| Summary of Significant Accounting Policies | 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 and Splash Mex, CMS
(as discontinued operations), and Copa. All intercompany balances have been eliminated in consolidation. Our investment in Salt Tequila USA, LLC is accounted
for at cost, as the company does not have the ability to exercise significant influence. Our accounting and reporting policies conform to accounting
principles generally accepted in the United States of America (GAAP). The accompanying condensed consolidated financial
statements have been prepared by 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 six months ended
June 30, 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 June 30, 2021 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 no Our cash in bank deposit accounts, at times, may
exceed federally insured limits of $250,000. At June 30, 2021 we had $ 11,115,182
Accounts Receivable and Allowance for Doubtful
Accounts Accounts receivable are carried at their estimated
collectible amounts and are periodically evaluated for collectability based on past credit history with clients and other factors. We
establish provisions for losses on accounts receivable on the basis of loss experience, known and inherent risk in the account balance,
and current economic conditions. At June 30, 2021 and December 31, 2020, our accounts receivable amounts are reflected net of allowances
of $ 775,274
484,858 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 June 30, 2021 and December 31, 2020 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 $ 319,622 366,109 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 39 Depreciation expense totaled $ 44,465 10,750 80,048 13,045
Schedule of Property and equipment
June 30, 2021 December 31, 2020
Property and equipment, at cost 2,170,899 843,097
Accumulated depreciation (1,569,585 ) (161,745 )
Property and equipment, net 601,304 681,352 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 is liable for the taxes upon the removal of product from the Company’s warehouse on a per gallon basis. The federal
tax rate is affected by a small winery tax credit provision which decreases based upon the number of gallons of wine production in a year
rather than the quantity sold. Paycheck Protection Program The Company records Paycheck Protection Program (“PPP”) loan
proceeds in accordance with Accounting Standards Codification (“ASC”) 470, Debt. Debt is extinguished when either the debtor
pays the creditor or the debtor is legally released from being the primary obligor, either judicially or by the creditor. See note 11. Fair
Value of Financial Instruments Financial
Accounting Standards (FASB) guidance specifies a hierarchy of valuation techniques based on whether the inputs to
those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources,
while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in
active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level
3 measurement). The three levels of the fair value hierarchy are as follows:
Level
1 - Unadjusted
quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at
the measurement date. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such
as exchange-traded instruments and listed equities.
Level
2 - Inputs
other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly
(e.g., quoted prices of similar assets or liabilities in active markets, or quoted prices for identical or similar assets
or liabilities in markets that are not active).
Level
3 - Unobservable
inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values are determined using
pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable. The
liabilities and indebtedness presented on the consolidated financial statements approximate fair values at June 30, 2021 and
December 31, 2020, consistent with recent negotiations of notes payable and due to the short duration of maturities. Revenue
Recognition We
recognize revenue under ASC 606, Revenue from Contracts with Customers (Topic 606). This guidance sets forth a five-step model
which depicts the recognition of revenue in an amount that reflects what we expect to receive in exchange for the transfer of
goods or services to customers. We
recognize revenue when our performance obligations under the terms of a contract with the customer are satisfied. Product sales
occur once control of our products is transferred upon delivery to the customer. Revenue is measured as the amount of consideration
that we expect to receive in exchange for transferring goods and is presented net of provisions for customer returns and allowances.
The amount of consideration we receive and revenue we recognize varies with changes in customer incentives we offer to our customers
and their customers. Sales taxes and other similar taxes are excluded from revenue. Distribution
expenses to transport our products, where applicable, and warehousing expense after manufacture are accounted for within operating
expenses. 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 Income
Taxes We
use the liability method of accounting for income taxes as set forth in ASC 740, Income Taxes 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% likelihood that a tax benefit will be sustained, no tax benefit will be
recognized in the financial statements. Company management has determined that there are no 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.
Schedule of Earnings Per Share, Basic and Diluted
Numerator 2021 2020
Net loss from continuing applicable to common shareholders $ (11,001,024 ) $ (402,166 )
Net loss from discontinued applicable to common shareholders $ 240,486 $ 28,816
Denominator
Weighted average number of common shares outstanding
Basic 26,003,605 16,809,392
Dilutive 26,003,605 16,809,392
Net loss per share from continuing operations
Basic (0.42 ) (0.23 )
Dilutive (0.42 ) (0.23 )
Net income per share from discontinued operations
Basic 0.01 0.00
Dilutive 0.01 0.00 Weighted
average number of shares outstanding excludes anti-dilutive common stock equivalents, including warrants to purchase 3 The weighted average number of common
shares calculation excludes 10,068,836 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 $ 150,753 23,962 198,538 46,768 Goodwill Goodwill represents the excess of acquisition
cost over the fair value of the net assets acquired and is not subject to amortization. The Company reviews goodwill annually in the
fourth quarter for impairment or when circumstances indicate carrying value may exceed the fair value. This evaluation is performed at
the reporting unit level. If a qualitative assessment indicates that it is more likely than not that the fair value is less than carrying
value, a quantitative analysis is completed using either the income or market approach, or a combination of both. The income approach
estimates fair value based on expected discounted future cash flows, while the market approach uses comparable public companies and transactions
to develop metrics to be applied to historical and expected future operating results. At December 31, 2020, our management determined
that an impairment charge of approximately $9.5 million, was necessary to reduce the goodwill relating to our Medical Device Segment.
The impairment charge was primarily related to the net cash flow projection of that business unit. 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
groups 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 In
June 2016, that FASB issued ASU 2016-13, Financial Instruments – Credit Losses Management
is currently assessing the new standard but does not believe that it would have a material effect. 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. |
