 and 2020, respectively. Accrued interest was $195,215 at September 30, 2021.
On April 24, 2017, a note holder filed a complaint against the Company for a promissory note in default. The note holder is requesting summary judgment in the amount of $287,215. In September 2021 a summary judgement was initiated against the Company in the amount of $263,215. As of October 2021, the Company has negotiated and paid $217,500 to the plaintiff.
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Note 5 – Licensing Agreement and Royalty Payable
We have a licensing agreement with ABG TapouT, LLC (“TapouT”), providing us with licensing rights to the brand “TapouT” on energy drinks, energy shots, water, teas and sports drinks for beverages sold in the United States of America, its territories, possessions, U.S. military bases and Mexico. Under the terms of the agreement, we are required to pay a 6% royalty on net sales, as defined. In 2021 and 2020, we are required to make monthly payments of $49,500 and $45,000, respectively.
There were 0 unpaid royalties at September 30, 2021. We paid the guaranteed minimum royalty payments of $445,500 and $405,000 for the nine-months ended September 30, 2021 and 2020, which is included in general and administrative expenses.
In connection with the Copa APA, we acquired the license to certain patents from 1/4 Vin SARL (“1/4 Vin”) On February 16, 2018, the Copa di Vino entered into three separate license agreements with 1/4 Vin SARL, (1/4 Vin). 1/4 Vin has the right to license certain patents and patent applications relating to inventions, systems, and methods used in the Company’s manufacturing process. In exchange for notes payable, 1/4 Vin granted the Company a nonexclusive, royalty-bearing, non-assignable, nontransferable, terminable license which would continue until the subject equipment is no longer in service or the patents expire. Amortization is approximately $31,000 annually until the license agreement is fully amortized. The asset is being amortized over a 10-year useful life.
Note 6 – Stockholders’ Equity (Deficiency)
Common Stock
At March 31, 2020, we issued shares of common stock in exchange for services provided to us. The shares were valued at $ per share. We recognized share-based compensation expense of $, which is classified within the other general and administrative line on the Statement of Operations. At March 31, 2021, we issued shares of common stock in exchange for services provided to us. At September 30, 20172021, we issued shares of common stock in exchange for services provided to us. The shares were valued at a fair market value stock price based on the agreement date. We recognized share-based compensation expense of $6,111,911, which is classified within the other general and administrative line on the Condensed Consolidated Statement of Operations.
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Note 6 – Deficiency in Stockholders’ Equity, continued
Private Placement Memorandum (PPM)
In July 2020, the Board of Directors has determined that it is in the best interests of the Corporation and its stockholders to obtain working capital by conducting a private placement offering of shares of the common stock and 650,000 warrants to purchase common stock of the Company, $ par value per share at a purchase price of $ per share for aggregate gross proceeds of $3,070,000.
In January 2021, the Board of Directors approved a private placement offering of shares of the common stock of the Company, $ value per share at a purchase price of $ per share for aggregate gross proceeds of $4,000,000 (“PPM”). As part of the PPM, each purchaser received a warrant to purchase one share for every two shares purchased. In February 2021, we completed our PPM by issuing a total of 1,212,355 of shares and 606,179 warrants receiving gross proceeds of $4,000,771.
Stock Plans
2012 Plan
On May 2012, the Board adopted the 2012 Stock Incentive Plan (the “2012 Plan”), which provided for the grant of Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock Awards, Restricted Stock Units and Stock Appreciation Rights to eligible recipients. The total number of shares that may be issued under the 2012 plan was .
The Board previously granted options to purchase 885,897 shares of common stock, which were exercised prior to 2019. In December, 2019, the Board granted options to purchase 374,804 shares to certain employees and consultants at an exercise price of $2.20.
Concurrently with the consummation of the Merger, the outstanding options to purchase shares were cancelled and replaced with warrants to purchase 374,804 shares at an exercise price of $2.20, and the 2012 Plan was retired.
2020 Plan
On August 2020, the Board adopted the 2020 Stock Incentive Plan (the “2020 Plan”), which provides for the grant of Options, Restricted Stock Awards, Stock Appreciation Rights, Performance Units and Performance Bonuses to consultants and eligible recipients. The total number of shares that may be issued under the 2020 plan was .
At September 30, 2021, all awards have been granted under the 2020 Plan.
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Warrants/Options
The total amount of outstanding warrants/options are summarized below:
| Schedule of Warrants Activity | |
| [A] | 454,064 |
| [B] | 124,162 |
| [C] | 908,129 |
| [D] | 650,000 |
| [E] | 606,179 |
| [F] | 374,803 |
| [G] | 1,884,833 |
| [H] | 833,333 |
| [I] | 333,333 |
| [J] | 3,900,000 |
| [K] | 1,065,000 |
| [L] | 29,998 |
| Total | 11,163,834 |
[A] Warrant Issuance-Series A Convertible Preferred Stock
As an incentive to convert their Series A preferred stock, in March 2020, we issued 333,333 new warrants to the holders of our Series A preferred stock to purchase shares of SBG common stock. Concurrently with the consummation of the Merger, these warrants were exchanged for warrants to purchase 454,064 of Splash Beverage Group, Inc. shares all of which were outstanding as of September 30, 2021. These warrants have a 3-year term and expire March 2023.
[B] Warrant Issuance-Series B Convertible Preferred Stock
As part of the sale and issuance of 1,777,892 shares of our Series B Convertible Preferred Stock, we issued 888,946 warrants to purchase shares our common stock. The warrants have a 5-year term and at September 30, 2021, there are 124,162 warrants outstanding.
[C] Warrant Issuance-GMA Bridge Holdings, LLC Consulting Services
We issued 454,307 warrants to purchase shares of our common stock as part of our consulting agreement with GMA Bridge Holdings, LLC (“GMA), at December 31, 2016,2019. These warrants subsequently were exchanged for 908,615 warrants in March 2020 as an incentive for GMA to convert indebtedness and accrued interest into shares of our common stock. At September 30, 2021 all 908,615 warrants remain outstanding.
[D] We issued warrants to purchase common stock of the Company in connection with the July 2020 private placement offering of shares of common stock
[E] We issued warrants to purchase common stock of the Company in connection with the January 2021 private placement offering of shares of common stock.
[F] We issued warrants to purchase common stock, as a replacement of cancelled outstanding options concurrent with the March 2020 Merger
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
[G] In December 2020 we granted warrants to purchase common stock of the Company to employees, consultants, and directors. These warrants vest over three years
[H] In December 2020 we granted warrants to purchase common stock of the Company to our board of directors. These warrants vest over two - three years
[I] In May 2021 we granted warrants to purchase common stock of the Company to a director. These warrants vest, equally, over three years
[J] We issued warrants to purchase common stock of the Company in connection with the June 2021 underwritten public offering of 3,750,000 shares of common stock, in addition to warrants to purchase common stock of the Company to the representative underwriter.
[K] In September 2021 we granted options to purchase common stock of the Company to employees, consultants, and directors. These options vest over three years.
[L] In September 2021 we granted warrants to purchase common stock of the Company to consultants. These warrants vest over three years.
Shareholder Advances and Liability to Issue Stock and Warrants
We have multiple agreements with consultants in the amount of $834,500 to be paid by the issuance of the common stock of the company.
Note 7 – Related Parties
During the normal course of business, we incurred expenses related to services provided by our CEO or Company expenses paid by our CEO, resulting in related party payables.
There are related party notes payable of $1.0 million outstanding as of September 30, 2021.
Note 8 – Investment in Salt Tequila USA, LLC
The Company has a marketing and distribution agreement with SALT in Mexico for the manufacturing of our Tequila product line.
The Company has a 22.5% percentage interest in SALT Tequila USA, LLC (“SALT”), and has the right to increase its ownership to 37.5%. This investment is accounted for at cost.
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Note 9 – Operating Lease Obligations
Effective July 2018, we entered into a lease agreement for the right to use and occupy office space. The lease term commenced July 1, 2018 and is scheduled to expire after 36 months, on June 30, 2021. We renewed the lease under the same terms.
Effective November 2019, we entered into a lease with Interport Logistics, LLC. The lease term commenced on November 11, 2019 and is scheduled to expire on November 11, 2022.
Effective May 2019, we entered into a lease in Mexico. The lease commenced May 1, 2019 and is scheduled to expire after 24 months, on April 1, 2021. We have negotiated a one year lease term for our Mexican warehouse.
Effective January 2021, we entered into a lease agreement for the right to use and occupy office space in Sarasota Florida. The lease term commenced January 18, 2021 and is scheduled to expire after 18 months, on July 31, 2022.
Effective January 2021, we entered into a lease agreement for the right to use and occupy office and manufacturing space located in Miami Florida. The lease term commenced January 1, 2021 and is scheduled to expire after 60 months, on December 31, 2025.
The following table presents the discounted present value of minimum lease payments for our office and warehouses to the amounts reported as operating lease liabilities on the consolidated balance sheet at September 30, 2021:
| Maturities of lease liabilities | ||||
| Undiscounted Future Minimum Lease Payments | Operating Lease | |||
| 2021 (three months remaining) | $ | 89,355 | ||
| 2022 | 342,273 | |||
| 2023 | 276,318 | |||
| 2024 | 265,493 | |||
| 2025 | 238,506 | |||
| Total | 1,211,945 | |||
| Amount representing imputed interest | (99,470 | ) | ||
| Total operating lease liabilities | 1,112,476 | |||
| Current portion of operating lease liabilities | 313,982 | |||
| Operating lease liabilities, non-current | $ | 798,494 | ||
The table below presents information for lease costs related to our operating leases at September 30, 2021:
| Lease costs | ||||
| Operating lease cost: | ||||
| Amortization of leased assets | $ | 222,226 | ||
| Interest of lease liabilities | 45,140 | |||
| Total operating lease cost | $ | 267,366 |
The table below presents lease- related terms and discount rates at September 30, 2021:
| Summary of lease- related terms and discount rates | ||
| Remaining term on leases | 11 to months 51 | |
| Incremented borrowing rate | 5.0% |
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Note 10 – Line of Credit
At December 31, 2020 SBG owed $68,000 to a bank $64,619 and $70,373 respectively,financial institution under a revolving line of credit. The line of credit is secured by all Companythe assets is capped at $100,000,of SBG is due on demand, and bears interest at variable rates approximating 6% on average. Interest expense under the note approximated $3,336 and $2,250 during eachapproximately 6.1% at December 31, 2020. As part of the nine months ended Septemberacquisition of Copa di Vino the LOC was paid off.
Note 11 – PPP Loan
On January 30, 20172020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and 2016, respectively. During the nine months ended September 30, 2017risks to the international community as the virus spreads globally beyond the point of origin. On March 20, 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.
In response to the COVID-19 outbreak in the United States, the CARES Act (the “Act”) was passed by Congress and 2016,signed into law on March 27, 2020. In connection with the CARES Act, the Company madeand its subsidiary applied for and received loans with an original aggregate principal paymentsbalance of $5,754approximately $158,000. These loans and $5,448, respectively.
In April 2021, we received notification of forgiveness for the entire outstanding balance.
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Note 12 – Segment Reporting
The Company evaluates segment reporting in accordance with the FASB Accounting Standards Codification Topic 280, Segment Reporting, each reporting period, including evaluating the reporting package reviewed by the Chief Executive Officer and Chief Financial Officer.
Note: The Copa di Vino business is included in our Splash Beverage Group segment.
| Schedule of Segment Reporting Information | ||||||||||||||||
| Three-Months Ending | Nine-Months Ending | |||||||||||||||
| Revenue | Q3 2021 | Q3 2020 | Q3 2021 | Q3 2020 | ||||||||||||
| Splash Beverage Group | 960,382 | 91,778 | 3,351,989 | 213,174 | ||||||||||||
| E-Commerce | 1,867,012 | 601,196 | 4,902,088 | 1,004,536 | ||||||||||||
| Total Revenues continuing operations | 2,827,393 | 692,974 | 8,254,078 | 1,217,710 | ||||||||||||
| Total Revenues discontinued operations | 207,043 | 316,641 | 855,262 | 516,217 | ||||||||||||
| Total assets | Sept 2021 | Dec 2020 | ||||||
| Splash Beverage Group | 18,091,715 | 8,403,670 | ||||||
| E-Commerce | 969,461 | 505,646 | ||||||
| Medical Devices - discontinued operations | 410,279 | 316,572 | ||||||
| Total Assets | 19,471,456 | 9,225,888 | ||||||
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Note 13 – Commitment and Contingencies
We are a party to asserted claims and are subject to regulatory actions in the ordinary course of business. The results of such proceedings cannot be predicted with certainty, but we do not anticipate that the outcome, if any, arising out of any such matter will have a material adverse effect on its business, financial condition or results of operations.
Capital Raise
In connection with the CMS merger we were committed to our previous preferred stock and debt consistsholders to raise $9 million in a secondary IPO or debt, as defined in the agreements.
In February 2021, we successfully raised the $9 million required.
Stock Price Guarantee
We have a commitment to issue additional shares associated with specific stock price guarantee granted to an investor. The stock price guarantee expired March 2021.
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Note 14 – Registration Statement
Underwriting Agreement
On June 10, 2021, the Company entered into an underwriting agreement ( “Underwriting Agreement”) relating to an underwritten public offering (the “Offering”) of common stock, no par value per share (the “Common Stock”) and warrants to purchase one share of Common Stock (the “Warrants”). Pursuant to the Offering, the Company sold 3,750,000 shares of Common Stock and Warrants, which include Warrants sold upon the partial exercise of the following:
September 30, 2017 | December 31, 2016 | |||||||
| 3.53% installment note payable $352 monthly, including interest, through July 2019, collateralized by vehicle with carrying value of $4,078 | $ | 7,496 | $ | 10,426 | ||||
| 3.79% installment note payable $299 monthly, including | ||||||||
| interest, through July 2021, collateralized by vehicle with carrying value of $12,466 | 12,764 | 15,052 | ||||||
| 2.99% installment note payable $350 monthly, including interest, through August 2019, collateralized by vehicle with carrying value of $6,806 | 7,809 | 10,745 | ||||||
| 28,069 | 36,223 | |||||||
| Less principal due within one year | (10,973 | ) | (10,918 | ) | ||||
| TOTAL LONG-TERM DEBT | $ | 17,096 | $ | 25,305 | ||||
Representative’s Warrants
On January 10, 2017June 15, 2021, pursuant to the Underwriting Agreement, the Company issued 350,000the Representative’s Warrants to purchase up to an aggregate of 150,000 shares of its common stock at $.10Common Stock. The Representative’s Warrants may be exercised beginning on December 10, 2021 until June 10, 2026. The initial exercise price of each Representative Warrant is $4.60 per share, for total proceedswhich represents 115% of $35,000the Offering Price.
Note 15 – Subsequent Events
On October 11, 2021, the Company called to unaffiliated individuals.
In all likelihood,October 2021, the Company will be required to make significant future expendituressettled their lawsuit with an investor. See Note 4.
In October 2021, the matured notes listed in connection with marketing efforts along with general administrative expenses. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
ITEM 2. Management's DiscussionMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 AnalysisSection 21E of Financial Conditionthe Securities Exchange Act of 1934, as amended. These forward-looking statements involve risks and Resultsuncertainties, including statements regarding our capital needs, business strategy and expectations. Any statements that are not of Operations.
Unless the context otherwise requires, references in this Form 10-Q to “we,” “us,” “our,” or the “Company” refer to Splash Beverage Group and its subsidiaries.
The following discussion and analysis should be read in conjunction with the Condensed Consolidated Financial Statements (unaudited) and Related Notes herewith.
Business Overview
Splash Beverage Group (“SBG” or “Splash”), f/k/a Canfield Medical Supply, Inc. (the “CMS”), was incorporated in the State of Ohio on September 3, 1992, and changed domicile to Condensed Financial Statements (unaudited) filed herein.
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.
Prior to the rehabilitation market, which consistsMerger, CMS was in the business of home health services, primarily the selling of homedurable medical equipment and supplies. More than 50%medical supplies to the public, nursing homes, hospitals and other end users and the Company continues to operate the home health supply business as a separate division.
As the owners and management of our revenues are derived fromSplash have voting and operating control of CMS following the saleMerger, the Merger transaction was accounted for as a reverse acquisition (that is with Splash as the acquiring entity), followed by a recapitalization.
Splash specializes in the manufacturing, distribution, 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 salesales & marketing of various home medical supplies including diabetic testing, incontinence, ostomy, wound care,beverages across multiple channels. Splash operates in both the non-alcoholic and catheter care.alcoholic beverage segments. Additionally, Splash operates its own vertically integrated B-to-B and B-to-C E-commerce distribution platform called Qplash, further expanding its distribution abilities and visibility.
In July, 2020, the Company changes its name from Canfield Medical Supply, Inc. to Splash Beverage Group, Inc. Our emphasisnew ticker symbol is on helping patientsSBEV.
On December 24, 2020, SBG consummated an Asset Purchase Agreement(the “APA”) with mobility related limitations, but our overallCopa di Vino Corporation (“CdV”), to purchase certain assets and assume certain liabilities that comprise the Copa di Vino business is aimed at helping patients remainfor a total purchase price of $5,980,000, payable in their homes insteadthe combination of having$2,000,000 in cash (“Cash Consideration”), $2,000,000 convertible promissory note (the “Convertible Note”) to go to hospitals, rehab centersSeller and other similar facilities. Mosta variable number of shares of the equipmentCompany’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 supplies that we sell are prescribed by a physician as partfacilities in The Dalles, Oregon.
Results of an overall care plan.
Revenue
Revenues for the three months ended September 30, 20172021 were $319,015 as$2,827,393 compared to the revenues of $236,059$692,974 for the three months ended September 30, 2016. The 35%2020. A significant portion of the $2,134,419 increase in sales is due to an increasing trend in powerchair sales.
Operating Expenses
Operating expenses for the three months ended September 30, 20172021 were $137,283 as$12,892,079 compared to $134,719$2,733,435 for the three months ended September 30, 2016.2020. The 2%$10,158,644 increase in our operating expenses was primarily duea result of recording the warrants issued pursuant to certain private placements conducted by the 6% increase in salariesCompany, and wages which was offset in partoptions and stock approved by small decreases inthe Board ($3,010,013), increased headcount from the Copa acquisition and the addition of new sales reps, professional fees ($6,391,514) and depreciation.
Interest Expense
Interest expenses for the $47,262 improvement includethree months ended September 30, 2021 were $100,128 compared to $23,110 for the fact thatthree months ended September 30, 2020. The $77,018 increase in our interest expenses was primarily a result of additional debt taken on in Q2 2021.
Results of Operations for the sales increased by $82,956 while the cost of good sold only increased by $35,092.
Revenue
Revenues for the nine months ended September 30, 20172021 were $739,647 as$8,254,078 compared to the revenues of $695,697$1,217,709 for the nine months ended September 30, 2016.2020. The 6% increase$7,036,369increase in sales is primarily due to an increasing trend in power chair sales.
Operating Expenses
Operating expenses for the nine months ended September 30, 20172021 were $446,371 as$25,171,500 compared to $380,941$4,774,571 for the nine months ended September 30, 2016.2020. The 17% increase is due to the $27,104$20,396,929 increase in salariesour operating expenses was primarily a result of recording the warrants issued pursuant to certain private placements conducted by the Company, and wages attributable to pay raisesoptions and stock approved by the Board ($7,407,976), increased headcount from the Copa acquisition and the hiringaddition of anew sales representative during the third quarter of 2016, the $12,373 increase inreps, professional fees incurred during the latest nine months for the audit of our December 31, 2016 financial statements($8,996,732) and Form 10-K filing (we did not commence our December 31, 2015 audit until the second quarter of 2016), and the $14,514 increase in other general and administrative expenses comprised primarily of our new website development and outsourcing of our billing collections.
Interest Expense
Interest expenses for the nine months ended September 30, 2021 were $341,715 compared to $1,958,601 for the nine months ended September 30, 2020. The $1,616,886 decrease in our interest expenses was primarily a result of recording a finance charge of $1,821,426 associated with warrants issued to one of our note holders in Q1 2020 offset by interest expense recorded in the period.
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 capital expenditures.
As of September 30, 2017,2021, we had negative working capitaltotal cash and cash equivalents of ($10,032)$8,144,171, as compared to working capital of $2,784 as ofwith $380,000 at December 31, 2016.
Net cash (used for)used for operating activities during the nine months ended September 30, 20172021 was ($7,561)$11,615,297 as compared to the net cash providedused by operating activities infor the nine months ended September 30, 20162020 of $27,256.$4,311,170. The primary reasonreasons for the change in net cash used for operating activities was the increaseis due to losses sustained and increases in the net loss from $33,023 in the nine months ended September 30, 2016inventory, offset by non-cash expenses relating to a net loss of $45,642 in the latest nine-month period as explained previously.
Net cash used for investing activities during the nine months ended September 30, 20172021 was $37,909 which included $48,199$0 as compared to the net cash used by operating activities for the purchase of equipment. In comparison, during the nine months ended September 30, 2016,2020 of $154,341. The net cash used in the Company used $43,194 forfirst quarter of 2020 was primarily due to the purchase of equipment.
Net cash provided by financing activities during the nine months ended September 30, 20172021 was $21,092 as$19,597,565 compared to $38,379$5,081,594 provided byfrom financing activities infor the nine months ended September 30, 2016. The Company sold shares of its common stock during2020. During the nine months ended September 30, 20172021, we received $21,393,065 from investors, which was offset by repayments to shareholders and 2016debt holders of $1,795,188.
CONTRACTUAL OBLIGATIONS
Minimum Royalty Payments:
We have a licensing agreement with ABG TapouT, LLC (“TapouT”). Under the licensing agreement, we have minimum royalty payments to raise $35,000 and $50,000, respectively, to help payTapouT for the costs associated with being a public company. Minimal payments towards the Company’s line of credit and notes payable were also made during each of the nine-month periods ended September 30, 2017 and 2016.
| ● | 2021 $594,000 |
| ● | 2022 $653,400 |
Inventory Purchase Commitments:
None.
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.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
Not required for Smaller Reporting Companies.
ITEM 4. CONTROLS AND PROCEDURES
| (a) | Evaluation of Disclosure Controls and Procedures |
We maintain disclosure controls and Procedures.
As further discussed below, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operationsoperation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the endExchange Act. Based on that evaluation, our chief executive officer and chief financial officer concluded that, because of the period covered by this quarterly report, and have concluded thatcertain material weaknesses in our internal control over financial reporting our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act were not effective as of September 30, 2021. The material weaknesses relate to the absence of in-house accounting personnel with the ability to properly account for complex transactions and a lack of separation of duties between accounting and other functions.
We hired a consulting firm to advise us on technical issues related to U.S. generally accepted accounting principles as related to the maintenance of our accounting books and records and the preparation of our consolidated financial statements. Although we are adequate.
| (b) | Changes in Internal Controls over Financial Reporting |
There has been no change in our internal control over financial reporting (as definedidentified in connection with the evaluation required by paragraph (d) of Rules 13a-15(f) and 15d-15(f)13a-15 or 15d-15 under the Securities Exchange Act)Act of 1934 that occurred during the period covered by this reportour most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 1. Legal Proceedings.
None.
ITEM 1A. Risk Factors.
Not required for smaller reporting companies.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
ITEM 3. Defaults Upon Senior Securities.
None.
ITEM 4. Mine Safety Disclosures.
No disclosure required.
ITEM 5. Other Information.
None.
ITEM 6. Exhibits.
(a) Exhibits required by Item 601 of Regulation S-K.
| Exhibits | Description |
| 31.1 | Certification of CEO and Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) - Filed herewith electronically |
| 31.2 | Certification of CFO and Principal Financial and Accounting Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) - Filed herewith electronically |
| 32.1 | Certification of CEO and Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Filed herewith electronically |
| 32.2 | Certification of CFO and Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Filed herewith electronically | |
| 101 | XBRL Exhibits |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Date: November | By: | /s/ | |
| Date: November | By: | /s/ | |
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