What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2021-03-08 compared with 2020-03-27 · 1183 added, 430 removed, 36 unchanged (98% of the section changed)

Financial Statements and Supplementary Data.

MEDICAL SUPPLY, INC.

REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS

FINANCIAL STATEMENTS

Balance Sheets

Statements of Operations

Statements of Changes in Stockholders' Deficit

Statements of Cash Flows

Notes to Financial Statements

Statements and Supplementary Data.

of Independent Registered Public Accounting Firm

the Board of Directors and Stockholders

Medical Supply, Inc.

on the Financial Statements

have audited the accompanying balance sheets of Canfield Medical Supply, Inc.

(the Company) as of December 31, 2019 and 2018,

and the related statements of operations, stockholders’

equity (deficit), and cash flows for the years then ended, and the

related notes (collectively referred to as the financial statements).

In our opinion, the financial statements present fairly,

in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations

and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States

Consideration

of the Company’s Ability to Continue as a Going Concern

accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

The Company has

suffered recurring losses and has working capital and stockholders' equity deficits, which raise substantial doubt about its ability

to continue as a going concern.

Management's plans regarding these matters are described in Note 8.

The financial statements do

not include any adjustments that might result from the outcome of this uncertainty.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on

the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company

Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance

Beverage Group, Inc.

Lauderdale, Florida

Opinion on the Financial Statements

We have audited the accompanying consolidated

balance sheets of Splash Beverage Group, Inc.

(f/k/a Canfield medical supply, Inc.) (the “Company”) at December 31,

2020 and 2019, and the related consolidated statements operations, deficiency in stockholders’

equity and cash flows for

each of the years in the two-year period ended December 31, 2020, and the related notes (collectively referred to as the financial

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company

at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the two-year period

ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Going Concern Uncertainty

The accompanying financial statements

have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 3 to the financial statements,

the Company has sustained recurring losses from operations and has a net capital deficiency that raise substantial doubt about

its ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 3.

The financial

statements do not include any adjustments that might result from the outcome of this uncertainty.

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an

opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public

Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance

with the U.S.

1 unchanged sentence

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits

to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial

As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but

not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Those standards require that we plan and perform the audit

to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether

due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over

financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting,

but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to

error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether

due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis,

evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the

accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the

consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Pinnacle Accountancy Group of Utah

Audit Matters

critical audit matters communicated below are matters arising from the current period audit of the financial statements that were

communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material

to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of

critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by

communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or

disclosures to which they relate.

Assets Impairment Assessments

described in Notes 2 and 8 to the consolidated financial statements, the Company has goodwill of $5.7 million at December 31,

In most cases, no directly observable market inputs are available to measure the fair value to determine if the asset is

Therefore, an estimate is derived indirectly and is based on net present value techniques utilizing post-tax cash flows

and discount rates.

The estimates that management used in calculating the net present values depend on assumptions specific to

the nature of the management service activities with regard to the amount and timing of projected future cash flows;

professional service forecasts;

actions of competitors (competing services), future tax and discount rates.

principal considerations for our determination that performing procedures relating to the intangible assets impairment assessment

is a critical audit matter are the significant judgment by management when developing the net present value of the intangible

This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating

management’s significant assumptions related to the amount and timing of projected future cash flows and the discount rate.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the

consolidated financial statements.

These procedures included testing management’s process for developing the fair value

evaluating the appropriateness of the net present value techniques;

testing the completeness and accuracy of underlying

data used in the model;

and evaluating the significant assumptions used by management, including the amount and timing of projected

future cash flows and the discount rate.

Evaluating management’s assumptions related to the amount and timing of projected

future cash flows and the discount rate involved evaluating whether the assumptions used by management were reasonable considering

the current and past performance of the intangible assets, the consistency with external market and industry data, and whether

these assumptions were consistent with evidence obtained in other areas of the audit.

Daszkal Bolton LLP

have served as the Company’s auditor since 2020

Accountancy Group of Utah

DBA of Heaton & Co., PLLC)

MEDICAL SUPPLY, INC.

Lauderdale, Florida

Splash Beverage Group, Inc.

[f/k/a Canfield Medical Supply, Inc.]

Consolidated Balance Sheets

December 31, 2020 and December 31, 2019

Current assets:

Accounts receivable

Right-of-use asset

Cash and cash equivalents

Accounts Receivable, net

Prepaid Expenses

Inventory, net

Other receivables

Assets from discontinued operations

Total current assets

Equipment, net of accumulated depreciation of $95,488 and $92,907

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Non-current assets:

Investment in Salt Tequila USA, LLC

Right of use asset, net

Quart Vin License

Property and equipment, net

Total non-current assets

Liabilities and Deficiency in Stockholders' Equity

Current liabilities

Accounts payable and accrued liabilities

Line of credit

Due to officer

Lease liability

Current portion of long-term debt

Accounts payable and accrued expenses

Right of use liability - current

Due to related parties

Bridge loan payable, net

Related party notes payable

Convertible Loan Payable

Notes payable, current portion

Royalty payable

Revenue financing arrangements

Shareholder advances

Accrued interest payable

Accrued interest payable - related parties

Liabilities from discontinued operations

Total current liabilities

Long-term Liabilities:

Long-term debt

Related party notes payable - noncurrent

Notes payable - noncurrent

Liability to issue shares in APA

Right of use liability - noncurrent

Total long-term liabilities

Total liabilities

Stockholders' Equity (Deficit)

Preferred stock, no par value;

5,000,000 shares authorized;

no shares issued and outstanding

Common stock, no par value;

100,000,000 shares authorized;

11,813,200 (December 31, 2019) and 11,477,200 (December 31, 2018) shares issued and outstanding

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

Deficiency in stockholders' equity:

Common Stock, $0.001 par, 150,000,000 shares authorized, 63,471,129 and 44,021,382 shares issued 63,471,129 and 43,885,090 outstanding, at December 31, 2020 and 2019, respectively

Additional paid in capital

Treasury Stock, $0.001 par, 100,000 shares at cost

Accumulated deficit

Total Stockholders' Equity (Deficit)

Total Liabilities and Stockholders' Equity (Deficit)

accompanying footnotes are an integral part of these financial statements.

MEDICAL SUPPLY, INC.

OF OPERATIONS

December 31, 2019

December 31, 2018

Sales (net of returns)

(61,589,735 )

(31,845,506 )

Total deficiency in stockholders' equity

Total liabilities, mezzanine shares and deficiency in stockholders' equity

The accompanying notes are an integral part

of these consolidated financial statements.

Splash Beverage

[f/k/a Canfield Medical Supply, Inc.]

Consolidated Statements of Operations

For the Year Ended December 31, 2020

Cost of goods sold

Operating expenses:

Salaries and wages

Professional fees

Other selling, general and administrative

Contracted services

Salary and wages

Other general and administrative

Sales and marketing

Total operating expenses

Income (loss) from operations

Loss from operations

(17,301,236 )

Other income/(expense):

1 unchanged sentence

Interest expense

Gain on sale of fixed assets

Total other income (expense)

Income (loss) before provision for income taxes

Provision for income tax

Net income (loss)

Net income (loss) per share applicable to common shareholders - basic

Net income (loss) per share applicable to common shareholders - diluted

Weighted average number of common shares outstanding - basic

Weighted average number of common shares outstanding - diluted

accompanying footnotes are an integral part of these financial statements.

MEDICAL SUPPLY, INC.

OF STOCKHOLDERS’

EQUITY (DEFICIT)

Common Stock (No Par)

Gain from debt extinguishment

Total other (expense)

Provision for income taxes

Net loss from continuing operations

(19,227,703 )

Net income from discontinued operations, net of tax

$ (28,674,556 )

$ (5,135,731 )

Net loss per share (basic diluted)

Continuing operations

Discontinued operations

Net loss per share

Weighted average number of common shares outstanding

The accompanying notes are an integral part

of these consolidated financial statements.

Splash Beverage Group, Inc.

[f/k/a Canfield Medical Supply, Inc.]

Consolidated Statement of Deficiency

in Stockholders’

For the year ended

December 31, 2020 and 2019

Treasury Stock

Additional Paid-In

Stockholders'

Equity (Deficit)

Stockholders' Equity

Balances at December 31, 2018

Common stock issued for cash

Net income for the year

$ (26,709,776 )

$ (7,831,132 )

Issuance of Common stock for cash

Issuance of Common stock for services

Issuance of series B convertible preferred stock

Issuance of Common stock from treasury

Warrants issued in connection with debt modification

Share-based compensation

Balances at December 31, 2019

Common stock issued for cash

Stock options granted and vested

Net (loss) for the year

$ (31,845,506 )

$ (9,756,083 )

Issuance of common stock for convertible debt

Incremental beneficial conversion for preferred A

Issuance of warrants on convertible instruments

Issuance of options

Issuance of common stock for services

Issuance of common stock for cash

Issuance of common stock for acquisition

(28,674,556 )

Balances at December 31, 2020

accompanying footnotes are an integral part of these financial statements

MEDICAL SUPPLY, INC.

OF CASH FLOWS

Cash Flows from Operating Activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:

Gain on disposal of fixed assets

Stock-based compensation

Changes in current assets and liabilities

Increase in accounts receivable

(Increase) decrease in inventory

Increase in accounts payable and accrued liabilities

Net cash provided by (used for) operating activities

(61,589,735 )

The accompanying notes are an integral part

of these consolidated financial statements.

Splash Beverage

[f/k/a Canfield Medical Supply, Inc.]

Consolidated Statement Cash Flows

For the Year Ended December 31, 2020

$ (28,674,556 )

$ (5,135,731 )

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

Amortization of ROU Asset

Gain from debt extinguishment

Non-cash interest expense

Share-based compensation

Liability to issue shares in APA

Non-cash acquisition costs

Other noncash changes

Changes in working capital items:

Accounts receivable, net

Inventory, net

Prepaid expenses and other current assets

Accounts payable and accrued expenses

Royalty payable

Accrued Interest payable

Net cash used in operating activities –

continuing operations

(21,316,556 )

Net cash used in operating activities –

discontinued operations

Cash Flows from Investing Activities:

Proceeds from sale of fixed assets

Purchase of property and equipment

Net cash (used for) 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:

Net borrowings on line of credit

Proceeds from officer

Payments to officer

Payments on long-term debt

Proceeds from sales of common stock.

Net cash provided by (used for) financing activities

Net Increase (Decrease) in Cash

Cash at the Beginning of the Period

Cash at the End of the Period

Schedule Of Non-Cash Investing And Financing Activities

Recognition of right-of use asset and lease liability

Amortization of right-of-use asset

Supplemental Disclosure

Proceeds from issuance of Common stock

Cash advance from shareholder

Repayment of cash advance

Proceeds from issuance of debt

Principal repayment of debt

Reduction of ROU Liability

Net cash provided by financing activities –

continuing operations

Net cash provided by financing activities –

discontinued operations

Net Change in Cash and Cash Equivalents

Cash and Cash Equivalents, beginning of year

Cash and Cash Equivalents, end of year

Supplemental Disclosure of Cash Flow Information:

Cash paid for Interest

Cash paid for income taxes

accompanying footnotes are an integral part of these financial statements.

MEDICAL SUPPLY, INC.

TO FINANCIAL STATEMENTS

31, 2019 and 2018

ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Medical Supply, Inc.

(the “Company”), was incorporated in the State of Ohio on September 3, 1992, and changed domicile

to Colorado on April 18, 2012.

The Company is in the business of home health services, primarily the selling of durable medical

Supplemental Disclosure of Non-Cash Investing and Financing Activities

Notes payable and accrued interest converted to common stock (12,605,283 shares)

The accompanying notes are an integral part

of these consolidated financial statements.

Splash Beverage

[f/k/a Canfield Medical Supply, Inc.]

Notes to the Consolidated Financial

Note 1 –

Business Organization and Nature of Operations

Splash Beverage Group (“SBG”),

f/k/a Canfield Medical Supply, Inc.

(the “CMS”), was incorporated in the State of Ohio on September 3, 1992, and changed

domicile to Colorado on April 18, 2012.

CMS is in the business of home health services, primarily the selling of durable medical

equipment and medical supplies to the public, nursing homes, hospitals and other end users.

June 21, 2019 WesBev LLC, a Nevada limited liability company ("WesBev"), acquired 8,000,000 shares of common stock

from Michael J.

West, a founder, director and former principal shareholder of the Company, consisting of approximately 69.7% of

the issued and outstanding shares of the Company at the time of the purchase.

As part of his agreement with WesBev, Mr.

West undertook

to appoint or cause the appointment of up to three persons nominated by WesBev to the board of directors of the Company.

June 21, 2019 the Company sold 336,000 shares of common stock to WesBev for $100,000.

Following these stock purchases WesBev beneficially

owns 8,336,000 shares, or approximately 71% of the issued and outstanding shares of the Company and may be deemed to be in control

of the registrant.

December 31, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with SBG

Acquisition Inc.

(“Merger Sub”), a Nevada Corporation wholly-owned by the Company, and Splash Beverage Group, Inc.

a Nevada corporation (“Splash”) pursuant to which Merger Sub shall be merged with and into Splash (the “Merger”)

with Splash as the surviving company and a wholly-owned subsidiary of the Company.

The closing of the Merger shall take place

on the first business day following satisfaction or waiver of the closing terms and conditions set forth in the Merger Agreement.

of the Merger is subject to customary closing terms and conditions including, among others:

the adoption of the Merger Agreement by Splash’s stockholders;

the representations and warranties of the respective parties being true and correct in all material respects as of the closing day of the Merger;

since June 1, 2019 through the closing of the Merger, Splash shall have raised from the aggregate sale of its equity securities not less than $1,500,000 which shall be available or was utilized for inventory purchases, reductions to accounts payable and for other general working capital purposes;

on the closing of the Merger liabilities of Splash debt shall not exceed $500,000;

Splash shall have entered into note conversion agreements with substantially all holders of its debt pursuant to which such debt is converted into shares Splash’s common stock at a conversion price of $1.00 per share;

designated shareholders of Splash shall have entered into lock-up/leak out agreements by which they will agree to restrict post-Merger sales of Canfield securities for a period of up to one year following the Merger, as more particularly described within the Merger Agreement;

the Company and Michael West, the Company’s former Chief Executive Officer, and a current director, shall have entered into a Business Transfer and Indemnity Agreement pursuant to which all operations, assets and liabilities of the Company’s home health services business shall be transferred and conveyed to Mr.

West or an entity designated by Mr.

West in exchange for his indemnifying the Company for certain liabilities and claims;

the Company shall not have any liabilities exceeding $50,000 in the aggregate;

the Company’s directors and officers shall have tendered their resignations;

Robert Nistico, Chief Executive Officer of Splash, shall be appointed as chief executive officer of the Company;

the composition of the Company’s board of directors shall be as set forth in the Merger Agreement.

As of the date of this annual report, all conditions to closing have been completed, except for the fourth, and the seventh through

eleventh bulleted conditions listed above.

The items listed in the seventh, ninth and tenth bulleted conditions above have been

finalized, but will not be delivered until the closing date.

preparation of financial statements in conformity with U.S.

Generally Accepted Accounting Principles (“U.S.

requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of

contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during

the reporting period.

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

The Merger was consummated on March 31, 2020.

As the owners and management of Splash

have voting and operating control of CMS following the Merger, the Merger transaction was accounted for as a reverse acquisition

(that is with Splash as the acquiring entity), followed by a recapitalization.

As part of the recapitalization, previously

issued shares of SBG preferred stock have been reflected as shares of common stock that were received in the Merger.

shares have been retrospectively presented as outstanding for all periods.

Splash specializes in the manufacturing,

distribution, and sales & marketing of various beverages across multiple channels.

Splash operates in both the non-alcoholic

and alcoholic beverage segments.

Additionally, Splash operates its own vertically integrated B-to-B and B-to-C E-commerce distribution

platform called Qplash, further expanding its distribution abilities and visibility.

On July 2, 2020, CMS received a Certificate

of Good Standing from the State of Colorado.

This certificate allowed us to change our name from Canfield Medical Supply, Inc.

to Splash Beverage Group, Inc.

a Colorado company.

On July 31, 2020, we received approval from FINRA to change the Company’s

name from Canfield Medical Supply, Inc.

to Splash Beverage Group, Inc.

Our new ticker symbol is SBEV.

On December 24, 2020, SBG consummated

an Asset Purchase Agreement(the “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.

Splash Beverage Group, Inc.

[f/k/a Canfield Medical Supply, Inc.]

Notes to the Consolidated Financial

Note 2 –

Summary of Significant

Accounting Policies

Basis of Presentation and Consolidation

These consolidated financial statements

include the accounts of Splash Beverage Group and its wholly owned subsidiaries, Holdings and Splash Mex, in addition to the accounts

of the CMS from March 31, 2020, and Copa from December 1, 2020 the merger/acquisition effective date.

All intercompany balances

have been eliminated in consolidation.

Our accounting and reporting policies

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

The accompanying consolidated financial

statements have been prepared by us.

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 year ended December 31, 2020

and 2019 have been made.

Use of Estimates

The preparation of the 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.

and Cash Equivalents

Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents.

majority of the Company’s revenues are received from Medicare, Medicaid, and private insurance companies.

As such, the Company

records revenues at allowable amounts, net of estimated allowances and discounts based on contracted prices and historical collection

The Company reviews accounts receivable periodically for collectability and establishes an allowance for doubtful accounts

and records bad debt expense when deemed necessary.

At December 30, 2019 and December 31, 2018, the Company has determined that

no allowance for doubtful accounts is necessary.

MEDICAL SUPPLY, INC.

TO FINANCIAL STATEMENTS

31, 2019 and 2018

ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):

and Equipment

and equipment are recorded at cost and depreciated under straight line methods over each item's estimated useful life.

Company carries inventory of durable medical equipment and medical supplies for resale.

Inventory is accounted for on

a first–in first-out basis.

Inventory consists of the following:

December 31, 2019

December 31, 2018

Durable medical equipment

Medical supplies

is the Company’s policy that revenues from product sales is recognized in accordance with ASC 606 "

Revenue Recognition ."

Five basic steps must be followed before revenue can be recognized;

(1) Identifying the contract(s) with a customer that

creates enforceable rights and obligations;

(2) Identifying the performance obligations in the contract, such as promising to

transfer goods or services to a customer;

(3) Determining the transaction price, meaning the amount of consideration in a contract

to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer;

(4) Allocating

the transaction price to the performance obligations in the contract, which requires the company to allocate the transaction price

to each performance obligation on the basis of the relative standalone selling prices of each distinct good or services promised

in the contract;

and (5) Recognizing revenue when (or as) the entity satisfies a performance obligation by transferring a promised

good or service to a customer.

The amount of revenue recognized is the amount allocated to the satisfied performance obligation.

For sales of our Company products, a purchase arrangement is evidenced by a written order, with delivery considered

as made after physical customer acceptance.

Although rare, defective products may be returned, with other return issues considered

on a case by case basis.

Services such as periodic scheduled deliveries are contracted in writing, and generally billed monthly.

Any service revenue earned by the Company for services such as safety and set up consulting or claims processing is recorded after

the service is performed.

Rental of durable home medical equipment is evidenced by written contract, with revenue recognized when

rent is earned.

MEDICAL SUPPLY, INC.

TO FINANCIAL STATEMENTS

31, 2019 and 2018

ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):

Company’s primary source of revenue is reimbursement from Medicare, Medicaid, and private insurance companies for the procurement

and sale of medical equipment and supplies to patients.

The amount of revenue earned from each classification as a percent of

total revenues is as follows:

Private pay/private insurance

costs are expensed as incurred.

The Company had advertising costs during the years ended December 31, 2019 and 2018 of $13,453

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 cash equivalents at December 31, 2020 and

Our cash in bank deposit accounts, at times,

may exceed federally insured limits of $250,000.

At December 31, 2020 we had bank accounts over the federally insured limits by

approximately $29,300.

Our bank deposit accounts in Mexico ($2,400) are uninsured.

Splash Beverage Group, Inc.

[f/k/a Canfield Medical Supply, Inc.]

Notes to the Consolidated Financial

Note 2 –

Summary of Significant

Accounting Policies, continued

Accounts Receivable and Allowance

for Doubtful Accounts

Accounts receivable are carried at their

estimated collectible amounts and are periodically evaluated for collectability based on past credit history with clients and other

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 December 31, 2020 and 2019, our accounts receivable amounts are

reflected net of allowances of $0 and $11,430, respectively.

Inventory is stated at the lower of cost

or net realizable value, accounted for using the weighted average cost method.

The inventory balances at December 31, 2020 and

2019 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 $366,109 and $150,974 at December 31, 2020

and 2019, respectively.

Company accounts for income taxes pursuant to ASC 740.

Under ASC 740, deferred taxes are provided for using the liability method

whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred

tax liabilities are recognized for taxable temporary differences.

Temporary differences are the differences between the reported

amounts of assets and liabilities and their tax bases.

Deferred tax assets are reduced by a valuation allowance when, in the opinion

of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

February 2012, the Company was an S-Corporation for income tax purposes, and therefore a pass-through entity paying no income

tax at the corporate level.

The Company had no material loss carryforwards as of December 31, 2011.

Included in the Company’s

accumulated deficit from February 2012 forward is approximately $99,000 in undistributed S-Corporation losses.

At December 31,

2019 and 2018 the Company had net operating loss carryforwards (NOL’s) of approximately $462,000 and $144,000 respectively,

which may be applied against future taxable income.

However, if certain substantial changes in the Company’s ownership should

occur, there could be an annual limitation on the amount of net operating loss carryforwards that can be utilized.

of and ultimate realization of the benefits from the operating loss carryforwards for income tax purposes is dependent, in part,

upon the tax laws in effect, the future earnings of the Company, and other future events, the effects of which cannot be determined.

Because of the uncertainty surrounding the realization of the loss carryforwards, the Company has established a valuation allowance

equal to the tax effect (2019 and 2018:

21% federal and 5% state) of the loss carryforwards of approximately $120,000 and $37,440

at December 31, 2019 and 2018, respectively, and therefore, no deferred tax asset has been recognized for the loss carryforwards.

The change in valuation allowance is approximately $82,560 and ($19,760) for the periods ended December 31, 2019 and 2018, respectively.

The tax effect of remaining NOL’s and resulting deferred tax assets of $120,000 remain fully reserved by valuation allowance,

due to continued uncertainty as to their utilization.

MEDICAL SUPPLY, INC.

TO FINANCIAL STATEMENTS

31, 2019 and 2018

ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):

Income (Loss) per Share

net income per common share ("Basic EPS'') excludes dilution and is computed by dividing net income by the

weighted average number of common shares outstanding during the period.

Diluted net income per common share ("Diluted

EPS'') reflects the potential dilution that could occur if stock options or other contracts to issue shares of common

stock were exercised or converted into common stock.

The computation of Diluted EPS does not assume exercise or conversion of

securities that would have an anti-dilutive effect on net income per common share.

December 31, 2019

Year Ended December 31, 2018

Net income (loss) applicable to common shareholders

Weighted average common shares outstanding, basic

Stock options

Weighted average common shares outstanding, diluted

Net Income per share - Basic

Income per shares - Diluted

carrying value of the Company’s financial instruments, as reported in the accompanying balance sheets, approximates fair

Concentrations

instruments that potentially subject the Company to concentrations of credit risk include cash and cash equivalents.

places its cash and cash equivalents at well-known financial institutions, where at times, such balances may exceed FDIC insurance

Company receives a significant amount of its revenues in reimbursements from Medicare and Medicaid through competitive bidding processes.

There is no guarantee that the Company will be selected as a winning contract supplier under future bidding rounds.

Selling, General and Administrative Expenses

selling, general and administrative expenses included the following:

Office expenses

MEDICAL SUPPLY, INC.

TO FINANCIAL STATEMENTS

31, 2019 and 2018

ORGANIZATION,

OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):

accordance with ASC 350, the Company regularly reviews the carrying value of intangible and other long-lived assets for the existence

of facts or circumstances, both internally and externally, that suggest impairment.

If impairment testing indicates a lack of

recoverability, an impairment loss is recognized by the Company if the carrying amount of a long-lived asset exceeds its fair

No impairment was noted during the years ended December 31, 2019 and 2018.

and Services, Geographic Areas and Major Customers

Company’s business of medical supply sales constitutes one operating segment.

All revenues each year were domestic and to

external customers.

February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, “Lease (Topic 842),”

a new lease standard requiring lessees to recognize lease assets and lease liabilities for most leases classified as operating

leases under previous U.S.

A lessee should recognize in the statement of financial position a liability to make lease payments

(the lease liability) and a right-of-use asset (“ROU”

asset) representing its right to use the underlying asset for

the lease term.

The guidance is effective for fiscal years beginning after December 15, 2018, with early adoption permitted.

Company has adopted this standard effective January 1, 2019.

The Company elected the optional transition method that permits adoption

of the new standard prospectively, as of the effective date, without adjusting comparative periods presented.

See Note 6 for disclosure

required by ASC 842.

and equipment are recorded at cost and consist of the following:

Office equipment

Wheelchair rental pool

Total property and equipment

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.

Property and Equipment

We record property and equipment at cost

when purchased.

Depreciation is recorded for property, equipment, leasehold improvements, and software using the straight-line

method over the estimated economic useful lives of assets, which range from 3-39 years.

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 $55,616 and

$19,781 for the year ended December 31, 2020 and 2019, respectively.

Property and equipment as of December 31, 2020 and 2019 consisted

of the following:

Property and equipment, at cost

Accumulated depreciation

Net property and equipment

is computed using the straight-line method based upon estimated useful lives as follows:

for 2019 and 2018 was $63,758 and $62,825, respectively.

wheelchair rental pool consists of wheelchairs rented to customers over the shorter of the 13 month use period as mandated by

Medicare and Medicaid, or the period over which the customer requires use of a wheelchair.

At the end of the use period, the chair

is either returned to the pool to be rented to another customer, or title of the chair is transferred to the customer.

December 31, 2019 and December 31, 2018, the Company owed a bank $69,534 and $66,181, respectively, under a revolving line of

The line of credit is secured by all Company assets, is capped at $100,000, is due on demand, and bears interest at variable

rates approximating 7% on average.

Interest expense under the note totaled $5,410 and $4,327 during the years ended December 31,

2019 and 2018, respectively.

During 2019 and 2018, the Company made net borrowings $3,353 and $3,803, respectively.

MEDICAL SUPPLY, INC.

TO FINANCIAL STATEMENTS

31, 2019 and 2018

RELATED PARTY LOAN

On June 21, 2019, the

Company entered into a short-term loan with Michael West, an officer of the Company, for $276,550.

The loan has a one-year term

from June 21, 2019, and is non-interest bearing.

The Company made payments of $78,701 on this loan, resulting in a loan balance

of $197,849 and $0 as of December 31, 2019 and December 31, 2018, respectively.

debt consists of the following vehicle loans, which are collateralized by their underlying vehicles with net carrying values exceeding

the outstanding loan amounts :

3.53% installment note payable $352 monthly, including interest, through July 2019

3.79% installment note payable $299 monthly, including

interest, through July 2021

2.99% installment note payable $350 monthly, including interest, through August 2019

Less principal due within one year

TOTAL LONG-TERM DEBT

payments due on long-term debt subsequent to December 31, 2019, are as follows:

MEDICAL SUPPLY, INC.

TO FINANCIAL STATEMENTS

31, 2019 and 2018

STOCKHOLDERS’

June 2019, the Company received net proceeds of $100,000 from the sale of 336,000 shares of no-par value common stock at $0.298

July 2018, the Company received net proceeds of $2,000 from the sale of 200,000 shares of no-par value common stock at $0.01 per

Stock Options Granted

November 26, 2019, the Board granted stock options to each of two officers, one director, and one advisor for

the purchase of 300,000 shares of the common stock of the Company .

The options expire

in five years from the issuance date, have an exercise price of $0.55, and were immediately vested and exercisable.

the grant date, total recognized compensation of $160,786 was recorded as salaries and wages .

the year ended

Number of shares

Fair market value per share

Stock based compensation recognized

of December 31, 2019, total unrecognized compensation remaining to be recognized in future periods totaled $0.

The fair value

of each option award above is estimated using the Black-Scholes option-pricing model with

the following assumptions at the measurement date, which was deemed to be the November 26, 2019 grant date:

Measurement date

Dividend yield

Expected volatility

Risk-free interest rate

Expected life (years)

Exercise Price

summary of the activity for the Company's stock options is as follows:

December 31, 2019

Property and equipment, net

Licensing Agreements

The initial amount of the TapouT agreement

as entered into by one of the founders prior to the Company’s assumption in 2013 was $4,000,000 to be paid over several

years pursuant to a guaranteed minimum royalty agreement.

Royalty costs incurred under the agreements, guaranteed minimum royalty

amounts, are expensed as incurred.

We have not made any payments to Salt

Tequila USA, LLC under the licensing agreement due to the immaterial level of our sales to date from the brand.

In connection with the Copa APA, we acquired

the license to certain patents from 1/4 Vin SARL (“1/4 Vin”) 1/4 Vin has the right to license certain patents and

patent applications relating to inventions, systems, and methods used in the Company’s manufacturing process.

for notes payable, 1/4 Vin granted the Company a nonexclusive, royalty-bearing, non-assignable, nontransferable, terminable license

which would continue until the subject equipment is no longer in service or the patents expire.

Amortization will be approximately

$31,000 annually until the license agreement is fully amortized.

The asset is being amortized over a 10 year useful life.

Splash Beverage Group, Inc.

[f/k/a Canfield Medical Supply, Inc.]

Notes to the Consolidated Financial

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

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:

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.

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

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 December 31, 2020 and 2019, consistent with recent

negotiations of notes payable and due to the short duration of maturities.

Convertible Instruments

GAAP requires

the bifurcation of certain conversion rights contained in convertible indebtedness and account for them as free standing derivative

financial instruments according to certain criteria.

This criteria include circumstances in which (a) the economic characteristics

and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks

of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract

is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value

reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument

would be considered a derivative instrument.

An exception to this rule is when the host instrument is deemed to be conventional

as that term is described under applicable U.S.

When bifurcation

is required, the embedded conversion options are bifurcated from the convertible note, resulting in the recognition of discounts

to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between

the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price

embedded in the note.

Debt discounts under these arrangements are amortized over the term of the related debt to their stated

date of redemption.

to convertible preferred stock, we record a dividend for the intrinsic value of conversion options embedded in preferred securities

based upon the differences between the fair value of the underlying common stock at the commitment date of the transaction and

the effective conversion price embedded in the preferred shares.

Splash Beverage Group, Inc.

[f/k/a Canfield Medical Supply, Inc.]

Notes to the Consolidated Financial

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.

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

Stock-Based Compensation

We account for stock-based compensation

in accordance with ASC 718, “

Compensation - Stock Compensation”

Under the fair value recognition

provisions, cost is measured at the grant date based on the fair value of the award and is recognized as expense ratably over

the requisite service period, which is generally the option vesting period.

We use the Black-Scholes option pricing

model to determine the fair value of stock options.

We early adopted ASU 2018-07, “Improvements to Nonemployee

Share-Based Payment Accounting”, which aligns accounting treatment for such awards to non-employees with the existing guidance

on employee share-based compensation in ASC 718.

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

For those income tax positions where there

is less than 50% likelihood that a tax benefit will be sustained, no tax benefit will be recognized in the financial statements.

Company management has determined that there are no material uncertain tax positions at December 31, 2020 and 2019.

Net loss per share

The net loss per share is computed by

dividing the net 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.

Net loss from continuing applicable to common shareholders

$ (19,227,703 )

$ (5,135,731 )

Net loss from discontinued applicable to common shareholders

$ (9,446,853 )

Weighted average number of common shares outstanding

Net loss per share from continuing operations (basic diluted)

Net income per share from discontinued operations (basic diluted)

Splash Beverage

[f/k/a Canfield Medical Supply, Inc.]

Notes to the Consolidated Financial

Note 2 –

Summary of Significant

Accounting Policies, continued

Weighted average number of shares outstanding

excludes anti-dilutive common stock equivalents, including warrants to purchase 3 million shares of common stock for nominal consideration.

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 $146,579 and $4,767 for the years ended December 31, 2020 and 2019, respectively.

Related Parties

We are indebted to certain members of

our Board of Directors at December 31, 2020 and 2019.

Transactions between us and the Board members are summarized in Notes 4

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

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.

During 2020, the company recorded an impairment charge associated with the CMS acquisition.

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

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

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 ”

This ASU provides financial statement

users with more decision-useful information about the expected credit losses on financial instruments and other commitments

to extend credit held by a reporting entity at each reporting date.

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.

Note 3 –

Going Concern

The accompanying consolidated financial

statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities

in the normal course of business.

Our business operations have not yet generated significant revenues, and we have sustained

net losses of approximately $28.7 million during the year ended December 31, 2020 and have an accumulated deficit of approximately

$61.6 million at December 31, 2020.

In addition, we have current liabilities in excess of current assets of approximately $3.2

million at December 31, 2020.

Further, we are in default on approximately $1.0 million of indebtedness, including accrued interest.

Our ability to continue as a going concern

in the foreseeable future is dependent upon our ability to generate revenues and obtain sufficient long-term financing to meet

current and future obligations and deploy such to produce profitable operating results.

Management has evaluated these conditions

and plans to raise capital as needed and to generate revenues to satisfy our capital needs.

No assurance can be given that we

will be successful in these efforts.

These factors, among others, raise substantial

doubt about our ability to continue as a going concern for a reasonable period of time.

These consolidated financial statements

do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification

of liabilities that might be necessary should we be unable to continue as a going concern.

Splash Beverage Group, Inc.

[f/k/a Canfield Medical Supply, Inc.]

Notes to the Consolidated Financial

Note 4 –

Notes payable are generally nonrecourse

and secured by all Company owned assets.

Notes Payable

In October 2013, we entered into a short-term loan agreement with an entity in the amount of $25,000.

The note matured and in March 2020 the full outstanding principal balance of $25,000 and unpaid accrued interest of $11,345 was converted into 234,767 shares of common stock.

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 and were not exercised by February 28, 2017.

The note matured and remains in default.

In March 2014, we entered into a 12-month term loan agreement with an individual in the amount of $500,000.

The note included warrants for 681,461 shares of common stock at $0.92 per share.

The warrants expired and unexercised by February 28, 2017.

The note matured and in March 2020 the full outstanding principal balance of $500,000 and unpaid accrued interest of $373,065 was converted into 1,124,802 shares of common stock.

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 and unexercised by February 28, 2017.

The loans matured and remains in default.

In May 2020, we entered into a two year loan with an entity

under the Paycheck Protection Program established by the CARES Act in the amount of $89,612.

The note requires monthly payments

of principal and interest starting in December 2020 and maturing in May 2020.

We expect $73,167 of the loan amount to be forgiven

in accordance with the CARES Act.

In June 2020, we entered into a six-month loan with an individual in the amount of $100,000.

The loans matured and remains in default.

In August 2020, we entered into a nine-month loan with a company in the amount of $112,000.

The loan requires 9 monthly payments of principal and interest in the amount of $12,246.66 with the final payment due May 2021.

Notes payable for license agreements due in 36 monthly payments of $10,000, interest imputed at 10%, maturing in January 2021.

In December 2020, we entered into a 56 month loan with a company in the amount of $1,578,237.

The loan requires variable payments and performance interest based on a percentage of revenue.

Interest expense on notes payable was $50,592

and $105,966 for the years ended December 31, 2020 and 2019, respectively.

Accrued interest was $271,533 and $581,693 at 31, 2020

and December 31, 2019, respectively.

Concurrently with the consummation of

the Merger with CMS, notes payable of $525,000 and accrued interest were converted to shares of Splash common stock, which were

exchanged for Splash Beverage Group, Inc.

[Formerly known as Canfield Medical Supply, Inc.] shares.

Pursuant to the terms of the

conversion agreements, these investors have the right to rescind the common shares received and receive replacement notes payable

if we fail to raise $9 million in a secondary initial public offering by September 30, 2020 (subsequently extended to April 30,

As a result, these shares are classified as mezzanine equity in our consolidated balance sheet.

Splash Beverage Group, Inc.

[f/k/a Canfield Medical Supply, Inc.]

Notes to the Consolidated Financial

Note 4 –Debt, continued

Related Parties Notes Payable

During 2012, we entered into two 6-month term loan agreements with an entity, totaling $150,000.

The notes included warrants for 68,146 shares of common stock at $0.73 per share which expired unexercised in 2017.

The note matured and in March 2020 the full outstanding principal balance of $41,500 and unpaid accrued interest of $31,515 was converted into 98,726 shares of common stock.

In March 2014, we entered into a $50,000 12-month term loan agreement.

The note included warrants for 136,292 shares of common stock at $0.92 per share.

The warrants expired unexercised on February 28, 2017.

The note matured and in March 2020 the full outstanding principal balance of $50,000 and unpaid accrued interest of $24,145 was converted into 99,252 shares of common stock.

During 2015, we entered into a 12-month term loan agreement with an individual in the amount $250,000.

The note matured and in March 2020 the full outstanding principal balance of $250,000 and unpaid accrued interest of $101,850 was converted into 98,726 shares of common stock.

In February 2012, we entered into a loan agreement with an officer of the Company in the amount of $100.

On September 25, 2018 an additional $10,500 loan agreement was entered into.

The note matured and in March 2020 the full outstanding principal balance of $10,600 and unpaid accrued interest of $1,189 was converted into 15,734 shares of common stock.

During 2013, 2014, 2015, and 2016, we entered into several 12-month term loan agreements with an officer of the Company in the amounts of $57,000, $225,000, $105,000, and $9,000, respectively.

The note matured and in March 2020 the full outstanding principal balance of $396,000 and unpaid accrued interest of $146,828 was converted into 727,344 shares of common stock.

Continued on next page

Splash Beverage Group, Inc.

[f/k/a Canfield Medical Supply, Inc.]

Notes to the Consolidated Financial

Note 4 –Debt, continued

Related Parties Notes Payable, continued

During 2012, 2013, 2014, and 2016, we entered into 6-month term loan agreements with an officer of the Company in the amounts of $155,000, $210,000, $150,000 and $40,000, all respectively.

The notes included warrants for issuances of 204,438 shares of common stock at $.092 per share.

The warrants expired unexercised on March 1, 2017.

The note matured and in March 2020 the full outstanding principal balance of $495,000 and unpaid accrued interest of $213,010 was converted into 942,504 shares of common stock.

During 2013, 2014 and 2017, we entered into 12-month term loan agreements with an officer of the Company in the amounts of $60,000, $50,000 and $10,000.

The note matured and in March 2020 the full outstanding principal balance of $120,000 and unpaid accrued interest of $50,305 was converted into 228,328 shares of common stock.

During 2018, we entered into a long term note payable with an entity owned by an officer for $12,000 to be payable on July 10, 2020.

The note matured and in March 2020 the full outstanding principal balance of $12,000 and unpaid accrued interest of $1,050 was converted into 17,407 shares of common stock.

In December 2020, we entered into a 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 $144,444 with the final payment due June 2022.

During 2019, we entered into a term note payable with an entity owned by an officer for $130,000 to be paid on August 8, 2019.

The note matured and in March 2020 the full outstanding principal balance of $130,000 and unpaid accrued interest of $9,078 was converted into 182,525 shares of common stock.

Interest expense on related party notes

payable was $37,967 and $95,183 for the year ended December 31, 2020 and 2019, respectively.

Accrued interest was $0 and $546,362

as of December 31, 2020 and December 31, 2019.

Concurrently with the consummation of the

Merger with CMS, notes payable of $1,505,100 and accrued interest were converted to shares of Splash common stock, which were exchanged

for Splash Beverage Group, Inc.

[Formerly known as Canfield Medical Supply, Inc.] shares.

Pursuant to the terms of the conversion

agreements, these investors have the right to rescind the common shares received and receive replacement notes payable if we fail

to raise $9 million in a secondary initial public offering by September 30, 2020 (subsequently extended to April 30, 2021).

a result, these shares are classified as mezzanine equity in our consolidated balance sheet.

Splash Beverage Group, Inc.

[f/k/a Canfield Medical Supply, Inc.]

Notes to the Consolidated Financial

Note 4 –Debt, continued

September 30,

Convertible Bridge Loans Payable

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.

This loan matured and remains

October 2015, we entered into a 3-month term loan agreement with two individuals in the amount of $25,000.

On December 26,

2018, the outstanding principal and accrued interest of $14,388 was consolidated into a new $39,388 term loan due August 26,

In March 2020 the full outstanding principal balance of $39,388 and unpaid accrued interest of $5,973 was converted

into 59,694 shares of common stock.

June 2015, we entered into a 3-month term loan with two individuals in the amount of $100,000.

On December 26, 2018, the outstanding

principal amount of $100,000 and accrued interest of $64,307 was consolidated into a new $164,307 term loan due August 26,

In March 2020 the full outstanding principal balance of $164,307 and unpaid accrued interest of $24,916 was converted

into 249,013 shares of common stock.

2016, 2017 and 2018, we entered into multiple loan agreements with an entity in varying amounts.

On December 26, 2018, the

outstanding principal of $235,500 and accrued interest of $155,861 was consolidated into a new $391,361 term due August 26,

In March 2020 the full outstanding principal balance of $391,361 and unpaid accrued interest of $43,823 was converted

into 435,184 shares of common stock.

2016, we entered into 3-month term loan agreements with an individual totaling $20,000.

The loan was extended to August 14,

In March 2020 the full outstanding principal balance of $20,000 and unpaid accrued interest of $10,096 was converted

into 41,336 shares of common stock.

2014 through 2018, we entered into convertible promissory note agreements with various terms ranging from 90 days to 18 months

at 18% interest with an entity which were consolidated into one loan at 12% in 2018 totaling $795,137 with a due date of August

In March 2020 the full outstanding principal balance of $795,137 and unpaid accrued interest of $89,037 was converted

into 884,174 shares of common stock.

2015 and 2016, we entered into a series of 3-month term convertible promissory note agreements at 18% interest with an entity

which were consolidated into one loan at 12% in 2018 totaling $692,471 with a due date of August 26, 2020.

In March 2020 the

full outstanding principal balance of $692,471 and unpaid accrued interest of $77,541 was converted into 770,012 shares of

common stock.

Splash Beverage

[f/k/a Canfield Medical Supply, Inc.]

Notes to the Consolidated Financial

Note 4 –Debt, continued

Interest expense on the convertible bridge

loans payable was $117,785 and $310,865 for the year ended December 31, 2020 and 2019, respectively.

Accrued interest was $117,785

and $439,344 as of December 31, 2020 and December 31, 2019.

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

Concurrently with the consummation of

the Merger, notes payable of $2,102,664 and accrued interest were converted to shares of Splash common stock, which were exchanged

for Splash Beverage Group, Inc.

[Formerly known as Canfield Medical Supply, Inc.] shares.

Pursuant to the terms of the conversion

agreements, these investors have the right to rescind the common shares received and receive replacement notes payable if we fail

to raise $9 million in a secondary initial public offering by September 30, 2020 (subsequently extended to April 30, 2021).

a result, these shares are classified as mezzanine equity in our consolidated balance sheet.

Revenue Financing Arrangements

August 2015, we entered into a 3-month term loan agreement with an entity in the amount of $50,000, with required daily payments

we entered into two additional 3-month loan agreements with the entity in 2016 in the amounts of $60,000 and $57,000,

with required daily payments of $928 and $713, respectively.

The term loans have been paid.

November 2016, we entered into a short-term loan agreement with an entity in the amount of $55,000 with required daily payments

The note was in default as of December 31, 2018.

In 2019, we entered into a settlement agreement with monthly installment

payments of $6,000.

The loan was fully repaid in 2020.

Interest expense on the revenue financing

arrangements was $25,067 and $2,557 for the year ended December 31, 2020 and 2019, respectively.

Accrued interest was $0 and $32,154

at December 31, 2020 and December 31, 2019.

Bridge Loan Payable

We issued a bridge loan in October 2018

for $2 million with a one-year maturity to GMA Bridge Fund LLC (“GMA”).

This bridge loan contains a 10% administration

fee of which the full $200,000 was accrued at December 31, 2019 and included in bridge loan payable, net.

We incurred $271,670

of loan costs, which was fully amortized at December 31, 2019.

Interest on the bridge loan was 0.5% monthly for the first six months

and 0.75% monthly for the next six months.

At the same time the debt was issued, we entered into a separate agreement in which

GMA provided consulting services for one year (“Consulting Agreement”).

We compensated GMA for the Consulting Agreement

services by issuance of a warrant with a 5-year term to acquire 1,362,922 shares of our common stock at an exercise price of $0.01

The warrant vested immediately.

The value of the warrant, based on a Black-Scholes option pricing model, was $991,423

and was expensed in full in 2018.

Interest expense on the bridge loan for the year ended December 31, 2020 and 2019 was $0 and

$137,637 and accrued interest at December 31, 2020 and 2019 was $0 and $166,240.

As part of GMA’s conversion agreement,

we reissued the original warrants to purchase 1 million shares and granted additional warrants.

To purchase 1 million shares.

value of the warrants based on a Black-Scholes option pricing model, was $1,657,805, and was expensed.

Concurrently with the consummation of the

Merger, the $2,500,000 note payable of was converted to shares of Splash common stock, which were exchanged for Splash Beverage

[Formerly known as Canfield Medical Supply, Inc.] shares.

Pursuant to the terms of the conversion agreements, GMA has

the right to rescind the common shares received and receive replacement notes payable if we fail to raise $9 million in a secondary

initial public offering by September 30, 2020 (subsequently extended to April 30, 2021).

As a result, these shares are classified

as mezzanine equity in our consolidated balance sheet.

Splash Beverage Group, Inc.

[f/k/a Canfield Medical Supply, Inc.]

Notes to the Consolidated Financial

Note 5 –

Licensing Agreement

and Royalty Payable

We have a licensing agreement with ABG

TapouT, LLC (“TapouT”), providing us with licensing rights to the brand “TapouT”

on energy drinks, energy

shots, water, teas and sports drinks for beverages sold in the United States of America, its territories, possessions, U.S.

bases and Mexico.

Under the terms of the agreement, we are required to pay a 6% royalty on net sales, as defined.

2019, we are required to make monthly payments of $45,000 and $39,000, respectively.

There were no unpaid royalties at December

We paid the guaranteed minimum royalty payments of $540,000 and $468,000 for the years ended December 31, 2020 and 2019,

which is included in general and administrative expenses.

In connection with the Copa APA, we acquired

the license to certain patents from 1/4 Vin SARL (“1/4 Vin”)On February 16, 2018, the Copa di Vino entered into three

separate license agreements with 1/4 Vin SARL, (1/4 Vin).

1/4 Vin has the right to license certain patents and patent applications

relating to inventions, systems, and methods used in the Company’s manufacturing process.

In exchange for notes payable,

1/4 Vin granted the Company a nonexclusive, royalty-bearing, non-assignable, nontransferable, terminable license which would continue

until the subject equipment is no longer in service or the patents expire.

Amortization will be approximately $31,000 annually

until the license agreement is fully amortized.

The asset is being amortized over a 10 year useful life.

Note 6 –

Deficiency in Stockholders’

In 2019, we issued 1,846,078 shares of

our common stock in exchange for services provided to us.

The shares were valued at $0.73 per share.

We recognized share-based

compensation expense of $1,354,500, which is classified within the contracted services line on the Statement of Operations.

In 2020, we issued 490,652 shares to an

existing shareholder under a 3-year consulting agreement dated December 2019.

The shareholder fulfilled his performance obligation

in full and the board approved issuance of the shares.

In 2020, we entered into multiple subscription

and consulting agreements for $8,540,659 in exchange for 7,355,604 of our common stock.

Private Placement Memorandum

Our 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 2,727,272 shares of the common stock of the Company, $0.001 value per share at a purchase price of $1.10 per share

for aggregate gross proceeds of $3,000,000.

As part of the PPM, each purchaser will receive a warrant to purchase one share

for every two shares purchased.

We completed our PPM by issuing a total of 2,790,909 of shares with gross proceeds of $3,070,000.

The shares listed in this section is already included in the 7.4 million shares listed within the Common Stock section of this

Treasury Stock

From time to time, we have repurchased

shares from our shareholders.

Since its inception, we have repurchased

shares from our shareholders.

To date, we have repurchased 1,226,630 shares, of which 817,753 have been retired.

In connection with a 2018 consulting agreement,

we were committed to issue the 408,877 shares held in treasury upon the occurrence of certain events or milestones.

We issued 136,292

shares in July 2018, 136,292 shares in July 2019 and 136,292 shares on March 31, 2020.

Warrant Issuance-Common Stock

As part of the sale and issuance of 4,088,765

shares of our Series A Convertible Preferred Stock, we issued 4,088,765 warrants to purchase shares of our common stock at a price

of $0.73 per share.

The warrants had a five-year term and expired during 2019.

As an incentive to convert their Series

A preferred stock we issued 1,000,000 new warrants to purchase shares of SBG common stock at $0.18 per share.

Concurrently with

the consummation of the Merger, these warrants were exchanged for warrants to purchase 1,362,922 of Splash Beverage Group, Inc.

[Formerly known as Canfield Medical Supply, Inc.] shares.

These warrants have a 3-year term.

Warrant Issuance-Common Stock

As part of the sale and issuance of 5,333,675

shares of our Series B Convertible Preferred Stock, we issued 2,666,839 warrants to purchase shares our common stock at a price

of $1.10 per share.

The warrants have a 5-year term.

At December 31, 2020, there are 912,052 warrants outstanding.

As part of the sale of 300,000 shares

of common stock, we issued 975,000 warrants to purchase shares of our common stock at a price of $0.25 per share.

These warrants

have a 3-year term.

During the third quarter of 2020, the holder exercised these warrants and received 975,000 shares of the Company’s

common stock.

Splash Beverage Group, Inc.

[f/k/a Canfield Medical Supply, Inc.]

Notes to the Consolidated Financial

Note 7 –

Share-Based Payments

Warrant Issuance-GMA Consulting

We issued 1,362,922 warrants to purchase

shares of our common stock at $0.007 per share as part of our consulting agreement with GMA, at December 31, 2020, the weighted

average life of the outstanding warrants is 2.75 years.

The warrants entitle the holder to purchase

one share per warrant of our common stock at a price of $0.01 per share during the five-year period commencing on October 2, 2018,

or, if greater, the number of common shares with a market value equivalent to two percent of the enterprise value of the Company

at an exercise price of $0.008 per share.

As an incentive for GMA to convert their

debt and accrued interest into shares of common stock, we retired the original 1,362,922 warrants and issued 2,725,844 pre-merger

new warrants to purchase shares of our common stock at $0.18 per share.

These warrants have a 3-year term starting March 31, 2020.

We have adopted the 2012 Stock Incentive

Plan for SBG (the “Plan”), which provides for the grant of common stock and stock options to employees.

We have reserved

4,088,765 shares for issuance under the Plan.

The option exercise price generally may not be less than the underlying stock’s

fair market value at the date of the grant and generally have a term of ten years.

On December 7, 2019, our Board of Directors

granted 1,124,410 options to certain employees and consultants.

None of these options were exercised at December 31, 2020.

of December 31, 2020, the total number of options available for grant is 306,657 under this plan.

We measure employee stock-based awards

at the grant-date fair value and recognizes employee compensation expense on a straight-line basis over the vesting period of

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, the expected life of the option, and expected stock price volatility

and exercise price.

We used the Black-Scholes option pricing model to value its stock option 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 was 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 and employment

duration for its stock options grants.

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 options granted.

The risk-free interest rate is based on U.S.

Treasury notes with a term approximating the expected

life of the option.

The estimation of the number of stock 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.

We recognized stock-based compensation

expense of $265,589 for the year ended December 31, 2019.

There was no unrecognized compensation cost related to stock option awards

for the year ended December 31, 2020.

Concurrently with the consummation of

the Merger, options to purchase 825,000 SBG shares were converted to options to purchase 1,124,410 Splash Beverage Group, Inc.

[Formerly known as Canfield Medical Supply, Inc.] shares.

Weighted Average

Exercise Price

Outstanding, beginning of year

Outstanding, end of year

Weighted average fair value of options granted

MEDICAL SUPPLY, INC.

TO FINANCIAL STATEMENTS

31, 2019 and 2018

Company rents office space under a non-cancellable lease through September 2020 with monthly payments of approximately $2,292.

Pursuant to ASC 842, an operating lease right-of-use (“ROU”) asset and liability were recognized at January 1, 2019

based on the present value of lease payments over the remaining lease term.

The ROU asset represents the Company’s right

to use the underlying office space asset for the lease term, and the lease liability represents the Company’s obligation

to make lease payments arising from the lease.

Generally, the implicit rate of interest in arrangements is not readily determinable

and the Company utilizes its incremental borrowing rate in determining the present value of lease payments.

The operating lease

ROU asset includes any lease payments made and excludes lease incentives.

The Company recognized $27,504 in lease expense during

each of the years ended December 31, 2019 and 2018.

Remaining lease term at December 31, 2019 (in months)

Discount rate

Year Ended December 31, 2019

Operating lease expense

Cash paid for amounts included in measurement of lease liability

supplemental balance sheet information related to leases for the period is as follows:

Right-of-Use Asset

ROU Asset, January 1, 2019

Amortization of ROU Asset

ROU Asset, December 31, 2019

of the Company’s lease liabilities are as follows:

Imputed interest/present value discount

Present value of lease liability at December 31, 2019

Company has suffered losses from operations and has working capital and stockholders’

equity deficits.

In all likelihood,

the Company will be required to make significant future expenditures in connection with marketing efforts along with general administrative

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Company may raise additional capital through the sale of its equity securities, through an offering of debt securities, or through

borrowings from financial institutions or related parties.

By doing so, the Company hopes to generate sufficient capital to execute

its business plan of selling medical supplies on an ongoing basis.

Management believes that actions presently being taken to obtain

additional funding provide the opportunity for the Company to continue as a going concern.

Company has evaluated subsequent events through the date these financial statements were issued and determined that there are

no reportable subsequent events.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Outstanding - Beginning of 2019

Cancelled/forfeited

Outstanding - December 31, 2019

Cancelled/forfeited

Outstanding - December 31, 2020

Exercisable at December 31, 2020

Weighted average grant date fair value of options during year

Weighted average duration to expiration of outstanding options at December 31, 2020

In August 2020, we adopted a new incentive

The 2020 Long-Term Incentive Compensation Plan (the “Plan”) is established by Splash Beverage Group, Inc., a

Colorado corporation (the “Company”), to create incentives which are designed to motivate Participants to put forth

maximum effort toward the success and growth of the Company and to enable the Company to attract and retain experienced individuals

who by their position, ability and diligence are able to make important contributions to the Company’s success.

objectives, the Plan provides for the grant of Options, Restricted Stock Awards, Stock Appreciation Rights (“SARs”),

Performance Units and Performance Bonuses to Eligible Employees and the grant of Nonqualified Stock Options, Restricted Stock

Awards, SARs and Performance Units to Consultants and Eligible Directors, subject to the conditions set forth in the Plan.

December 31, 2020, the board approved the granting of 2,634,500 warrants were issued under this new plan.

These warrants expire

Splash Beverage

[f/k/a Canfield Medical Supply, Inc.]

Notes to the Consolidated Financial

Note 8 –

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,

net of $368,904 and $429,432 as of December 31, 2020 and 2019.

The related party payable to the CEO bears no interest payable and

is due on demand.

There are related party notes payable of

$2,000,000 outstanding as of December 31, 2020 as discussed in Note 4.

Note 9 –

Investment in Salt

Tequila USA, LLC

On December 9, 2013, we entered into a

marketing and distribution agreement with SALT Tequila USA, LLC (“SALT”) in Mexico for the manufacturing of our SALT

product line.

The agreement was for a one-year term with an additional two-year renewal.

On December 28, 2015, the agreement was

extended through 2020.

In the December 9, 2013 agreement, we received a 5% ownership interest in SALT, 12 months after the date

of the agreement we received an additional 5% ownership interest in SALT, and 24 months after the date of the agreement we received

an additional 5% interest, resulting in a total interest of 15% in SALT.

SALT also has product at a unrelated international

alcohol distributor, American Spirits Exchange, for preliminary market testing in 9 of 16 states that they distribute to, that

are government-controlled alcohol resellers.

In 2019 we had no sales for SALT Tequila.

On December 31, 2018, we created a Mexican

subsidiary, Splash MEX SA DE CV (“Splash Mex”) for the exporting of SALT Tequila from Mexico to the USA, South and

Central Americas.

Splash Mex will also act as the manufacturing and distribution agent of TapouT in Central and South Americas.

Applications for the appropriate licenses required for import and wholesale of alcohol in the USA have been completed for at the

Federal and State levels.

These licenses will permit direct alcohol sales to distributors and wholesalers thereby limiting the

use of agents for importing SALT Tequila to the USA for distribution.

On March 26, 2020, we entered into an

amended stock sale and purchase agreement.

The agreement is for $1,000,000 to be paid in 4 tranches of $250,000 and entitles us

to additional equity interest in Salt Tequila USA, LLC as follows:

Tranche 1 –

Tranche 2 –

Tranche 3 –

Tranche 4 –

Once all tranches are paid-out we will

have a total equity stake of 37.5% of Salt Tequila USA, LLC.

During 2020, we paid the first tranche

of $250,000 resulting in a total interest of 22.5%.

Splash Beverage Group, Inc.

[f/k/a Canfield Medical Supply, Inc.]

Notes to the Consolidated Financial

Note 10 –

Operating Lease

Effective July 2018, we entered into a

lease agreement for the right to use and occupy office space.

The lease term commenced July 1, 2018 and is scheduled to expire

after 36 months, on June 30, 2021.

Effective November 2019, we entered into

a 6-month lease agreement for our NY affiliate which expired on April 30, 2020.

Effective November 2019, we entered into

a new lease with Interport Logistics, LLC.

The lease term commenced on November 11, 2019 and is scheduled to expire on November

We are in the process of negotiating a new lease with Interport Logistics, LLC.

Effective May 2019, we entered into a

new lease in Mexico.

The lease commenced May 1, 2019 and is scheduled to expire after 24 months, on April 1, 2021.

We are in the

process of negotiating a new lease for our Mexican warehouse.

The following table presents the discounted

present value of minimum lease payments for our office and warehouses to the amounts reported as financial lease liabilities on

the consolidated balance sheet at December 31, 2020:

Undiscounted Future Minimum Lease Payments

Operating Lease

Amount representing imputed interest

Total operating lease liability

Current portion of operating lease liability

Operating lease liability, non-current

The table below presents information for

lease costs related to our operating leases at December 31, 2020:

Operating lease cost:

Amortization of leased assets

Interest of lease liabilities

Total operating lease cost

The table below presents lease-related

terms and discount rates at December 31, 2020:

Remaining term on leases

9 to 25 months

Incremented borrowing rate

Note 11 –

Line of Credit

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 the acquisition of Copa di Vino the LOC

was paid off.

Note 12 –

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.

Splash Beverage Group, Inc.

[f/k/a Canfield Medical Supply, Inc.]

Notes to the Consolidated Financial

Note 13 –

Business Combinations

CMS-SGB Merger:

As stated in Note 1, we consummated the

merger of SBG on March 31, 2020 which was accounted for as a reverse merger.

The value of our merger was approximately

$9.2 million based on the valuation of the SBG equity on the date of consummation.

The following summarizes our allocation

of the purchase price for the acquisition:

Cash and cash equivalents

Accounts receivable

Property and equipment

Accounts payable, accrued expenses and other liabilities

Purchase price

During 2020, the goodwill associated with

the CMS merger was impaired.

SBG-Copa Acquisition:

As stated in Note 1, we consummated the

acquisition of Copa di Vino Company 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, for total consideration of approximately $6.0 million.

following summarizes our allocation of the purchase price for the acquisition:

Purchase Accounting

Accounts receivable, net

Other current assets

Property and equipment, net

License agreement, net

Total identifiable assets

Accounts payable and accrued expenses

Total liabilities and equity

Note 14 –

Segment Reporting

The Company evaluates segment reporting

in accordance with the FASB Accounting Standards Codification Topic 280, Segment Reporting, each reporting period, including evaluating

the reporting package reviewed by the Chief Executive Officer and Chief Financial Officer.

The Copa di Vino business is included

in our Splash Beverage Group segment.

Splash Beverage Group

Medical Devices (Discontinued)

Total Revenues

Splash Beverage Group

Medical Devices (Discontinued)

Note 15 –

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 are

committed to our previous preferred stock and debt holders to raise $9 million in a secondary IPO, private placement and debt as

defined in the agreements.

Stock Price Guarantee

We have a commitment to issue additional

shares associated with specific stock price guarantee granted to an investor.

Note 16 –

The Company has evaluated the positive

and negative evidence in assessing the realizability of its deferred tax assets.

This assessment included the evaluation of scheduled

reversals of deferred tax liabilities, estimates of projected future taxable income and tax planning strategies to determine which

deferred tax assets are more likely than not to be realized in the future.

Due to uncertainty to the Company’s ability to

utilize its deferred tax assets, the Company has recorded a full valuation allowance against its deferred tax assets.

At December 31, 2020, the Company’s

net operating loss carryforward for Federal income tax purposes was $49,495,907, which will be available to offset future taxable

If not used, these carry forwards will begin to expire in 2032, except for the net operating losses generated January 1,

2018 and after, which can be carried forward indefinitely.

There was no income tax expense or benefit

for the years ended December 31, 2020 and 2019 due to the full valuation allowance recorded.

The reconciliation of the income tax benefit

is computed at the U.S.

federal statutory rate as follows:

Federal Statutory Tax Rate

Permanent Differences

Change in Valuation Allowance

Net deferred tax asset

The tax effects of temporary differences

which give rise to the significant portions of deferred tax assets or liabilities at December 31 are as follows:

Deferred Tax Assets:

Net Operating Losses

Deferred Rent

Accrued Interest/Interest Expense Limitation

Total deferred tax assets

Deferred Tax Liabilities:

Total deferred tax liabilities

Valuation allowance

(13,397,525 )

Total Net Deferred Tax Assets

The Company continually evaluates expiring

statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings.

The open tax years subject

to examination with respect to the Company's operations are 2015 through 2020.

Note 17 –

In accordance with ASC 350, Intangibles—Goodwill

and Other, we test goodwill for impairment for each reporting unit on an annual basis, or when events or circumstances indicate

the fair value of a reporting unit is below its carrying value.

Our goodwill represents the excess of

the purchase price over the fair value of the net identifiable assets acquired in business combinations.

The goodwill generated

from the business combinations is primarily related to the value placed on the employee workforce and expected synergies.

is involved in determining if an indicator or change in circumstances relating to impairment has occurred.

Such changes may include,

among others, a significant decline in expected future cash flows, a significant adverse change in the business climate, and unforeseen

We have the option of performing a qualitative

assessment of impairment to determine whether any further quantitative testing for impairment is necessary.

The option of whether

or not to perform a qualitative assessment is made annually and may vary by reporting unit.

Factors we consider in the qualitative

assessment include general macroeconomic conditions, industry and market conditions, cost factors, overall financial performance

of our reporting units, events or changes affecting the composition or carrying amount of the net assets of its reporting units,

sustained decrease in its share price, and other relevant entity specific events.

If the management determines on the basis of

qualitative factors that the fair value of the reporting unit is more likely than not less than the carrying value, then we perform

a quantitative test for that reporting unit.

The fair value of each reporting unit is compared to the reporting unit’s carrying

value, including goodwill.

Subsequent to the adoption on January 1, 2017 of Accounting Standards Update (“ASU”) No.

2017-04, Intangibles—Goodwill and Other:

Simplifying the Test for Goodwill Impairment, if the fair value of a reporting

unit is less than its carrying value, we recognize an impairment equal to the excess carrying value, not to exceed the total amount

of goodwill allocated to that reporting unit.

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.

Note 18 –

Subsequent Events

During the first quarter of 2021 we

initiated a private sale of securities pursuant to a Private Placement Memorandum (“PPM”) to raise $4,000,000 in

exchange of the for the issuance of shares of our common stock at a price of $1.10 per share.

Pursuant to the PPM,

participants also received warrants to purchase additional shares (one warrant for each two shares purchased) at a strike

price of $1.10 per share.

As of the date of this filing, we issued 3,637,064 shares, and received proceeds of $4.0

As of February 22, 2021, we have raised

more $9 million, which resulted in the cancellation of the rescission rights held by certain investors as part of the terms of

their conversion agreements.

In June 2020, we entered into a six-month

loan with an individual in the amount of $100,000.

During the first quarter of 2021, we paid back the entire note plus accrued

interest in the amount of $108,000.

in and Disagreements with Accountants on Accounting and Financial Disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data