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) |
(954)745-5815
(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, 2023, there were 11,277,100 shares of Common Stock issued and outstanding.
SPLASH BEVERAGE GROUP, INC. |
FORM 10-Q |
September 30, 2023 |
TABLE OF CONTENTS
i |
ITEM 1. FINANCIAL STATEMENTS
Splash Beverage Group, Inc.
Condensed Consolidated Financial Statements.
September 30, 2023
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, 2023 and December 31, 2022 |
September 30, 2023 | December 31, 2022 | |||||||
Assets | (unaudited) | |||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 96,121 | $ | 4,431,745 | ||||
Accounts receivable, net | 1,512,693 | 1,812,110 | ||||||
Prepaid expenses | 225,446 | 348,036 | ||||||
Inventory | 2,907,461 | 3,721,307 | ||||||
Other receivables | 376,905 | 344,376 | ||||||
Total current assets | 5,118,626 | 10,657,574 | ||||||
Non-current assets: | ||||||||
Deposit | $ | 49,398 | $ | 49,290 | ||||
Goodwill | 256,823 | 256,823 | ||||||
Intangible assets, net | 4,564,037 | 4,851,377 | ||||||
Investment in Salt Tequila USA, LLC | 250,000 | 250,000 | ||||||
Operating lease right of use asset | 619,559 | 750,042 | ||||||
Property and equipment, net | 385,603 | 489,597 | ||||||
Total non-current assets | 6,125,420 | 6,647,129 | ||||||
Total assets | $ | 11,244,046 | $ | 17,304,703 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Liabilities: | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued expenses | $ | 4,199,476 | $ | 3,383,187 | ||||
Liability to issue shares | — | 91,800 | ||||||
Operating lease liabilities - current | 259,072 | 268,749 | ||||||
Notes payable, current portion | 5,548,830 | 1,080,257 | ||||||
Due to related party | 426,000 | — | ||||||
Shareholder advance | 200,000 | — | ||||||
Accrued interest payable | 496,384 | 141,591 | ||||||
Total current liabilities | 11,129,762 | 4,965,584 | ||||||
Long-term liabilities: | ||||||||
Notes payable | 408,801 | 2,536,319 | ||||||
Operating lease liabilities - noncurrent | 363,313 | 480,666 | ||||||
Total long-term liabilities | 772,114 | 3,016,985 | ||||||
Total liabilities | 11,901,876 | 7,982,569 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $ | par value, shares authorized, shares issued— | — | ||||||
Common Stock, $ par, shares authorized, shares issued, shares outstanding at September 30, 2023 and shares issued, shares outstanding at December 31, 2022 | 42,902 | 41,086 | ||||||
Additional paid in capital | 126,648,371 | 121,632,547 | ||||||
Accumulated other comprehensive loss | (8,448 | ) | (20,472 | ) | ||||
Accumulated deficit | (127,340,655 | ) | (112,331,027 | ) | ||||
Total stockholders’ equity | (657,830 | ) | 9,322,134 | |||||
Total liabilities and stockholders’ equity | $ | 11,244,046 | $ | 17,304,703 |
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 and Comprehensive Loss |
For the Three and Nine Months Ended September 30, 2023 and 2022 (Unaudited) |
Three months ended September 30 | Nine months ended September 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Net revenues | 5,144,069 | 4,870,407 | 16,161,747 | 13,295,921 | ||||||||||||
Cost of goods sold | (3,847,202 | ) | (3,101,807 | ) | (11,326,298 | ) | (8,886,508 | ) | ||||||||
Gross profit | 1,296,867 | 1,768,600 | 4,835,449 | 4,409,413 | ||||||||||||
Operating expenses: | ||||||||||||||||
Contracted services | 382,096 | 438,004 | 1,094,398 | 1,196,852 | ||||||||||||
Salary and wages | 1,195,916 | 1,262,935 | 3,794,179 | 3,180,198 | ||||||||||||
Non-cash share-based compensation | 367,244 | 1,697,201 | 1,224,101 | 7,039,695 | ||||||||||||
Other general and administrative | 3,048,779 | 2,734,377 | 8,617,013 | 7,698,231 | ||||||||||||
Sales and marketing | 626,363 | 746,965 | 2,105,559 | 1,918,420 | ||||||||||||
Total operating expenses | 5,620,398 | 6,879,482 | 16,835,250 | 21,033,396 | ||||||||||||
Loss from continuing operations | (4,323,531 | ) | (5,110,882 | ) | (11,999,801 | ) | (16,623,983 | ) | ||||||||
Other income/(expense): | ||||||||||||||||
Interest income | 348 | 158 | 1,668 | 2,867 | ||||||||||||
Interest expense | (221,488 | ) | (66,193 | ) | (561,249 | ) | (225,543 | ) | ||||||||
Other Income | — | — | 49,819 | — | ||||||||||||
Amortization of debt discount | (1,125,410 | ) | — | (2,500,065 | ) | — | ||||||||||
Total other expense | (1,346,550 | ) | (66,035 | ) | (3,009,827 | ) | (222,676 | ) | ||||||||
Provision for income taxes | — | — | — | — | ||||||||||||
Net loss from continuing operations, net of tax | (5,670,081 | ) | (5,176,917 | ) | (15,009,628 | ) | (16,846,659 | ) | ||||||||
Net loss from discontinued operations, net of tax | — | — | — | (199,154 | ) | |||||||||||
Gain on sale of discontinued operations | — | 33,116 | — | 148,748 | ||||||||||||
Income (Loss) from discontinued operations | — | 33,116 | — | (50,406 | ) | |||||||||||
Net loss | $ | (5,670,081 | ) | $ | (5,143,801 | ) | $ | (15,009,628 | ) | $ | (16,897,065 | ) | ||||
Other Comprehensive Income | ||||||||||||||||
Foreign currency translation Income | 29,406 | — | 12,024 | — | ||||||||||||
Total Comprehensive Loss | $ | (5,640,675 | ) | $ | (5,143,801 | ) | $ | (14,997,604 | ) | $ | (16,897,065 | ) | ||||
Loss per share - continuing operations | ||||||||||||||||
Basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
Weighted average number of common shares outstanding - continuing operations | ||||||||||||||||
Basic and diluted |
The accompanying footnotesnotes are an integral part of these unaudited condensed consolidated financial statements.
Splash Beverage Group, Inc.
Condensed Consolidated Statement of Changes in Stockholders’ Equity
For the Three and Nine months ended September 30, 2023 and 2022
(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 | $ | - | $ | - | ||||
Total | ||||||||||||||||||||||||
Accumulated Other | Stockholders' | |||||||||||||||||||||||
Common Stock | Additional | Comprehensive | Accumulated | Equity | ||||||||||||||||||||
Shares | Amount | Paid-In Capital | Income | Deficit | (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 and options 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 | $ | 111,107,117 | — | $ | (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 | $ | (6,570 | ) | $ | (102,393,821 | ) | $ | 11,457,685 | |||||||||||
Issuance of warrants for services | — | — | 1,036,066 | — | — | 1,036,066 | ||||||||||||||||||
Issuance of common stock for APA | 380,959 | 381 | (381 | ) | — | — | — | |||||||||||||||||
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 | $ | 117,487,990 | $ | 2,225 | $ | (107,537,622 | ) | $ | 9,992,245 |
Balances at December 31, 2022 | 41,085,520 | $ | 41,086 | $ | 121,632,546 | $ | (20,472 | ) | $ | (112,331,026 | ) | $ | 9,322,134 | |||||||||||
Common stock issuable and beneficial conversion feature on convertible 12-month promissory note | — | — | 1,786,468 | — | — | 1,786,468 | ||||||||||||||||||
Issuance of warrants for services | — | — | 215,760 | — | — | 215,760 | ||||||||||||||||||
Accumulated Comprehensive loss – translation, net | — | — | — | (1,609 | ) | — | (1,609 | ) | ||||||||||||||||
Net loss | — | — | — | — | (3,729,299 | ) | (3,729,299 | ) | ||||||||||||||||
Balances at March 31, 2023 | 41,085,520 | $ | 41,086 | $ | 123,634,774 | $ | (22,081 | ) | $ | (116,060,325 | ) | $ | 7,593,454 | |||||||||||
Issuance of common stock on convertible instruments | 1,500,000 | 1,500 | (1,500 | ) | — | — | — | |||||||||||||||||
Share based compensation | — | — | 509,232 | — | — | 509,232 | ||||||||||||||||||
Issuance of common stock for services | 216,666 | 216 | 223,449 | — | — | 223,665 | ||||||||||||||||||
Issuance of warrants on convertible instruments | — | — | 1,269,669 | — | — | 1,269,669 | ||||||||||||||||||
Accumulated Comprehensive loss – translation, net | — | — | — | (15,773 | ) | — | (15,773 | ) | ||||||||||||||||
Net loss | — | — | — | — | (5,610,249 | ) | (5,610,249 | ) | ||||||||||||||||
Balances at June 30, 2023 | 42,802,186 | $ | 42,802 | $ | 125,635,624 | $ | (37,854 | ) | $ | (121,670,574 | ) | $ | 3,969,998 | |||||||||||
Debt discount from convertible instrument | — | — | 79,817 | — | — | 79,817 | ||||||||||||||||||
Share based compensation | — | — | 300,912 | — | — | 300,912 | ||||||||||||||||||
Issuance of common stock for services | 99,999 | 100 | 66,232 | — | — | 66,332 | ||||||||||||||||||
Issuance of warrants on convertible instruments | — | — | 565,786 | — | — | 565,786 | ||||||||||||||||||
Accumulated Comprehensive loss – translation, net | — | — | — | 29,406 | — | 29,406 | ||||||||||||||||||
Net loss | — | — | — | — | (5,670,081 | ) | (5,670,081 | ) | ||||||||||||||||
Balances at September 30, 2023 | 42,902,185 | $42,902 | $ | 126,648,371 | $ | (8,448 | ) | $ | (127,340,655 | ) | $ | (657,830) |
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, 2023 and 2022 |
(Unaudited) |
2023 | 2022 | |||||||
Net loss | $ | (15,009,628 | ) | $ | (16,897,065 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 403,948 | 306,900 | ||||||
Amortization of debt discount | 2,500,065 | — | ||||||
ROU assets, net | 3,453 | 4,888 | ||||||
Loss (gain) from sale of discontinued operation | — | 50,407 | ||||||
Common stock issued for services | 289,998 | — | ||||||
Non-cash share-based compensation | 1,224,101 | 7,107,684 | ||||||
Changes in working capital items: | ||||||||
Accounts receivable, net | 299,417 | (364,161 | ) | |||||
Inventory, net | 813,846 | (1,660,852 | ) | |||||
Prepaid expenses and other current assets | 90,061 | (398,328 | ) | |||||
Deposits | (108 | ) | 281,635 | |||||
Accounts payable and accrued expenses | 526,290 | 732,139 | ||||||
Accrued interest payable | 354,792 | 12,101 | ||||||
Net cash used in operating activities - continuing operations | (8,503,765 | ) | (10,824,652 | ) | ||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (12,613 | ) | (45,420 | ) | ||||
Net cash used in investing activities - continuing operations | (12,613 | ) | (45,420 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of common stock | — | 10,810,900 | ||||||
Cash advance from related party | 426,000 | — | ||||||
Cash advance from shareholder | 200,000 | (280,500 | ) | |||||
Proceeds from issuance of debt | 4,300,000 | 45,420 | ||||||
Principal repayment of debt | (757,270 | ) | (1,285,861 | ) | ||||
Net cash provided by financing activities - continuing operations | 4,168,730 | 9,289,959 | ||||||
Net cash effect of exchange rate changes on cash | 12,024 | — | ||||||
Net change in cash and cash equivalents | (4,335,624 | ) | (1,580,113 | ) | ||||
Cash and cash equivalents, beginning of year | 4,431,745 | 4,181,383 | ||||||
Cash and cash equivalents, end of period | $ | 96,121 | $ | 2,601,270 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for Interest | $ | 206,456 | $ | 164,107 | ||||
Supplemental disclosure of non-cash investing and financing activities | ||||||||
Notes payable and accrued interest converted to common stock (223,596 shares) | — | 1,206,511 | ||||||
Non-cash debt discount in the form of issuance of equity instruments and beneficial conversion feature in conjunction with convertible notes | 3,099,940 | — |
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, Inc. (the “Company”), was incorporated“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 StateUS and is now expanding to select attractive international markets. Through its division Qplash, Splash’s distribution reach includes e-commerce access to both business-to-business (B2B) and business-to-consumer (B2C) customers. Qplash markets well known beverage brands to customers throughout the US that prefer delivery direct to their office, facilities, and or homes.
Note 2 – Summary of Ohio on September 3, 1992, and changed domicile to Colorado on April 18, 2012. The Company is in the businessSignificant Accounting Policies
Basis 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 Company 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, 2017 and 2016 have been made.
The accompanying condensed consolidated financial statements.statements are unaudited and include all adjustments (consisting of normal recurring adjustments) that management considers necessary for a fair presentation of its condensed financial position and results of operations for the interim periods presented. The results of operations for the interim periods ended September 30, 2017 and 2016 are not necessarily indicative of the operating results that may be expected for the fullentire year.
Basis of Presentation and Consolidation
These consolidated financial statements include the accounts of Splash and its wholly owned subsidiaries Splash Beverage Holdings LLC (“Holdings”), Splash International Holdings LLC (“International”), Splash Mex SA de CV (“Splash Mex”) and Copa di Vino Wine Group, Inc. (“Copa di Vino”).
Canfield Medical Supply, Inc. (“CMS”) (as discontinued operations), was consolidated until September 30, 2022.
All intercompany balances have been eliminated in consolidation.
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Our investment in Salt Tequila USA, LLC is carried at cost less impairment, the investment does not have a readily determinable fair value.
Certain reclassifications have been made to the prior period financial statements to conform to the December 31, 2022 audited financial statement and the current period classifications. In the three months ended September 30, 2022, the Company reclassified $617,553 from cost of goods sold to other general and administrative cost in the condensed consolidated statement of operations and comprehensive loss, which consisted of $176,504 of shipping and handling and $441,049 of Amazon selling fees. In the nine months ended September 30, 2022, the Company reclassified $1,753,208 from cost of goods sold to other general and administrative cost in the condensed consolidated statement of operations and comprehensive loss, which consisted of $602,479 of shipping and handling and $1,150,729 of Amazon selling fees. These reclassifications had no impact on net loss.
Use of estimates
The preparation of condensed consolidated financial statements in conformity with generally accepted accounting principlesU.S. GAAP 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 condensed 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
The Company considers all highly liquid investmentssecurities with an original maturity of twelvethree months or less asto be cash equivalents.
At September 30, 20172023 the Company’s cash on deposit with financial institutions, at times, had not exceed federally insured limits of $250,000.
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. The Company establishes 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, 2023 and December 31, 2016,2022, our accounts receivable amounts are reflected net of allowances of $14,634 and $13,683, respectively.
Inventory
Inventory is stated at the lower of cost or net realizable value, accounted for using the weighted average cost method. The inventory balances at September 30, 2023 and December 31, 2022 consisted of raw materials, work-in-process, and finished goods held for distribution. The cost elements of inventory consist of purchase of products, transportation, and warehousing. The Company has determined that no allowanceestablish provisions for doubtful accounts is necessary.
Property and equipment
The Company records 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 $38,242 and Nine Months Ended$27,762 for the three months ended September 30, 20172023 and 2016 (Unaudited)
Schedule of property and equipment | ||||||||
2023 | 2022 | |||||||
Auto | 45,420 | 45,420 | ||||||
Machinery & equipment | 1,160,578 | 1,108,870 | ||||||
Buildings | 233,323 | 282,988 | ||||||
Leasehold improvements | 723,639 | 713,068 | ||||||
Computer Software | 5,979 | — | ||||||
Office furniture & equipment | 7,657 | 13,636 | ||||||
Total cost | 2,176,596 | 2,163,983 | ||||||
Accumulated depreciation | (1,790,993 | ) | (1,674,385 | ) | ||||
Property, plant & equipment, net | 385,603 | 489,597 |
Excise taxes
The Company pays 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.
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 Board (“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, 2023 and December 31, 2022, 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
The Company recognizes 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 the Company expects to receive in exchange for the transfer of goods or services to customers.
The Company recognizes revenue when the Company’s performance obligations under the terms of a contract with the customer are satisfied. Product sales occur for the Splash Beverage and E-commerce businesses once control of the Company’s products are transferred upon delivery to the customer. Revenue is measured as the amount of consideration that the Company expects to receive in exchange for transferring goods, and revenue is presented net of provisions for customer returns and allowances. The amount of consideration the Company receives and revenue the Company recognizes varies with changes in customer incentives offered to the Company’s 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.
Other General and Administrative Expenses
Other General and Administrative expenses include Amazon selling fees, royalty cost for selling TapouT, cost associated with the outbound shipping and handling of finished goods, insurance cost, consulting cost, legal and audit fees, Investor Relations expenses, travel & entertainment expenses, occupancy cost, shipping and handling cost and other cost.
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Shipping and Handling Costs
The Company includes costs associated with the outbound shipping and handling of finished goods as a component of other general and administrative expenses in the consolidated statements of operations and comprehensive loss. Shipping and handling are not separately billed to the customers and are included in fees charged to the customer and are recorded as revenue when earned.
The Company incurred $1,279,189 and $1,268,636 of shipping and handling costs for the three months ending September 30, 2023 and 2022 respectively. The Company incurred $4,016,394 and $3,261,266 of shipping and handling costs for the nine months ending September 30, 2023 and 2022 respectively. These amounts, which primarily relate to shipping, are recorded in other general and administrative expenses.
Stock-Based Compensation
The Company accounts 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. The Company uses the Black-Scholes option pricing model to determine the fair value of stock-based awards.
Income Taxes
The Company uses 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. The Company records 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 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 no material uncertain tax positions at September 30, 2023 and December 31, 2022.
The Company’s federal, state and local income tax returns prior to fiscal year 2019 are closed and management continually evaluates expiring statutes of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects oflimitations, audits, proposed settlements, changes in tax lawslaw and rates onnew authoritative rulings.
The Company recognizes interest and penalties associated with tax matters, if any, as part of operating expenses and includes accrued interest and penalties with accrued expenses in the datecondensed interim balance sheets.
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Note 2 – Summary 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
The Company conducts 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 Copa Di Vino. The Company amortizes intangible assets with finite lives on a straight-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 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 December 31, 2016,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.
Segment reporting
The Company discloses a measurement of segment profit or loss that its chief operating decision maker (CODM) uses to assess segment performance and to make decisions about resource allocations for each reportable segment.
Recent Accounting Pronouncements
On January 1, 2023, the Company owedadopted FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326) (“ASU 2016-13”), which requires the immediate recognition of management’s estimates of current and expected credit losses. Adoption of this standard did not have a bank $64,619 and $70,373 respectively, undermaterial impact on the Company’s condensed consolidated financial statements or disclosures.
Management does not believe that any recently issued, but not yet effective, accounting standards could have a revolving line of credit. The line of credit is secured by allmaterial effect on the accompanying financial statements. As new accounting pronouncements are issued, the Company assets, is capped at $100,000, is due on demand, and bears interest at variable rates approximating 6% on average. Interest expensewill adopt those that are applicable under the note approximated $3,336circumstances.
In October 2021, the FASB issued ASU 2021-08, Business Combinations - Accounting for contract assets and $2,250contract liabilities from contracts with customers (Topic 805), which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with Revenues from contracts with customers (Topic 606). For public companies, the guidance is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The Company adopted the guidance during eachfiscal year 2023. The adoption of this guidance did not have a material impact on the nineCompany’s consolidated financial statements.
Foreign Currency Gains/Losses
Foreign Currency Gains/Losses — foreign subsidiaries’ functional currency is the local currency of operations and the net assets of foreign operations are translated into U.S. dollars using current exchange rates. Gains or losses from these translation adjustments are included in the condensed consolidated statement of operations and other comprehensive loss as foreign currency translation gains or losses. Translation gains and losses that arise from the translation of net assets from functional currency to the reporting currency, as well as exchange gains and losses on intercompany balances, are included in foreign currency translation in the condensed consolidated statement of operations and comprehensive loss. The Company incurred foreign currency translation net gain of $13,632 and $4,345 for the three months ended September 30, 20172023 and 2016, respectively. During2022 respectively and net gain of $12,023 and net loss of$2,225 (2,225) for the nine months ending September 30, 2023 and 2022 respectively.
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Liquidity and Going Concern Considerations
These condensed consolidated financial statements have been prepared assuming the Company will be able to continue as a going concern. The Company historically has incurred significant losses and negative cash flows from operation since inception and had net-loss of approximately $15 million for nine-month period ended September 30, 20172023 and 2016, the Company made principal paymentsaccumulated deficit of $5,754 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 |
If sales volumes do not meet the Company’s projections, expenses exceed the Company’s expectations, or the Company’s plans change, the Company may be unable to September 30, 2017, future minimum payments under the leases total approximately $75,625 including: 2017 (balance) $6,875, 2018 - $27,500, 2019 - $27,500, and 2020 - $13,750.
In order to have sufficient cash to fund our operations, the Company will need to raise additional equity deficits. In all likelihood, theor debt capital. There can be no assurance that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to us. The Company will be required to make significantpursue sources of additional capital through various means, including debt or equity financings. Future financings through equity investments are likely to be dilutive to existing stockholders. Also, the terms of securities the Company may issue in future expenditurescapital transactions may be more favorable for new investors. Newly issued securities may include preferences, superior voting rights, the issuance of warrants or other derivative securities, and the issuances of incentive awards under equity employee incentive plans, which may have additional dilutive effects. Further, the Company may incur substantial costs in pursuing future capital and/or financing, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs. The Company may also be required to recognize non-cash expenses in connection with marketing efforts alongcertain securities the Company may issue, such as convertible notes and warrants, which will adversely impact our financial condition. Our ability to obtain needed financing may be impaired by such factors as the capital markets and our history of losses, which could impact the availability or cost of future financings. If the amount of capital the Company is able to raise from financing activities together with general administrative expenses. These conditions raiseour revenues from operations, is not sufficient to satisfy our capital needs, even to the extent that the Company reduce our operations accordingly, the Company may be required to curtail or cease operations. As a result, there is uncertainty regarding the Company’s ability to maintain liquidity sufficient to operate its business effectively, which raises substantial doubt aboutas to the Company’s ability to continue as a going concern.
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Note 3 – Notes Payable, Related Party Notes Payable, Convertible Bridge Loans Payable and Revenue Financing Arrangements
Notes payable are generally non-recourse and secured by all Company owned assets.
Schedule of notes payable | ||||||||||||
Interest Rate | September 30, 2023 | December 31, 2022 | ||||||||||
Notes Payable and Convertible Notes Payable | ||||||||||||
In March 2014, the Company 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 and interest was paid off in February 2023 | 8 | % | — | 200,000 | ||||||||
In December 2020, the Company entered into a 56- month loan with a company in the amount of $1,578,237. The loan requires payments of 3.75% through November 2022 and 4.00% through September 2025 of the previous month’s revenue. Note is due September 2025. Note is guaranteed by a related party see note 6. | 17 | % | 494,204 | 1,044,445 | ||||||||
In April 2021, the Company entered into various six-month loans with individuals totaling in the amount of $168,000. The loans had an original maturity of October 2021 with principal and interest due at maturity with conversion price of $3.30 per share. The loans were extended to March 31, 2024. | 7 | % | 168,000 | 168,000 | ||||||||
In May 2021, the Company entered into various six-month loans with individuals totaling in the amount of $60,000. The loans had an original maturity of October 2021 with principal and interest due at maturity with conversion price of $3.30 per share. The loans were extended to March 31, 2024. | 7 | % | 60,000 | 60,000 |
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
In August 2022, the Company entered into a 56-months auto loan in the amount of $45,420. | 2.35 | % | 35,367 | 42,396 | ||||||||
In December 2022, the Company entered into various eighteen-month loans with individuals totaling in the amount of $4,000,000. The notes included 100% warrant coverage. The loans mature in June 2024 with principal and interest due at maturity with conversion price of $1.00 per share. | 12 | % | 4,000,000 | 4,000,000 | ||||||||
In February 2023, the Company entered into a twelve-month loan with an entity in the amount of $2,000,000. The convertible note included the issuance of shares of common stock . The loan matures in February 2024 with conversion price of $0.85 per share and is non-interest bearing | — | 2,000,000 | — | |||||||||
In May 2023, the Company entered into various eighteen-month loans with individuals totaling in the amount of $800,000. The notes included 50% warrant coverage. The loans mature in November 2024 with principal and interest due at maturity with conversion price of $1.00 per share. | 12 | % | 800,000 | — |
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
In June 2023, the Company entered into various eighteen-month loans with individuals totaling in the amount of $350,000. The notes included 50% warrant coverage. The loans mature in December 2024 with principal and interest due at maturity with conversion price of $1.00 per share. | 12 | % | 350,000 | — | ||||||||
In July 2023, the Company entered into a twelve-month loan with an individual in the amount of $750,000. The note included 100% warrant coverage. The loan matures in July 2024 with principal and interest due at maturity with conversion price of $1.00 per share. | 12 | % | 750,000 | — | ||||||||
In July 2023, the Company entered into a twelve-month loan with an individual in the amount of $100,000. The note included 100% warrant coverage. The loan matures in January 2025 with principal and interest due at maturity with conversion price of $1.00 per share. | 12 | % | 100,000 | — | ||||||||
In August 2023, the Company entered into a twelve-month loan with an individual in the amount of $300,000. The convertible note included the issuance of shares of common stocks. The loan matures in August 2024 with principal and interest due at maturity with conversion price of $0.85 per share and is non-interest bearing. | - | 300,000 | — | |||||||||
Total notes payable | $ | 9,057,571 | $ | 5,514,841 | ||||||||
Less notes discount | (3,099,940 | ) | (1,898,265 | ) | ||||||||
Less current portion | (5,548,830 | ) | (1,080,257 | ) | ||||||||
Long-term notes payable | $ | 408,801 | $ | 2,536,319 |
Interest expense on notes payable was $207,087 and $65,007 for the three months ended September 30, 2023 and 2022, respectively. Interest expense on notes payable was $546,849 and $217,123 for the nine months ended September 30, 2023 and 2022, respectively. Accrued interest was $496,384 as of September 30, 2023. The Company may raise additional capital throughCompany’s effective interest rate was 41.07% for the salenine months ended September 30, 2023.
As of its equity securities, through an offeringSeptember 30, 2023, the Company’s convertible note balances are convertible into shares of debt securities, or through borrowings from financial institutions or related parties. By doing so,common stock.
Shareholder Advances
As of February 23, 2023, the Company hopes to generate sufficient capital to execute its business plan of selling medical supplies on an ongoing basis. Management believes that actions presently being taken to obtain additional funding provide the opportunityreceived a shareholder advance for $ with a % interest rate and interest expense was $ for the Companynine months ended September 30, 2023.
Splash Beverage Group, Inc.
Notes to continue as a going concern.
Note 4 – Licensing Agreement and Royalty Payable
The Company has evaluated subsequent events througha licensing agreement with ABG TapouT, LLC (“TapouT”), providing the date these financial statementsCompany with licensing rights to the brand “TapouT” (i)energy drinks, (ii) energy bars, (iii) coconut water, (iv) electrolyte gum/chews, (v) energy shakes, (vi) powdered drink mix, (viii) water (including enhanced water), (vii) energy shots, (viii) teas, and (ix) sports drinks sold in the North America (including US Territories and Military Bases), United Kingdom, Brazil, South Africa, Australia, Scandinavia, Peru, Colombia, Chile and Guatemala. The Company is required to pay a 6% royalty on net sales, as defined, and are required to make minimum monthly payments of $55,000 in 2023 and $54,450 in 2022.
There were availableno unpaid royalties at September 30, 2023. The Company paid the guaranteed minimum royalty payments of $165,000 and $163,350 for the three months ended September 30, 2023 and 2022 respectively and $495,000 and $490,050 for the nine months ending September 30, 2023 and 2022 respectively, which is included in general and administrative expenses in the condensed consolidated statement of operations and comprehensive loss.
In connection with the Copa di Vino APA, the Company acquired the license to certain patents from 1/4 Vin SARL (“1/4 Vin”). On February 16, 2018, Copa di Vino entered into three separate license agreements with 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 in 2027. The asset is being amortized over a 10-year useful life.
Note 5– Stockholders’ Equity
Common Stock
During the period ended September 30, 2023, the Company entered into a private placement offering to purchase convertible instruments that convert into the Company’s common stock up to an aggregate of $8,500,000. The Company received gross proceeds of $4,300,000 from the issuance of convertible instruments with shares and 1,000,000 warrants.
In the three months and nine months ended September 30, 2023, the Company granted share-based awards to certain consultants totaling
and shares of common stock, respectively, at a weighted average price of $0.66 and $0.91, respectively, recognized share-based compensation of $ and $ , respectively. In the nine months ended September 30, 2023, the Company issued shares in satisfaction of a $ liability to issue shares recorded in December 2022.Splash Beverage Group, Inc.
Notes to the Consolidated Financial Statements
Note 5 – Stockholders’ Equity, continued
Stock Plans
2020 Plan
In July 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 2020 Plan has an “evergreen” feature, which provides for the annual increase in the number of shares issuable under the plan by an amount equal to 5% of the number of issued and outstanding common shares at year end, unless otherwise adjusted by the Board of Directors. At January 1, 2023 and 2022, the number of shares issuable under the 2020 plan increased by
and shares, respectively.In October 2023, the shareholders voted to increase the number of shares issuable under the Plan to 7.5%.
The following is a summary of the Company’s stock option activity during the period ended September 30, 2023:
Schedule of stock option activity | ||||||||||||
Stock options | Weighted average exercise price of outstanding stock options | Weighted average remaining life (Yrs) | ||||||||||
Balance January 01, 2023 * | 1,151,000 | $ | 1.12 | |||||||||
Granted | 65,000 | 1.08 | ||||||||||
Exercises | — | — | ||||||||||
Cancelled | — | — | ||||||||||
Balance March 31, 2023 | 1,216,000 | $ | 1.12 | |||||||||
Granted | 3,376,008 | 1.13 | ||||||||||
Exercises | — | — | ||||||||||
Cancelled | — | — | ||||||||||
Balance - June 30, 2023 | 4,592,008 | $ | 1.13 | |||||||||
Exercisable - June 30, 2023 | 3,608,923 | $ | 1.12 | |||||||||
Granted | — | — | ||||||||||
Exercises | — | — | ||||||||||
Cancelled | — | — | ||||||||||
Balance - September 30, 2023 | 4,592,008 | $ | 1.13 | $ | ||||||||
Exercisable - September 30, 2023 | 3,608,923 | $ | 1.12 | $ |
* | These prices are reflective of the price modification made on April 24, 2023. |
The Company recognized $
and $ of share-based compensation during the three months and nine months ended September 30, 2023.Splash Beverage Group, Inc.
Notes to the Consolidated Financial Statements
The following is a summary of the Company’s Warrant activity.
Schedule of warrant activity | ||||||||||||
Warrants | Weighted average exercise price of outstanding warrants | Weighted average remaining term (Yrs) | ||||||||||
Balance December 31, 2022 | 14,343,896 | $ | 1.85 | |||||||||
Granted | — | — | ||||||||||
Balance March 31, 2023 | 14,343,896 | $ | 1.85 | |||||||||
Granted | 575,000 | 0.25 | ||||||||||
Exercises | 68,146 | 2.19 | ||||||||||
Cancelled | 2,345,677 | 2.32 | ||||||||||
Balance - June 30, 2023 | 12,505,073 | $ | 1.68 | |||||||||
Granted | 425,000 | 0.25 | ||||||||||
Exercises | — | — | ||||||||||
Cancelled | — | — | ||||||||||
Balance - September 30, 2023 | 12,930,073 | $ | 1.63 |
Note 6 – Related Parties
During the normal course of business, the Company incurs expenses related to services provided by the CEO for Company expenses paid by the CEO. In conjunction with the acquisition of Copa di Vino, the Company also entered into a Revenue Loan and Security Agreement (the “Loan and Security Agreement”) by and among the Company, Robert Nistico, was an additional Guarantor and each of the subsidiary guarantors from time-to-time party thereto (each a “Guarantor”, and, collectively, the “Guarantors”), and Decathlon Alpha IV, L.P. (the “Lender”). The Note Payable had a balance outstanding of $494,204 at September 30,2023.
On June 22, 2023, the Company received an interest free short-term loan from the CEO for $250,000. In August and September 2023, the Company received an interest free short-term loan from the CEO for $165,000 and expense payable of $11,000. The loan is expected to be issuedrepaid within the current year.
Note 7 – Investment in Salt Tequila USA, LLC
The Company has a marketing and determineddistribution agreement with SALT Tequila USA, LLC (“SALT”) for the manufacturing of our Tequila product line in Mexico.
The Company has a 22.5% percentage ownership interest in SALT, this investment is carried at cost less impairment, the investment does not have a readily determinable fair value. The Company has the right to increase our ownership to 37.5%.
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Note 8 –Leases
The Company has various operating lease agreements primarily related to real estate and office space. The Company’s real estate leases represent a majority of the lease liability. Lease payments are mainly fixed. Any variable lease payments, including utilities, common area maintenance are expensed during the period incurred. Variable lease costs were immaterial for the three months and nine-month period ended September 30, 2023 and 2022. A majority of the real estate leases include options to extend the lease. Management reviews all options to extend at the inception of the lease and account for these options when they are reasonably certain of being exercised.
Operating lease expense is recognized on a straight-line basis over the lease term and is included in the Company’s condensed consolidated statement of operations and comprehensive loss. Operating lease cost was $273,631 and $263,159 during the nine-month period ended September 30, 2023 and 2022, respectively.
The following table sets forth the maturities of our operating lease liabilities and reconciles the respective undiscounted payments to the operating lease liabilities in the consolidated balance sheet at September 30, 2023:
Schedule of operating lease liability | ||||
Undiscounted Future Minimum Lease Payments | Operating Lease | |||
2023 (Three months remaining) | 71,416 | |||
2024 | 286,168 | |||
2025 | 287,193 | |||
2026 | 17,856 | |||
Total | 662,633 | |||
Amount representing imputed interest | (40,248 | ) | ||
Total operating lease liability | 622,385 | |||
Current portion of operating lease liability | 259,072 | |||
Operating lease liability, non-current | $ | 363,313 |
The table below presents lease-related terms and discount rates at September 30, 2023:
Schedule of lease-related terms and discount rates | ||||
Remaining term on leases | 1 to 33 months | |||
Incremental borrowing rate | 5.0 to 9.0 % |
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Note 9 – Segment Reporting
The Company has two reportable operating segments: (1) the manufacture and distribution of non-alcoholic and alcoholic brand beverages, and (2) the e-commerce sale of beverages. These operating segments are managed respectively, and each segment’s major customers have different characteristics. Segment Reporting is evaluated by our Chief Executive Officer and Chief Financial Officer.
Schedule of segment reporting information | ||||||||||||||||
Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||
Revenue | 2023 | 2022 | 2023 | 2022 | ||||||||||||
Splash Beverage Group | $ | 1,104,878 | $ | 1,147,248 | $ | 4,130,817 | $ | 3,980,794 | ||||||||
E-Commerce | 4,039,191 | 3,723,159 | 12,030,930 | 9,315,127 | ||||||||||||
Net revenues, continuing operations | 5,144,069 | 4,870,407 | 16,161,747 | 13,295,921 | ||||||||||||
Contribution after Marketing | ||||||||||||||||
Splash Beverage Group | (652,727 | ) | (430,049 | ) | (1,468,563 | ) | (1,278,987 | ) | ||||||||
E-Commerce | 1,323,231 | 1,451,684 | 4,198,453 | 3,769,980 | ||||||||||||
Total contribution after marketing | 670,504 | 1,021,635 | 2,729,890 | 2,490,993 | ||||||||||||
Contracted services | 382,096 | 438,004 | 1,094,398 | 1,196,852 | ||||||||||||
Salary and wages | 1,195,916 | 1,262,935 | 3,794,179 | 3,180,198 | ||||||||||||
Non-cash share-based compensation | 367,244 | 1,697,201 | 1,224,101 | 7,039,695 | ||||||||||||
Other general and administrative | 3,048,779 | 2,734,377 | 8,617,013 | 7,963,231 | ||||||||||||
Loss from continuing operations | $ | (4,323,531 | ) | $ | (5,110,882 | ) | $ | (11,999,801 | ) | $ | (16,623,983 | ) |
Total assets | September 30, 2023 | December 31, 2022 | ||||||
Splash Beverage Group | $ | 9,599,010 | $ | 14,723,553 | ||||
E-Commerce | 1,645,036 | 2,581,150 | ||||||
Total assets | $ | 11,244,046 | $ | 17,304,703 |
Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements
Note 10 – Commitment and Contingencies
The Company is 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 the Company does not anticipate that therethe 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 11 – Subsequent Events
In October, 2023, the Company received approximately $1.9 million from the issuance of senior secured convertible notes, a convertible promissory note and a merchant agreement. The senior convertible notes have an eighteen-month term, accrue interest at 12% and are no reportable subsequent events.
The notes that matured in October 2023 were extended by the note holders to March 31, 2024.
The maturity dates of the related party notes were extended to March 31, 2024.
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 Beverage Group, Inc. (the “Company”, “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 rehabilitation market, which consists primarilyUS and is now expanding to select attractive international markets. Through its division Qplash, Splash’s distribution reach includes e-commerce access to both business-to-business (B2B) and business-to-consumer (B2C) customers. Qplash markets well known beverage brands to customers throughout the US that prefer delivery direct to their office, facilities, and or homes.
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
Three months ended September 30, 2017 were $319,015 as2023:
Revenue increased by 5.6%, over same quarter last year $5,144,069 compared to the revenues$4,870,407. The increase of $236,059 for the three$273,662 was due to:
· | An increase from our e-commerce distribution platform called Qplash. |
· | Increase in the Energy and Salt brands |
· | Offset by a partial decline in sales in the Hydration, Copa and Pulpoloco brands |
Nine months ended September 30, 2016.2023:
Revenue increased by 21.6%, over same period last year $16,161,747 compared to $13,295,921. The 35% increase in sales isof $2,865,826 was due to an increasing trend in powerchair sales.
· | An increase from our e-commerce distribution platform called Qplash. |
· | Increase in the Energy, Salt and Copa brands. |
· | Offset by a partial decline in sales in the Hydration and Pulpoloco brands. |
Cost of Goods Sold
Three months ended September 30, 2023:
Cost of goods sold forincreased by 24%, over the threesame quarter last year $3,847,202compared to $3,101,807. The increase of $745,395 was due to:
· | Increase in sales |
· | Higher production costs in the Hydration brand |
· | Increase in cost associated with valuation allowances for expired, damaged, or impaired inventory. |
Nine months ended September 30, 2017 were $148,664 as compared to cost of goods sold for the three2023:
· | Cost of goods sold increased by 27.5%, over the same nine months last year $11,326,298 compared to $8,886,508. The increase of $2,439,790 was due to: |
· | Increase in sales |
· | Higher production costs in the Hydration brand |
· | Increase in cost associated with valuation allowances for expired, damaged, or impaired inventory. |
Operating Expenses
Three months ended September 30, 2016 of $113,572. The 31% increase in the latest three months is primarily due to the 35% increase in sales.
Operating expenses for the three months ended September 30, 2017 were $137,283 as2023, was $ 5,620,398 compared to $134,719$6,879,482 for the three months ended September 30, 2016.2022, a decrease of $1,259,084. The 2% increasedecrease in operating expenses was primarily due to the 6% increasea decrease in salaries and wages which was offset in part by small decreases in professional fees and depreciation.
Nine months ended September 30, 2017 was $35,408 as compared to a net loss of $11,854 for the three months ended September 30, 2016. The reasons for the $47,262 improvement include the fact that the sales increased by $82,956 while the cost of good sold only increased by $35,092.
Operating expenses for the nine months ended September 30, 2017 were $446,371 as2023, was $ 16,835,250 compared to $380,941$21,033,396 for the nine months ended September 30, 2016.2022, a decrease of $4,198,146. The 17% increase isdecrease in operating expenses was primarily due to the $27,104 increase in salariesto:
· | Decrease in consulting fees. |
· | Offset by increase in Employee cost due to new hires |
· | Offset by increase in e-commerce shipping and handling directly attributive to increase in e-commerce sales |
Net Other Income 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 monthsExpense
Interest expense for the audit of our December 31, 2016 financial statementsthree 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.
Included in Other Income for the increased lossthree months ended September 30, 2023 was an insurance settlement of $57,429. For the three and nine months ended September 30, 2022 the other income / expense $0.
Amortization of debt discount for the three months and nine months ended September 30, 2023 was $1,125,409 and $2,500,065 respectively. For the three and nine months ended September 30, 2022 the amortization of debt discount was $0.
LIQUIDITY, GOING CONCERN CONSIDERATIONS 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 first nine monthsmanagement of 2017 was primarily the $65,430 increase in operating expenses discussed above.
As of September 30, 2017, we2023, the Company had negative working capitaltotal cash and cash equivalents of ($10,032)$96,121, as compared to working capital of $2,784 as ofwith $4,431,745 at December 31, 2016.
Net cash (used for)used for operating activities during the nine months ended September 30, 20172023 was ($7,561)$8,503,765 as compared to the net cash providedused by operating activities infor the nine months ended September 30, 20162022 of $27,256.$10,824,651. The primary reasondriver for the change in net cash used for operating activities was the increase in the net loss from $33,023 in the nine months ended September 30, 2016is due to a net lossreduction of $45,642inventory in the latest nine-month period as explained previously.
Net cash provided by financing activities during the nine months ended September 30, 20172023 was $21,092 as compared to $38,379 provided by financing activities in$4,168,730. During the nine months ended September 30, 2016.2023, the Company received $4,500,000 for convertible notes and a $460,000 loan from a related party, which was offset by repayments to debt holders of $757,270.
In order to have sufficient cash to fund operations, the Company will need to raise additional equity or debt capital. There can be no assurance that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to the Company. The Company sold shareswill be required to pursue sources of additional capital through various means, including debt or equity financings. Future financings through equity investments are likely to be dilutive to existing stockholders. Also, the terms of new securities the Company may issue in future capital transactions may be more favorable for new investors. Newly issued securities may include preferences, superior voting rights, the issuance of warrants or other derivative securities, and the issuance of incentive awards under equity incentive plans, which may have additional dilutive effects. Further, the Company may incur substantial costs in pursuing future capital and/or financing, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs. The Company may also be required to recognize non-cash expenses in connection with certain securities the Company may issue, such as convertible notes and warrants, which will adversely impact financial condition. The Company’s ability to obtain needed financing may be impaired by such factors as the capital markets and its common stock duringhistory of losses, which could impact the nine months ended September 30, 2017 and 2016availability or cost of future financings. If the amount of capital the Company are able to raise $35,000 and $50,000, respectively,from financing activities together with our revenues from operations, is not sufficient to help paysatisfy our capital needs, even to the extent that the Company reduce our operations accordingly, the Company may be required to curtail or cease operations. As a result, there is uncertainty regarding the Company’s ability to maintain liquidity sufficient to operate its business effectively, which raises substantial doubt as to the Company’s ability to continue as a going concern for at least twelve months from the date of the consolidated financial statements being available to be issued.
CONTRACTUAL OBLIGATIONS
Share obligation:
None.
Minimum Royalty Payments:
The Company has a licensing agreement with ABG TapouT, LLC (“TapouT”). Under the licensing agreement, the Company has minimum royalty payments to TapouT of $165,000 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.
Inventory Purchase Commitments:
None.
Off-Balance Sheet Arrangements
The Company does 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.
Critical Accounting Estimates
None.
Recently Issued Accounting Pronouncements
None.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
ITEM 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures.
Our Chief Executive Officermanagement, with the participation of the principal executive and Principal Financial Officer haveprincipal financial officers, evaluated the effectiveness of the design and operations of our disclosure controls and procedures, as defined in Rules 13a – 15(e) and 15d – 15(e) under the Securities Exchange Act of 1934, as amended, or Exchange Act, as of the end of the period covered by this quarterly report,Report. Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, because of certain material weaknesses in our internal controls over financial reporting, our disclosure controls and procedures are adequate.
The Company plans to implement additional internal controls or enhance existing internal controls to strengthen its control environment. Subsequent to the quarter ended September 30, 2023, the Company is reviewing a plan to engage additional internal staff, external staff, or an advisory firm to provide support on technical issues related to U.S. GAAP as related to the maintenance of our accounting books and records and the preparation of our financial statements.
Changes in Internal Control overOver Financial Reporting.
Except as noted there were no additional changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the period covered by this report that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.
ITEM 1. Legal Proceedings.
None.
ITEM 1A. Risk Factors.
There can be no assurances that the common stock will not be subject to potential delisting if the Company do not continue to maintain the listing requirements of the NYSE American.
Since June 11, 2021, the common stock has been listed on the NYSE American, under the symbol “SBEV”. The NYSE American has rules for continued listing, including, without limitation, minimum market capitalization and other requirements. Failure to maintain our listing (i.e., being de-listed from the NYSE American), would make it more difficult for shareholders to sell our common stock and more difficult to obtain accurate price quotations on our common stock. This could have an adverse effect on the price of common stock. The ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing the Company may need in the future, may also be materially and adversely affected if common stock is not traded on a national securities exchange.
As of September 30, 2023, we have a negative stockholders’ equity. If we are unable to raise additional capital, or otherwise become unable to satisfy our obligations as they become due, we may become insolvent and face the risk of bankruptcy.
Since our inception and throughout most of our history, we have incurred net losses, including but not limited to, a net loss of $16,897,065 incurred in Fiscal 2022. As of December 31, 2022, we also reported positive stockholders’ equity of $9,322,134 and a gross loss of $$112,331,027. However, as of September 30, 2023, our current shareholders’ equity is ($657,830). We incur substantial expenditures related to manufacturing products in the United States, sales and marketing, general and administrative and research and development purposes. Our ability to achieve profitability in the future will primarily depend on our ability to increase sales of our products. Stockholders’ equity improvement will also be dependent on our ability to increase sales which will increase the value of our assets and decrease our liabilities. Future profitability is dependent on our ability to reduce manufacturing costs. However, some manufacturing costs are fixed and cannot be reduced.
Upon the occurrence of a breach relating to our outstanding notes, the lender may seek to remedy.
We may have breached terms on certain of our outstanding loans by violating certain covenants. Although we have not been informed by any of our lenders that we are in default, such lenders could do so, and at such time the lenders may seek to remedy. It is possible that the occurrence of such an event could place us in breach of other outstanding agreements as well. At this time we are current on all of our outstanding payments with respect to all of our outstanding agreements.
ITEM 2. Unregistered SalesUNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
In the nine months ended September 30, 2023, the Company issued 1,150,000 shares in connection with convertible instruments. On May 10, 2023, the Company received $800,000 for the sale of Equity Securitiesconvertible notes with 12.0% interest and Useeighteen-month term to four individual investors totaling 800,000 shares with an exercise price of Proceeds.
In the three months and nine months ended September 30, 2023, the Company issued 99,999 and 316,665 shares of common stock to consultants in exchange for services and recognized non-cash compensation on our Condensed Consolidated Statement of Operation in the amount of $289,998.
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 |
31.2 | Certification of CFO and Principal Financial and Accounting Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) |
32.1 | Certification of CEO and Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Filed herewith |
32.2 | Certification of CFO and Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Filed herewith | |||
101 | XBRL Exhibits | |||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith
** Furnished herewith
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 | By: | /s/ | |
(Principal |
31