Splash Beverage Group, Inc.
Condensed Consolidated Statements of Operations
For the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~
(Unaudited)

Three months ended September 30, Nine months ended September 30,
2021 2020 2021 2020
Net revenues $ 2,827,393 $ 692,974 $ 8,254,078 $ 1,217,709
Cost of goods sold (2,007,544 ) (349,037 ) (6,011,755 ) (744,024 )
Gross margin 819,849 343,937 2,242,323 473,685

Operating expenses:
Contracted services 354,355 1,954,165 821,471 2,377,843
Salary and wages 1,246,253 293,133 2,892,818 309,539
Salary and wages – non-cash share-based compensation 1,315,261 — 3,688,453 590,283
Other general and administrative 2,214,274 221,442 7,767,241 1,411,113
Other general and administrative – non-cash share-based compensation 7,512,836 — 9,537,608 —
Sales and marketing 249,100 38,551 465,705 85,793
Total operating expenses 12,892,079 2,507,291 25,173,296 4,774,571

Loss from continuing operations (12,072,230 ) (2,163,354 ) (22,930,973 ) (4,300,886 )

Other income/(expense):
Other Income 3,632 16,351 3,632 16,351
Interest income 527 16,354 642 32,710
Interest expense (100,128 ) (23,110 ) (341,715 ) (1,958,601 )
Gain /( loss) from debt extinguishment (1,695 ) 1,521 95,701 36,483
Total other income/(expense) (97,664 ) 11,116 (241,740 ) (1,873,057 )

Provision for income taxes — — — —

Net loss from continuing operations, net of tax (12,169,894 ) (2,152,238 ) (23,172,713 ) (6,173,943 )

Net (loss) income from discontinued operations, net of tax (22,077 ) 68,132 218,410 68,132

Net loss $ (12,191,971 ) $ (2,084,106 ) $ (22,954,303 ) $ (6,105,811 )

Income(loss) per share - continuing operations
Basic (0.40 ) (0112 ) (0.83 ) (0.34 )
Dilutive (0.40 ) (0.112 ) (0.83 ) (0.34 )

Weighted average number of common shares outstanding - continuing operations
Basic 30,515,251 19,465,898 27,512,776 17,702,667
Dilutive 30,515,251 19,465,898 27,512,776 17,702,667

Income(loss) per share - discontinued operations
Basic 0.00 0.00 0.01 0.00
Dilutive 0.00 0.00 0.01 0.00

Weighted average number of common shares outstanding - discontinued operations
Basic 30,515,251 19,465,898 27,512,776 17,702,667
Dilutive 30,515,251 21,410,019 30,809,267 19,001,271

Three months ended March 31,
2022 2021

Gross sales $ 4,071,356 $ 2,190,525
Customer discounts (144,783 ) (51,601 )

Net revenues 3,926,573 2,138,924
Cost of goods sold (3,094,571 ) (1,621,504 )
Gross profit 832,002 517,420

Operating expenses:
Contracted services
431,545
276,511
Salary and wages 785,651 833,851
Salary and wages - non-cash share-based compensation 1,242,697 1,186,596
Other general and administrative
2,222,238
2,072,659
Other general and administrative - non-cash share-based compensation 1,112,845 654,854
Sales and marketing
720,979
41,878
Total operating expenses
6,515,955
5,066,349

Loss from continuing operations (5,683,953 ) (4,548,929 )

Other income/(expense):

Interest expense (85,879 ) (92,097 )
Gain from debt extinguishment — 1,319
Total other (expense) (85,879 ) (90,778 )

Provision for income taxes — —

Net loss from continuing operations, net of tax (5,769,831 ) (4,639,707 )

Net loss /income from discontinued operations, net of tax (224,576 ) 197,488

Net loss $ (5,994,408 ) $ (4,442,219 )

Loss per share - continuing operations
Basic $ (0.16 ) $ (0.19 )
Dilutive (0.16 ) (0.19 )

Weighted average number of common shares outstanding - continuing operations
Basic and dilutive 35,188,404 24,642,532

Income/(loss) per share - discontinued operations
Basic $ (0.00 ) $ (0.00 )
Dilutive $ (0.00 ) $ (0.00 )

Weighted average number of common shares outstanding - discontinued operations
Basic 35,188,404 24,642,532
Dilutive 35,188,404 26,965,927
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

Splash Beverage Group, Inc.
Condensed Consolidated Statement of Changes in Stockholders’ Equity ~~(Deficit)~~
For the ~~Three and Nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~
~~(Unaudited)~~

Three Months Ended September 30, Nine Months Ended September 30, 2022 2021
2021 2020 2021 2020

Total stockholders’ equity (deficit), beginning balances 12,999,888 (1,779,516 ) (9,350,723 ) (9,756,083 )
Total stockholders’ equity, beginning balances 8,873,227 (9,350,724 )

Common stock and additional paid-in capital
Beginning balances 85,592,443 34,955,643 52,239,012 22,139,424 99,513,784 52,239,012
Issuance of common stock for convertible debt — — — 145,579
Incremental beneficial conversion for preferred A — — — 240,770
Issuance of warrants on convertible instruments — 438,431 — 3,002,571
Issuance of common stock upon conversion of
convertible instruments 1,206,510
Issuance of warrants for services 3,010,012 — 5,383,204 — 1,242,697 1,186,596
Issuance of common stock for services 6,111,911 1,729,280 8,212,864 2,279,280 1,113,395 731,035
Issuance of common stock for cash — 1,700,321 19,630,565 1,842,887 8,067,400 4,350,624
Reclassification of Mezzanine shares — — 9,248,720 — — 9,248,720
Issuance of common stock for acquisition — — — 9,173,164
Ending balances 94,714,365 38,823,675 94,714,365 38,823,675

Treasury stock
Beginning balances — — — (50,000 )
Issuance of common stock for services — — — 50,000
Ending balances — — — —
111,143,786
67,935,987

Accumulated deficit
Beginning balances (72,592,554 ) (36,735,159 ) (61,589,735 ) (31,845,506 ) (90,640,557 ) (61,589,735 )
Incremental beneficial conversion for preferred A — — — (240,770 )
Issuance of warrants on convertible instruments — — — (828,903 )
Net loss (12,169,894 ) (2,283,683 ) (23,172,713 ) (6,103,663 ) (5,994,407 ) (4,442,219 )
Ending balances (84,762,448 ) (39,018,842 ) (84,762,448 ) (39,018,842 ) (96,544,694 ) (66,031,954 )

Net loss (12,169,894 ) (2,283,683 ) (23,172,713 ) (6,103,663 ) (5,994,407 ) (4,442,219 )
Total stockholders’ equity (deficit), ending balances 9,951,917 (195,167 ) 9,951,917 (195,167 )
Total stockholders’ equity, ending balances 14,508,822 1,904,032
The accompanying notes are an integral part of these condensed consolidated financial statements.
4

Splash Beverage Group, Inc.
Condensed Consolidated Statement Cash Flows
For the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~
(Unaudited)

2022 2021
Net loss $ (5,994,407 ) $ (4,442,219 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 205,888 76,506
Finance charges (1,128,000 ) —
Beneficial conversion 106,061 —
Non-cash warrant expense 1,242,697 1,186,596
Share-based compensation 1,112,845 731,035
Other noncash changes 64,896 (362,516 )
Changes in working capital items:
Accounts receivable, net (279,841 ) (318,194 )
Inventory, net (133,506 ) (70,391 )
Prepaid expenses and other current assets (114,626 ) 22,453
Deposits 124,378 —
Accounts payable and accrued expenses 97,776 (469,562 )
Accrued Interest payable 19,953 26,253
Net cash used in operating activities - continuing operations (4,675,886 ) (3,620,039 )

Net cash used in operating activities - discontinued operations 224,575 (40,082 )

Cash Flows from Investing Activities:
Capital Expenditures — —
Investment in Salt Tequila USA, LLC — —
Cash used for Copa acquisition — —
Net cash acquired in Canfield merger — —
Net cash used in investing activities - continuing operations — —

Net cash used in investing activities - discontinued operations —

Cash Flows from Financing Activities:
Proceeds from issuance of Common stock 9,203,074 4,530,624
Cash advance from shareholder — 416,201
Repayment of cash advance (107,966 )
Proceeds from issuance of debt —
Principal repayment of debt (437,474 ) (333,333 )
Net cash provided by financing activities - continuing operations 8,765,600 4,505,526

Net cash provided by financing activities - discontinued operations — —

Net Change in Cash and Cash Equivalents 4,314,289 845,405

Cash and Cash Equivalents, beginning of year 4,181,383 380,000

Cash and Cash Equivalents, end of year $ 8,495,672 $ 1,225,405

Supplemental Disclosure of Cash Flow Information:
Cash paid for Interest $ 10,000 $ —

Supplemental Disclosure of Non-Cash Investing and Financing Activities
Notes payable and accrued interest converted to common stock (223,596 shares) 843,480 —

Nine months ended Nine months ended
September 30, 2021 September 30, 2020
Net loss $ (23,172,713 ) $ (6,105,811 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 119,847 26,339
ROU assets, net 86,699 61,341
Gain from debt extinguishment (95,701) (36,483 )
Interest on notes payable converted to common stock — —
Interest expense due to the issuance of warrants — —
Non-cash warrant expense 5,383,204 —
Share-based compensation 8,212,864 2,329,280
Other noncash changes (222,317 ) 590,283
Changes in working capital items:
Accounts receivable, net (716,370 ) (243,369 )
Inventory, net (732,529 ) (269,172 )
Prepaid expenses and other current assets (168,622 ) (206,994 )
Deposits — (4,174 )
Accounts payable and accrued expenses (207,570 ) (474,940 )
Royalty payable — (39,000 )
Accrued interest payable (102,089 ) 61,530
Net cash used in operating activities - continuing operations (11,615,297 ) (4,311,170 )

Net cash used in operating activities - discontinued operations (218,410 ) 28,816

Cash Flows from Investing Activities:
Capital Expenditures — (9,693 )
Proceeds from the sale of fixed assets — —
Investment in Salt Tequila USA, LLC — (150,000 )
Net cash used in investing activities - continuing operations — (159,693 )

Net cash used in investing activities - discontinued operations — 72,442

Cash Flows from Financing Activities:
Proceeds from issuance of common stock 19,630,565 3,574,002
Cash advance from shareholder 834,500 1,097,995
Funds in escrow — (1,000,000 )
Repayment of cash advance (322,279 ) —
Proceeds from issuance of debt 928,000 1,470,099
Principal repayment of debt (1,384,944 ) —
ROU liability, net (87,965 ) (60,502 )
Net cash provided by financing activities - continuing operations 19,597,877 5,081,594

Net cash provided by financing activities - discontinued operations — —

Net Change in Cash and Cash Equivalents 7,764,170 711,989

Cash and Cash Equivalents, beginning of year 380,000 42,639

Cash and Cash Equivalents, end of year $ 8,144,171 $ 754,628

Supplemental Disclosure of Cash Flow Information:
Cash paid for Interest $ 173,363 $ —

Supplemental Disclosure of Non-Cash Investing and Financing Activities
Notes payable and accrued interest converted to common stock (12,605,283 shares) — 9,248,720
Liability issued for investment in SALT Tequila USA, LLC — 100,000

The accompanying notes are an integral part of these condensed consolidated financial statements.
5

Splash Beverage Group, Inc.
Notes to the Condensed Consolidated Financial Statements

Note 1 – Business Organization and Nature of Operations

Splash ~~Beverage Group (“SBG”~~seeks to identify, acquire, and build early stage or ~~“Splash”), f/k/a Canfield Medical Supply, Inc. (the “CMS”), was incorporated~~under-valued beverage brands that have strong growth potential within its distribution system. Splash’s distribution system is comprehensive in the ~~State of Ohio on September 3, 1992,~~US and ~~changed domicile~~is now expanding to ~~Colorado on April 18, 2012. CMS was in the business of home health services, primarily the selling of durable medical equipment~~select attractive international markets. The Splash brand portfolio is growing and ~~medical supplies to the public, nursing homes, hospitals and other end users.~~

On December 31, 2019, CMS entered into an Agreement and Plan of Merger (the “Merger Agreement”) with SBG Acquisition Inc. (“Merger Sub”), a Nevada Corporation wholly owned by CMS, and Splash Beverage Group, Inc. a Nevada corporation (“Splash”) pursuant to which Merger Sub merged with and into Splash (the “Merger”) with Splash as the surviving company and a wholly-owned subsidiary of CMS. The Merger was consummated on March 31, 2020.

As the owners and management of Splash have voting and operating control of CMS following the Merger, the Merger transaction was accounted for as a reverse acquisition (that is with Splash as the acquiring entity), followed by a recapitalization.

~~As part of the recapitalization, previously issued shares of SBG preferred stock have been reflected as shares of common stock~~diverse, covering multiple categories that ~~were received in the Merger. These common shares have been retrospectively presented as outstanding for all periods.~~

~~Splash specializes in the manufacturing, distribution, and sales & marketing of various beverages across multiple channels. Splash operates~~are exhibiting strong growth in both the ~~non-alcoholic~~non-alcohol and ~~alcoholic beverage segments. Additionally, Splash operates~~alcohol sectors. Through its ~~own vertically integrated~~wholly owned subsidiary Qplash, Splash’s distribution reach includes e-commerce access to both B-to-B and B-to-C ~~E-commerce distribution platform called Qplash, further expanding its distribution abilities~~customers. Q-plash markets well known beverage brands to customers throughout the US that prefer delivery direct to their office, facilities and ~~visibility.~~or homes.

In July 2020 the Company filed a Certificate of Amendment of Articles of Incorporation of CMS with the Secretary of State of the State of Colorado, pursuant to which the Company changed its name from CMS. to Splash Beverage Group, Inc. On July 31, 2020, we received approval from FINRA to change the Company’s name from CMS to Splash Beverage Group, Inc. Our new ticker symbol is SBEV.

On December 24, 2020, SBG consummated an Asset Purchase Agreement (the “Copa APA”) with Copa di Vino Corporation (“CdV”), to purchase certain assets and assume certain liabilities that comprise the Copa di Vino business for a total purchase price of $~~5,980,000, payable in the combination of $2,000,000~~ ~~in cash (“Cash Consideration”), $2,000,000~~ convertible promissory note (the “Convertible Note”) to Seller and a variable number of shares of the Company’s common stock based on a attainment of revenue hurdles. CdV is one of the leading producers of premium wine by the glass in the United States with its primary offices and facilities in The Dalles, Oregon.

On February 2021, Management initiated a plan to divest its ~~CMS~~Canfied Medical Supply, Inc. (“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.

In coordination with uplisting to the NYSE on June 11, 2021 the Company consummated a 1.0 for 3.0 reverse stock ~~split~~.split. All common stock shares stated herein have been adjusted on a retrospective basis to reflect the split.

6

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, Holdings, Copa di Vino, Inc.(‘CdV”) and Splash ~~Mex,~~Mexico., CMS ~~(as~~is reflected as discontinued ~~operations), and Copa.~~operations. All intercompany balances have been eliminated in consolidation.

~~Our investment in Salt Tequila USA, LLC is accounted for at cost, as the company does not have the ability to exercise significant influence.~~

Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America (GAAP).

The accompanying condensed ~~consolidated~~ financial statements have been prepared by us 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,~~March 31, 2022 and 2021 ~~and 2020~~ have been made.

Certain information and footnote disclosures normally included in consolidated financial statements prepared in GAAP have been condensed or omitted. The results of operations for the period ended ~~September 30, 2021~~March 31, 2022 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 GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures 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 Concentration of Cash Balance

We consider all highly liquid securities with an original maturity of three months or less to be cash equivalents. We had 0cash equivalents at ~~September 30, 2021~~March 31, 2022 or December 31, ~~2020.~~2021.

Our cash in bank deposit ~~accounts,~~amounts, at times, may exceed federally insured limits of $~~250,000~~.$250,000. At ~~September 30, 2021~~March 31, 2022 we had $~~7,403,481~~7,632,587 ~~over~~in excess of the federally insured limits. Our bank deposit amounts in Mexico $2,169 are uninsured.

7

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 ~~collectible~~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, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, our accounts receivable amounts are reflected net of allowances of $~~26,578~~13,949 and $045,203, respectively.

~~Splash Beverage Group, Inc.~~

~~Notes to the Condensed Consolidated Financial Statements~~Inventory

~~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, 2021~~March 31, 2022 and December 31, ~~2020~~2021 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. We establish provisions for excess or inventory near expiration are based on management’s estimates of forecast turnover of inventories on hand and under contract. A significant change in the timing or level of demand for certain products as compared to forecast amounts may result in recording additional provisions for excess or expired inventory in the future. Provisions for excess inventory are included in cost of goods sold and have historically been adequate to provide for losses on inventory. We manage inventory levels and purchase commitments in an effort to maximize utilization of inventory on hand and under commitments. The amount of our reserve was $~~351,285~~253,703 and $~~366,109~~223,223 at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

Property and Equipment

We record property and equipment at cost when purchased. Depreciation is recorded for property, equipment, and software using the straight-line method over the estimated economic useful lives of assets, which range from 3-39years. Company management reviews the recoverability of all long-lived assets, including the related useful lives, whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset might not be recoverable.

Depreciation expense totaled $~~44,465~~30,695 and $~~10,750~~43,487 for the three months ended ~~September 30,~~March 31, 2022 and March 31, 2021, ~~and September 30, 2020, respectively. Depreciation expense totaled $80,048~~ ~~and $13,045~~ ~~for the nine months ended September 30, 2021 and September 30, 2020,~~ respectively. Property and equipment as of March 31, 2022 and December 31, 2021 consisted of the following:

Schedule of property and equipment
September 30, 2021 December 31, 2020
Property and equipment, at cost 2,076,711 843,097
Accumulated depreciation (1,515,206 ) (161,745 )
Property and equipment, net 561,505 681,352

Schedule of Property and equipment
	2022			2021
Machinery & equipment		1,108,870			1,108,870
Buildings		282,988			279,543
Leasehold improvements		662,537			662,537
Office furniture & equipment		70,960			70,960
Total cost		2,125,355			2,121,910
Accumulated depreciation		(1,582,820	)		(1,552,125	)
Property, plant & equipment, net		542,535			569,785

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.

8

~~Paycheck Protection Program~~

The Company records Paycheck Protection Program (“PPP”) loan proceeds in accordance with Accounting Standards Codification (“ASC”) 470, Debt. Debt is extinguished when either the debtor pays the creditor or the debtor is legally released from being the primary obligor, either judicially or by the creditor. See note 11.

Splash Beverage Group, Inc.

Notes to the Condensed Consolidated Financial Statements

Note 2 – Summary of Significant Accounting Policies, continued

Fair Value of Financial Instruments

Financial Accounting Standards (“FASB”) guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows:

Level 1 -

Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed equities.


	Level 2 -	Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (e.g., quoted prices of similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active).


	Level 3 -	Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable.

The liabilities and indebtedness presented on the condensed consolidated financial statements approximate fair values at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, consistent with recent negotiations of notes payable and due to the short duration of ~~maturities.~~maturities and market rates of interest.

9

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.

Distribution expenses to transport our finished goods products, where applicable, and warehousing expense ~~after manufacture~~ are accounted for within operating expenses. Distribution expense is capitalized as part of inventory as the materials are received by our distillery, co-packer or internal/external warehouse.

~~Splash Beverage Group, Inc.~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~Note 2 – Summary of Significant Accounting Policies, continued~~

Cost of Goods Sold

Cost of goods sold include the costs of products, packaging, transportation, warehousing, and costs associated with valuation allowances for expired, damaged or impaired inventory.

We measure stock-based awards at the grant-date fair value for employees, directors and consultants and recognizes compensation expense on a straight-line basis over the vesting period of the award. Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions, including the fair value of our common stock, and for stock options and warrants, the expected life of the option and warrant, and expected stock price volatility and exercise price. We used the Black-Scholes option pricing model to value its stock-based awards. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards. The expected life of stock options/warrants were estimated using the “simplified method,” which calculates the expected term as the midpoint between the weighted average time to vesting and the contractual maturity, we have limited historical information to develop reasonable expectations about future exercise patterns. The simplified method is based on the average of the vesting tranches and the contractual life of each grant. For stock price volatility, we use comparable public companies as a basis for its expected volatility to calculate the fair value of award. The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected life of the award. The estimation of the number of awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from the Company’s current estimates, such amounts are recognized as an adjustment in the period in which estimates are revised.

Stock-Based Compensation

We account for stock-based compensation in accordance with ASC 718, "“Compensation - Stock Compensation”. Under the fair value recognition provisions, cost is measured at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period, which is generally the ~~option~~award’s vesting period. We use the Black-Scholes option pricing model to determine the fair value of ~~stock options.~~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 as set forth in ASC 740, "“Income Taxes”. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. We record a valuation allowance when it is not more likely than not that the deferred 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 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%~~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 0no material uncertain tax positions at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021.

10

Splash Beverage Group, Inc.

Notes to the Condensed Consolidated Financial Statements

Note 2 – Summary of Significant Accounting Policies, continued

Net income (loss) per share

The net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common outstanding. Warrants, stock options, and common stock issuable upon the conversion of the Company’s convertible debt or preferred stock (if any), are not included in the computation if the effect would be anti-dilutive.

Weighted average number of shares outstanding for awards granted from 2021 to 2022 excludes anti-dilutive common stock equivalents, including warrants to purchase 3million shares of common stock for nominal consideration. ~~The weighted average number of common shares calculation excludes 11,163,834 warrants which have been granted by our Board but have not been exercised.~~

Advertising

We conduct advertising for the promotion of our products. In accordance with ASC 720-35, advertising costs are charged to operations when incurred. We recorded advertising expense of $~~249,831~~87,590 and $~~23,962~~1,987 for the three-months ended ~~September 30,~~March 31, 2022 and 2021, respectively.

Goodwill and ~~2020, respectively. We recorded advertising expense of $465,608~~Intangibles Assets ~~and $46,768~~ ~~for the nine-months ended September 30, 2021 and 2020, respectively.~~

~~Goodwill~~

Goodwill represents the excess of acquisition cost over the fair value of the net assets acquired and is not subject to amortization. The Company reviews goodwill annually in the fourth quarter for impairment or when circumstances indicate carrying value may exceed the fair value. This evaluation is performed at the reporting unit level. If a qualitative assessment indicates that it is more likely than not that the fair value is less than carrying value, a quantitative analysis is completed using either the income or market approach, or a combination of both. The income approach estimates fair value based on expected discounted future cash flows, while the market approach uses comparable public companies and transactions to develop metrics to be applied to historical and expected future operating results. ~~At December 31, 2020, our management determined that an impairment charge~~

Intangible assets consist of ~~approximately $9.5~~ ~~million, was necessary to reduce~~customer lists, brands and license agreements acquired in the ~~goodwill relating to our Medical Device Segment.~~acquisition of CdV. The ~~impairment charge was primarily related to the net cash flow projection~~Company amortizes intangible assets with finite lives on a straight-line basis over their estimated useful lives of ~~that business unit.~~15 years.

11

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 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 the circumstances.

Reclassifications

Certain prior period amounts have been reclassified to conform with the current year presentation.

12

~~Note 3 –~~ ~~Liquidity, Capital Resources and Going Concern Considerations~~

~~At December 31, 2020, the Company had liabilities in excess of assets in the amount of approximately $9.4~~ ~~million. During the nine-month period of 2021, the Company received approximately $19.6~~ million from the proceeds from the issuance common stock. These events served to mitigate the conditions that historically raised substantial doubt about the Company’s ability to continue as a going concern.

~~Based on this analysis the Company concluded it has the ability to continue as a going concern for at least the next 12 months.~~

Splash Beverage Group, Inc.

Notes to the Condensed Consolidated Financial Statements

Note 43 – Notes Payable, Related Party Notes Payable, Convertible Bridge Loans Payable, Revenue Financing Arrangements and Bridge Loan Payable

Notes payable are generally nonrecourse and secured by all Company owned assets.

Interest Rate September 30, 2021 December 31, 2020
Notes Payable

In February 2014, we entered into a 12-month term loan agreement with an individual in the amount of $200,000. The note included warrants for 66,146 shares of common stock at $0.73 per share. The warrants expired on February 28, 2017 and none were exercised at that date. The note was paid off in Q2 2021. 15 % — 150,000

In March 2014, we entered into a short-term loan agreement with an entity in the amount of $200,000. The note included warrants for 272,584 shares of common stock at $0.94 per share. The warrants expired on February 28, 2017 and none were exercised at that date. The loan matured and remains in default. 8 % 200,000 200,000

In May 2020, we entered into a two year loan with the SBA under the Paycheck Protection Program established by the CARES Act in the amount of $94,833. The note requires monthly payments of principal and interest starting in December 2020 and maturing in May 2021. We received 100% forgiveness in Q2 2021. See note 11. 1 % — 89,612

In June 2020, we entered into a six-month loan with an individual in the amount of $100,000. The loan matured in December 2020 with principal and interest due at maturity. The note remains in default. 12 % — 100,000

In August 2020, we entered into a nine-month loan with a company in the amount of $112,000. The loan requires 9 amortized payments of principal and interest in the amount of $12,246 with the final payment due May 2021. 4.8 % — 62,719

In September 2021, we entered into a twelve-month loan with a company in the amount of $208,000. The loan requires 12 amortized payments with the final payment due August 2022. 4.8 % 208,000 —

Notes payable for license agreements due in 36 monthly payments of $10,000, interest imputed at 10%, matured in January 2021 and remains in default. 10.0 % 10,000 59,212

In December 2020, we entered into a 56 month loan with a company in the amount of $1,578,237. The loan requires payments of 3.75% of the previous months’ revenue. Various 1,441,505 1,578,237

In April 2021, we entered into a six-month convertible note with an individual in the amount of $84,000. The note matured in October 2021. 7 % 84,000 —

In April 2021, we entered into a six-month convertible note with an individual in the amount of $84,000. The note matured in October 2021. 7 % 84,000 —

In May 2021, we entered into a six-month convertible note with an individual in the amount of $50,000. The note matured in October 2021. 7 % 50,000 —

In May 2021, we entered into a six-month convertible note with an individual in the amount of $500,000. The note matured in October 2021. 7 % 500,000 —

In May 2021, we entered into a six-month convertible note with an individual in the amount of $10,000. The note matured in October 2021. 7 % 10,000 —

In May 2021, we entered into a six-month convertible note with an individual in the amount of $200,000. The note matured in October 2021. 7 % 200,000 —

Total notes payable $ 2,794,751 $ 2,239,780

Less current portion (1,638,754 ) (999,736 )

Long-term notes payable $ 1,148,751 $ 1,240,044

Schedule of Notes payable
	Interest Rate			March 31, 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 $0.94 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 loan requires 12 amortized payments with the final payment due August 2022.		4.8	%		46,870			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	%		1,396,198			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 August 2022.		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 August 2022.		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 August 2022.		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 August 2022.		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 loan expires November 2022 with the principal and interest due at maturity.		7	%		300,000			300,000


		Total notes payable and convertible notes payable		$	2,171,068		$	2,967,812

		Less current portion			(2,171,068	)		(2,967,812	)

		Long-term notes payable and convertible notes payable		$	—		$	—

Interest expense on notes payable was $~~82,871~~81,700 and $~~13,337~~9,625 for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, respectively.~~

~~Interest expense on notes payable was $340,653~~ ~~and $73,236~~ ~~for the nine months ended September 30, 2021 and 2020,~~ respectively. Accrued interest was $~~145,445~~154,209 at ~~September 30, 2021~~March 31, 2022.

13

Splash Beverage Group, Inc.

Notes to the Condensed Consolidated Financial Statements

Note ~~4 –~~3– Notes Payable, Related Party Notes Payable, Convertible Bridge Loans Payable, Revenue Financing Arrangements and Bridge Loan Payable, continued

Schedule of debt
Schedule of Related Party Notes Payable
	Interest Rate	September 30, 2021			December 31, 2020			Interest Rate	March 31, 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 requires 18 monthly amortized payments of principal and interest in the amount of $114,444 with the final payment due June 2022.	2.0%		991,837			2,000,000		2.0%		312,351			653,081


	Less current portion		(991,837	)		(1,333,333	)	Less current portion		(312,351	)		(653,081	)

	Long-term notes payable	$	—		$	666,667		Long-term notes payable	$	—		$	—

Interest expense on related party notes payable was $~~5,995~~2,602 and $0for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, respectively. Interest expense on related party notes payable was $21,833~~ ~~and $37,967~~ ~~for the nine months ended September 30, 2021 and 2020,~~ respectively. Accrued interest was $0as of ~~September 30, 2021.~~March 31, 2022.

14

Splash Beverage Group, Inc.

Notes to the Condensed Consolidated Financial Statements

~~Note 4 – Notes Payable, Related Party Notes Payable, Convertible Bridge Loans Payable, Revenue Financing Arrangements and Bridge Loan Payable, continued~~

Schedule of debt
Interest Rate September 30, 2021 December 31, 2020
Convertible Bridge Loans Payable

In May 2015, we entered into a 3-month term loan agreement with an individual in the amount of $100,000. The annual interest rate for this bridge loan was 32% for the first 90 days, and 4% thereafter, compounded monthly. See left $ 100,000 $ 100,000

~~Splash Beverage Group, Inc.~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~Note 4 – Notes Payable, Related Party Notes Payable, Convertible Bridge Loans Payable, Revenue Financing Arrangements and Bridge Loan Payable, continued~~

~~Interest expense on the convertible bridge loans payable was $8,000~~ ~~and $8,000~~ ~~for the three months ended September 30, 2021 and 2020, respectively. Interest expense on the convertible bridge loans payable was $24,000~~ ~~and $109,785~~ ~~for the nine months ended September 30, 2021 and 2020, respectively. Accrued interest was $195,215~~ ~~at September 30, 2021.~~

~~On April 24, 2017, a note holder filed a complaint against the Company for a promissory note in default. The note holder is requesting summary judgment in the amount of $287,215. In September 2021 a summary judgement was initiated against the Company in the amount of $263,215. As of October 2021, the Company has negotiated and paid $217,500~~ ~~to the plaintiff.~~

~~Splash Beverage Group, Inc.~~

~~Notes to the Condensed Consolidated Financial Statements~~

Note 54 – Licensing Agreement and Royalty Payable

We have a licensing agreement with ABG TapouT, LLC (“TapouT”), providing us with licensing rights to the brand “TapouT” on energy drinks, energy shots, water, teas and sports drinks for beverages sold in the United States of America, its territories, possessions, U.S. military bases and Mexico. Under the terms of the agreement, we are required to pay a 6% royalty on net sales, as defined. ~~In 2021 and 2020, we~~We are required to make minimum monthly payments of $~~49,500~~54,450 in 2022 and $~~45,000~~49,500 ~~, respectively.~~in 2021.

There were 0no unpaid royalties at ~~September 30, 2021.~~March 31, 2022. We paid the guaranteed minimum royalty payments of $~~445,500~~163,350 and $~~405,000~~148,500 for the ~~nine-months~~three-months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ which is included in general and administrative expenses.

In connection with the Copa APA, we acquired the license to certain patents from 1/4 Vin SARL (“1/4 Vin”) On February 16, 2018, the ~~Copa di Vino~~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 ~~the Company’s~~our manufacturing process. In exchange for notes payable, 1/4 Vin granted ~~the Company~~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~~$31,000 annually until the license agreement is fully amortized. The asset is being amortized over a 10-year useful life.

Note ~~6 –~~5– Stockholders’ Equity ~~(Deficiency)~~

Common Stock

~~At March 31, 2020, we issued~~

~~272,584~~ ~~shares of common stock in exchange for services provided to us. The shares were valued at $2.19~~ ~~per share. We recognized share-based compensation expense of $600,000, which is classified within the other general and administrative line on the Statement of Operations.~~ At March 31, 2021, we issued 168,333shares of common stock in exchange for services provided to us. At September 30, 2021, we issued 2,136,819shares of common stock in exchange for services provided to us. ~~The~~At December 31, 2021, we issued 977,497 shares of common stock in exchange for services provided to us. At March 31, 2022, we issued 550,000 shares of common stock in exchange for services, and 2,300,000 as part of our S3 drawdown and convertible instruments. For the three-month-ended March 31, 2022 the shares were valued at a fair market value stock price based on the agreement date. We recognized share-based compensation expense for the three-months ended March 31, 2022 of $~~6,111,911~~2,355,542, which is classified within the other general and administrative line on ~~the~~our Condensed Consolidated ~~Statement~~Statements of Operations.

~~Splash Beverage Group, Inc.~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~Note 6 – Deficiency in Stockholders’ Equity, continued~~

Private Placement Memorandum (PPM)

~~In July 2020, the Board of Directors has determined that it is in the best interests of the Corporation and its stockholders to obtain working capital by conducting a private placement offering of~~ ~~930,303~~ ~~shares of the common stock and~~ ~~650,000~~ ~~warrants to purchase common stock of the Company, $0.001~~ ~~par value per share at a purchase price of $3.30~~ ~~per share for aggregate gross proceeds of $3,070,000~~.

In January 2021, the Board of Directors approved a private placement offering of 1,212,121shares of the common stock of the Company, $0.001value per share at a purchase price of $3.30per share for aggregate gross proceeds of $4,000,000(“PPM”). As part of the PPM, each purchaser received a warrant to purchase one share for every two shares purchased. In February 2021, we completed our PPM by issuing a total of 1,212,355of shares and ~~606,179~~606,178 warrants receiving gross proceeds of approximately $~~4,000,771~~4,000,000.

15

Splash Beverage Group, Inc.

Notes to the Consolidated Financial Statements

Note 5 – Stockholders’ Equity, continued

Stock Plans

~~2012 Plan~~

On May 2012, the Board adopted the 2012 Stock Incentive Plan (the “2012 Plan”), which provided for the grant of Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock Awards, Restricted Stock Units and Stock Appreciation Rights to eligible recipients. The total number of shares that may be issued under the 2012 plan was ~~1,362,920~~.

~~The Board previously granted options to purchase~~ ~~885,897~~ ~~shares of common stock, which were exercised prior to 2019. In December, 2019, the Board granted options to purchase~~ ~~374,804~~ ~~shares to certain employees and consultants at an exercise price of $2.20~~.

~~Concurrently with the consummation of the Merger, the outstanding options to purchase~~ ~~374,803~~ ~~shares were cancelled and replaced with warrants to purchase~~ ~~374,804~~ ~~shares at an exercise price of $2.20, and the 2012 Plan was retired.~~

2020 Plan

On August 2020, the Board adopted the 2020 Stock Incentive Plan (the “2020 Plan”), which provides for the grant of Options, Restricted Stock Awards, Stock Appreciation Rights, Performance Units and Performance Bonuses to consultants and eligible recipients. The total number of shares that may be issued under the 2020 plan was 2,313,133.

~~At September 30, 2021, all awards have been granted under~~ at the time the 2020 ~~Plan.~~

~~Splash Beverage Group, Inc.~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~Warrants/Options~~plan was adopted

The ~~total~~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 ~~warrants/options are summarized below:~~

~~Schedule of Warrants Activity~~
~~[A]~~	~~454,064~~
~~[B]~~	~~124,162~~
~~[C]~~	~~908,129~~
~~[D]~~	~~650,000~~
~~[E]~~	~~606,179~~
~~[F]~~	~~374,803~~
~~[G]~~	~~1,884,833~~
~~[H]~~	~~833,333~~
~~[I]~~	~~333,333~~
~~[J]~~	~~3,900,000~~
~~[K]~~	~~1,065,000~~
~~[L]~~	~~29,998~~
~~Total~~	~~11,163,834~~

common shares at year end, unless otherwise adjusted by the board. At January 1, 2021 AND 2022, the number of shares issuable under the 2020 plan increased by ~~[A] Warrant Issuance-Series A Convertible Preferred Stock~~1,057,852 and 1,679,812 shares, respectively.

~~As an incentive to convert their Series A preferred stock, in~~During the three-month period ended March 31, 2022, the company granted 773,596 shares under the 2020 weplan. At March 31, 2022, the total number of awards that may be issued ~~333,333~~ ~~new warrants to~~under the ~~holders of our Series A preferred stock to purchase shares of SBG common stock. Concurrently with the consummation of the Merger, these warrants were exchanged for warrants to purchase~~2020 plan was ~~454,064~~2,123,703 ~~of Splash Beverage Group, Inc. shares all of which were outstanding as of September 30, 2021. These warrants have a~~ 3~~-year term and expire March 2023.~~.

~~[B] Warrant Issuance-Series B Convertible Preferred Stock~~The fair value of stock options recognized in the period has been estimated using the Black-Scholes option pricing model.

~~As part of~~The company did not grant any new options, warrants, or shares in Q1 2022 that would fall under the ~~sale and issuance of~~ ~~1,777,892~~ ~~shares of our Series B Convertible Preferred Stock, we issued~~ ~~888,946~~ ~~warrants to purchase shares our common stock. The warrants have a~~ 5~~-year term and at September 30, 2021, there are~~ ~~124,162~~ ~~warrants outstanding.~~2020 plan.

~~[C] Warrant Issuance-GMA Bridge Holdings, LLC Consulting Services~~

~~We issued~~ ~~454,307~~ ~~warrants to purchase shares of our common stock as part of our consulting agreement with GMA Bridge Holdings, LLC (“GMA), at December 31, 2019. These warrants subsequently were exchanged for~~ ~~908,615~~ ~~warrants in March 2020 as an incentive for GMA to convert indebtedness and accrued interest into shares of our common stock. At September 30, 2021 all~~ ~~908,615~~ ~~warrants remain outstanding.~~

~~[D] We issued~~ ~~650,000~~ ~~warrants to purchase common stock of the Company in connection with the July 2020 private placement offering of~~ ~~930,303~~ ~~shares of common stock~~

~~[E] We issued~~ ~~606,179~~ ~~warrants to purchase common stock of the Company in connection with the January 2021 private placement offering of~~ ~~1,212,121~~ ~~shares of common stock.~~

~~[F] We issued~~ ~~374,803~~ ~~warrants to purchase common stock, as a replacement of cancelled outstanding options concurrent with the March 2020 Merger~~

~~Splash Beverage Group, Inc.~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~[G] In December 2020 we granted~~ ~~1,884,833~~ ~~warrants to purchase common stock of the Company to employees, consultants, and directors. These warrants vest over three years~~

~~[H] In December 2020 we granted~~ ~~833,333~~ ~~warrants to purchase common stock of the Company to our board of directors. These warrants vest over two - three years~~

~~[I] In May 2021 we granted~~ ~~333,333~~ ~~warrants to purchase common stock of the Company to a director. These warrants vest, equally, over three years~~

~~[J] We issued~~ ~~3,750,000~~ ~~warrants to purchase common stock of the Company in connection with the June 2021 underwritten public offering of~~ ~~3,750,000~~ ~~shares of common stock, in addition to~~ ~~150,000~~ ~~warrants to purchase common stock of the Company to the representative underwriter.~~

~~[K] In September 2021 we granted~~ ~~1,065,000~~ ~~options to purchase common stock of the Company to employees, consultants, and directors. These options vest over three years.~~

~~[L] In September 2021 we granted~~ ~~29,998~~ ~~warrants to purchase common stock of the Company to consultants. These warrants vest over three years.~~

Shareholder Advances and Liability to Issue Stock and Warrants

We have ~~multiple~~various agreements with consultants in the amount of $~~834,500~~0.5 million shares to be ~~paid~~issued by in Q2 2022. The stock price will be valued using the 10-day average price of the company’s stock from the issuance date. As part of our private placement memoranda, we owe an investor 33,333 shares at $3.30 of the Company’s common stock ~~of the company.~~which will be issued in Q2 2022.

Note 76 –Related Parties

~~During the normal course of business, we incurred expenses related to services provided by our CEO or Company expenses paid by our CEO, resulting in related party payables.~~

There are related party notes payable of $~~1.0~~0.3 and $0.7 million outstanding as of ~~September 30, 2021.~~March 31, 2022 and December 31,2021, respectively. See note 3.

Note 87 – Investment in Salt Tequila USA, LLC

~~The Company has~~We have a marketing and distribution agreement with SALT ~~in Mexico~~Tequila USA, LLC (“SALT”) for the manufacturing of our Tequila product ~~line.~~line in Mexico.

~~The Company has~~ We have a 22.5% percentage ownership interest in SALT, ~~Tequila USA, LLC (“SALT”), and has~~have the right to increase ~~its~~our ownership to 37.5%. This investment is accounted for at ~~cost.~~cost, due to our inability to exercise significant influence over the assets and operations.

16

Splash Beverage Group, Inc.

Notes to the Condensed Consolidated Financial Statements

Note 98 – 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, 2018and is scheduled to expire after 36months, on June 30, 2021. ~~We renewed the lease under~~In July 2021, we executed a two-year renewal at the same ~~terms.~~monthly amount.

Effective November 2019, we entered into a new lease with Interport Logistics, LLC. The lease term commenced on November 11, 2019and is scheduled to expire on November 11, 2022.

Effective May 2019, we entered into a new lease in Mexico. The lease commenced May 1, 2019and is scheduled to expire after 24 months, on April 1, ~~2021~~2021. Our new 1 ~~. We have negotiated a one~~ year lease ~~term for our Mexican warehouse.~~agreement is renewed annually.

Effective January 2021, we entered into a lease agreement for the right to use and occupy office ~~space in Sarasota Florida.~~space. The lease term commenced January 18, 2021and is scheduled to expire after 18months, on July 31, 2022.

Effective January 2021, we entered into a lease agreement for the right to use and occupy office and manufacturing ~~space located in Miami Florida.~~space. The lease term commenced January 1, 2021and is scheduled to expire after 60months, on December 31, 2025.

The following table presents the discounted present value of minimum lease payments for our office and warehouses to the amounts reported as ~~operating~~financial lease liabilities on the condensed consolidated balance sheet at ~~September 30, 2021:~~March 31, 2022:

Maturities of lease liabilities
Schedule of maturities of lease liabilities
Undiscounted Future Minimum Lease Payments	Operating Lease			Operating Lease

2021 (three months remaining)	$	89,355
2022		342,273
2022 (Nine months remaining)					252,723
2023		276,318			279,790
2024		265,493			252,000
2025		238,506			252,000
Total		1,211,945			1,036,513
Amount representing imputed interest		(99,470	)		(83,448	)
Total operating lease liabilities		1,112,476
Current portion of operating lease liabilities		313,982
Operating lease liabilities, non-current	$	798,494
Total operating lease liability					953,065
Current portion of operating lease liability					284,372
Operating lease liability, non-current				$	668,693

The table below presents information for lease costs related to our operating leases at ~~September 30, 2021:~~March 31, 2022:

Lease costs
Schedule of lease costs
Operating lease cost:
Amortization of leased assets	$	222,226	$	386,475
Interest of lease liabilities		45,140		71,811
Total operating lease cost	$	267,366	$	458,286

The table below presents ~~lease- related~~lease-related terms and discount rates at ~~September 30, 2021:~~March 31, 2022:

Summary of ~~lease- related~~lease-related terms and discount rates
Remaining term on leases	4 11to ~~months~~ 5145 months
Incremented borrowing rate	5.0	%

17

Splash Beverage Group, Inc.

Notes to the Condensed Consolidated Financial Statements

Note 109 – ~~Line of Credit~~Business Combination

~~At December 31, 2020 SBG owed $68,000~~ ~~to a financial institution under a revolving line of credit. The line of credit is secured by the assets of SBG is due on demand, and bears interest at variable rates approximately~~ ~~6.1% at December 31, 2020. As part of~~We consummated the acquisition of ~~Copa di Vino~~CdV on December 24, 2020. The purchase price consideration was comprised of $1.5 million in debt, $0.5 million in cash and $2.0 million in contingent shares, and a note payable for $2.0 million (see note 4) for total consideration of approximately $6.0 million.

The following summarizes our allocation of the ~~LOC was paid off.~~updated purchase price for the acquisition:

Schedule of purchase price for the acquisition
	Preliminary Purchase Accounting		Final Purchase Accounting
Accounts receivable, net		88,131		88,131
Other current assets		11,236		11,236
Inventory, net		273,951		273,951
Property and equipment, net		663,273		663,273
License agreement, net		222,095		222,095
Brands		—		4,459,000
Customer lists		—		957,000
Goodwill		5,672,823		256,823
Total indentifiable assets		6,931,509		6,931,509

Accounts payable and accrued expenses		882,297		882,297
Note payable		69,212		69,212
Equity		5,980,000		5,980,000
Total liabilities and equity		6,931,509		6,931,509

18

~~Note 11 –~~ ~~PPP Loan~~

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond the point of origin. On March 20, 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.

In response to the COVID-19 outbreak in the United States, the CARES Act (the “Act”) was passed by Congress and signed into law on March 27, 2020. In connection with the CARES Act, the Company and its subsidiary applied for and received loans with an original aggregate principal balance of approximately $~~158,000. These loans and interest will be forgiven as long as the funds are used for qualifying expenditures as outlined in the Act. The loans bear interest at~~ 1~~%, with an~~ 18~~-month term and has a 6-month initial payment deferral. See Note 4.~~

~~In April 2021, we received notification of forgiveness for the entire outstanding balance.~~

Splash Beverage Group, Inc.

Notes to the Condensed Consolidated Financial Statements

Note 1210 – Segment Reporting

The Company evaluates segment reporting in accordance with the FASB Accounting Standards Codification Topic 280, Segment Reporting, each reporting period, including evaluating the reporting package reviewed by the Chief Executive Officer and Chief Financial Officer.

Note: The ~~Copa di Vino~~CdV business is included in our Splash Beverage Group segment.

Schedule of Segment Reporting Information
	Three-Months Ending				Nine-Months Ending
Revenue	Q3 2021		Q3 2020		Q3 2021		Q3 2020		2022		2021
Splash Beverage Group		960,382		91,778		3,351,989		213,174		1,478,158		825,742
E-Commerce		1,867,012		601,196		4,902,088		1,004,536		2,448,415		1,313,182

Total Revenues continuing operations		2,827,393		692,974		8,254,078		1,217,710		3,926,573		2,138,924

Total Revenues discontinued operations		207,043		316,641		855,262		516,217
Total Revenues discontinuing operations										114,071		278,777

Total assets Sept 2021 Dec 2020
Splash Beverage Group 18,091,715 8,403,670
E-Commerce 969,461 505,646
Medical Devices - discontinued operations 410,279 316,572

Total Assets 19,471,456 9,225,888

~~Splash Beverage Group, Inc.~~

~~Notes to the Condensed Consolidated Financial Statements~~

Total assets	2022		2021
Splash Beverage Group		19,188,887		14,998,597
E-Commerce		1,170,122		913,312
Total assets discontinued operations		187,401		473,461

Total Assets		20,611,306		16,385,370

Note 1311 – Commitment and Contingencies

We are a party to asserted claims and are subject to regulatory actions in the ordinary course of business. The results of such proceedings cannot be predicted with certainty, but we do not anticipate that the outcome, if any, arising out of any such matter will have a material adverse effect on its business, financial condition or results of operations.

~~Capital Raise~~

~~In connection with the CMS merger we were committed to our previous preferred stock and debt holders to raise $~~9 ~~million in a secondary IPO or debt, as defined in the agreements.~~

~~In February 2021, we successfully raised the $~~9 ~~million required.~~

~~Stock Price Guarantee~~

~~We have a commitment to issue additional shares associated with specific stock price guarantee granted to an investor. The stock price guarantee expired March 2021.~~

~~Splash Beverage Group, Inc.~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~Note 14 –~~ ~~Registration Statement~~

~~Underwriting Agreement~~

On June 10, 2021, the Company entered into an underwriting agreement ( “Underwriting Agreement”) relating to an underwritten public offering (the “Offering”) of common stock, no par value per share (the “Common Stock”) and warrants to purchase one share of Common Stock (the “Warrants”). Pursuant to the Offering, the Company sold ~~3,750,000~~ ~~shares of Common Stock and~~ ~~4,312,500~~ ~~Warrants, which include~~ ~~562,500~~ ~~Warrants sold upon the partial exercise of the Underwriters’ over-allotment, for total gross proceeds of approximately $~~15 ~~million. After deducting the underwriting commissions, discounts, and offering expenses payable by the Company, the Company received net proceeds of approximately $13.2~~ ~~million.~~

~~Representative’s Warrants~~

~~On June 15, 2021, pursuant to the Underwriting Agreement, the Company issued the Representative’s Warrants to purchase up to an aggregate of~~ ~~150,000~~ ~~shares of Common Stock. The Representative’s Warrants may be exercised beginning on December 10, 2021 until June 10, 2026. The initial exercise price of each Representative Warrant is $4.60~~ ~~per share, which represents 115% of the Offering Price.~~

Note 1512 – Subsequent Events

On October 11, 2021, the Company called to order a special meeting with shareholders on record as of August 16, 2021. The Company sought approval to re-incorporate from Colorado to Nevada. The recommendation was approved.

~~In October 2021, the Company settled their lawsuit with an investor. See Note 4.~~

~~In October 2021, the matured notes listed in Note 4 have been extended.~~None

19

ITEM 2. MANAGEMENT’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 Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve risks and uncertainties, including statements regarding our capital needs, business strategy and expectations. Any statements that are not of historical fact may be deemed to be forward-looking statements. These forward-looking statements involve substantial risks and uncertainties. In some cases you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue”, the negative of the terms or other comparable terminology. Actual events or results may differ materially from the anticipated results or other expectations expressed in the forward-looking statements. In evaluating these statements, you should consider various factors, including the risks included from time to time in other reports or registration statements filed with the United States Securities and Exchange Commission. These factors may cause our actual results to differ materially from any forward-looking statements. We disclaim any obligation to publicly update these statements or disclose any difference between actual results and those reflected in these statements.

Unless the context otherwise requires, references in this Form 10-Q to “we,” “us,” “our,” or the “Company” refer to Splash Beverage Group and its subsidiaries.

The following discussion and analysis should be read in conjunction with the Condensed ~~Consolidated~~ Financial Statements (unaudited) and ~~Related~~ Notes to Condensed Financial Statements (unaudited) filed herewith.

Business Overview

Splash ~~Beverage Group (“SBG”~~seeks to identify, acquire, and build early stage or ~~“Splash”), f/k/a Canfield Medical Supply, Inc. (the “CMS”), was incorporated~~under-valued beverage brands that have strong growth potential within its distribution system. Splash’s distribution system is comprehensive in the ~~State of Ohio on September 3, 1992,~~US and ~~changed domicile~~is now expanding to ~~Colorado on April 18, 2012.~~

~~On December 31, 2019, CMS entered into an Agreement~~select attractive international markets. The Splash brand portfolio is growing and Plan of Merger (the “Merger Agreement”) with SBG Acquisition Inc. (“Merger Sub”), a Nevada Corporation wholly-owned by CMS, and Splash Beverage Group, Inc. a Nevada corporation (“Splash”) pursuant to which Merger Sub merged with and into Splash (the “Merger”) with Splash as the surviving company and a wholly-owned subsidiary of CMS. The Merger was consummated on March 31, 2020.

Prior to the Merger, CMS was in the business of home health services, primarily the selling of durable medical equipment and medical supplies to the public, nursing homes, hospitals and other end users and the Company continues to operate the home health supply business as a separate division.

As the owners and management of Splash have voting and operating control of CMS following the Merger, the Merger transaction was accounted for as a reverse acquisition (that is with Splash as the acquiring entity), followed by a recapitalization.

~~Splash specializes in the manufacturing, distribution, and sales & marketing of various beverages across~~diverse, covering multiple ~~channels. Splash operates~~categories that are exhibiting strong growth in both the ~~non-alcoholic~~non-alcohol and ~~alcoholic beverage segments. Additionally, Splash operates~~alcohol sectors. Through its ~~own vertically integrated~~wholly owned subsidiary Qplash, Splash’s distribution reach includes e-commerce access to both B-to-B and B-to-C ~~E-commerce distribution platform called Qplash, further expanding its distribution abilities~~customers. Q-plash markets well known beverage brands to customers throughout the US that prefer delivery direct to their office, facilities and ~~visibility.~~

~~In July, 2020, the Company changes its name from Canfield Medical Supply, Inc. to Splash Beverage Group, Inc. Our new ticker symbol is SBEV.~~or homes.

On December 24, 2020, SBG consummated an Asset Purchase ~~Agreement(the “APA”~~Agreement (the “Copa APA”) with Copa di Vino Corporation (“CdV”), to purchase certain assets and assume certain liabilities that comprise the Copa di Vino business for a total purchase price of $5,980,000, payable in the combination of $2,000,000 in cash (“Cash Consideration”), $2,000,000 convertible promissory note (the “Convertible Note”) to Seller and a variable number of shares of the Company’s common stock based on a attainment of revenue hurdles. CdV is one of the leading producers of premium wine by the glass in the United States with its primary offices and facilities in The Dalles, Oregon.

On February 2021, Management initiated a plan to divest its CMS business. As a result, the assets and operations of CMS have been retrospectively reflected as discontinued operations. On November 12, 2021 the Company changed its state of Domicile from Colorado to Nevada.

In coordination with uplisting to the NYSE on June 11, 2021 the Company consummated a 1.0 for 3.0 reverse stock split.

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. At January 1, 2021 AND 2022, the number of shares issuable under the 2020 plan increased by 1,057,852 and 1,679,812 shares, respectively.

20

Results of Operations for the Three Months Ended ~~September 30, 2021~~March 31, 2022 compared to Three Months Ended ~~September 30, 2020.~~March 31, 2021.

Revenue

Revenues for the three months ended ~~September 30, 2021~~March 31, 2022 were ~~$2,827,393~~$3,926,573 compared to revenues of ~~$692,974~~$2,138,924 for the three months ended ~~September 30, 2020. A significant portion of the $2,134,419~~March 31, 2021. The $1,787,649 increase in sales is due to an increase from CdV ($505105) and within our vertically integrated B2B and B2C e-commerce distribution platform called ~~Qplash. This platform~~Qplash ($1,135,233). Qp;ash sells goods on both Amazon and Shopify. ~~In addition, we had increased sales from Copa di Vino Wine Group, Inc., our single-serve wine and Pulpoloco Sangria businesses.~~). Cost of goods sold for the three months ended ~~September 30, 2021~~March 31, 2022 were ~~$2,007,544~~$3,094,571 compared to cost of goods sold for the three months ended ~~September 30, 2020~~March 31, 2021 of ~~$349,037.~~$1,621,504. The ~~$1,658,507~~$1,473,066 increase in cost of goods sold for the three-month period ended ~~September 30, 2021~~March 31, 2022 is primarily due to our increased sales, and as our sales increased, our cost of sales for those sales correspondingly increased.

Operating Expenses

Operating expenses for the three months ended ~~September 30, 2021~~March 31, 2022 were ~~$12,892,079~~$6,515,955 compared to ~~$2,733,435~~$5,066,349 for the three months ended ~~September 30, 2020.~~March 31, 2021. The ~~$10,158,644~~$1,449,606 increase in our operating expenses was primarily a result of recording the warrants issued pursuant to certain private placements conducted by the Company ~~and options and stock approved by the Board~~ ($~~3,010,013)~~888,158), ~~increased headcount from the Copa acquisition and the addition of new sales reps, professional fees~~marketing spend ($~~6,391,514)~~633,389) and shipping costs ($~~521,315).~~296,941) offset by other operating expenses. The net loss for the three months ended ~~September 30, 2021~~March 31, 2022 was ~~$12,169,894~~$5,994,407 as compared to a net loss of ~~$2,351,814~~$4,442,219 for the three months ended ~~September 30, 2020.~~March 31, 2021. The increase in net loss is due to our increase in operating expenses offset by our increase in revenues.

Interest Expense

Interest expenses for the three months ended ~~September 30, 2021~~March 31, 2022 were ~~$100,128~~$85,879 compared to ~~$23,110~~$92,211 for the three months ended ~~September 30, 2020. The $77,018 increase in our interest expenses was primarily a result of additional debt taken on in Q2~~March 31, 2021.

~~Results of Operations for the Nine Months Ended September 30, 2021 compared to Nine Months Ended September 30, 2020.~~

~~Revenue~~

Revenues for the nine months ended September 30, 2021 were $8,254,078 compared to revenues of $1,217,709 for the nine months ended September 30, 2020. The $7,036,369increase in sales is due to an increase within our vertically integrated B2B and B2C e-commerce distribution platform called Qplash ($4,902,088). This platform sells goods on both Amazon and Shopify. In addition, we had increased sales from Copa di Vino Wine Group, Inc., our single-serve wine and Pulpoloco Sangria businesses ($3.085,299). Cost of goods sold for the nine months ended September 30, 2021 were $6,011,755 compared to cost of goods sold for the nine months ended September 30, 2020 of $744,024. The $5,267,731 increase in cost of goods sold for the nine-month period ended September 30, 2021 is primarily due to our increased sales, and as our sales increased, our cost of sales for those sales correspondingly increased.

~~Operating Expenses~~

Operating expenses for the nine months ended September 30, 2021 were $25,171,500 compared to $4,774,571 for the nine months ended September 30, 2020. The $20,396,929 increase in our operating expenses was primarily a result of recording the warrants issued pursuant to certain private placements conducted by the Company, and options and stock approved by the Board ($7,407,976), increased headcount from the Copa acquisition and the addition of new sales reps, professional fees ($8,996,732) and shipping costs ($1,404,110). The net loss for the nine months ended September 30, 2021 was $23,170,917 as compared to a net loss of $6,173,943 for the nine months ended September 30, 2020. The decrease in net loss is due to our increase in operating expenses offset by our increase in revenues.

~~Interest Expense~~

Interest expenses for the nine months ended September 30, 2021 were $341,715 compared to $1,958,601 for the nine months ended September 30, 2020. The $1,616,886 decrease in our interest expenses was primarily a result of recording a finance charge of $1,821,426 associated with warrants issued to one of our note holders in Q1 2020 offset by interest expense recorded in the period.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.

As of ~~September 30, 2021,~~March 31, 2022, we had total cash and cash equivalents of ~~$8,144,171,~~$8,495,672, as compared with ~~$380,000~~$4,181,383 at December 31, ~~2020.~~2021. The increase is primarily due to ~~cash~~the gross proceeds of $8,100,000 received from ~~private placements conducted by us and our S1/A~~the sale of 2.3 million shares of the Company’s registered common stock in February 2022 pursuant to the Company’s shelf registration statement ~~where we raised $15,000,000.~~on Form S-3.

Net cash used for operating activities during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 was ~~$11,615,297~~$4,675,886 as compared to the net cash used by operating activities for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 of ~~$4,311,170.~~$3,620,039. The primary reasons for the change in net cash used is due to losses sustained and increases in inventory, offset by non-cash expenses relating to warrant expense ($~~5,665,464)~~1,242,697) and share-based compensation ($~~8,212,864)~~1,112,845).

~~Net~~For the period March 31, 2022 and 2021, did not use or receive cash ~~used for~~relating to investing activities during the nine months ended September 30, 2021 was $0 as compared to the net cash used by operating activities for the nine months ended September 30, 2020 of $154,341. The net cash used in the first quarter of 2020 was primarily due to the $150,000 payment made to SALT Tequila USA.activities.

Net cash provided by financing activities during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 was ~~$19,597,565~~$8,765,000 compared to ~~$5,081,594~~$4,505,526 provided from financing activities for the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021. During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, we received ~~$21,393,065~~$9,203,074 from investors, which was offset by repayments ~~to shareholders and~~ debt holders of ~~$1,795,188.~~$437,474.

21

CONTRACTUAL OBLIGATIONS

Share obligation:

~~CONTRACTUAL OBLIGATIONS~~·The company hasa obligation to issue 500K shares to two marketing firms of which the cost associated to 167K shares was accrued for in Q1 2022.

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 the next two years.

●

~~2021 $594,000~~

●

2022 ~~$653,400~~$653,000

●

2023 $653,000

Inventory Purchase Commitments:

None.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements (as that term is defined in Item 303 of Regulation S-K) that are reasonably likely to have a current or future material effect on our financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required for Smaller Reporting Companies.

ITEM 4. CONTROLS AND PROCEDURES

(a)	Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities and Exchange Commission Act of 1934 reports is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible 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 operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on that evaluation, our chief executive officer and chief financial officer concluded that, because of certain material weaknesses in our internal control over financial reporting our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act were not effective as of September 30, 2021. The material weaknesses relate to the absence of in-house accounting personnel with the ability to properly account for complex transactions and a lack of separation of duties between accounting and other functions.March 31, 2022.

22

We hired a ~~consulting firm~~consultant to advise us on technical issues related to U.S. generally accepted accounting principles as related to the maintenance of our accounting books and records and the preparation of our consolidated financial statements. Although we are 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 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

~~There has been no change in our~~

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting ~~identified~~is a process designed to provide reasonable, but not absolute, assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in ~~connection~~accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the ~~evaluation required by paragraph (d)~~policies or procedures may deteriorate.

A material weakness is a deficiency, or a combination of ~~Rules 13a-15~~deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or ~~15d-15 under~~interim financial statements will not be prevented or detected on a timely basis.

Our management assessed the ~~Securities Exchange Act~~effectiveness of ~~1934 that occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect,~~the Company’s internal control over financial reporting at March 31, 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.

The remediation plan includes:

● Walk through and document critical process.

● Review resources and organizational structure to address segregation of duty issues and support the jobs assigned.

● Implement a BI tool that will replace Excel worksheets that can be prone to errors.

23

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

None.

ITEM 1A. RISK FACTORS

~~Not required~~

No new risk factors noted since our Annual Report on Form 10-K for ~~smaller reporting companies.~~ the year ended December 31, 2021.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

No disclosure required.

ITEM 5. OTHER INFORMATION

None.

24

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

25

SIGNATURES

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.

	SPLASH ~~BEVERAGE~~BEVERAE GROUP, INC.

Date: ~~November 15, 2021~~May 16, 2022	By:	/s/ Robert Nistico
		Robert Nistico, Chairman and CEO
		(principal executive officer)

Date: ~~November 15, 2021~~May 16, 2022	By:	/s/ ~~Dean Huge~~Ron Wall
		Ron Wall, CFO
		~~Dean Huge, CFO~~(principal accounting officer and principal financial officer)

3526

Nevada		34-1720075
(State or other jurisdiction of incorporation or formation)		(I.R.S. employer identification number)

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, ~~No par~~$0.001 value per share	SBEV	NYSE American LLC
Warrants to purchase one whole share of common stock at an exercise price of $4.60	SBEV- WT	NYSE American LLC

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated ~~Filer~~filer ☒		Smaller reporting company ☒ Emerging growth company ☐

		Page
PART I: FINANCIAL INFORMATION
ITEM 1:	FINANCIAL STATEMENTS	1
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statement of Changes in Shareholders’ Equity ~~(Deficit)~~	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to the Condensed Consolidated Financial Statements	76
ITEM 2:	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2720
ITEM 3:	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	3022
ITEM 4:	CONTROLS AND PROCEDURES	3122
PART II: OTHER INFORMATION
ITEM 1	LEGAL PROCEEDINGS	3224
ITEM 1A:	RISK FACTORS	3224
ITEM 2:	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	3324
ITEM 3:	DEFAULTS UPON SENIOR SECURITIES	3324
ITEM 4:	MINE SAFETY DISCLOSURES	3324
ITEM 5:	OTHER INFORMATION	3324
ITEM 6:	EXHIBITS	3425
SIGNATURES		3526


	September 30, 2021			December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	8,144,171		$	380,000
Accounts receivable, net		811,674			484,858
Prepaid expenses		395,350			173,414
Inventory. net		1,491,073			798,273
Other receivables		102,838			90,919
Assets from discontinued operations		410,279			316,572
Total current assets		11,355,385			2,244,036

Non-current assets:
Deposits	$	324,259		$	77,686
Goodwill		5,672,823			5,672,823
Investment in Salt Tequila USA, LLC		250,000			250,000
Right of use assets, net		1,111,222			80,479
Quart Vin License		196,262			219,512
Property and equipment, net		561,505			681,352
Total non-current assets		8,116,071			6,981,852

Total assets	$	19,471,456		$	9,225,888

Liabilities and Stockholders’ Equity (Deficit)

Liabilities:
Current liabilities
Accounts payable and accrued expenses	$	903,969		$	1,521,818
Right of use liabilities - current		313,982			57,478
Sales tax payable		11,688			—
Due to related parties		46,625			368,904
Related party notes payable		991,837			1,333,333
Convertible loan payable		100,000			100,000
Notes payable, current portion		1,638,754			999,736
Shareholder advances		834,500			—
Accrued interest payable		340,659			442,748
Liabilities from discontinued operations		410,279			591,642
Total current liabilities		5,592,293			5,415,659

Long-term Liabilities:
Related party notes payable - noncurrent		—			666,667
Notes payable - noncurrent		1,148,751			1,240,044
Liability to issue shares in APA		1,980,000			1,980,000
Right of use liability - noncurrent		798,494			25,521
Total long-term liabilities		3,927,245			3,912,232

Total liabilities		9,519,538			9,327,891

Common stock, (mezzanine shares) 12,605,283 shares, contingently convertible to notes payable at December 31, 2020		—			9,248,720

Stockholders’ equity (deficit):
Common Stock, $0.001 par, 150,000,000 shares authorized, 32,618,735 and 21,157,043 shares issued and outstanding, at September 30, 2021 and December 31, 2020, respectively		32,619			21,157
Additional paid in capital		94,681,747			52,217,855
Accumulated deficit		(84,762,448	)		(61,589,735	)
Total stockholders’ equity (deficit)		9,951,917			(9,350,723	)

Total liabilities, mezzanine shares and (deficit) stockholders’ equity	$	19,471,456		$	9,225,888


	March 31, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	8,495,672		$	4,181,383
Accounts Receivable, net		1,394,293			1,114,452
Prepaid Expenses		653,036			607,178
Inventory, net		2,056,985			1,923,479
Other receivables		45,811			41,939
Assets from discontinued operations		252,297			473,461
Total current assets		12,898,094			8,341,892

Non-current assets:
Deposit	$	206,508		$	330,886
Intangible assets		5,763,318			5,861,335
Investment in Salt Tequila USA, LLC		250,000			250,000
Right of use asset, net		950,851			1,031,472
Property and equipment, net		542,535			569,785
Total non-current assets		7,713,212			8,043,478

Total assets	$	20,611,306		$	16,385,370

Liabilities and Stockholders’ Equity

Liabilities:
Current liabilities
Accounts payable and accrued expenses		1,517,305		$	1,901,535
Liability to issue shares		476,667			—
Sales tax payable		15,322			11,924
Right of use liability - current		284,372			294,067
Related party notes payable		312,351			653,081
Notes payable, current portion		2,171,068			2,967,812
Shareholder advances		110,000			390,500
Accrued interest payable		154,209			171,452
Liabilities from discontinued operations		392,497			389,086
Total current liabilities		5,433,791			6,779,457

Long-term Liabilities:


Liability to issue shares in APA		—			—
Right of use liability - noncurrent		668,693			732,686
Total long-term liabilities		668,693			732,686

Total liabilities		6,102,484			7,512,143

Common stock, (mezzanine shares) 12,605,283 shares, contingently convertible to notes payable at December 31, 2020		—			—

Deficiency in stockholders’ equity (deficit):
Common Stock, $0.001 par, 150,000,000 shares authorized, 36,669,828 and 33,596,232 shares issued 36,669,828 and 33,596,232 outstanding, at March 31, 2022 and December 31, 2021, respectively		36,670			33,596
Additional paid in capital		111,107,116			99,480,188
Accumulated deficit		(96,634,964	)		(90,640,557	)
Total deficiency in stockholders’ equity		14,508,822			8,873,227

Total liabilities, mezzanine shares and deficiency in stockholders’ equity	$	20,611,306		$	16,385,370


	Three months ended September 30,						Nine months ended September 30,
	2021			2020			2021			2020
Net revenues	$	2,827,393		$	692,974		$	8,254,078		$	1,217,709
Cost of goods sold		(2,007,544	)		(349,037	)		(6,011,755	)		(744,024	)
Gross margin		819,849			343,937			2,242,323			473,685

Operating expenses:
Contracted services		354,355			1,954,165			821,471			2,377,843
Salary and wages		1,246,253			293,133			2,892,818			309,539
Salary and wages – non-cash share-based compensation		1,315,261			—			3,688,453			590,283
Other general and administrative		2,214,274			221,442			7,767,241			1,411,113
Other general and administrative – non-cash share-based compensation		7,512,836			—			9,537,608			—
Sales and marketing		249,100			38,551			465,705			85,793
Total operating expenses		12,892,079			2,507,291			25,173,296			4,774,571

Loss from continuing operations		(12,072,230	)		(2,163,354	)		(22,930,973	)		(4,300,886	)

Other income/(expense):
Other Income		3,632			16,351			3,632			16,351
Interest income		527			16,354			642			32,710
Interest expense		(100,128	)		(23,110	)		(341,715	)		(1,958,601	)
Gain /( loss) from debt extinguishment		(1,695	)		1,521			95,701			36,483
Total other income/(expense)		(97,664	)		11,116			(241,740	)		(1,873,057	)

Provision for income taxes		—			—			—			—

Net loss from continuing operations, net of tax		(12,169,894	)		(2,152,238	)		(23,172,713	)		(6,173,943	)

Net (loss) income from discontinued operations, net of tax		(22,077	)		68,132			218,410			68,132

Net loss	$	(12,191,971	)	$	(2,084,106	)	$	(22,954,303	)	$	(6,105,811	)

Income(loss) per share - continuing operations
Basic		(0.40	)		(0112	)		(0.83	)		(0.34	)
Dilutive		(0.40	)		(0.112	)		(0.83	)		(0.34	)

Weighted average number of common shares outstanding - continuing operations
Basic		30,515,251			19,465,898			27,512,776			17,702,667
Dilutive		30,515,251			19,465,898			27,512,776			17,702,667

Income(loss) per share - discontinued operations
Basic		0.00			0.00			0.01			0.00
Dilutive		0.00			0.00			0.01			0.00

Weighted average number of common shares outstanding - discontinued operations
Basic		30,515,251			19,465,898			27,512,776			17,702,667
Dilutive		30,515,251			21,410,019			30,809,267			19,001,271


	Three months ended March 31,
	2022			2021

Gross sales	$	4,071,356		$	2,190,525
Customer discounts		(144,783	)		(51,601	)

Net revenues		3,926,573			2,138,924
Cost of goods sold		(3,094,571	)		(1,621,504	)
Gross profit		832,002			517,420

Operating expenses:
Contracted services		431,545			276,511
Salary and wages		785,651			833,851
Salary and wages - non-cash share-based compensation		1,242,697			1,186,596
Other general and administrative		2,222,238			2,072,659
Other general and administrative - non-cash share-based compensation		1,112,845			654,854
Sales and marketing		720,979			41,878
Total operating expenses		6,515,955			5,066,349

Loss from continuing operations		(5,683,953	)		(4,548,929	)

Other income/(expense):

Interest expense		(85,879	)		(92,097	)
Gain from debt extinguishment		—			1,319
Total other (expense)		(85,879	)		(90,778	)

Provision for income taxes		—			—

Net loss from continuing operations, net of tax		(5,769,831	)		(4,639,707	)

Net loss /income from discontinued operations, net of tax		(224,576	)		197,488

Net loss	$	(5,994,408	)	$	(4,442,219	)

Loss per share - continuing operations
Basic	$	(0.16	)	$	(0.19	)
Dilutive		(0.16	)		(0.19	)

Weighted average number of common shares outstanding - continuing operations
Basic and dilutive		35,188,404			24,642,532

Income/(loss) per share - discontinued operations
Basic	$	(0.00	)	$	(0.00	)
Dilutive	$	(0.00	)	$	(0.00	)

Weighted average number of common shares outstanding - discontinued operations
Basic		35,188,404			24,642,532
Dilutive		35,188,404			26,965,927


	Nine months ended			Nine months ended
	September 30, 2021			September 30, 2020
Net loss	$	(23,172,713	)	$	(6,105,811	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		119,847			26,339
ROU assets, net		86,699			61,341
Gain from debt extinguishment		(95,701)			(36,483	)
Interest on notes payable converted to common stock		—			—
Interest expense due to the issuance of warrants		—			—
Non-cash warrant expense		5,383,204			—
Share-based compensation		8,212,864			2,329,280
Other noncash changes		(222,317	)		590,283
Changes in working capital items:
Accounts receivable, net		(716,370	)		(243,369	)
Inventory, net		(732,529	)		(269,172	)
Prepaid expenses and other current assets		(168,622	)		(206,994	)
Deposits		—			(4,174	)
Accounts payable and accrued expenses		(207,570	)		(474,940	)
Royalty payable		—			(39,000	)
Accrued interest payable		(102,089	)		61,530
Net cash used in operating activities - continuing operations		(11,615,297	)		(4,311,170	)

Net cash used in operating activities - discontinued operations		(218,410	)		28,816

Cash Flows from Investing Activities:
Capital Expenditures		—			(9,693	)
Proceeds from the sale of fixed assets		—			—
Investment in Salt Tequila USA, LLC		—			(150,000	)
Net cash used in investing activities - continuing operations		—			(159,693	)

Net cash used in investing activities - discontinued operations		—			72,442

Cash Flows from Financing Activities:
Proceeds from issuance of common stock		19,630,565			3,574,002
Cash advance from shareholder		834,500			1,097,995
Funds in escrow		—			(1,000,000	)
Repayment of cash advance		(322,279	)		—
Proceeds from issuance of debt		928,000			1,470,099
Principal repayment of debt		(1,384,944	)		—
ROU liability, net		(87,965	)		(60,502	)
Net cash provided by financing activities - continuing operations		19,597,877			5,081,594

Net cash provided by financing activities - discontinued operations		—			—

Net Change in Cash and Cash Equivalents		7,764,170			711,989

Cash and Cash Equivalents, beginning of year		380,000			42,639

Cash and Cash Equivalents, end of year	$	8,144,171		$	754,628

Supplemental Disclosure of Cash Flow Information:
Cash paid for Interest	$	173,363		$	—

Supplemental Disclosure of Non-Cash Investing and Financing Activities
Notes payable and accrued interest converted to common stock (12,605,283 shares)		—			9,248,720
Liability issued for investment in SALT Tequila USA, LLC		—			100,000

Total assets	Sept 2021		Dec 2020
Splash Beverage Group		18,091,715		8,403,670
E-Commerce		969,461		505,646
Medical Devices - discontinued operations		410,279		316,572

Total Assets		19,471,456		9,225,888