What changed in this filing

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Item 1. Financial Statements

2021-05-12 compared with 2020-11-13 · 529 added, 864 removed, 384 unchanged (78% of the section changed)

1 unchanged sentence

Beverage Group, Inc.

Canfield Medical Supply, Inc.]

Condensed Consolidated Financial Statements

Beverage Group, Inc.

Consolidated Balance Sheets

31, 2021 and December 31, 2020

September 30,

March 31, 2021

December 31, 2020

Current assets:

Funds in Escrow

Cash and cash equivalents

Accounts Receivable, net

1 unchanged sentence

Other receivables

Assets of discontinued operations

Total current assets

2 unchanged sentences

Right of use asset, net

Quart Vin License, net

Property and equipment, net

5 unchanged sentences

Due to related parties

Bridge loan payable, net

Related party notes payable

1 unchanged sentence

Notes payable, current portion

Royalty payable

Revenue financing arrangements

Shareholder advances

Accrued interest payable

Accrued interest payable - related parties

Liabilities of discontinued operations

Total current liabilities

Long-term Liabilities:

Related party notes payable - noncurrent

Notes payable - noncurrent

Liability to issue shares in APA

Right of use liability - noncurrent

1 unchanged sentence

Total liabilities

Common stock, (mezzanine shares)

12,605,283 shares, contingently convertible to notes payable at September 30, 2020

Deficiency in stockholders’

Common Stock, $0.001 par, 150,000,000 shares authorized, 60,574,873 and 44,021,382 shares issued 60,574,873 and 43,885,090 outstanding, at September 30, 2020 and December 31, 2019, respectively

Common stock, (mezzanine shares) 0 and 12,605,283 shares, contingently convertible to notes payable at March 31, 2021 and December 31, 2020

Stockholders’

Common Stock, $0.001 par, 150,000,000 shares authorized, 80,104,839 and 63,471,129 shares issued and outstanding, at March 31, 2021 and December 31, 2020.

Additional paid in capital

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

Accumulated deficit

4 unchanged sentences

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

Beverage Group, Inc.

Canfield Medical Supply, Inc.]

Splash Beverage Group, Inc

Consolidated Statements of Operations

the Three- and Nine- Months Ended September 30, 2020 and 2019

September 30,

the Three Months Ended March 31, 2021 and March 31, 2020

Three months ended March 31,

Cost of goods sold

11 unchanged sentences

Total other income/(expense)

$ (2,283,682 )

$ (1,067,246 )

Provision for income taxes

Net loss from continuing operations

Net income from discontinued operations, net of tax

$ (4,442,219 )

$ (3,446,630 )

Net loss per share (basic diluted)

Earnings//(Loss)per share (basic diluted)

Continuing operations

Weighted average number of common shares outstanding

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

Beverage Group, Inc.

Canfield Medical Supply, Inc.]

Consolidated Statement of Deficiency in Stockholders’

the Nine months ended September 30, 2020 and 2019

Treasury Stock

Additional Paid-In

Stockholders’

Balances at December 31, 2018

$ (26,709,776 )

$ (7,831,132 )

Issuance of Common stock for cash

Issuance of Common stock for services

Balances at March 31, 2019

$ (27,413,400 )

$ (8,513,755 )

Issuance of Common stock for cash

Balances at June 30, 2019

$ (28,334,920 )

$ (9,080,275 )

Issuance of Common stock for cash

Issuance of Common stock for services

Issuance of Common stock from treasury

Balances at September 30, 2019

$ (29,308,466 )

$ (9,288,921 )

Splash Beverage Group, Inc.

Consolidated Statement of

Changes in Deficiency in Stockholders’

For the three months

ended March 31, 2021 and 2020

Treasury Stock

Additional Paid-In

Stockholders’

Paid-In Capital

Equity (Deficit)

Balances at December 31, 2019

4 unchanged sentences

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

1 unchanged sentence

(36,361,809 )

$ (1,626,167 )

Issuance of warrants

Issuance of warrants on convertible instruments

Issuance of options

Issuance of common stock for services

Issuance of common stock for cash

Balances at June 30, 2020

(22,570,893 )

Issuance of warrants

Issuance of options

Balances at December 31, 2020

$ (61,589,735 )

$ (9,350,725 )

Issuance of warrants for services

Issuance of common stock for services

Issuance of common stock for cash

Balances at September 30, 2020

Issuance of common stock and warrants for cash

Mezzanine shares

Balances at March 31, 2021

$ (66,031,954 )

1 unchanged sentence

Beverage Group, Inc.

Canfield Medical Supply, Inc.]

Consolidated Statement Cash Flows

the Nine Months Ended September 30, 2020 and 2019

Nine months ended September 30,

the Three Months Ended March 31, 2021 and 2020

Three months ended March 31,

$ (4,442,219 )

2 unchanged sentences

Depreciation and amortization

Amortization of ROU Asset

ROU asset, net

Gain from debt extinguishment

Non-cash interest expense

Interest on notes payable converted to common stock

Interest expense due to the issuance of warrants

Non-cash warrant expense

Share-based compensation

Other noncash changes

Changes in working capital items:

Accounts receivable

Accounts receivable, net

Inventory, net

Prepaid expenses and other current assets

2 unchanged sentences

Accrued Interest payable

Net cash used in operating activities

Net cash used in operating activities - continuing operations

Net cash used in operating activities - discontinued operations

Cash Flows from Investing Activities:

1 unchanged sentence

Investment in Salt Tequila USA, LLC

Net cash acquired in merger

Net cash used in investing activities

Net cash used in investing activities - continuing operations

Net cash used in investing activities - discontinued operations

Cash Flows from Financing Activities:

Proceeds from issuance of Common stock

Funds placed in Escrow

Repayment of shareholder advance

Cash advance from shareholder

Proceeds from issuance of debt

Repayment of cash advance

Principal repayment of debt

Reduction of ROU Liability

Net cash provided by financing activities

Net Change in Cash

Cash, beginning of year

Cash, end of period

ROU liability, net

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:

2 unchanged sentences

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

Series A & B preferred stock and declared dividends converted to common stock

Liability issued for investment in SALT Tequila USA, LLC

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

accompanying notes are an integral part of these financial statements.

Beverage Group, Inc.

Canfield Medical Supply, Inc.]

to the Condensed Consolidated Financial Statements

Business Organization and Nature of Operations

Beverage Group (“SBG”), f/k/a Canfield Medical Supply, Inc.

(the “CMS”), was incorporated in the State

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.

1 unchanged sentence

primarily the selling of durable medical equipment and medical supplies to the public, nursing homes, hospitals and other end

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

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

December 31, 2019, CMS entered into an Agreement and Plan of Merger (the Merger Agreement) with SBG Acquisition

(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

(Splash) pursuant to which Merger Sub merged with and into Splash (the Merger) with Splash as the

surviving company and a wholly-owned subsidiary of CMS.

5 unchanged sentences

These common shares have been retrospectively presented as outstanding for all periods.

Splash specializes in the manufacturing,

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

Splash operates 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.

specializes in the manufacturing, distribution, and sales & marketing of various beverages across multiple channels.

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.

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.

On July 31, 2020, we received approval

from FINRA to change the Companys name from Canfield Medical Supply, Inc.

to Splash Beverage Group, Inc.

Our new ticker symbol is SBEV.

Our new ticker

symbol is SBEV.

On December 24, 2020, SBG consummated an Asset Purchase

Agreement (the “Copa APA”) with Copa di Vino Corporation (“CdV”), to purchase certain assets and assume certain

liabilities that comprise the Copa di Vino business for a total purchase price of $5,980,000, payable in the combination of $2,000,000

in cash (“Cash Consideration”), $2,000,000 convertible promissory note (the “Convertible Note”) to Seller and

a variable number of shares of the Company’s common stock based on a attainment of revenue hurdles.

CdV is one of the leading producers

of premium wine by the glass in the United States with its primary offices and facilities in The Dalles, Oregon.

On February 2021, Management initiated a plan to divest its CMS business.

As a result, the assets and operations of CMS are reflected as discontinued operations.

Summary of Significant Accounting Policies

of Presentation and Consolidation

condensed 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, the merger consummation date.

All intercompany balances

have been eliminated in consolidation.

These consolidated financial

statements include the accounts of Splash Beverage Group and its wholly owned subsidiaries, Holdings and Splash Mex, CMS (as

discontinued operations), and Copa.

All intercompany balances have been eliminated in consolidation.

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

The accompanying condensed consolidated

financial statements have been prepared by us without audit.

In the opinion of management, all adjustments (which include only

normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the

nine months ended September 30, 2020 and 2019 have been made.

Certain information and footnote disclosures

normally included in financial statements prepared in accordance with GAAP have been condensed or omitted.

It is suggested that

these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto

included in our December 31, 2019 audited financial statements.

The results of operations for the period ended September 30, 2020

are not necessarily indicative of the operating results for the full year.

accompanying financial statements have been prepared by us without audit.

In the opinion of management, all adjustments (which

include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash

flows for the three months ended March 31, 2021 and 2020 have been made.

Certain information and footnote disclosures normally

included in consolidated financial statements prepared in GAAP have been condensed or omitted.

The results of operations for the period

ended March 31, 2021 are not necessarily indicative of the operating results for the full year.

Use of Estimates

The preparation of the condensed consolidated

financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported

amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated

financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ

from those estimates.

The preparation of 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.

Equivalents and Concentration of Cash Balance

1 unchanged sentence

We had no cash

equivalents at September 30, 2020 or December 31, 2019.

cash in bank deposit accounts, at times, may exceed federally insured limits of $250,000.

At September 30, 2020 we had bank

accounts over the federally insured limits.

Our bank deposit accounts in Mexico are uninsured.

equivalents at March 31, 2021 or December 31, 2020.

Our cash in bank deposit accounts, at times, may exceed

federally insured limits of $250,000.

At March 31, 2021 we had $511,146 over the federally insured limits.

Our bank deposit accounts in

Mexico $2,447 are uninsured.

Beverage Group, Inc.

Canfield Medical Supply, Inc.]

to the Condensed Consolidated Financial Statements

Summary of Significant Accounting Policies, continued

Receivable and Allowance for Doubtful Accounts

receivable are carried at their estimated collectible amounts and are periodically evaluated for collectability based on past

credit history with clients and other factors.

We establish provisions for losses on accounts receivable on the basis of loss

experience, known and inherent risk in the account balance, and current economic conditions.

At September 30, 2020 and December

31, 2019, our accounts receivable amounts are reflected net of allowances of $547,498 and $11,430, respectively.

is stated at the lower of cost or net realizable value, accounted for using the weighted average cost method.

The inventory balances

at September 30, 2020 and December 31, 2019 consisted of 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.

and Equipment

record property and equipment at cost when purchased.

Depreciation is recorded for property, equipment, and software using the

straight-line method over the estimated economic useful lives of assets, which range from 3-10 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 $7,530 and

$2,377 for the three months ended September 30, 2020 and September 30, 2019, respectively.

Depreciation expense totaled $26,339

and $7,088 for the nine months ended September 30, 2020 and September 30, 2019, respectively.

Property and equipment as of September

30, 2020 and December 31, 2019 consisted of the following:

September 30,

Accounts Receivable and Allowance for Doubtful

Accounts receivable are carried at their estimated

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

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 March 31, 2021 and December 31, 2020, our accounts receivable amounts are reflected net of allowances

of $6,507 and $0, 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 March 31, 2021 and December 31, 2020 consisted

of raw materials, work-in-process, and finished goods held for distribution.

The cost elements of inventory consist of purchase of products,

transportation, and warehousing.

We establish provisions for excess or inventory near expiration are based on management’s estimates

of forecast turnover of inventories on hand and under contract.

A significant change in the timing or level of demand for certain products

as compared to forecast amounts may result in recording additional provisions for excess or expired inventory in the future.

for excess inventory are included in cost of goods sold and have historically been adequate to provide for losses on inventory.

manage inventory levels and purchase commitments in an effort to maximize utilization of inventory on hand and under commitments.

amount of our reserve was $355,780 and $366,109 at March 31, 2021 and December 31, 2020, respectively.

Property and Equipment

We record property and equipment at cost when purchased.

Depreciation is recorded for property, equipment, and software using the straight-line method over the estimated economic useful lives

of assets, which range from 3-39 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 $43,487 and $2,294 for

the three months ended March 31, 2021 and March 31, 2020, respectively.

Property and equipment as of March 31, 2021 and December 31, 2020

consisted of the following:

March 31, 2021

December 31, 2020

Property and equipment, at cost

1 unchanged sentence

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.

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.

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

The Company is liable for the taxes upon the removal of product from the Company’s warehouse on a per gallon basis.

tax rate is affected by a small winery tax credit provision which decreases based upon the number of gallons of wine production in a year

rather than the quantity sold.

Paycheck Protection Program

The Company records Paycheck Protection Program (“PPP”) loan

proceeds in accordance with Accounting Standards Codification (“ASC”) 470, Debt.

Debt is extinguished when either the debtor

pays the creditor or the debtor is legally released from being the primary obligor, either judicially or by the creditor.

Beverage Group, Inc.

Canfield Medical Supply, Inc.]

to the Condensed Consolidated Financial Statements

1 unchanged sentence

Value of Financial Instruments

Accounting Standards (“FASB”) guidance specifies a hierarchy of valuation techniques based on whether the inputs to

Accounting Standards (FASB) guidance specifies a hierarchy of valuation techniques based on whether the inputs to

those valuation techniques are observable or unobservable.

15 unchanged sentences

pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable.

The liabilities and indebtedness presented

on the condensed consolidated financial statements approximate fair values at September 30, 2020 and December 31, 2019, consistent

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

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.

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.

respect 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.

liabilities and indebtedness presented on the consolidated financial statements approximate fair values at March 31, 2021 and

December 31, 2020, consistent with recent negotiations of notes payable and due to the short duration of maturities.

Beverage Group, Inc.

Canfield Medical Supply, Inc.]

to the Condensed Consolidated Financial Statements

16 unchanged sentences

for expired, damaged or impaired inventory.

account for stock-based compensation in accordance with ASC 718, “

Compensation - Stock Compensation”

account for stock-based compensation in accordance with ASC 718, Compensation - Stock Compensation .

the fair value recognition provisions, cost is measured at the grant date based on the fair value of the award and is recognized

2 unchanged sentences

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

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.

use the liability method of accounting for income taxes as set forth in ASC 740, “

Income Taxes”

use the liability method of accounting for income taxes as set forth in ASC 740, Income Taxes .

the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax

10 unchanged sentences

Company management has determined that there are no material uncertain tax positions at

September 30, 2020 and December 31, 2019.

loss per share

net loss per share is computed by dividing the net loss by the weighted average number of shares of common outstanding.

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.

September 30,

Net loss applicable to common shareholders

$ (2,283,683 )

$ (1,067,246 )

$ (6,105,812 )

$ (2,692,629 )

Weighted average number of common shares outstanding

Net loss per share (basic diluted)

March 31, 2021 and December 31, 2020.

Beverage Group, Inc.

Canfield Medical Supply, Inc.]

to the Condensed Consolidated Financial Statements

Summary of Significant Accounting Policies, continued

Net income (loss) per share

The net income (loss) per share is computed by

dividing the net income (loss) by the weighted average number of shares of common outstanding.

Warrants, stock options, and common stock

issuable upon the conversion of the Company’s convertible debt or preferred stock (if any), are not included in the computation

if the effect would be anti-dilutive.

Net loss from continuing applicable to common shareholders

$ (4,482,301 )

$ (3,446,630 )

Earnings from discontinued applicable to common shareholders

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)

average number of shares outstanding excludes anti-dilutive common stock equivalents, including warrants to purchase 3 million

3 unchanged sentences

when incurred.

are indebted to certain members of our Board of Directors at September 30, 2020 and December 31, 2019.

Transactions between us

and the Board members are summarized in Notes 4 and 8.

Goodwill represents the excess of acquisition

cost over the fair value of the net assets acquired and is not subject to amortization.

The Company reviews goodwill annually in

the fourth quarter for impairment or when circumstances indicate carrying value may exceed the fair value.

This evaluation is performed

at the reporting unit level.

If a qualitative assessment indicates that it is more likely than not that the fair value is less

than carrying value, a quantitative analysis is completed using either the income or market approach, or a combination of both.

The income approach estimates fair value based on expected discounted future cash flows, while the market approach uses comparable

public companies and transactions to develop metrics to be applied to historical and expected future operating results.

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.

We recorded advertising expense of $47,785 and $23,012 for the three-months ended March 31, 2021 and 2020, respectively.

represents the excess of acquisition cost over the fair value of the net assets acquired and is not subject to amortization.

Company reviews goodwill annually in the fourth quarter for impairment or when circumstances indicate carrying value may exceed

the fair value.

This evaluation is performed at the reporting unit level.

If a qualitative assessment indicates that it is more

likely than not that the fair value is less than carrying value, a quantitative analysis is completed using either the income

or market approach, or a combination of both.

The income approach estimates fair value based on expected discounted future cash

flows, while the market approach uses comparable public companies and transactions to develop metrics to be applied to historical

and expected future operating results.

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

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

For asset groups held and used, including warehouses to be relocated, the carrying value of the asset group is considered

recoverable when the estimated future undiscounted cash flows generated from the use and eventual disposition of the asset group

exceed the respective carrying value.

In the event that the carrying value is not considered recoverable, an impairment loss is

recognized for the asset group to be held and used equal to the excess of the carrying value above the estimated fair value of

the asset group.

For asset groups classified as held-for-sale (disposal group), the carrying value is compared to the disposal

groups fair value less costs to sell.

The Company estimates fair value by obtaining market appraisals from third party

brokers or using other valuation techniques.

Accounting Pronouncements

February 2016, the FASB issued ASU 2016-02, “

Leases ”

This ASU requires a lessee to recognize a

right-of-use asset and a lease liability for most leases in its balance sheet.

adopted the standard on January 1, 2019, using the modified retrospective method.

The adoption of this standard resulted in recognition

of a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, for all leases with

a term greater than 12 months.

When available, we would use the rate implicit in the lease to discount lease payments to present

However, our leases generally do not provide a readily determinable implicit rate.

Therefore, our management estimates

the incremental borrowing rate to discount lease payments based on the information at the lease commencement.

The accounting for

finance leases is substantially unchanged.

Given the nature of our operation, the adoption of Topic 842 did not have a material

impact on our balance sheet, statement of income, or liquidity.

Refer to Note 10 –

Operating Lease Obligations for information

regarding our adoption of Topic 842 and the Company’s undiscounted future lease payments and the timing of those payments.

June 2016, that FASB issued ASU 2016-13, Financial Instruments –

Credit Losses (Topic 326).

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.

is currently assessing the new standard but does not believe that it would have a material effect.

does not believe that any other recently issued, but not yet effective, accounting standards could have a material effect on the

3 unchanged sentences

Going Concern

The accompanying condensed 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 $6.1 million during the nine months ended September 30, 2020 and have an accumulated

deficit of approximately $39.0 million at September 30, 2020.

In addition, we have current liabilities in excess of current assets

of approximately $0.8 million at September 30, 2020.

Further, we are in default on approximately $0.9 million of indebtedness,

including accrued interest.

The accompanying condensed 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 $4.4 million

during the three months ended March 31, 2021 and have an accumulated deficit of approximately $66.0 million at March 31, 2021.

we have current liabilities in excess of current assets of approximately $1.9 million at March 31, 2021.

Further, we are in default on

approximately $0.9 million of indebtedness, including accrued interest.

ability to continue as a going concern in the foreseeable future is dependent upon our ability to generate revenues and obtain

2 unchanged sentences

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 condensed 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.

factors, among others, raise substantial doubt about our ability to continue as a going concern for a reasonable period of time.

These condensed 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.

Beverage Group, Inc.

Canfield Medical Supply, Inc.]

to the Condensed Consolidated Financial Statements

1 unchanged sentence

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

September 30,

Interest Rate

March 31, 2021

December 31, 2020

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 according to the Merger Agreement.

In February 2014, we entered into a 12-month term loan agreement with an individual in the amount of $200,000.

2 unchanged sentences

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 on February 28, 2017 and none were exercised at that date.

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 according to the Merger Agreement.

In March 2014, we entered into a short-term loan agreement with an entity in the amount of $200,000.

1 unchanged sentence

The warrants expired on February 28, 2017 and none were exercised at that date.

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 $159,033.

The loan matured and remains in default.

In May 2020, we entered into a two year loan with the SBA under the Paycheck Protection Program established by the CARES Act in the amount of $94,833.

The note requires monthly payments of principal and interest starting in December 2020 and maturing in May 2021.

We expect $74,000 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.

1 unchanged sentence

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

The loan requires 9 amortized payments of principal and interest in the amount of $12,246.66 with the first payment due September 2020.

Interest expense on notes payable was $13,377

and $28,813 for the three months ended September 30, 2020 and 2019, respectively.

Interest expense on notes payable was $73,236

and $86,439 for the nine months ended September 30, 2020 and 2019, respectively.

Accrued interest was $258,738 and $581,693 at

September 30, 2020 and December 31, 2019.

Concurrently with the consummation of the

Merger, 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, 2021).

these shares are classified as mezzanine equity in our condensed consolidated balance sheet.

Beverage Group, Inc.

Canfield Medical Supply, Inc.]

to the Condensed Consolidated Financial Statements

Notes Payable, Related Party Notes Payable, Convertible Bridge Loans Payable, Revenue Financing Arrangements and Bridge

Loan Payable, continued

September 30,

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 according to the Merger Agreement.

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 according to the Merger Agreement.

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 according to the Merger Agreement.

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 according to the Merger Agreement.

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 according to the Merger Agreement.

The loan requires 9 amortized payments of principal and interest in the amount of $12,246 with the final payment due September 2020.

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 payments of 3.75% of the previous months revenue.

Total notes payable

Less current portion

Long-term notes payable

expense on notes payable was $9,625 and $49,430 for the three months ended March 31, 2021 and 2020, respectively.

Accrued interest

was $273,880 at March 31, 2021.

Beverage Group, Inc.

Canfield Medical Supply, Inc.]

to the Condensed Consolidated Financial Statements

1 unchanged sentence

Loan Payable, continued

September 30,

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 according to the Merger Agreement.

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 according to the Merger Agreement.

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 according to the Merger Agreement.

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 according to the Merger Agreement.

Interest expense on related party notes

payable was $0 and $24,714 for the three months ended September 30, 2020 and 2019, respectively.

Interest expense on related party

notes payable was $37,967 and $74,342 for the nine months ended September 30, 2020 and 2019, respectively.

Accrued interest was

$0 and $546,362 as of September 30, 2020 and December 31, 2019.

Concurrently with the consummation of the

Merger, 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 condensed consolidated balance sheet.

Parties Notes Payable

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.

current portion

notes payable

expense on related party notes payable was $0 and $37,967 for the three months ended March 31, 2021 and 2020, respectively.

interest was $0 as of March 31, 2021.

Beverage Group, Inc.

Canfield Medical Supply, Inc.]

to the Condensed Consolidated Financial Statements

1 unchanged sentence

Loan Payable, continued

September 30,

Convertible Bridge Loans Payable

In May 2015, we entered into a 3-month term loan agreement with

an individual in the amount of $100,000.

The annual interest rate for this bridge loan was 32% for the first 90 days, and 4% thereafter,

compounded monthly.

The loan remains in default.

In 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, 2020.

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 according to the Merger Agreement.

In 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, 2020.

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 according to the Merger Agreement.

During 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, 2020.

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 according to the Merger Agreement.

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

The loan was extended to August 14, 2020.

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 according to the Merger Agreement.

During 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 26, 2020.

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 according to the Merger Agreement.

During 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 according to the Merger Agreement.

During 2018, we issued convertible bridge

loans payable which are convertible, at the holders’

option, into shares of our common stock.

During 2018 multiple convertible bridge

loans payable to five counterparties, and related unpaid interest were consolidated into five new convertible bridge loans payable

totaling $2,082,665.

The notes are of varying amounts and are due in August 2020, at an interest rate of 12%.

We analyzed the notes

and concluded the conversion terms did not constitute beneficial conversion features.

The principal amount and any accrued and

unpaid interest are convertible at the conversion price of a potential future offering of the Company.

In May 2015, we entered into a 3-month term loan agreement with an individual in the amount of $100,000.

The annual interest rate for this bridge loan was 32% for the first 90 days, and 4% thereafter, compounded monthly.

Beverage Group, Inc.

Canfield Medical Supply, Inc.]

to the Condensed Consolidated Financial Statements

1 unchanged sentence

Loan Payable, continued

Interest expense on the convertible bridge

loans payable was $8,000 and $70,480 for the three months ended September 30, 2020 and 2019, respectively.

Interest expense on

the convertible bridge loans payable was $109,785 and $140,960 for the nine months ended September 30, 2020 and 2019, respectively.

Accrued interest was $163,215 and $439,344 as of September 30, 2020 and December 31, 2019.

expense on the convertible bridge loans payable was $32,000 and $93,785 for the three months ended March 31, 2021 and 2020, respectively.

Accrued interest was $179,215 at March 31, 2021.

April 24, 2017, a note holder filed a complaint against the Company for a promissory note in default.

1 unchanged sentence

summary judgment in the amount of $279,215.

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 condensed consolidated balance sheet.

September 30,

Revenue Financing Arrangements

During August 2015, we entered into a 3-month term loan agreement

with an entity in the amount of $50,000, with required daily payments of $999.

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.

term loans matured and remains in default.

During November 2016, we entered into a short-term loan agreement with an entity in the amount of $55,000 with required daily payments of $1,299.

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 is scheduled to be fully repaid in 2020.

Interest expense on the revenue financing

arrangements was $25,067 and $1,723 for the nine months ended September 30, 2020 and 2019, respectively.

Accrued interest was $0

and $32,154 at September 30, 2020 and December 31, 2019.

issued an additional 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 per share.

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

nine months ended September 30, 2020 was $0 and accrued interest at September 30, 2020 was $0.

part of GMA’s conversion agreement, we replaced the original warrants to purchase 1 million shares and granted additional

To purchase 1 million shares.

The 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 condensed consolidated balance sheet.

Beverage Group, Inc.

Canfield Medical Supply, Inc.]

to the Condensed Consolidated Financial Statements

Licensing Agreement and Royalty Payable

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.

Note 5 –

Licensing Agreement and Royalty

We have a licensing agreement with ABG TapouT, LLC

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

on energy drinks, energy shots, water, teas

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

military bases and Mexico.

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

In 2020 and 2019, we are required to make monthly payments of $45,000 and $39,000, respectively.

There were no unpaid royalties at September

Guaranteed minimum royalty payments totaled $135,000 and $117,000 for the three months ended September 30, 2020 and 2019,

which is included in general and administrative expenses.

Guaranteed minimum royalty payments totaled $405,000 and $351,000 for

the nine months ended September 30, 2020 and 2019, which is included in general and administrative expenses.

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

In 2021 and 2020, we are required to make monthly

payments of $49,500 and $45,000, respectively.

There were no unpaid royalties at March 31, 2021.

We paid the guaranteed minimum royalty payments of $148,500 and $135,000 for the three-months ended March 31, 2021 and 2020, which is

included in general and administrative expenses.

In connection with the Copa APA, we acquired the license

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

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

Note 6 –

Deficiency in Stockholders’

Series A and B Convertible Preferred

As part of the merger consummated on March

31, 2020, all series A and B convertible preferred stock were converted to common stock.

If the Company is unable to achieve the

capital raise event as defined in the Merger Agreement by September 30, 2020 (subsequently extended to April 30, 2021), these shareholders

can rescind their common shares back to preferred shares.

Below are the new rights to these shareholders if they decide to rescind:

A Convertible Preferred Stock :

The Series A Preferred Stock shall rank, with respect to dividend rights and to rights upon any voluntary or involuntary liquidation,

dissolution or winding up of the Company (each, a “Liquidation Event”), (a) senior in preference and priority to the

common stock of the Company (the “Common Stock”) and any other class or series of equity security established and

designated by the Board of Directors the terms of which do not expressly provide that it ranks senior in preference or priority

to or on parity with the Series A Preferred Stock with respect to dividend rights and rights upon a Liquidation Event (collectively,

“Junior Securities”), (b) on parity, without preference or priority, with each other class or series of equity security

established and designated by the Board of Directors the terms of which expressly provide that it ranks on parity, without preference

or priority to, the Series A Preferred Stock with respect to dividend rights and rights upon a Liquidation Event (collectively,

“Parity Securities”), and (c) junior in preference and priority to each other class or series of equity security established

and designated by the Board of Directors the terms of which expressly provide that it ranks senior in preference or priority to

the Series A Preferred Stock with respect to dividend rights and rights upon a Liquidation Event (collectively, “Senior

Securities”).

Holders of shares of the Series A Preferred Stock are entitled to receive, when, as and if declared by the Board, out of funds

legally available for the payment of dividends, cumulative cash dividends at an annual rate of eight percent (8%) of the Original

Issue Price per share (equal to $.08 per share per annum).

Dividends shall accrue on each share of Series A Preferred Stock from

the date of issuance thereof, whether paid or not, and shall be cumulative and compounded annually.

In the event of any Liquidation Event, the holders of shares of Series A Preferred Stock then outstanding shall be

entitled to be paid out of the assets of the Company available for distribution to its stockholders before any payment shall be

made to the holders of any Junior Securities by reason of their ownership thereof, an amount per share equal to one hundred fifty

percent (150%) of the Series A Original Issue Price (the “Liquidation Preference”), plus the amount of accrued and

unpaid dividends thereon from the Original Issue Date through the date of liquidation.

If upon any such Liquidation Event the

assets of the Company available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series

A Preferred Stock the full amount to which they shall be entitled under this, the holders of shares of Series A Preferred Stock

and Parity Securities shall share ratably in any distribution of the assets available for distribution in proportion to the respective

amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on

or with respect to such shares were paid in full.

The holders of Series A Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

Each share of Series A Preferred Stock shall be convertible, at the option of the holder thereof, at any time and

from time to time, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Series

A Original Issue Price by the Conversion Price (as defined below) in effect at the time of conversion.

The Conversion Price at

which shares of Common Stock shall be deliverable upon conversion of Series A Preferred Stock without the payment of additional

consideration by the holder thereof (the “Conversion Price”) shall initially be $1.28 per share.

Such initial Conversion

Price, and the rate at which shares of Series A Preferred Stock may be converted into shares of Common Stock, shall be subject

to adjustment as provided below.

All accrued and unpaid dividends may be converted by each holder of Series A Preferred Stock

into Common Stock by first determining the number of shares of Series A Preferred Stock that could be purchased based on the Series

A Original Issue Price then in effect and then determining the number of shares of Common Stock such additional shares of Series

A Preferred Stock are convertible into.

By way of illustration only, if the accrued and unpaid dividends are equal to $100,000,

then based on the Series A Original Issue Price of $1.00 and a Conversion Price of $0.85, the holders of Series A Preferred Stock

would receive an additional 85,000 shares of Common Stock.

Upon the consummation of an underwritten public offering of the Common Stock of the Company (“IPO”) ,

each share of Series A Preferred Stock shall automatically be converted into such number of fully paid and non-assessable shares

of Common Stock at a Conversion Price equal to the lesser of (i) the Conversion Price in effect immediately prior to the consummation

of the IPO or (ii) fifty percent (50%) of the public offering price of the Common Stock in the IPO.

All accrued and unpaid dividends

may be converted by each holder of Series A Preferred Stock into Common Stock by first determining the number of shares of Series

A Preferred Stock that could be purchased based on the Series A Original Issue Price then in effect and then determining the number

of shares of Common Stock such additional shares of Series A Preferred Stock are convertible into.

By way of illustration only,

if the accrued and unpaid dividends are equal to $100,000, then based on the Series A Original Issue Price of $1.00 and a Conversion

Price of $0.85, the holders of Series A Preferred Stock would receive an additional 85,000 shares of Common Stock.

Beverage Group, Inc.

Canfield Medical Supply, Inc.]

to the Condensed Consolidated Financial Statements

Deficiency in Stockholders’

Equity, continued

B Convertible Preferred Stock :

The Series B Preferred Stock shall rank, with respect to dividend rights and to rights upon any voluntary or involuntary liquidation,

dissolution or winding up of the Company (each, a “Liquidation Event”), (a) senior in preference and priority to the

common stock of the Company (the “Common Stock”) and any other class or series of equity security established and

designated by the Board of Directors the terms of which do not expressly provide that it ranks senior in preference or priority

to or on parity with the Series B Preferred Stock with respect to dividend rights and rights upon a Liquidation Event (collectively,

“Junior Securities”), (b) on parity, without preference or priority, with the Series A Preferred Stock and with each

other class or series of equity security established and designated by the Board of Directors the terms of which expressly provide

that it ranks on parity, without preference or priority to, the Series B Preferred Stock with respect to dividend rights and rights

upon a Liquidation Event (collectively, “Parity Securities”), and (c) junior in preference and priority to each other

class or series of equity security established and designated by the Board of Directors the terms of which expressly provide that

it ranks senior in preference or priority to the Series B Preferred Stock with respect to dividend rights and rights upon a Liquidation

Event (collectively, “Senior Securities”).

The holders of the Series B Preferred Stock shall be entitled to receive cash dividends, when, as and if declared by the Board,

out of any assets legally available therefor, prior and in preference to any declaration or payment of any dividend on any other

class of Preferred Stock, except for the Series A Preferred Stock which shall be paid at the same time as the Series B Preferred

Stock is paid, and Common Stock of the Corporation at an annual rate of nine percent (9%) of the Original Issue Price per share

(equal to $.09 per share per annum) payable out of legally available funds.

Dividends shall accrue on each share of Series B Preferred

Stock from the date of issuance thereof, whether paid or not, and shall be cumulative and compounded annually.

Such dividends

shall be payable on the first day of each January, April, July and October commencing with respect to each share of Series B Preferred

Stock, on the first of such dates to occur after the issuance of such share (each such date a “Dividend Payment Date”)

to the holders of record at the close of business on the fifteenth day of each December, March, June and September, respectively,

subject to declaration of such dividends by the Board.

All dividends paid with respect to shares of Series B Preferred Stock shall

be paid pro rata to the holders entitled thereto.

Dividends, if paid, must be paid, on all outstanding shares of Series B Preferred

Stock contemporaneously.

If any dividend shall not be paid on a Dividend Payment Date, for any reason, the right of the holders

to receive such dividend shall not lapse or terminate but each such dividend shall accrue and be paid to such holders, subject

to the conversion provisions below.

No dividend shall be paid to the holders of any shares of Common Stock until all dividends,

including accrued dividends, then owing to the holders of Series B Preferred Stock, shall have been paid in full.

In the event of any Liquidation Event, the holders of shares of Series B Preferred Stock then outstanding shall be

entitled to be paid out of the assets of the Company available for distribution to its stockholders before any payment shall be

made to the holders of any Junior Securities by reason of their ownership thereof, an amount per share equal to one hundred fifty

percent (150%) of the Series B Original Issue Price (the “Liquidation Preference”), plus the amount of accrued and

unpaid dividends thereon from the Original Issue Date through the date of liquidation.

If upon any such Liquidation Event the

assets of the Company available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series

B Preferred Stock the full amount to which they shall be entitled under this Section , the holders of shares of Series B Preferred

Stock and Parity Securities shall share ratably in any distribution of the assets available for distribution in proportion to

the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts

payable on or with respect to such shares were paid in full.

The holders of Series B Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

Each share of Series B Preferred Stock shall be convertible, at the option of the holder thereof, at any time and

from time to time, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Series

B Original Issue Price by the Conversion Price (as defined below) in effect at the time of conversion.

The Conversion Price at

which shares of Common Stock shall be deliverable upon conversion of Series B Preferred Stock without the payment of additional

consideration by the holder thereof (the “Conversion Price”) shall initially be $1.28 per share.

Such initial Conversion

Price, and the rate at which shares of Series B Preferred Stock may be converted into shares of Common Stock, shall be subject

to adjustment as provided below.

All accrued and unpaid dividends may be converted by each holder of Series B Preferred Stock

into Common Stock by first determining the number of shares of Series B Preferred Stock that could be purchased based on the Series

B Original Issue Price then in effect and then determining the number of shares of Common Stock such additional shares of Series

B Preferred Stock are convertible into.

By way of illustration only, if the accrued and unpaid dividends are equal to $100,000,

then based on the Series B Original Issue Price of $1.50 and a Conversion Price of $1.28, the holders of Series B Preferred Stock

would receive an additional 78,125 shares of Common Stock.

Upon the consummation of an underwritten public offering of the Common Stock of the Company (“IPO”), each

share of Series B Preferred Stock shall automatically be converted into such number of fully paid and non-assessable shares of

Common Stock at a Conversion Price equal to the lesser of (i) the Conversion Price in effect immediately prior to the consummation

of the IPO or (ii) fifty percent (50%) of the public offering price of the Common Stock in the IPO.

All accrued and unpaid dividends

may be converted by each holder of Series B Preferred Stock into Common Stock by first determining the number of shares of Series

B Preferred Stock that could be purchased based on the Series B Original Issue Price then in effect and then determining the number

of shares of Common Stock such additional shares of Series B Preferred Stock are convertible into.

By way of illustration only,

if the accrued and unpaid dividends are equal to $100,000, then based on the Series B Original Issue Price of $1.50 and a Conversion

Price of $1.28, the holders of Series B Preferred Stock would receive an additional 78,125 shares of Common Stock.

At March 31, 2020, we issued 817,753 shares of 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 $600,000, which is classified within the contracted services line on the Statement of Operations.

At March 31, 2021, we issued 505,000

shares of common stock in exchange for services provided to us.

The shares were valued at a fair market value stock price based on the

agreement date.

We recognized share-based compensation expense of $731,035, which is classified within the contracted services line on

the Statement of Operations.

Beverage Group, Inc.

Canfield Medical Supply, Inc.]

to the Condensed Consolidated Financial Statements

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 Q3 2020, we entered into multiple subscription

agreements for $3,429,601 in exchange for 3,391,683 of our common stock.

In Q3 2020, we issued 490,652 shares to

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

The shareholder fulfilled his deliverables in

full and the board approved issuing the shares early.

Private Placement Memorandum (PPM)

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 2,790,909 shares of the common stock of the Company, no par value per share at a purchase price of $1.10 per share

for aggregate gross proceeds of $3,070,000.

As part of the PPM, each common share holds one-half warrant.

We will issue all shares

for subscription agreements executed after September 30, 2020, in Q4 2020.

Deficiency in Stockholders Equity, continued

Placement Memorandum (PPM)

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

3,636,364 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 $4,000,000.

As part of the PPM, each purchaser received a warrant to purchase one share for every two shares purchased.

In February 2021, we completed our PPM by issuing a total of 3,637,065 of shares and warrants with gross proceeds of $4,000,771.

its inception, we have repurchased shares from our shareholders.

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have been retired.

connection with a 2018 consulting agreement, we were committed to issue the 408,877 shares held in treasury upon the occurrence

connection with a 2018 consulting agreement, we are 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

Issuance-Common Stock

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.

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 1,362,922 of Splash Beverage

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

We issued 136,292 shares in July 2018, 136,292 shares in July 2019 and 136,292 shares at March

Issuance-Series A Convertible Preferred Stock

As an incentive to convert their Series A preferred

stock we issued 1,000,000 new warrants to the holders of our Series A preferred stock to purchase shares of SBG common stock at $0.18

Concurrently with the consummation of the Merger, these warrants were exchanged for warrants to purchase 1,362,922 of Splash

Beverage Group, Inc.

shares all of which were outstanding as of March 31, 2021.

These warrants have a 3-year term.

Issuance-Common Stock

Issuance-Series B Convertible Preferred Stock

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

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The warrants have a 5-year term.

At September 30, 2020, there

are 935,386 warrants outstanding.

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.

In Q3 2020, the holder exercised all of his warrants and received 975,000

shares of the Company’s common stock.

At March 31, 2021, there are

565,819 warrants outstanding.

Beverage Group, Inc.

Canfield Medical Supply, Inc.]

to the Condensed Consolidated Financial Statements

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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, 2019, the weighted average life of the outstanding warrants is 3.75 years.

warrants entitle the holder to purchase one share per warrant of the Company’s common stock at a price of $0.01 per share

GMA, at December 31, 2019.

warrants entitle the holder to purchase one share per warrant of the Companys 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

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These warrants

have a 3-year term.

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

On December 31, 2018, the sole option holder at the time, our CEO, exercised his options to purchase 2,657,698 shares of

common stock at a purchase price of $0.12 per share, totaling $312,000, which total purchase price was paid by the cancelation

of the equivalent amount of debt owed by us to the CEO.

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 September 30, 2020.

There are 1,124,410 options

issued and outstanding under the Plan at September 30, 2020.

As of September 30, 2020, the total number of options available for

grant is 306,657.

have a 3-year term and remain outstanding as of March 31, 2021.

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 March 31, 2021.

As of March 31, 2021, the total

number of options available for grant is 306,657 under this plan.

measure employee stock-based awards at the grant-date fair value and recognizes employee compensation expense on a straight-line

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

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.

The assumptions used in calculating the fair value of stock- based awards represent managements best estimates

and involve inherent uncertainties and the application of managements judgment.

As a result, if factors change and management

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The expected life

of stock options was estimated using the “simplified method,”

which calculates the expected term as the midpoint between

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

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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

awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from the Companys

current estimates, such amounts are recognized as an adjustment in the period in which estimates are revised.

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 at September 30, 2020.

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 - Beginning of 2021

Cancelled/forfeited

Outstanding - September 30, 2020

Exercisable at September, 30 2020

Outstanding - March 31, 2021

Exercisable at March, 31 2021

Weighted average grant date fair value of options during year

Weighted average duration to expiration of outstanding

options at September 30, 2020

In August 2020, we adopted a new

incentive plan.

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.

Toward these 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.

At September 30, 2020, no awards have been granted by the board of

Weighted average duration to expiration of outstanding options at March 31, 2021

Beverage Group, Inc.

Canfield Medical Supply, Inc.]

to the Condensed Consolidated Financial Statements

August 2020, we adopted a new incentive plan.

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

Companys success.

Toward these 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.

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

These warrants expire in 5 years.

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 $469,904 as of September 30, 2020.

The related party payable to the CEO bears no interest payable and is due on demand.

We also assumed a $50,000 note for the President of WesBev who is the majority shareholder of Splash Beverage Group, Inc.

known as Canfield Medical Supply, Inc.].

are related party notes payable of $0 outstanding as of September 30, 2020 as discussed in Note 4.

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 $252,904 at March 31, 2021.

The related party payable to the CEO bears no interest

payable and is due on demand.

We also assumed a $50,000 note for the President of WesBev who is the majority shareholder of SBG.

are related party notes payable of $1.6 million outstanding as of March 31, 2021 as discussed in Note 4.

Investment in Salt Tequila USA, LLC

December 9, 2013, we entered into a marketing and distribution agreement with SALT Tequila USA, LLC (“SALT”) in Mexico

for the manufacturing of our product line.

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

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.

We have not recorded the

cost of the investment or our share of its results of operations as the amounts are considered immaterial.

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.

March 26, 2020, we entered into a new 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 –

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 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.

also has sold product to an 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

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 a new 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 receive additional

equity interest in Salt Tequila USA, LLC as follows:

all tranches are paid-out we will have a total equity stake of 37.5% of Salt Tequila USA, LLC.

2020, we paid the first tranche of $250,000 resulting in a total interest of 22.5%.

Beverage Group, Inc.

Canfield Medical Supply, Inc.]

to the Condensed Consolidated Financial Statements

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and is scheduled to expire after 36 months, on June 30, 2021.

to the current lease, we entered into a lease agreement in 2014 for the right to use and occupy office space.

The lease term commenced

November 1, 2014 and was scheduled to expire after 62 months, on March 31, 2020.

The lease was terminated in February 2018.

Effective November 2019, we entered into

a new lease agreement for our NY affiliate.

The lease was for six months and had expired on April 30, 2020.

This lease was not

subjected to the new lease standard, Topic 842.

November 2019, we entered into a new lease with Interport Logistics, LLC.

The lease term commenced on November 11, 2019 and is

scheduled to expire on November 11, 2020.

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 11, 2022.

May 2019, we entered into a new lease in Mexico.

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April 1, 2021.

We are in the process of negotiating a new lease for our Mexican warehouse.

January 2021, we entered into a lease agreement for the right to use and occupy office space.

The lease term commenced January

18, 2021 and is scheduled to expire after 18 months, on July 31, 2022.

January 2021, we entered into a lease agreement for the right to use and occupy office and manufacturing space.

The lease term

commenced January 1, 2021 and is scheduled to expire after 60 months, on December 31, 2025.

following table presents the discounted present value of minimum lease payments for our office and warehouses to the amounts reported

as financial lease liabilities on the condensed consolidated balance sheet at September 30, 2020:

as financial lease liabilities on the consolidated balance sheet at March 31, 2021:

Undiscounted Future Minimum Lease Payments

Operating Lease

2021 (nine months)

Amount representing imputed interest

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Operating lease liability, non-current

table below presents information for lease costs related to our operating leases at September 30, 2020:

table below presents information for lease costs related to our operating leases at March 31, 2021:

Operating lease cost:

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Total operating lease cost

table below presents lease-related terms and discount rates at September 30, 2020:

table below presents lease-related terms and discount rates at March 31, 2021:

term on leases

borrowing rate

Beverage Group, Inc.

to the Condensed Consolidated Financial Statements

Line of Credit

At September 30, 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 September 30, 2020.

Interest expense under the note was approximately $300 during the three months

ended September 30, 2020.

Interest expense under the note was approximately $2,300 during the nine months ended September 30, 2020.

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

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.

the acquisition of Copa di Vino the LOC was paid off.

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.

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based on the rapid increase in exposure globally.

response to the COVID-19 outbreak in the United States, the CARES Act (the “Act”) was passed by Congress and signed

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.

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initial payment deferral.

Beverage Group, Inc.

Canfield Medical Supply, Inc.]

to the Condensed Consolidated Financial Statements

As of March 31, 2021, we have a balance of $94,833.

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

Business Combinations

stated in Note 1, we consummated the merger of SBG on March 31, 2020 which was accounted for as a reverse merger.

value of our merger was approximately $9.2 million based on the valuation of the SBG equity on the date of consummation.

stated in Note 1, we consummated the merger of CMS on March 31, 2020 which was accounted for as a reverse merger.

value of our merger was approximately $9.2 million based on the valuation of the CMS equity on the date of consummation.

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

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Purchase price

2020, the goodwill associated with the CMS merger was impaired.

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:

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

Segment Reporting

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each reporting period, including evaluating the reporting package reviewed by the Chief Executive Officer and Chief Financial

Three-Months Ending

Nine-Months Ending

September 30,

The Copa di Vino business is included in our Splash Beverage Group segment.

Splash Beverage Group

Medical Devices

Medical Devices - Discontinued

Total Revenues

Splash Beverage Group

Medical Devices

Medical Devices - Discontinued

Commitment and Contingencies

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a material adverse effect on its business, financial condition or results of operations.

In connection with the 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.

There cannot be any assurance that we will raise this capital as required.

Stock Price Guarantee

We have a commitment to issue additional

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

Note 16 –

connection with the merger we are committed to our previous preferred stock and debt holders to raise $9 million in a secondary

IPO or debt, as defined in the agreements.

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

Price Guarantee

have a commitment to issue additional shares associated with specific stock price guarantee granted to an investor.

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.

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

Judgment 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 competition.

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

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.

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 units 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.

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.

Subsequent Events

Subscription Agreements

Q4 2020 , we entered into multiple subscription agreements

for $1,895,000 in exchange for 1,722,727 of our common stock at $1.10 per share as well as warrants to purchase 861,361 shares

of our common stock at $1.10 per share.

2020 Incentive Plan

In October 2020, our board approved the

granting of both shares and warrants to purchase shares to existing employees as well as consultants.

International Distribution Agreement

The Company entered into a distribution

agreement with China-based American Software Capital (“ASC”), resulting in securing distribution and Manufacturing

capabilities in Greater China for its TapouT Performance brand and distribution for its SALT Naturally Flavored Tequila brand.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In April 2021, SBG received notification

that its PPP loan has been forgiven in full .

In April 2021 we filed a registration statement on

Form S-1 for the sale of up to $60 million of common stock.

In May 2021, our board of directors approved the Company to increase the

amount of authorized shares from 150,000,000 to 250,000,000.

In addition, the board has approved the Company the right to affect a reverse

stock split with a range from 1 to 1.5 up to 1 to 10.

The Company’s Articles of Incorporation have not yet been amended with

respect to either of the a above-referenced actions.

In May 2021, we received $718,000 in convertible notes which has an annual

interest rate of 7%.

All notes mature October 2021.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statement Regarding Forward-Looking Statements

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risks and uncertainties.

In some cases you can identify forward-looking statements by terminology such as “may,”

“will,”

“should,”

“expect,”

“plan,”

“intend,”

“anticipate,”

“believe,”

“estimate,”

“predict,”

“potential,”

or “continue”, the negative of the terms or

In some cases you can identify forward-looking statements by terminology such as may, will,

should, expect, plan, intend, anticipate, believe,

estimate, predict, potential, or continue, the negative of the terms or

other comparable terminology.

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obligation to publicly update these statements or disclose any difference between actual results and those reflected in these

the context otherwise requires, references in this Form 10-Q to “we,”

Unless the context

otherwise requires, references in this Form 10-Q to “we,”

“us,”

“our,”

“Company”

refer to Splash Beverage Group, Inc.

or the “Company”

refer to Splash Beverage Group and its subsidiaries.

following discussion and analysis should be read in conjunction with the Condensed Financial Statements (unaudited) and Notes

to Condensed Financial Statements (unaudited) filed herewith.

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

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

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

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.

December 31, 2019, CMS entered into an Agreement and Plan of Merger (the Merger Agreement) with SBG Acquisition

(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

(Splash) pursuant to which Merger Sub merged with and into Splash (the Merger) with Splash as the

surviving company and a wholly-owned subsidiary of CMS.

The Merger was consummated on March 31, 2020.

Prior to the Merger, CMS was in the business of home health services, primarily

the selling of durable medical equipment and medical supplies to the public, nursing homes, hospitals and other end users and the Company

continues to operate the home health supply business as a separate division.

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.

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.

These common shares have been retrospectively presented as outstanding for all periods.

specializes in the manufacturing, distribution, and sales & marketing of various beverages across multiple channels.

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B-to-B and B-to-C E-commerce distribution platform called Qplash, further expanding its distribution abilities and visibility.

July 2020, we filed a Certificate of Amendment of Articles of Incorporation to change our name to Splash Beverage Group Inc.

July 31, 2020, we received approval from FINRA regarding our name change.

of Operations for the Three Months Ended September 30, 2020 compared to Three Months Ended September 30, 2019.

Revenues for the three months ended September

30, 2020 were $1,009,615 compared to revenues of $0 for the three months ended September 30, 2019.

The $1,009,615 increase in sales

was due to Salt Tequila ($91,782), Qplash –our vertically integrated B2B and B2C e-commerce distribution platform which sells

their products on Amazon and Shopify ($704,388) and Canfield’s medical device business ($290,638).

Cost of goods sold for

the three months ended September 30, 2020 were $570,979 compared to cost of goods sold for the three months ended September 30,

In July, 2020, the Company changes its name from

Canfield Medical Supply, Inc.

to Splash Beverage Group, Inc.

Our new ticker symbol is SBEV.

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 Companys 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.

Results of Operations

for the Three Months Ended March 31, 2021 compared to Three Months Ended March 31, 2020.

Revenues for the three months ended March 31, 2021

were $2,417,701 compared to revenues of $112,003 for the three months ended March 31, 2020.

The $2,305,698 increase in sales is due to

an increase within our vertically integrated B2B and B2C e-commerce distribution platform called Qplash ($1,313,182).

This platform sells

goods on both Amazon and Shopify.

In addition, we had increased sales from our single-serve wine business ($742,355).

Cost of goods sold

for the three months ended March 31, 2021 were $1,742,875 compared to cost of goods sold for the three months ended March 31, 2020 of

The $1,635,661 increase in cost of goods sold for the three-month period ended March 31, 2021 is primarily due to our increased

sales, and as our sales increased, our cost of sales for those sales correspondingly increased.

Operating Expenses

Operating expenses for the three months ended March

31, 2021 were $5,066,349 compared to $1,553,933 for the three months ended March 31, 2020.

The $3,512,416 increase in our operating expenses

was primarily a result of recording the warrants issued pursuant to certain private placements conducted by the Company, increased headcount

from the Copa acquisition and the addition of new sales reps, professional fees ($1,100,000) and shipping costs ($325,160).

for the three months ended March 31, 2021 was $4,442,219 as compared to a net loss of $3,446,630 for the three months ended March 31,

The decrease in net loss is due to our increase in operating expenses offset by our increase in revenues.

Interest Expense

Interest expenses for the three

months ended March 31, 2021 were $ 92,211 compared to $1 ,913,637 for

the three months ended March 31, 2020.

The $1,821,426 decrease in our interest expenses was primarily a result of recording a

finance charge of $1,821,426 associated with

warrants issued to one of our note holders in Q1 2020.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is the ability of a company to generate

funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis.

Significant factors

in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.

As of March 31, 2021, we had total cash and cash equivalents

of $1,225,406, as compared with $380,000 at December 31, 2020.

The increase is primarily due to cash received from private placements

conducted by us.

Net cash used for operating activities during the

three months ended March 31, 2021 was $3,581,308 as compared to the net cash used by operating activities for the three months ended March

31, 2020 of $924,860.

The $557,032 increase in cost of goods sold for the three-month period ended September 30, 2020 was primarily

due to our increased sales, and as our sales increased, our cost of sales for those sales correspondingly increased.

expenses for the three months ended September 30, 2020 were $2,733,434 compared to $847,657 for the three months ended September

The $1,885,777 increase in our operating expenses was primarily a result of recording $1,236,254 in consulting fees

relating to the issuance of warrants and $730,085 in other consulting related expenses.

The net loss for the three months ended

September 30, 2020 was $2,283,682 as compared to a net loss of $1,067,246 for the three months ended September 30, 2019.

in net loss is due to our increase in operating expenses slightly offset by our increase in revenues.

Income/(Expense)

income/(expense) for the three months ended September 30, 2020 were $11,116 compared to ($205,642) for the three months ended

September 30, 2019.

The $216,758 decrease in our interest expenses was primarily a result converting the majority of our debt

into common stock in Q1 2020 as part of our merger.

of Operations for the Nine Months Ended September 30, 2020 compared to Nine Months Ended September 30, 2019.

Revenues for the nine months ended September

30, 2020 were $ $1,733,926 compared to revenues of $47,086 for the nine months ended September 30, 2019.

The $1,686,840 increase

in sales was due to Salt Tequila $213,933, Qplash –

our vertically integrated B2B and B2C e-commerce distribution platform

which sells their products on Amazon and Shopify $1,004,536 and Canfield’s medical device business $490,217.

Cost of goods

sold for the nine months ended September 30, 2020 were $965,966 compared to cost of goods sold for the nine months ended September

The primary reasons for the change in net cash used is due to losses sustained and increases in inventory, offset

by non-cash expenses relating to warrant expense ($1,186,596) and share-based compensation ($731,035).

Net cash used for investing activities during the

three months ended March 31, 2021 was $0 as compared to the net cash used by operating activities for the three months ended March 31,

2020 of $152,419.

The $877,638 increase in cost of goods sold for the nine-month period ended September 30, 2020 was primarily

due to our increased sales, and as our sales increased, our cost of sales for those sales correspondingly increased.

Operating Expenses

Operating expenses for the nine months

ended September 30, 2020 were $5,000,715 compared to $ 2,025,184 for the nine months ended September 30, 2019.

The $2,975,530

increase in our operating expenses was primarily a result of recording $500,000 in consulting fees for one of our investors, $465,511

in increased salaries, and $1,966,339 in consulting fees of which $1,236,254 was for the issuance of warrants.

The net loss for

the nine months ended September 30, 2020 was $6,105,812 as compared to a net loss of $ $2,692,629 for the nine months ended September

The increase in net loss is due to our increase in operating expenses slightly offset by our increase in revenues.

Income/(Expense)

income/(expense) for the nine months ended September 30, 2020 were $1,873,057 compared to $626,166 for the nine months ended September

The $1,246,891 increase in our interest expenses was primarily a result of recording a finance charge of $1,236,254

associated with warrants issued to one of our note holders.

AND CAPITAL RESOURCES

is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise

operate on an ongoing basis.

Significant factors in the management of liquidity are funds generated by operations, levels of accounts

receivable and accounts payable and capital expenditures.

As of September 30, 2020, we had total

cash and cash equivalents of $ $725,811, as compared with $42,639 at December 31, 2019.

The increase was primarily due to issuances

of notes payable and subscription agreements offset by expenses relating to the operating the business.

Net cash used for operating activities

during the nine months ended September 30, 2020 was $ 4,311,170 as compared to the net cash used by operating activities for the

nine months ended September 30, 2019 of $1,909,725.

The primary reasons for the change in net cash used was due to losses sustained

and increases for stock-based compensation, offset by other non-cash expenses.

Net cash used for investing activities

during the nine months ended September 30, 2020 was $87,251 as compared to the net cash used by investing activities for the nine

months ended September 30, 2019 of $9,942.

The net cash used in the first nine months of 2020 was primarily due to the $150,000

payment made to SALT Tequila USA, offset by $72,422 of cash obtained in the acquisition of Canfield Medical Supply, Inc.

Net cash provided by financing activities

during the nine months ended September 30, 2020 was $5,081,594 compared to $1,011,991 provided from financing activities for the

nine months ended September 30, 2019.

During the nine months ended September 30, 2020, we received $6,191,406 from investors and

related parties, of which $1,000,000 of funds are held in escrow.

The net cash used in the first quarter of 2020 was primarily due to the $150,000 payment made to SALT Tequila USA.

Net cash provided by financing activities during the three months ended

March 31, 2021 was $4,466,796 compared to $1,582,212 provided from financing activities for the three months ended March 31, 2020.

the three months ended March 31, 2021, we received $4,946,825 from investors, which was offset by repayments to shareholders and debt

holders of $441,299.

Royalty Payments:

stated in Note 5, we have a licensing agreement with ABG TapouT, LLC (“TapouT”).

Under the licensing agreement, we

have minimum royalty payments to TapouT for the next three years.

2020 $540,000

We have a licensing agreement with ABG TapouT,

LLC (“TapouT”).

Under the licensing agreement, we have minimum royalty payments to TapouT for the next two years.

2021 $594,000

8 unchanged sentences

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What changed 10-Q

Item 1. Financial Statements