U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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.
(NameExact name of registrant as specified in its charter)
| 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 | ||
| American LLC | ||||
| American LLC |
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 filer | 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).
☐
Yes ☒NoCheck 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, 2017,14, 2022, there were 11,277,100 shares of Common Stock issued and outstanding.
| SPLASH BEVERAGE GROUP, INC. |
| FORM 10-Q |
| September 30, 2022 |
TABLE OF CONTENTS
ITEM 1. Financial Statements.
| 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, 2022 and December 31, 2021 (Unaudited) |
| Assets | ||||||||
| September 30, 2022 | December 31, 2021 | |||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 2,601,270 | $ | 4,181,383 | ||||
| Accounts Receivable, net | 1,478,613 | 1,114,452 | ||||||
| Prepaid Expenses | 586,092 | 607,178 | ||||||
| Inventory, net | 3,584,331 | 1,923,479 | ||||||
| Other receivables | 461,353 | 41,939 | ||||||
| Assets from discontinued operations | — | 473,461 | ||||||
| Total current assets | 8,711,659 | 8,341,892 | ||||||
| Non-current assets: | ||||||||
| Deposit | $ | 49,251 | $ | 330,886 | ||||
| Goodwill | 256,823 | 256,823 | ||||||
| Other intangible assets, net | 5,310,461 | 5,604,512 | ||||||
| Investment in Salt Tequila USA, LLC | 250,000 | 250,000 | ||||||
| Right of use asset | 828,066 | 1,031,472 | ||||||
| Property and equipment, net | 556,936 | 569,785 | ||||||
| Total non-current assets | 7,251,537 | 8,043,478 | ||||||
| Total assets | $ | 15,963,196 | $ | 16,385,370 | ||||
| Liabilities and Stockholders’ Equity (Deficit) | ||||||||
| Liabilities: | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | 2,088,180 | $ | 1,913,459 | |||||
| Right of use liability - current | 290,789 | 294,067 | ||||||
| Due to related parties | 75,000 | — | ||||||
| Related party notes payable | — | 653,081 | ||||||
| Notes payable, current portion | 1,386,605 | 2,967,812 | ||||||
| Liability to issue shares | 1,160,950 | — | ||||||
| Shareholder advances | — | 390,500 | ||||||
| Accrued interest payable | 183,553 | 171,452 | ||||||
| Liabilities from discontinued operations | — | 389,086 | ||||||
| Total current liabilities | 5,185,077 | 6,779,457 | ||||||
| Long-term Liabilities: | ||||||||
| Notes payable - noncurrent | 248,428 | — | ||||||
| Right of use liability - noncurrent | 537,447 | 732,686 | ||||||
| Total long-term liabilities | 785,875 | 732,686 | ||||||
| Total liabilities | 5,970,952 | 7,512,143 | ||||||
| Stockholders’ equity: | ||||||||
| Common Stock, $par, shares authorized, and shares issued and outstanding, at September 30, 2022 and December 31, 2021, respectively | 39,651 | 33,596 | ||||||
| Additional paid in capital | 117,487,992 | 99,480,188 | ||||||
| Accumulated Comprehensive Income - Translation | 2,225 | — | ||||||
| Accumulated deficit | (107,537,624 | ) | (90,640,557 | ) | ||||
| Total stockholders’ equity | 9,992,244 | 8,873,227 | ||||||
| Total liabilities and stockholders’ equity | $ | 15,963,196 | $ | 16,385,370 | ||||
The accompanying footnotesnotes are an integral part of these unaudited condensed financial statements.
| 1 |
| 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, 2022 and September 30, 2021 (Unaudited) |
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Gross sales | $ | 5,104,397 | $ | 2,950,187 | $ | 14,037,453 | $ | 8,573,945 | ||||||||
| Customer discount | (233,990 | ) | (122,794 | ) | (741,532 | ) | (319,867 | ) | ||||||||
| Net revenues | 4,870,407 | 2,827,393 | 13,295,921 | 8,254,078 | ||||||||||||
| Cost of goods sold | (3,719,360 | ) | (2,007,544 | ) | (10,639,716 | ) | (6,011,755 | ) | ||||||||
| Gross profit | 1,151,047 | 819,849 | 2,656,205 | 2,242,323 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Contracted services | 438,004 | 354,355 | 1,196,852 | 821,471 | ||||||||||||
| Salary and wages | 1,262,935 | 1,246,253 | 3,180,198 | 2,892,818 | ||||||||||||
| Non-cash share based compensation | 1,697,201 | 8,828,097 | 7,039,695 | 13,226,061 | ||||||||||||
| Other general and administrative | 2,116,824 | 2,214,274 | 5,945,023 | 7,767,241 | ||||||||||||
| Sales and marketing | 746,965 | 249,100 | 1,918,420 | 465,705 | ||||||||||||
| Total operating expenses | 6,261,929 | 12,892,079 | 19,280,188 | 25,173,296 | ||||||||||||
| Loss from continuing operations | (5,110,882 | ) | (12,072,230 | ) | (16,623,983 | ) | (22,930,973 | ) | ||||||||
| Other income/(expense): | ||||||||||||||||
| Other Income | — | 3,632 | — | 3,632 | ||||||||||||
| Interest income | 158 | 527 | 2,867 | 642 | ||||||||||||
| Interest expense | (66,193 | ) | (100,128 | ) | (225,543 | ) | (341,715 | ) | ||||||||
| Gain from debt extinguishment | — | (1,695 | ) | — | 95,701 | |||||||||||
| Total other income/(expense) | (66,035 | ) | (97,664 | ) | (222,676 | ) | (241,740 | ) | ||||||||
| Provision for income taxes | — | — | — | — | ||||||||||||
| Net loss from continuing operations, net of tax | (5,176,917 | ) | (12,169,894 | ) | (16,846,659 | ) | (23,172,713 | ) | ||||||||
| Net income (loss) from discontinued operations, net of tax | — | (22,077 | ) | (199,154 | ) | 218,410 | ||||||||||
| Gain on sale of discontinued operations | 33,116 | — | 148,747 | — | ||||||||||||
| Income (loss) from discontinued operations, net of tax | 33,116 | (22,077 | ) | (50,407 | ) | 218,410 | ||||||||||
| Net loss | $ | (5,143,801 | ) | $ | (12,191,971 | ) | $ | (16,897,065 | ) | $ | (22,954,303 | ) | ||||
| Loss per share - continuing operations | ||||||||||||||||
| Basic and dilutive | $ | (0.14 | ) | $ | (0.40 | ) | $ | (0.46 | ) | $ | (0.83 | ) | ||||
| Weighted average number of common shares outstanding - continuing operations | ||||||||||||||||
| Basic | 37,364,031 | 30,515,251 | 36,417,222 | 27,512,776 | ||||||||||||
| Income(loss) per share - discontinued operations | ||||||||||||||||
| Basic | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.01 | ||||||||
| Dilutive | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.01 | ||||||||
| Weighted average number of common shares outstanding - discontinued operations | ||||||||||||||||
| Basic | 37,364,031 | 30,515,251 | 36,417,222 | 27,512,776 | ||||||||||||
| Dilutive | 38,861,544 | 30,515,251 | 36,417,222 | 30,809,267 | ||||||||||||
The accompanying footnotesnotes are an integral part of these unaudited condensed financial statements.
| 2 |
| 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 | $ | - | $ | - | ||||
| Splash Beverage Group, Inc. Condensed Consolidated Statements of Changes in Shareholders’ Equity For the Three and Nine months ended September, 2022 and 2021 (Unaudited) |
| Total | ||||||||||||||||||||||||||||
| Common Stock | Treasury Stock | Additional | Accumulated | Stockholders' | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Paid-In Capital | Deficit | Equity (Deficit) | ||||||||||||||||||||||
| Balances at December 31, 2020 | 21,157,043 | 21,157 | — | — | 52,217,855 | (61,589,735 | ) | (9,350,724 | ) | |||||||||||||||||||
| Issuance of warrants for services | — | — | — | — | 1,186,596 | — | 1,186,596 | |||||||||||||||||||||
| Issuance of common stock for services | 168,333 | 168 | — | — | 730,867 | — | 731,035 | |||||||||||||||||||||
| Issuance of common stock and warrants or cash | 1,174,476 | 1,174 | — | — | 4,529,450 | — | 4,530,624 | |||||||||||||||||||||
| Mezzanine shares | 4,201,761 | 4,202 | — | — | 9,244,519 | — | 9,248,720 | |||||||||||||||||||||
| Net loss | — | — | — | — | — | (4,442,219 | ) | (4,442,219 | ) | |||||||||||||||||||
| Balances at March 31, 2021 | 26,701,613 | 26,702 | 0 | $ | — | $ | 67,909,286 | $ | (66,031,954 | ) | $ | 1,904,033 | ||||||||||||||||
| Issuance of warrants for services | — | — | — | — | 1,186,596 | — | 1,186,596 | |||||||||||||||||||||
| Issuance of common stock for services | — | — | — | — | 1,369,918 | — | 1,369,918 | |||||||||||||||||||||
| Issuance of common stock and warrants or cash | 3,780,303 | 3,780 | — | — | 15,096,160 | — | 15,099,940 | |||||||||||||||||||||
| Net loss | — | — | — | — | — | (6,560,600 | ) | (6,560,600 | ) | |||||||||||||||||||
| Balances at June 30, 2021 | 30,481,916 | 30,482 | 0 | $ | — | $ | 85,561,961 | $ | (72,592,554 | ) | $ | 12,999,887 | ||||||||||||||||
| Issuance of warrants for services | — | — | — | — | 3,010,012 | — | 3,010,012 | |||||||||||||||||||||
| Issuance of common stock for services | 2,136,819 | 2,137 | — | — | 6,109,774 | — | 6,111,911 | |||||||||||||||||||||
| Net loss | — | — | — | — | — | (12,169,894 | ) | (12,169,894 | ) | |||||||||||||||||||
| Balances at September 30, 2021 | 32,618,735 | 32,619 | 0 | $ | — | $ | 94,681,747 | $ | (84,762,448 | ) | 9,951,916 | |||||||||||||||||
| Total | ||||||||||||||||||||||||||||
| Common Stock | Treasury Stock | Additional | Accumulated | Stockholders' | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Paid-In Capital | Deficit | Equity (Deficit) | ||||||||||||||||||||||
| Balances at December 31, 2021 | 33,596,232 | 33,596 | — | — | 99,480,188 | (90,640,557 | ) | 8,873,227 | ||||||||||||||||||||
| Issuance of common stock on convertible instruments | 223,596 | 224 | — | — | 1,206,287 | — | 1,206,511 | |||||||||||||||||||||
| Issuance of warrants for services | — | — | — | — | 1,242,697 | — | 1,242,697 | |||||||||||||||||||||
| Issuance of common stock for services | 550,000 | 550 | — | — | 1,112,845 | — | 1,113,395 | |||||||||||||||||||||
| Issuance of common stock and warrants for cash | 2,300,000 | 2,300 | — | — | 8,065,100 | — | 8,067,400 | |||||||||||||||||||||
| Net loss | — | — | — | — | — | (5,994,407 | ) | (5,994,407 | ||||||||||||||||||||
| Balances at March 31, 2022 | 36,669,828 | 36,670 | — | — | 111,107,116 | (96,634,964 | ) | 14,508,822 | ||||||||||||||||||||
| Issuance of warrants for services | — | — | — | 1,174,289 | — | 1,174,289 | ||||||||||||||||||||||
| Issuance of common stock for services | 500,000 | 500 | — | — | 1,429,500 | — | 1,430,000 | |||||||||||||||||||||
| Issuance of common stock and warrants for cash | 100,000 | 100 | — | — | 109,900 | — | 110,000 | |||||||||||||||||||||
| Accumulated Comprehensive Income - Translation | (6,570 | ) | (6,570 | ) | ||||||||||||||||||||||||
| Net loss | — | — | — | (5,758,857 | ) | (5,758,857 | ) | |||||||||||||||||||||
| Balances at June 30, 2022 | 37,269,828 | 37,270 | — | — | 113,820,805 | (102,400,391 | ) | 11,457,684 | ||||||||||||||||||||
| �� | ||||||||||||||||||||||||||||
| Issuance of warrants for services | — | — | — | 1,036,066 | — | 1,036,066 | ||||||||||||||||||||||
| Issuance of common stock for APA | 380,959 | 381 | — | — | (381 | ) | — | (0 | ) | |||||||||||||||||||
| Issuance of common stock and warrants for cash | 2,000,000 | 2,000 | — | — | 2,631,500 | — | 2,633,500 | |||||||||||||||||||||
| Accumulated Comprehensive Income - Translation | 8,795 | 8,795 | ||||||||||||||||||||||||||
| Net loss | — | — | — | (5,143,801 | ) | (5,143,801 | ) | |||||||||||||||||||||
| Balances at September 30, 2022 | 39,650,787 | 39,651 | — | — | 117,487,991 | (107,535,397 | ) | 9,992,244 | ||||||||||||||||||||
The accompanying footnotesnotes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
| Splash Beverage Group, Inc. Condensed Consolidated Statement Cash Flows For the Nine -Months Ended September 30, 2022 and 2021 (Unaudited) |
| Nine months ended | Nine months ended | |||||||
| September 30, | September 30, | |||||||
| 2022 | 2021 | |||||||
| Net loss | $ | (16,897,065 | ) | $ | (23,172,713 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 306,900 | 119,847 | ||||||
| ROU assets | 203,406 | 86,699 | ||||||
| Gain from debt extinguishment | — | (95,701 | ) | |||||
| Gain from sale of discontinued operation | 84,375 | |||||||
| Non-cash Share-based compensation | 7,107,684 | 13,373,751 | ||||||
| Changes in working capital items: | ||||||||
| Accounts receivable, net | (364,161 | ) | (716,370 | ) | ||||
| Inventory, net | (1,660,852 | ) | (732,529 | ) | ||||
| Prepaid expenses and other current assets | (398,328 | ) | (168,622 | ) | ||||
| Deposits | 281,635 | — | ||||||
| Accounts payable and accrued expenses | 698,170 | (207,570 | ) | |||||
| Accrued Interest payable | 12,101 | (102,089 | ) | |||||
| Net cash used in operating activities - continuing operations | (10,626,135 | ) | (11,615,297 | ) | ||||
| Net cash used in operating activities - discontinued operations | — | (218,410 | ) | |||||
| Cash Flows from Investing Activities: | ||||||||
| Capital Expenditures | (45,420 | ) | — | |||||
| Net cash used in investing activities - continuing operations | (45,420 | ) | — | |||||
| Net cash used in investing activities - discontinued operations | — | — | ||||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from issuance of Common stock | 10,810,900 | 19,630,565 | ||||||
| Cash advance from shareholder | (280,500 | ) | 834,500 | |||||
| Repayment of cash advance | — | (322,279 | ) | |||||
| Proceeds from issuance of debt | 45,420 | 928,000 | ||||||
| Principal repayment of debt | (1,285,861 | ) | (1,384,944 | ) | ||||
| ROU liability | (198,517 | ) | (87,965 | ) | ||||
| Net cash provided by financing activities - continuing operations | 9,091,442 | 19,597,877 | ||||||
| Net cash provided by financing activities - discontinued operations | — | — | ||||||
| Net Change in Cash and Cash Equivalents | (1,580,113 | ) | 7,764,170 | |||||
| Cash and Cash Equivalents, beginning of year | 4,181,383 | 380,000 | ||||||
| Cash and Cash Equivalents, end of year | $ | 2,601,270 | $ | 8,144,171 | ||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||
| Cash paid for Interest | $ | 164,107 | $ | 173,363 | ||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities: | ||||||||
| Notes payable and accrued interest converted to common stock (223,596 shares) | $ | 1,206,511 | $ | — | ||||
| Liability issued for investment in SALT Tequila USA, LLC | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 4 |
Splash Beverage Group, Inc.
Notes to the ThreeCondensed Consolidated Financial Statements
Note 1 – Business Organization and Nine Months Ended September 30, 2017Nature of Operations
Splash seeks to identify, acquire, and 2016 (Unaudited)
On February 2021, Management initiated a plan to divest its Canfied Medical Supply, Inc. (the “Company”(“CMS”) business. As a result, the assets and operations of CMS have been retrospectively reflected as discontinued operations. On November 12, 2021 the Company changed its state of Domicile from Colorado to Nevada.
On June 30, 2022, the Company entered into a Business Transfer and Indemnity Agreement (“Agreement”). Pursuant to the Agreement, the Company transferred and assigned the assets and liabilities from the CMS business. Pursuant to the Agreement the Company was paid $31,000 and recorded a gain of $148,747 for the nine months ended September 30, 2022.
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 on a retrospective basis 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 Beverage Group and its wholly owned subsidiaries, Splash International Holdings LLC, Splash Beverage Group Holding LLC, Splash Beverage Group II, Inc., was incorporatedCopa di Vino Wine Group, Inc. (“CdV”) and Splash Mexico SA de CV. CMS is reflected as discontinued operations until its disposal on June 30, 2022. All intercompany balances have been eliminated in consolidation.
Our accounting and reporting policies conform to accounting principles generally accepted in the StateUnited States of Ohio on September 3, 1992, and changed domicile to Colorado on April 18, 2012. The Company is 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.
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, 20172022 and 20162021 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 20162022 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 amounts, 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, 20172022 we had $2,210,567 in excess of the federally insured limits. Our bank deposit amounts in Mexico of $1,940 are uninsured. At December 31, 2021 we had $3,643,474 over the federally insured limits. Our cash in uninsured foreign bank accounts was $10,749 at December 31, 2021.
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Note 2 – Summary of Significant Accounting Policies, continued
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are carried at their estimated recoverable 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, 2022 and December 31, 2016,2021, our accounts receivable amounts are reflected net of allowances of $13,827 and $45,203, respectively.
Inventory
Inventory is stated at the Company has determined that no allowancelower of cost or net realizable value and 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 $27,762 and 2016 (Unaudited)
| Schedule of Property and equipment | ||||||||
| September 30, 2022 | December 31, 2021 | |||||||
| Auto | $ | 45,420 | — | |||||
| Machinery & Equipment | $ | 1,108,870 | 1,108,870 | |||||
| Buildings | $ | 282,988 | 279,543 | |||||
| Leasehold Improvements | $ | 699,512 | 662,537 | |||||
| Office Furniture & Fixtures | $ | 13,635 | 70,960 | |||||
| Property and equipment, at cost | $ | 2,150,425 | $ | 2,121,910 | ||||
| Accumulated depreciation | $ | (1,593,489 | ) | (1,552,125 | ) | |||
| Property and equipment, net | $ | 556,936 | 569,785 | |||||
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 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.
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 condensed consolidated financial statements approximate fair values at September 30, 2022 and December 31, 2021, consistent with recent negotiations of notes payable and due to the short duration of maturities and market rates of interest.
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Note 2 – Summary of Significant Accounting Policies, continued
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.
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.
Distribution expenses to transport our finished goods, where applicable, and warehousing expense are accounted for within cost of goods.
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 award’s vesting period. We use the Black-Scholes option pricing model to determine the fair value of stock-based awards. 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 in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred
Company management assesses its income tax assetspositions and liabilitiesrecords tax benefits for all years subject to examination based upon its evaluation of the 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 has full knowledge of all relevant 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 financial statements. Company management has determined that there are adjusted forno material uncertain tax positions at September 30, 2022 and December 31, 2021.
Splash Beverage Group, Inc.
Notes to the effectsCondensed Consolidated Financial Statements
Note 2 – Summary of changes in tax laws and rates on the date of enactment.
The net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common stock 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 and would increaseanti-dilutive.
Advertising
We conduct advertising for the earnings or decrease loss per share.
Goodwill and $40,281, respectively. Accumulated depreciation totaled $87,184Intangibles Assets
Goodwill represents the excess of acquisition cost over the fair value of the net assets acquired and $76,197is 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 September 30, 2017the 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 December 31, 2016, respectively.
Intangible assets consist of customer lists, brands and license agreements acquired in the acquisition of CdV. The Company owedamortizes intangible assets with finite lives on a bank $64,619straight-line basis over their estimated useful lives of 15 years.
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Note 2 – Summary of Significant Accounting Policies, continued
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 $70,373 respectively,used, including warehouses to be relocated, the carrying value of the asset group is considered recoverable when the estimated future undiscounted cash flows generated from the use and eventual disposition of the asset group exceed the respective carrying value. In the event that the carrying value is not considered recoverable, an impairment loss is recognized for the asset group to be held and used equal to the excess of the carrying value above the estimated fair value of the asset group. For asset groups classified as held-for-sale (disposal group), the carrying value is compared to the disposal group’s fair value less costs to sell. The Company estimates fair value by obtaining market appraisals from third party brokers or using other valuation techniques.
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 a revolving line of credit. The line of credit isthe circumstances.
Reclassifications
Certain prior period amounts have been reclassified to conform with the current year presentation.
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Note 3 – Notes Payable and Related Party Notes Payable
Notes payable are generally nonrecourse and secured by all Company assets, is capped at $100,000, is due on demand, and bears interest at variable rates approximating 6% on average. owned assets.
| Interest Rate | September 30, 2022 | December 31, 2021 | ||||||||||
| Notes Payable and Convertible Notes Payable | ||||||||||||
| 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 unexercised on February 28, 2017. The loan matured and remains in default. | 8 | % | 200,000 | 200,000 | ||||||||
| In September 2021, we entered into a twelve-month loan with a company in the amount of $208,000. The principal and interest was paid off in June 2022 | 4.8 | % | — | 116,478 | ||||||||
| 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. Note is due September 2025 | 17 | % | 1,162,320 | 1,423,334 | ||||||||
| In April 2021, we entered into a six-month convertible loan with an individual in the amount of $84,000. The loan had an original maturity of October 2021 with principal and interest due at maturity. The loan was extended to January 2023. | 7 | % | 84,000 | 84,000 | ||||||||
| In April 2021, we entered into a six-month convertible loan with an individual in the amount of $84,000. The loan had an original maturity of October 2021 with principal and interest due at maturity. The loan was extended to January 2023 | 7 | % | 84,000 | 84,000 | ||||||||
| In May 2021, we entered into a six-month convertible loan with an individual in the amount of $50,000. The loan had an original maturity of October 2021 with principal and interest due at maturity. The loan was extended to January 2023. | 7 | % | 50,000 | 50,000 | ||||||||
| In May 2021, we entered into a six-month convertible loan with an individual in the amount of $500,000. The loan had an original maturity of October 2021 with principal and interest due at maturity. The principal and interest was converted into shares of common stock in February 2022. | 7 | % | — | 500,000 | ||||||||
| In May 2021, we entered into a six-month convertible loan with an individual in the amount of $10,000. The loan had an original maturity of October 2021 with principal and interest due at maturity. The loan was extended to January 2023 | 7 | % | 10,000 | 10,000 | ||||||||
| In May 2021, we entered into a six-month convertible loan with an individual in the amount of $200,000. The loan had an original maturity of October 2021 with principal and interest due at maturity. The principal and interest was converted into shares of common stock in February 2022. | 7 | % | — | 200,000 | ||||||||
| In November 2021, we entered into a one-year convertible loan with an individual in the amount of $300,000. The principal and interest was converted to shares of common stock in April 2022. | 7 | % | — | 300,000 | ||||||||
| In August 2022, we entered into an 56-month auto loan in the amount of $45,420. | 2.35 | % | 44,713 | — | ||||||||
| Total notes payable and convertible notes payable | $ | 1,635,033 | $ | 2,967,812 | ||||||||
| Less current portion | (1,386,605 | ) | (2,967,812 | ) | ||||||||
| Long-term notes payable and convertible notes payable | $ | 248,428 | $ | — | ||||||||
Interest expense underon notes payable was $65,007 and $82,871 for the note approximated $3,336three months ended September 30, 2022 and $2,250 during each of2021, respectively.
Interest expense on notes payable was $217,123 and $340,653 for the nine months ended September 30, 20172022 and 2016,2021 respectively. DuringAccrued interest was $183,553 at September 30, 2022.
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Note 3– Notes Payable and Related Party Notes Payable
| Schedule of related party notes payable | ||||||||||||
| Interest Rate | September 30, 2022 | December 31, 2021 | ||||||||||
| 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 was paid off in June 2022. | 2.0 | % | — | 653,081 | ||||||||
| Less current portion | — | (653,081 | ) | |||||||||
| Long-term notes payable | $ | — | $ | — | ||||||||
Interest expense on related party notes payable was $0 and $5,995 for the three months ended September 30, 2022 and 2021, respectively. Interest expense on related party notes payable was $5,407 and $21,833 for the nine months ended September 30, 20172022 and 2016,2021, respectively. Accrued interest was $0 as of September 30, 2022.
Splash Beverage Group, Inc.
Notes to the Company made principalCondensed Consolidated Financial Statements
Note 4 – 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. We are required to make minimum royalty monthly payments of $5,754$54,450 in 2022 and $5,448, respectively.
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 | ||||
There were no unpaid royalties at September 30, 20172022. Royalty payments including the minimum totaling $490,050 and 2016 (Unaudited)
In connection with the Copa APA, we acquired the license to certain patents from 1/4 Vin SARL (“1/4 Vin”) On January February 16, 2018, the CdV 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 our manufacturing process. In exchange for notes payable, 1/4 Vin granted us 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 2017-year useful life.
Note 5– Stockholders’ Equity
Common Stock
During the three-months ended September 30, 2022, the Company issued 350,000 shares of common stock as part of the public offering and shares in settlement of litigation.
During the nine-months ended September 30, 2022, the Company issued shares of common stock as part of the public offerings, shares in exchange for services, shares in settlement of litigation, shares on convertible instruments, and shares for cash.
Private Placement Memorandum (PPM)
In January 2021, the Board of Directors approved a Private Placement Memorandum (PPM) 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. As part of the PPM, each purchaser received a warrant to purchase one share for every two shares purchased. In February 2021, the Company issued a total of 1,212,355 shares and 606,178 warrants and received the gross proceeds of approximately $4,000,000.
Splash Beverage Group, Inc.
Notes to the Consolidated Financial Statements
Note 6 – Related Parties
There is a $75,000 balance due to a related party as of September 30, 2022 and $653,081 was outstanding as of December 31, 2021.
Note 7 – Investment in Salt Tequila USA, LLC
We have a marketing and distribution agreement with SALT Tequila USA, LLC (“SALT”) for the manufacturing of our Tequila product line in Mexico.
We have a 22.5% percentage ownership interest in SALT and have the right to increase our ownership to 37.5%. This investment is accounted for at cost, due to our inability to exercise significant influence over the assets and operations.
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Note 8 – 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. In July 2021, we executed a two-year renewal at the same monthly amount. A three-year lease was signed in September 2022.
Effective November 2019, we entered into a new lease with Interport Logistics, LLC. The lease term commenced on November 11, 2019 and is scheduled to expire on November 11, 2022, at which point it became month-to-month.
Effective May 2019, we entered into a new lease in Mexico. The lease commenced May 1, 2019 and was renewed on April 1, 2022 for one year.
Effective January 2021, we entered into a lease agreement for the right to use and occupy office space. The lease term commenced January 18, 2021 and was extended for 1 18 months to July 31, 2023.
Effective January 2021, we entered into a lease agreement for the right to use and occupy office and manufacturing space. 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 financial lease liabilities on the condensed consolidated balance sheet at September 30, 2022:
| Undiscounted Future Minimum Lease Payments | Operating Lease | |||
| 2022 (three months) | 93,643 | |||
| 2023 | 293,050 | |||
| 2024 | 252,000 | |||
| 2025 | 252,000 | |||
| Total | 890,693 | |||
| Amount representing imputed interest | (62,457 | ) | ||
| Total Operating Lease Liability | 828,236 | |||
| Current portion operating lease liability | 290,789 | |||
| Operating lease liability, non-current | 537,447 |
The table below presents information for lease costs related to our operating leases at September 30, 2022
| Schedule of lease costs | ||||
| Operating lease cost: | ||||
| Amortization of leased assets | 543,865 | |||
| Interest of lease liabilities | 93,630 | |||
| Total operating lease cost | 637,495 |
The table below presents lease-related terms and discount rates at September 30, 2022
| Summary of lease-related terms and discount rates | ||||
| Summary of lease-related terms and discount rates | ||||
| Remaining term on leases | 1 to 39 months | |||
| Incremented borrowing rate | 5.0 | % | ||
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Note 9 – 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.
The CdV business is included in our Splash Beverage Group segment.
| Schedule of Segment Reporting Information | ||||||||||||||||
| Three-Months Ended | Nine-Months Ended | |||||||||||||||
| Net revenue | Q3 2022 | Q3 2021 | Q3 2022 | Q3 2021 | ||||||||||||
| Splash Beverage Group | 1,147,249 | 960,381 | 3,980,795 | 3,351,990 | ||||||||||||
| E-Commerce | 3,723,158 | 1,867,012 | 9,315,126 | 4,902,088 | ||||||||||||
| Total net revenues continuing operations | 4,870,407 | 2,827,393 | 13,295,921 | 8,254,078 | ||||||||||||
| Total net revenues discontinued operations | 0 | 207,043 | 385,174 | 855,262 | ||||||||||||
| Total assets | September 30, 2022 | December 31, 2021 | ||||||
| Splash Beverage Group | 14,206,415 | 14,998,597 | ||||||
| E-Commerce | 1,756,781 | 913,312 | ||||||
| Medical Devices - Discontinued | — | 473,461 | ||||||
| Total Assets | 15,963,196 | 16,385,370 | ||||||
The Company has obligations to issue shares of its common stock at $.10 per share for total proceeds of $35,000 to unaffiliated individuals.
| · | shares in connection with the conversion of indebtedness in the amount of $308,400 | |
| · | Shares equal to $ in connection with consulting services provided | |
| · | shares in connection with consulting services provided | |
| · | shares in connection with consulting services provided | |
| · | shares in connection with consulting services provided |
Note 11 – Commitment and 2016 was approximately $20,620. 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.
Note 12– Subsequent Events
Subsequent to September 30, 2017, future minimum payments under2022 the leases total approximately $75,625 including: 2017 (balance) $6,875, 2018 - $27,500, 2019 - $27,500,Company’s Board approved the issuance of 225,000 shares associated with a 3 year contract and 2020 - $13,750.
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 Financial Statements (unaudited) and Notes to Condensed Financial Statements (unaudited) filed herein.
Business Overview
Splash seeks to identify, acquire, and build early stage or under-valued beverage brands that have strong growth potential within its distribution system. Splash’s distribution system is comprehensive in the US and is now expanding to select attractive international markets. The Splash brand portfolio is growing and diverse, covering multiple categories that are exhibiting strong growth in both the non-alcohol and alcohol sectors. Through its wholly owned subsidiary Qplash, Splash’s distribution reach includes e-commerce access to both B2B and B2C customers. Q-plash markets well known beverage brands to customers throughout the US that prefer delivery direct to their office, facilities and or homes.
Splash was originally incorporated in the State of Nevada under the name TapouT Beverages, Inc. for the purpose of acquiring the rights under a license agreement with TapouT, LLC (Authentic Brands Group) for the right to use the TapouT brand in connection with manufacturing and selling certain beverages.
On March 31, 2020, a wholly-owned subsidiary of a public entity called Canfield Medical Supply, Inc. (“CMS”) merged with and into Splash and Splash became a wholly-owned subsidiary of CMS. At the time of the merger CMS’s state of incorporation was Colorado. At the time of the merger CMS’s common stock was quoted on the OTCQB.
On July 31, 2020, we changed our name from Canfield Medical Supply, Inc. to Splash Beverage Group, Inc.
On June 11, 2021, our common stock and warrants to purchase common stock began trading on the NYSE American under the symbols “SBEV” and SBEV WS,” respectively
On November 8, 2021, we changed our state of incorporation from Colorado to Nevada.
On June 30, 2022, Management completed its plan to divest its CMS’s business.
In coordination with uplisting to the rehabilitation market, which consists primarilyNYSE American on June 11, 2021 the Company consummated a 1.0 for 3.0 reverse stock split.
Results of home medical equipment and supplies. More than 50% of our revenues are derived from the sale and rental of durable home medical equipment including such items as wheeled walkers, manual and power wheelchairs, hospital beds, ramps, bedside commodes, and miscellaneous bathroom equipment. The balance of our revenue is from the sale of various home medical supplies including diabetic testing, incontinence, ostomy, wound care, and catheter care. Our emphasis is on helping patients with mobility related limitations, but our overall business is aimed at helping patients remain in their homes instead of having to go to hospitals, rehab centers and other similar facilities. Most of the equipment and supplies that we sell are prescribed by a physician as part of an overall care plan.
Net Revenue
Net revenues for the three and nine months ended September 30, 20172022 were $319,015 ashigher compared to the revenues of $236,059 for the three and nine months ended September 30, 2016. The 35% increase in sales is2021 due to an increasing trend in powerchair sales.
Cost of Goods Sold
Cost of goods sold for the three and nine months ended September 30, 20172022 were $148,664 ashigher compared to cost of goods sold for the three and nine months ended September 30, 2016 of $113,572.2021. The 31% increase in the latest three monthscost of goods sold is primarily due to higher sales at Qplash, incremental volumes in the 35% increase in sales.
Operating Expenses
Operating expenses for the three months ended September 30, 20172022 were $137,283 aslower compared to $134,719 for the three months ended September 30, 2016. The 2% increase in operating expenses was primarily2021 due to the 6% increase in salaries and wages which was offset in part by small decreases in professional fees and depreciation.
Interest Expense
Interest expenses for the three and nine months ended September 30, 2022 were lower compared to the three and nine months ended September 30, 2021 due to the paydown of notes payable.
Net Loss
The 17% increasenet loss for the three months ended September 30, 2022 was lower compared to the three months ended September 30, 2021. The decrease in the net loss is due to the $27,104our lower operating expenses and an increase in salaries and wages attributable to pay raises and the hiring of a sales representative during the third quarter of 2016, the $12,373 increase in professional fees incurred during the latest nine months for the audit of our December 31, 2016 financial statements 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.
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, 2017,2022, we had negative working capitaltotal cash and cash equivalents of ($10,032)$2,601,270 as compared to working capital of $2,784 as ofwith $4,181,383 at December 31, 2016.
Net cash (used for)used for operating activities during the nine months ended September 30, 20172022 was ($7,561)$10,626,135 as compared to the net cash providedused by operating activities infor the nine months ended September 30, 20162021 of $27,256.$11,615,297. The primary reasonreasons for the change in net cash used for operating activities wasis due to losses sustained, increases in inventory and costs incurred in connection with the increase in the net loss from $33,023 incompany’s shelf registration statement on Form S-3.
For the nine months ended September 30, 20162022, an SUV was purchased and financed with a loan. We did not use or receive cash relating to a net loss of $45,642 in the latest nine-month period as explained previously.
Net cash provided by financing activities during the nine months ended September 30, 20172022 was $21,092 as$9,091,442 compared to $38,379$19,597,565 provided byfrom financing activities infor the nine months ended September 30, 2016. The Company sold shares of its common stock during2021. During the nine months ended September 30, 20172022, we received $12,300,000 from investors from the Company Shelf Registration Statement on Form S-3, which was offset by repayments to debt holders of $1,285,861 and 2016 to raise $35,000 and $50,000, respectively, to help payfinancing fees associated with the Shelf Registration Statement $1,738,896.
Inventory increased 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 periodsthree months ended September 30, 2017 and 2016.
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 TapouT for $653,400 in 2022.
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, and capital expenditures or capital resources.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
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 end of the period covered by this quarterly report,Exchange Act. Based on that evaluation, our chief executive officer and havechief financial officer concluded that, our disclosure controls and procedures are adequate.
We hired a consultant to advise on technical issues related to U.S. generally accepted accounting principles as relates to the period covered by this report that has materially affected,maintenance of our accounting books and records and the preparation of our consolidated financial statements. Although we are aware of the risks associated with not having dedicated accounting personnel, we are also at an early stage in the development of our business. We anticipate expanding our accounting functions with dedicated staff and improving our internal accounting procedures and separation of duties when we can absorb the costs of such expansion and improvement with additional capital resources. In the meantime, management will continue to observe and assess our internal accounting function and make necessary improvements whenever they may be required. If our remedial measures are insufficient to address the material weakness, or is reasonably likely to materially affect,if additional material weaknesses or significant deficiencies in our internal control over financial reporting are discovered or occur in the future, our consolidated financial statements may contain material misstatements, and we could be required to restate our financial results. In addition, if we are unable to successfully remediate this material weakness and if we are unable to produce accurate and timely financial statements, our stock price may be adversely affected and we may be unable to maintain compliance with applicable stock exchange listing requirements.
| (b) | Changes in Internal Controls over Financial Reporting |
Our management is responsible for establishing and maintaining adequate internal control over financial reporting.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Our management assessed the effectiveness of the Company’s internal control over financial reporting at September 30, 2022, and this assessment identified some deficiencies in our internal control over financial reporting.
Remediation plan
The company has established two procedures to begin addressing the controls area. Each quarter Senior Managers respond to a questionnaire to identify areas that would impact the company’s financial statements to be reviewed against the reported financial statements. Also, quarterly financial packages are collected and reviewed with each subsidiary to analyze and ensure completeness of their financial statements.
Actions have been taken regarding the remediation plan, however there remain actions to complete:
| ● | Walk through and document critical process. This portion of the plan will commence in Q3 | |
| ● | Review resources and organizational structure to address segregation of duty issues and support the | |
| jobs assigned. The structure has been defined and resources are being identified. | ||
| ● | Implement a BI tool that will replace Excel worksheets that can be prone to errors. The tool has been selected and implementation is taking place. |
PART II – OTHER INFORMATION
ITEM 1. Legal Proceedings.
On June 10, 2022, Copa Di Vino Corporation (“Copa”) filed a lawsuit against the Company in Broward County, Florida. The complaint alleged that the Company still owed part of the final payment under the December 24, 2020 Asset Purchase Agreement (“APA”) between Copa and the Company. The Company settled the lawsuit with Copa Di Vino Corporation. This matter was settled in September 2022 without the admission of liability or wrongdoing on the part of Splash. In exchange for full release from COPA, the Company agreed to issue 380,959 shares of the Company’s common stock. The Company entered into the settlement solely to avoid the costs and uncertainty of litigation.
ITEM 1A. Risk Factors.
No new risk factors noted since our Annual Report on Form 10-K for the year ended December 31, 2021.
ITEM 2. Unregistered SalesUNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the three months ended March 31, 2022, we issued 550,000 shares of Equity Securitiescommon stock in exchange for services, 2,300,000 shares pursuant to our public offering to increase working capital, and Use223,596 shares were issued on convertible instruments. For the three-month-ended June 30, 2022 we issued 500,000 shares in exchange for service provided that were valued at a fair market value stock price based on the agreement date and 100,000 shares for cash. During the three-months ended September 30, 2022 we issued 2,000,000 shares pursuant to our public offering to support inventory increases. The Company also issued 380,959 shares in settlement of Proceeds.
ITEM 3. Defaults Upon Senior Securities.
None.
ITEM 4. Mine Safety Disclosures.
No disclosure required.
ITEM 5. Other Information.
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/ | |
| (principal executive officer) | |||
| Date: November 14, 2022 | By: | /s/ Ron Wall |
( principal financial officer) |
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