What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-31 compared with 2021-03-08 · 843 added, 1068 removed, 151 unchanged (93% of the section changed)

Statements and Supplementary Data.

Financial Statements and Supplementary

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets December 31, 2021 and December 31, 2020

Consolidated Statements of Operations For the Years Ended December 31, 2021 and December 31 2020

Consolidated Statements of Changes in Stockholders’ Equity (Deficit) For the years ended December 31, 2021 and 2020

Consolidated Statements of Cash Flows For the Year Ended December 30, 2021 and 2020

Notes to the Consolidated Financial Statements

of Independent Registered Public Accounting Firm

2 unchanged sentences

Lauderdale, Florida

Opinion on the Financial Statements

We have audited the accompanying consolidated

balance sheets of Splash Beverage Group, Inc.

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

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

equity and cash flows for

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

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

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

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

Going Concern Uncertainty

The accompanying financial statements

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

As discussed in Note 3 to the financial statements,

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

its ability to continue as a going concern.

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

The financial

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

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

Our responsibility is to express an

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

We are a public accounting firm registered with the Public

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

with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the

on the Financial Statements

have audited the accompanying consolidated balance sheets of Splash Beverage Group, Inc.

at December 31, 2021 and 2020, and the related

consolidated statements operations, stockholders’ equity (deficit) and cash flows for each of the years in the two-year period

ended December 31, 2021, and the related notes (collectively referred to as the financial statements).

In our opinion, the financial

statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results

of its operations and its cash flows for each of the years in the two-year period ended December 31, 2021, in conformity with accounting

principles generally accepted in the United States of America.

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

Our responsibility is to express an opinion on the Company’s

financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities

laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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

Those standards require that we plan and perform the audit

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

due to error or fraud.

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

financial reporting.

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

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

Those standards require that we plan and perform the audit to obtain

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

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

As part of our audits,

we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

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

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

Such procedures included examining, on a test basis,

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

Our audits also included evaluating the

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

consolidated financial statements.

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

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

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

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant

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

We believe that our audits

provide a reasonable basis for our opinion.

Audit Matters

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

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

(1) relate to accounts or disclosures that are material

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

The communication of

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

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

disclosures to which they relate.

Assets Impairment Assessments

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

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

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

critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated

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

(1) relate to accounts or disclosures that are material to the financial

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

The communication of a critical audit matter

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

matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.

of Intangible Assets in the Copa di Vino Company Acquisition

described in Notes 1 and 16 to the financial statements, during 2021 the Company completed the purchase price allocation for the December

24, 2020 acquisition of Copa di Vino Company (“CdV”) for consideration of approximately $6 million and the transaction was

accounted for as a business combination.

The acquired intangible assets included Brand and Customer Relationships valued at approximately

$4.5 million and $1.0 million, respectively.

The Company recorded the acquired intangible assets at the acquisition date fair value using

a Relief from Royalty discounted cash flow methodology to fair value Brand and a Multiple Period Excess Earnings approach to fair value

Customer Relationships.

The methods used to estimate the fair value of acquired intangible assets involve significant assumptions.

significant assumptions applied by management in estimating the fair value of acquired intangible assets included income projections

and discount rates.

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

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

professional service forecasts;

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

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

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

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

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

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

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

consolidated financial statements.

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

evaluating the appropriateness of the net present value techniques;

testing the completeness and accuracy of underlying

data used in the model;

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

future cash flows and the discount rate.

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

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

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

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

principal considerations for our determination that performing procedures relating to the valuation of intangible assets in the CdV acquisition

is a critical audit matter are (1) there was a high degree of auditor judgment and subjectivity in applying procedures relating to the

fair value of intangible assets acquired due to the significant judgment by management when developing the estimates and (2) significant

audit effort was required in evaluating the significant assumptions relating to the estimates, including the income projections and discount

In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these

procedures and evaluating the audit evidence obtained.

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

These procedures included testing the effectiveness of controls over the valuation of intangible assets including controls

over the development of the assumptions used in the valuation of the intangible assets.

These procedures also included, among others,

reading the purchase agreement, and testing management’s process for estimating the fair value of intangible assets.

Testing management’s

process included evaluating the appropriateness of the valuation models, testing the completeness, accuracy, and relevance of underlying

data used in the models, and testing the reasonableness of significant assumptions, including the income projections and discount rates.

Evaluating the reasonableness of the income projections involved considering the current performance of the acquired business, the consistency

with external market and industry data, and whether these assumptions were consistent with other evidence obtained in other areas of

Professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of significant assumptions,

including the discount rates, by comparing them against discount rate ranges that were independently developed using publicly available

market data for comparable companies.

Daszkal Bolton LLP

have served as the Company’s auditor since 2020

Lauderdale, Florida

Splash Beverage Group, Inc.

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

Beverage Group, Inc.

Consolidated Balance Sheets

December 31, 2020 and December 31, 2019

31, 2021 and December 31, 2020

and cash equivalents

Receivable, net

from discontinued operations

current assets

Cash and cash equivalents

Accounts Receivable, net

Prepaid Expenses

Inventory, net

Other receivables

Assets from discontinued operations

Total current assets

Goodwill and Intangibles

in Salt Tequila USA, LLC

of use asset, net

and equipment, net

non-current assets

Investment in Salt Tequila USA, LLC

Right of use asset, net

Quart Vin License

Property and equipment, net

Total non-current assets

Liabilities and Deficiency in Stockholders' Equity

Liabilities and Stockholders’ Equity (Deficit)

payable and accrued expenses

of use liability - current

to related parties

party notes payable

payable, current portion

interest payable

from discontinued operations

current liabilities

Accounts payable and accrued expenses

Right of use liability - current

Due to related parties

Bridge loan payable, net

Related party notes payable

Convertible Loan Payable

Notes payable, current portion

Royalty payable

Revenue financing arrangements

Shareholder advances

Accrued interest payable

Accrued interest payable - related parties

Liabilities from discontinued operations

Total current liabilities

party notes payable - noncurrent

payable - noncurrent

to issue shares in APA

of use liability - noncurrent

long-term liabilities

Related party notes payable - noncurrent

Notes payable - noncurrent

Liability to issue shares in APA

Right of use liability - noncurrent

Total long-term liabilities

Total liabilities

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

Deficiency in stockholders' equity:

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

Additional paid in capital

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

Accumulated deficit

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

Stockholders’ equity (deficit):

Common Stock, $ 0.001 par, 150,000,000 shares authorized, 33,596,234 and 21,157,043 shares issued 33,596,234 and 21,157,043 outstanding, at September 30, 2021 and December 31, 2020, respectively

paid in capital

( 90,640,557 )

( 61,589,735 )

Total deficiency in stockholders' equity

Total liabilities, mezzanine shares and deficiency in stockholders' equity

The accompanying notes are an integral part

of these consolidated financial statements.

Splash Beverage

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

Total deficiency

in stockholders’ equity

( 9,350,723 )

liabilities, mezzanine shares and deficiency in stockholders’ equity

The accompanying notes are an integral part of these

consolidated financial statements.

Beverage Group, Inc.

Consolidated Statements of Operations

For the Year Ended December 31, 2020

the Years Ended December 31, 2021 and December 31 2020

Cost of goods sold

( 8,734,413 )

( 1,936,533 )

Operating expenses:

1 unchanged sentence

Salary and wages

Salary and wages - non-cash share-based compensation

Other general and administrative

Other general and administrative - non-cash share-based compensation

Sales and marketing

Total operating expenses

Loss from operations

Loss from continuing operations

( 29,082,922 )

( 17,661,766 )

Other income/(expense):

1 unchanged sentence

Interest expense

( 1,980,871 )

Gain from debt extinguishment

Total other expense

( 1,926,467 )

Provision for income taxes

Net loss from continuing operations

Net loss from continuing operations, net of tax

( 29,345,372 )

Net income from discontinued operations, net of tax

( 19,588,233 )

Net income(loss) from discontinued operations, net of tax

( 9,086,323 )

Net loss per share (basic diluted)

Continuing operations

Discontinued operations

Net loss per share

Weighted average number of common shares outstanding

The accompanying notes are an integral part

of these consolidated financial statements.

Splash Beverage Group, Inc.

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

Consolidated Statement of Deficiency

in Stockholders’

For the year ended

December 31, 2020 and 2019

Treasury Stock

Additional Paid-In

Stockholders' Equity

Balances at December 31, 2018

$ ( 29,050,822 )

$ ( 28,674,556 )

Issuance of Common stock for cash

Issuance of Common stock for services

Issuance of series B convertible preferred stock

Issuance of Common stock from treasury

Warrants issued in connection with debt modification

Share-based compensation

Balances at December 31, 2019

Loss per share - continuing operations

Weighted average number of common shares outstanding - continuing operations

Income(loss) per share - discontinued operations

Weighted average number of common shares outstanding - discontinued operations

The accompanying notes are an integral part of these

consolidated financial statements.

Beverage Group, Inc.

Statements of Changes in Stockholders’ Equity (Deficit)

the years ended December 31, 2021 and 2020

stockholders’ equity (deficit), beginning balances

( 9,350,723 )

( 9,756,083 )

Issuance of common stock for convertible debt

Incremental beneficial conversion for preferred A

Issuance of warrants on convertible instruments

Issuance of options

Issuance of common stock for services

Issuance of common stock for cash

Issuance of common stock for acquisition

stock and additional paid-in capital

of common stock for convertible debt

beneficial conversion for preferred A

of warrants on convertible instruments

of warrants for services

of common stock for services

of common stock for cash

Reclassification

of Mezannine shares

of common stock for services

( 61,589,735 )

( 31,845,506 )

Balances at December 31, 2020

beneficial conversion for preferred A

of warrants on convertible instruments

( 29,050,822 )

The accompanying notes are an integral part

of these consolidated financial statements.

Splash Beverage

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

Consolidated Statement Cash Flows

For the Year Ended December 31, 2020

( 28,674,556 )

( 90,640,557 )

( 61,589,735 )

stockholders’ equity (deficit), ending balances

( 9,350,723 )

The accompanying notes are an

integral part of these consolidated financial statements

Splash Beverage Group, Inc.

Consolidated Statements Cash Flows

For the Year Ended December 30, 2021 and 2020

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

Depreciation and amortization

Amortization of ROU Asset

ROU asset, net

Gain from debt extinguishment

Non-cash interest expense

Non-cash warrant expense

Share-based compensation

9 unchanged sentences

Accrued Interest payable

Net cash used in operating activities –

continuing operations

(21,316,556 )

Net cash used in operating activities –

discontinued operations

Net cash used in operating activities - continuing operations

Net cash used in operating activities - discontinued operations

Cash Flows from Investing Activities:

3 unchanged sentences

Net cash acquired in Canfield merger

Net cash used in investing activities –

continuing operations

Net cash used in investing activities –

discontinued operations

Net cash used in investing activities - continuing operations

Net cash used in investing activities - discontinued operations

Cash Flows from Financing Activities:

4 unchanged sentences

Principal repayment of debt

Reduction of ROU Liability

Net cash provided by financing activities –

continuing operations

Net cash provided by financing activities –

discontinued operations

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

5 unchanged sentences

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

The accompanying notes are an integral part

of these consolidated financial statements.

Splash Beverage

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

Notes to the Consolidated Financial

Note 1 –

Business Organization and Nature of Operations

Splash Beverage Group (“SBG”),

f/k/a Canfield Medical Supply, Inc.

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

domicile to Colorado on April 18, 2012.

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

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

On December 31, 2019, CMS entered into

an Agreement and Plan of Merger (the “Merger Agreement”) with SBG Acquisition Inc.

(“Merger Sub”), a Nevada

Corporation wholly-owned by CMS, and Splash Beverage Group, Inc.

a Nevada corporation (“Splash”) pursuant to which

Merger Sub merged with and into Splash (the “Merger”) with Splash as the surviving company and a wholly-owned subsidiary

The Merger was consummated on March 31, 2020.

As the owners and management of Splash

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

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

As part of the recapitalization, previously

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

shares have been retrospectively presented as outstanding for all periods.

Splash specializes in the manufacturing,

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

Splash operates in both the non-alcoholic

and alcoholic beverage segments.

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

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

On July 2, 2020, CMS received a Certificate

of Good Standing from the State of Colorado.

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

The accompanying notes are an integral part of these

consolidated financial statements.

Splash Beverage Group, Inc.

Notes to the Consolidated Financial Statements

Note 1 – Business Organization and Nature of Operations

Splash Beverage Group (“SBG” or “Splash”), formally Canfield Medical Supply, Inc.

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

to Colorado on April 18, 2012.

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.

On December 31, 2019, CMS entered into an Agreement

and Plan of Merger (the “Merger Agreement”) with SBG Acquisition Inc.

(“Merger Sub”), a Nevada Corporation wholly

owned by CMS, and Splash Beverage Group, Inc.

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

into Splash (the “Merger”) with Splash as the surviving company and a wholly-owned subsidiary of CMS.

The Merger was consummated

on March 31, 2020.

As the owners and management of Splash have voting

and operating control of CMS following the Merger, the Merger transaction was accounted for as a reverse acquisition (that is with Splash

as the acquiring entity), followed by a recapitalization.

As part of the recapitalization, previously issued

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

These common shares have

been retrospectively presented as outstanding for all periods.

Splash specializes in the manufacturing, distribution,

and sales & marketing of various beverages across multiple channels.

Splash operates in both the non-alcoholic and alcoholic beverage

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.

In July 2020 the Company filed a Certificate of Amendment

of Articles of Incorporation of CMS with the Secretary of State of the State of Colorado, pursuant to which the Company changed its name

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 Company’s name from CMS

to Splash Beverage Group, Inc.

Our new ticker symbol is SBEV.

On December 24, 2020, SBG consummated

an Asset Purchase Agreement(the “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 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 have been retrospectively reflected as discontinued operations.

On November 12, 2021 the

Company changed its state of Domicile from Colorado to Nevada.

In coordination with uplisting to the NYSE on

June 11, 2021 the Company consummated a 1.0 for 3.0 reverse stock split.

All common stock shares stated herein have been adjusted to

reflect the split.

Splash Beverage Group, Inc.

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

Notes to the Consolidated Financial

Note 2 –

Summary of Significant

Accounting Policies

Notes to the Consolidated Financial Statements

Note 2 – Summary of Significant Accounting

Basis of Presentation and Consolidation

These consolidated financial statements

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

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

All intercompany balances

have been eliminated in consolidation.

Our accounting and reporting policies

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

The accompanying consolidated financial

statements have been prepared by us.

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

necessary to present fairly the financial position, results of operations and cash flows for the year ended December 31, 2020

and 2019 have been made.

These consolidated financial statements include the

accounts of Splash and its wholly owned subsidiaries, Holdings and Splash Mex, CMS (as discontinued operations), and CdV.

All intercompany

balances have been eliminated in consolidation.

Our investment in Salt Tequila USA, LLC is accounted

for at cost, as the company does not have the ability to exercise significant influence.

Our accounting and reporting policies conform to accounting

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

Certain reclassifications have been made to the prior

period financial statements to conform to the current period classifications.

Use of Estimates

The preparation of the consolidated financial

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

assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements

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

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.

Cash Equivalents and Concentration

of Cash Balance

We consider all highly liquid securities

with an original maturity of three months or less to be cash equivalents.

We had no cash equivalents at December 31, 2020 and

Our cash in bank deposit accounts, at times,

may exceed federally insured limits of $250,000.

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

approximately $29,300.

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

Cash Equivalents and Concentration of Cash

We consider all highly liquid securities with an original

maturity of three months or less to be cash equivalents.

We had no cash equivalents at December 31, 2021 or December 31, 2020.

Our cash in bank deposit accounts, at times, may

exceed federally insured limits of $ 250,000 .

At December 31, 2021 we had $ 3,643,474

over the federally insured limits.

Our cash in uninsured foreign bank accounts was $ 10,749 at December 31, 2021.

Note 2 – Summary of Significant Accounting

Policies, continued

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

of $ 45,203 and $ 0 , respectively.

Splash Beverage Group, Inc.

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

Notes to the Consolidated Financial

Note 2 –

Summary of Significant

Accounting Policies, continued

Accounts Receivable and Allowance

for Doubtful Accounts

Accounts receivable are carried at their

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

We establish provisions for losses on accounts receivable on the basis of loss experience, known and inherent risk in

the account balance, and current economic conditions.

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

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

Inventory is stated at the lower of cost

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

The inventory balances at December 31, 2020 and

2019 consisted of raw materials, work-in-process, and finished goods held for distribution.

The cost elements of inventory consist

of purchase of products, transportation, and warehousing.

We establish provisions for excess or inventory near expiration are based

on management’s estimates of forecast turnover of inventories on hand and under contract.

A significant change in the timing

or level of demand for certain products as compared to forecast amounts may result in recording additional provisions for excess

or expired inventory in the future.

Provisions for excess inventory are included in cost of goods sold and have historically been

adequate to provide for losses on inventory.

We manage inventory levels and purchase commitments in an effort to maximize

utilization of inventory on hand and under commitments.

The amount of our reserve was $366,109 and $150,974 at December 31, 2020

and 2019, respectively.

The Company pays alcohol excise taxes

based on product sales to both the Oregon Liquor Control Commission and to the U.S.

Department of the Treasury, Alcohol and Tobacco

Tax and Trade Bureau (TTB).

The Company is liable for the taxes upon the removal of product from the Company’s warehouse

on a per gallon basis.

The federal tax rate is affected by a small winery tax credit provision which decreases based upon the

number of gallons of wine production in a year rather than the quantity sold.

Notes to the Consolidated Financial Statements

Inventory is stated at the lower of cost or net realizable

value, accounted for using the weighted average cost method.

The inventory balances at December 31, 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 $ 223,223 and $ 366,109 at December 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, leasehold improvements, and software using the straight-line

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

Company management reviews the recoverability

of all long-lived assets, including the related useful lives, whenever events or changes in circumstances indicate that the carrying

amount of a long-lived asset might not be recoverable.

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 $ 156,766 and $ 55,616

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

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

of the following:

Property and equipment, at cost

for the years ended December 31, 2021 and 2020 respectively.

Property and equipment consisted of the following:

Schedule of Property and equipment

Machinery & equipment

Leasehold improvements

Office furniture & equipment

Accumulated depreciation

Property and equipment, net

Licensing Agreements

The initial amount of the TapouT agreement

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

years pursuant to a guaranteed minimum royalty agreement.

Royalty costs incurred under the agreements, guaranteed minimum royalty

amounts, are expensed as incurred.

We have not made any payments to Salt

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

In connection with the Copa APA, we acquired

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

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

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

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

Amortization will be approximately

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

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

( 1,552,125 )

( 1,395,359 )

Property, plant & equipment, net

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 also pays taxes to the State of Florida – Division of Alcoholic Beverages and Tobacco.

The Company is liable

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

The federal tax rate is affected by

a small winery tax credit provision which decreases based upon the number of gallons of wine production in a year rather than the quantity

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.

Splash Beverage Group, Inc.

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

Notes to the Consolidated Financial

Note 2 –

Summary of Significant

Accounting Policies, continued

Notes to the Consolidated Financial Statements

Note 2 – Summary of Significant Accounting

Policies, continued

Fair Value of Financial Instruments

Financial Accounting Standards (“FASB”)

guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable

or unobservable.

Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities

(Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).

The three levels of the fair value

hierarchy are as follows:

Unadjusted quoted prices in active markets for identical

assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 1 primarily consists

of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed equities.

Inputs other than quoted prices included within

Level 1 that are observable for the asset or liability, either directly or indirectly (e.g., quoted prices of similar assets

or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not

Unobservable inputs for the asset or liability.

Financial instruments are considered Level 3 when their fair values are determined using pricing models, discounted cash flows

or similar techniques and at least one significant model assumption or input is unobservable.

The liabilities and indebtedness presented

on the consolidated financial statements approximate fair values at December 31, 2020 and 2019, consistent with recent

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

Convertible Instruments

GAAP requires

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

financial instruments according to certain criteria.

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

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

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

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

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

would be considered a derivative instrument.

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

as that term is described under applicable U.S.

When bifurcation

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

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

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

embedded in the note.

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

date of redemption.

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

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

the effective conversion price embedded in the preferred shares.

Splash Beverage Group, Inc.

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

Notes to the Consolidated Financial

Note 2 –

Summary of Significant

Accounting Policies, continued

Financial Accounting Standards (“FASB”)

guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable.

Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions.

The hierarchy

gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and

the lowest priority to unobservable inputs (Level 3 measurement).

The three levels of the fair value hierarchy are as follows:

quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at

the measurement date.

Level 1 primarily consists of financial instruments whose value is based on quoted market prices such

as exchange-traded instruments and listed equities.

other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

(e.g., quoted prices of similar assets or liabilities in active markets, or quoted prices for identical or similar assets

or liabilities in markets that are not active).

inputs for the asset or liability.

Financial instruments are considered Level 3 when their fair values are determined using

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

The liabilities and indebtedness presented on the consolidated financial

statements approximate fair values at December 30, 2021 and December 31, 2020, consistent with recent negotiations of notes payable and

due to the short duration of maturities.

Revenue Recognition

We recognize revenue under ASC 606, Revenue

from Contracts with Customers (Topic 606).

This guidance sets forth a five-step model which depicts the recognition of revenue

in an amount that reflects what we expect to receive in exchange for the transfer of goods or services to customers.

We recognize revenue when our performance

obligations under the terms of a contract with the customer are satisfied.

Product sales occur once control of our products is

transferred upon delivery to the customer.

Revenue is measured as the amount of consideration that we expect to receive in exchange

for transferring goods and is presented net of provisions for customer returns and allowances.

The amount of consideration we

receive and revenue we recognize varies with changes in customer incentives we offer to our customers and their customers.

taxes and other similar taxes are excluded from revenue.

Distribution expenses to transport our

products, where applicable, and warehousing expense after manufacture are accounted for within operating expenses.

We recognize revenue under ASC 606, Revenue from Contracts

with Customers (Topic 606).

This guidance sets forth a five-step model which depicts the recognition of revenue in an amount that reflects

what we expect to receive in exchange for the transfer of goods or services to customers.

We recognize revenue when our performance obligations

under the terms of a contract with the customer are satisfied.

Product sales occur once control of our products is transferred upon delivery

to the customer.

Revenue is measured as the amount of consideration that we expect to receive in exchange for transferring goods and is

presented net of provisions for customer returns and allowances.

The amount of consideration we receive and revenue we recognize varies

with changes in customer incentives we offer to our customers and their customers.

Sales taxes and other similar taxes are excluded from

Distribution expenses to transport our products, where

applicable, and warehousing expense after manufacture are accounted for within operating expenses.

Splash Beverage Group, Inc.

Notes to the Consolidated Financial Statements

Note 2 – Summary of Significant Accounting

Policies, continued

Cost of Goods Sold

Cost of goods sold include the costs of

products, packaging, transportation, warehousing, and costs associated with valuation allowances for expired, damaged or impaired

Cost of goods sold include the costs of products,

packaging, transportation, warehousing, and costs associated with valuation allowances for expired, damaged or impaired inventory.

Stock-Based Compensation

We account for stock-based compensation

in accordance with ASC 718, “

Compensation - Stock Compensation”

Under the fair value recognition

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

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

We use the Black-Scholes option pricing

model to determine the fair value of stock options.

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

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

on employee share-based compensation in ASC 718.

We use the liability method of accounting

for income taxes as set forth in ASC 740, “

Income Taxes”

Under the liability method, deferred

taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities

using tax rates expected to be in effect during the years in which the basis differences reverse.

We record a valuation

allowance when it is not more likely than not that the deferred tax assets will be realized.

Company management assesses its income

tax positions and records tax benefits for all years subject to examination based upon its evaluation of the facts, circumstances

and information available at the reporting date.

In accordance with ASC 740-10, for those tax positions where there

is a greater than 50% likelihood that a tax benefit will be sustained, our policy is to record the largest amount of tax benefit

that is more likely than not to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant

For those income tax positions where there

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

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

Net loss per share

The net loss per share is computed by

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

Warrants, stock options, and common stock

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

if the effect would be anti-dilutive.

Net loss from continuing applicable to common shareholders

$ (19,227,703 )

$ (5,135,731 )

Net loss from discontinued applicable to common shareholders

$ (9,446,853 )

Weighted average number of common shares outstanding

Net loss per share from continuing operations (basic diluted)

Net income per share from discontinued operations (basic diluted)

Splash Beverage

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

Notes to the Consolidated Financial

Note 2 –

Summary of Significant

Accounting Policies, continued

Weighted average number of shares outstanding

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

We conduct advertising for the promotion

of our products.

We account for stock-based compensation in accordance

with ASC 718, ” Compensation - Stock Compensation” .

Under the fair value recognition provisions, cost is measured

at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period, which is

generally the option vesting period.

We use the Black-Scholes option pricing model to determine the fair value of stock options.

adopted ASU 2018-07, “Improvements to Nonemployee Share-Based Payment Accounting”, which aligns accounting treatment for such

awards to non-employees with the existing guidance on employee share-based compensation in ASC 718.

We measure stock-based awards at the grant-date fair

value for employees, directors and consultants and recognizes compensation expense on a straight-line basis over the vesting period of

Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions, including the fair

value of our common stock, and for stock options and warrants, the expected life of the option and warrant, and expected stock price

volatility and exercise price.

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

The assumptions used in

calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the

application of management’s judgment.

As a result, if factors change and management uses different assumptions, stock-based compensation

expense could be materially different for future awards.

The expected life of stock options/warrants were estimated using the “simplified

method,” which calculates the expected term as the midpoint between the weighted average time to vesting and the contractual maturity,

we have limited historical information to develop reasonable expectations about future exercise patterns.

The simplified method is based

on the average of the vesting tranches and the contractual life of each grant.

For stock price volatility, we use comparable public companies

as a basis for its expected volatility to calculate the fair value of award.

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

Treasury notes

with a term approximating the expected life of the award.

The estimation of the number of awards that will ultimately vest requires judgment,

and to the extent actual results or updated estimates differ from the Company’s current estimates, such amounts are recognized

as an adjustment in the period in which estimates are revised.

We use the liability method of accounting for income

taxes as set forth in ASC 740, ” Income Taxes” .

Under the liability method, deferred taxes are determined based

on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in

effect during the years in which the basis differences reverse.

We record a valuation allowance when it is not more likely than not that

the deferred tax assets will be realized.

Company management assesses its income tax positions

and records tax benefits for all years subject to examination based upon its evaluation of the facts, circumstances and information available

at the reporting date.

In accordance with ASC 740-10, for those tax positions where there is a greater than 50 % likelihood that a tax

benefit will be sustained, our policy is to record the largest amount of tax benefit that is more likely than not to be realized upon

ultimate settlement with a taxing authority that has full knowledge of all relevant information.

For those income tax positions where there is less

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

Company management

has determined that there are no material uncertain tax positions at December 31, 2021 and December 31, 2020.

Splash Beverage Group, Inc.

Notes to the Consolidated Financial Statements

Note 2 – Summary of Significant Accounting

Policies, continued

Net income (loss) per share

The net income (loss) per share is computed by dividing

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

Warrants, stock options, and common stock issuable

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

would be anti-dilutive.

Weighted average number of shares outstanding excludes

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

weighted average number of common shares calculation excludes 11,163,834 warrants which have been granted by our Board but have not been

We conduct advertising for the promotion of our products.

In accordance with ASC 720-35, advertising costs are charged to operations when incurred.

We recorded advertising

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

Related Parties

We are indebted to certain members of

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

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

We recorded advertising expense of $ 728,045

and $ 146,579 for the years ended December 30, 2021 and 2020, respectively.

Goodwill and other intangibles

Goodwill represents the excess of acquisition

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

The Company reviews goodwill annually

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

This evaluation

is performed at the reporting unit level.

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

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

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

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

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

The Company reviews goodwill annually in the

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

This evaluation is performed at

the reporting unit level.

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

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

The income approach

estimates fair value based on expected discounted future cash flows, while the market approach uses comparable public companies and transactions

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

At December 31, 2020, our management determined

that an impairment charge of approximately $9.2 million, was necessary to reduce the goodwill relating to our Medical Device Segment.

In 2021, the Company allocated the purchase price

of its acquisition of Copa di Vino, pursuant to a revaluation and goodwill was allocated as follows:

Schedule of Intangible assets and goodwill

Customer list

Splash Beverage Group, Inc.

Notes to the Consolidated Financial Statements

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.

The Company evaluates long-lived assets for impairment

on an annual basis, when relocating or closing a facility, or when events or changes in circumstances may indicate the carrying amount

of the asset group, generally an individual warehouse, may not be fully recoverable.

For asset groups held and used, including warehouses

to be relocated, the carrying value of the asset group is considered recoverable when the estimated future undiscounted cash flows generated

from the use and eventual disposition of the asset group exceed the respective carrying value.

In the event that the carrying value is

not considered recoverable, an impairment loss is recognized for the asset group to be held and used equal to the excess of the carrying

value above the estimated fair value of the asset group.

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

is compared to the disposal group’s fair value less costs to sell.

The Company estimates fair value by obtaining market appraisals

from third party brokers or using other valuation techniques.

Recent Accounting Pronouncements

In June 2016, that FASB issued ASU

2016-13, “

Financial Instruments –

Credit Losses ”

This ASU provides financial statement

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

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

Management is currently assessing the new

standard but does not believe that it would have a material effect.

Management does not believe that any other

recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements.

As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.

Note 3 –

Going Concern

The accompanying consolidated financial

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

in the normal course of business.

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

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

$61.6 million at December 31, 2020.

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

million at December 31, 2020.

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

Our ability to continue as a going concern

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

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

Management has evaluated these conditions

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

No assurance can be given that we

will be successful in these efforts.

These factors, among others, raise substantial

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

These consolidated financial statements

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

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

Management does not believe that any other recently

issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements.

As new accounting

pronouncements are issued, we will adopt those that are applicable under the circumstances.

Note 3 – Liquidity, Capital Resources

and Going Concern Considerations

At December 31, 2020, the company had a working capital

deficit of approximately $ 3.2 million.

During 2021, the Company received approximately $ 20.0

million and $0.9 million from the proceeds from the issuance common stock and debt.

These events served to mitigate

the conditions that previously raised substantial doubt about the Company’s ability to continue as a going concern.

In February 2022, the Company received approximately $ 9.0 million

as part of a sale of stock registered pursuant to a registration statement on Form

S-3 See Note 17.

Splash Beverage Group, Inc.

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

Notes to the Consolidated Financial

Note 4 –

Notes payable are generally nonrecourse

and secured by all Company owned assets.

Notes to the Consolidated Financial Statements

Note 4 – Notes Payable, Related Party

Notes Payable, Convertible Bridge Loans Payable, Revenue Financing Arrangements and Bridge Loan Payable

Notes payable are generally nonrecourse and secured

by all Company owned assets.

Schedule of debt

December 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.

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

The note included warrants for 66,146 shares of common stock at $0.73 per share.

The warrants expired and were not exercised by February 28, 2017.

The note matured and remains in default.

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

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

The warrants expired and unexercised by February 28, 2017.

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

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

The note included warrants for 272,584 shares of common stock at $0.94 per share.

The warrants expired and unexercised by February 28, 2017.

The loans matured and remains in default.

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

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

The note requires monthly payments

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

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

in accordance with the CARES Act.

In February 2014, we entered into a 12-month term loan agreement with

an individual in the amount of $ 200,000 .

The note included warrants for 66,146

shares of common stock at $ 0.73

The warrants expired as unexercised.

The note was paid off in Q2 2021.

In March 2014, we entered into a short-term loan agreement with an entity in the

amount of $ 200,000 .

The note included warrants for 272,584

shares of common stock at $ 0.94

The warrants expired as unexercised.

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 received 100% forgiveness in Q2 2021.

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

The loans matured and remains in default.

The loan matured in December 2020 with principal and interest due at maturity.

The loan and unpaid interest was settled in 2021 for $ 217,500 .

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

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

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

The loan required 9 amortized payments of principal and interest in the amount of $ 12,246

with the final payment due September 2020.

This note was paid off in 2021

In September 2021, we entered into a twelve-month loan with a company in the amount of $ 208,000 .

The loan requires 12 amortized payments with the final payment due August 2022.

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

In December 2020, we entered into a 56 month loan with a company in the amount of

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

Interest expense on notes payable was $50,592

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

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

and December 31, 2019, respectively.

Concurrently with the consummation of

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

exchanged for Splash Beverage Group, Inc.

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

Pursuant to the terms of the

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

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

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

$ 1,578,237 .

The loan requires payments of 3.75% of the previous months revenue.

Note is due September 2025,

In April 2021, we entered into a six-month loan with a individual in the amount of $ 84,000 .

The loan matures in October 2021 with principal and interest due at maturity.

The loan was extended to April 2022.

In April 2021, we entered into a six-month loan with a individual in the amount of $ 84,000 .

The loan had an original maturity of October 2021 with principal and interest due at maturity.

The loan was extended to April 2022.

In May 2021, we entered into a six-month loan with a individual in the amount of $ 50,000 .

The loan had an original maturity of October 2021 with principal and interest due at maturity.

The loan was extended to April 2022.

In May 2021, we entered into a six-month loan with a individual in the amount of $ 5000,000 .

The loan had an original maturity of October 2021 with principal and interest due at maturity.

The loan was extended to April 2022.

In May 2021, we entered into a six-month loan with a individual in the amount of $ 10,000 .

The loan had an original maturity of October 2021 with principal and interest due at maturity.

The loan was extended to April 2022.

In May 2021, we entered into a six-month loan with a individual in the amount of $ 200,000 .

The loan had an original maturity of October 2021 with principal and interest due at maturity.

The loan was extended to April 2022.

In November 2021, we entered into a one-year loan with a individual in the amount

of $ 300,000 .

The loan had an original maturity of November 2021 with principal and interest due at maturity.

The loan was extended to April 2022.

Total notes payable

Less current portion

( 2,967,812 )

Long-term notes payable

Interest expense on notes payable was $ 376,572 and $ 50,592 for the years

ended December 31, 2021 and 2020, respectively.

Accrued interest was $ 171,452 and $ 271,533 at 31, 2021 and December 31, 2020, respectively.

Splash Beverage Group, Inc.

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

Notes to the Consolidated Financial

Note 4 –Debt, continued

Notes to the Consolidated Financial Statements

Note 4 – Notes Payable, Related Party

Notes Payable, Convertible Bridge Loans Payable, Revenue Financing Arrangements and Bridge Loan Payable, continued

Schedule of Notes payable

Interest Rate

Related Parties Notes Payable

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

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

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

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

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

The warrants expired unexercised on February 28, 2017.

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

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

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

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

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

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

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

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

Continued on next page

Splash Beverage Group, Inc.

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

Notes to the Consolidated Financial

Note 4 –Debt, continued

Related Parties Notes Payable, continued

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

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

The warrants expired unexercised on March 1, 2017.

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

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

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

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

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

In December 2020, we entered into a 18 month loan with an individual in the amount of $2,000,000.

In December 2020, we entered into an 18 month loan with an individual in the amount of $ 2,000,000 .

The loan requires 18 monthly amortized payments of principal and interest in the amount of $ 114,444 with the final payment due June 2022.

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

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

Interest expense on related party notes

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

Accrued interest was $0 and $546,362

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

Concurrently with the consummation of the

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

for Splash Beverage Group, Inc.

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

Pursuant to the terms of the conversion

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

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

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

Less current portion

( 1,333,333 )

Long-term notes payable

Interest expense on related party notes payable was

for the years ended December 31, 2021 and 2020, respectively.

Accrued interest was $ 0

at both December 31, 2021 and December 31, 2020.

Splash Beverage Group, Inc.

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

Notes to the Consolidated Financial

Note 4 –Debt, continued

September 30,

Notes to the Consolidated Financial Statements

Note 4 – Notes Payable, Related Party

Notes Payable, Convertible Bridge Loans Payable, Revenue Financing Arrangements and Bridge Loan Payable, continued

Schedule of Notes payable

Interest Rate

December 31, 2021

December 31, 2020

Convertible Bridge Loans Payable

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

The annual interest

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

This loan matured and remains

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

On December 26,

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

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

into 59,694 shares of common stock.

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

On December 26, 2018, the outstanding

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

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

into 249,013 shares of common stock.

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

On December 26, 2018, the

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

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

into 435,184 shares of common stock.

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

The loan was extended to August 14,

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

into 41,336 shares of common stock.

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

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

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

into 884,174 shares of common stock.

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

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

In March 2020 the

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

common stock.

Splash Beverage

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

Notes to the Consolidated Financial

Note 4 –Debt, continued

Interest expense on the convertible bridge

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

Accrued interest was $117,785

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

On April 24, 2017, a note holder filed

a complaint against the Company for a promissory note in default.

The note holder is requesting summary judgment in the amount

Concurrently with the consummation of

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

for Splash Beverage Group, Inc.

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

Pursuant to the terms of the conversion

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

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

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

Revenue Financing Arrangements

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

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

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

The term loans have been paid.

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

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

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

payments of $6,000.

The loan was fully repaid in 2020.

Interest expense on the revenue financing

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

Accrued interest was $0 and $32,154

at December 31, 2020 and December 31, 2019.

Bridge Loan Payable

We issued a bridge loan in October 2018

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

This bridge loan contains a 10% administration

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

We incurred $271,670

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

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

and 0.75% monthly for the next six months.

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

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

We compensated GMA for the Consulting Agreement

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

The warrant vested immediately.

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

and was expensed in full in 2018.

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

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

As part of GMA’s conversion agreement,

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

To purchase 1 million shares.

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

Concurrently with the consummation of the

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

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

Pursuant to the terms of the conversion agreements, GMA has

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

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

As a result, these shares are classified

as mezzanine equity in our consolidated balance sheet.

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 was settled in 2021.

Splash Beverage Group, Inc.

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

Notes to the Consolidated Financial

Note 5 –

Licensing Agreement

and Royalty Payable

We have a licensing agreement with ABG

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

on energy drinks, energy

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

bases and Mexico.

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

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

Notes to the Consolidated Financial Statements

Note 4 – Notes Payable, Related Party

Notes Payable, Convertible Bridge Loans Payable, Revenue Financing Arrangements and Bridge Loan Payable, continued

Interest expense on the convertible bridge loans payable

was $ 26,667 and $ 117,785 for the year ended December 31, 2021 and 2020, respectively.

interest was $ 0 and $ 117,785 as of December 31, 2021 and December 31, 2020.

Splash Beverage Group, Inc.

Notes to the Consolidated Financial Statements

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.

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 December 31, 2021.

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

which is included in general and administrative expenses.

In connection with the Copa APA, we acquired

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

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

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

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

In exchange for notes payable,

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

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

Amortization will be approximately $31,000 annually

until the license agreement is fully amortized.

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

Note 6 –

Deficiency in Stockholders’

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

our common stock in exchange for services provided to us.

The shares were valued at $0.73 per share.

We recognized share-based

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

In 2020, we issued 490,652 shares to an

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

The shareholder fulfilled his performance obligation

in full and the board approved issuance of the shares.

In 2020, we entered into multiple subscription

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

Private Placement Memorandum

Our Board of Directors has determined

that it is in the best interests of the Corporation and its stockholders to obtain working capital by conducting a private placement

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

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

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

for every two shares purchased.

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

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

Treasury Stock

From time to time, we have repurchased

shares from our shareholders.

Since its inception, we have repurchased

shares from our shareholders.

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

In connection with a 2018 consulting agreement,

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

We issued 136,292

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

Warrant Issuance-Common Stock

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

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

of $0.73 per share.

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

As an incentive to convert their Series

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

Concurrently with

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

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

These warrants have a 3-year term.

Warrant Issuance-Common Stock

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

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

of $1.10 per share.

The warrants have a 5-year term.

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

As part of the sale of 300,000 shares

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

These warrants

have a 3-year term.

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

common stock.

We paid the guaranteed minimum royalty payments of $ 594,000 and $ 540,000 for the years ended December 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 is approximately $ 31,000 annually until the license agreement is fully amortized.

is being amortized over a 10 -year useful life.

Note 6 – Stockholders’ Equity (Deficiency)

At March 31, 2020, we issued 272,584 shares of common stock in exchange

for services provided to us.

At March 31, 2021, we issued 168,333 shares of common stock in exchange for services provided to us.

30, 2021, we issued 2,136,819 shares of common stock in exchange for services provided to us.

At December 31, 2021, we issued 967,497

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

For the year-ended December 31, 2021 the shares were valued at a fair

market value stock price based on the agreement date.

We recognized share-based compensation expense of $ 11,128,066 , which is classified

within the other general and administrative line on the Consolidated Statements of Operations.

Splash Beverage Group, Inc.

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

Notes to the Consolidated Financial

Note 7 –

Share-Based Payments

Warrant Issuance-GMA Consulting

We issued 1,362,922 warrants to purchase

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

average life of the outstanding warrants is 2.75 years.

The warrants entitle the holder to purchase

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

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

at an exercise price of $0.008 per share.

As an incentive for GMA to convert their

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

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

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

We have adopted the 2012 Stock Incentive

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

We have reserved

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

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

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

On December 7, 2019, our Board of Directors

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

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

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

We measure employee stock-based awards

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

Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions, including

the fair value of our common stock, and for stock options, the expected life of the option, and expected stock price volatility

and exercise price.

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

The assumptions used in calculating

the fair value of stock- based awards represent management’s best estimates and involve inherent uncertainties and the application

of management’s judgment.

As a result, if factors change and management uses different assumptions, stock-based compensation

expense could be materially different for future awards.

The expected life of stock options was estimated using the “simplified

method,”

which calculates the expected term as the midpoint between the weighted average time to vesting and the contractual

maturity, we have limited historical information to develop reasonable expectations about future exercise patterns and employment

duration for its stock options grants.

The simplified method is based on the average of the vesting tranches and the contractual

life of each grant.

For stock price volatility, we use comparable public companies as a basis for its expected volatility to calculate

the fair value of options granted.

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

Treasury notes with a term approximating the expected

life of the option.

The estimation of the number of stock awards that will ultimately vest requires judgment, and to the extent

actual results or updated estimates differ from the Company’s current estimates, such amounts are recognized as an adjustment

in the period in which estimates are revised.

We recognized stock-based compensation

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

There was no unrecognized compensation cost related to stock option awards

for the year ended December 31, 2020.

Concurrently with the consummation of

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

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

Weighted Average

Notes to the Consolidated Financial Statements

Note 6 – Deficiency in Stockholders’

Equity, continued

Private Placement Memorandum (PPM)

In July 2020, the Board of Directors has determined

that it is in the best interests of the Corporation and its stockholders to obtain working capital by conducting a private placement offering

of 930,303 shares of the common stock and 650,000 warrants to purchase common stock of the Company, $0.001 par value per share at a purchase

price of $3.30 per share for aggregate gross proceeds of $ 3,070,000 .

In January 2021, the Board of Directors approved

a private placement offering of 1,212,121

shares of the common stock of the Company, $0.001 value per share at a purchase price of $3.30 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 1,212,355

of shares and 606,179 warrants receiving gross proceeds of approximately $ 4,000,000 .

On May 2012, the Board adopted the 2012 Stock Incentive

Plan (the “2012 Plan”), which provided for the grant of Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock

Awards, Restricted Stock Units and Stock Appreciation Rights to eligible recipients.

The total number of shares that may be issued under

the 2012 plan was 1,362,920 .

Concurrently with the consummation of the Merger,

the outstanding options to purchase 374,803 shares were cancelled and replaced with warrants to purchase 374,804 shares at an exercise

price of $ 2.20 , and the 2012 Plan was retired.

On August 2020, the Board adopted the 2020 Stock Incentive

Plan (the “2020 Plan”), which provides for the grant of Options, Restricted Stock Awards, Stock Appreciation Rights, Performance

Units and Performance Bonuses to consultants and eligible recipients.

The total number of shares that may be issued under the 2020 plan

was 2,313,133 .

At December 31, 2021, 1,065,000 options have been

granted under the 2020 Plan.

The fair value of stock options recognized in the

period has been estimated using the Black-Scholes option pricing model.

Assumptions used in the options pricing model for the period

are provided below:

Schedule of assumptions used in Black-Scholes option pricing model

December 31, 2021

Risk-free interest rates

Exercise price

Outstanding - Beginning of 2019

Cancelled/forfeited

Outstanding - December 31, 2019

Cancelled/forfeited

Outstanding - December 31, 2020

Exercisable at December 31, 2020

Weighted average grant date fair value of options during year

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

In August 2020, we adopted a new incentive

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

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

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

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

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

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

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

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

These warrants expire

Splash Beverage

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

Notes to the Consolidated Financial

Note 8 –

Related Parties

During the normal course of business, we

incurred expenses related to services provided by our CEO or Company expenses paid by our CEO, resulting in related party payables,

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

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

is due on demand.

Expected life

Expected volatility

Expected dividends

Assumptions used in the warrants pricing model for

the period are provided below:

Schedule of assumptions used in Black-Scholes option pricing model

December 31, 2021

Risk-free interest rates

Exercise price

Expected life

Expected volatility

Expected dividends

The company recognized stock option expense of $ 283,473

for the year ended December 31, 2021.

No forfeitures were recorded.

A summary of the Company’s stock option plan

and changes during the year ended is as follows:

Schedule of stock option plan

Plan Category

of Shares to be Issued Upon Exercise or Vesting of Outstanding Stock Options

Weighted Average Exercise Price of Outstanding Stock Options

Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities

Equity compensation plan approved by board of directors

Splash Beverage Group, Inc.

Notes to the Consolidated Financial Statements

Warrants/Options

The total amount of outstanding warrants/options are

summarized below:

Schedule of Warrant Options Activity

[A] Warrant Issuance-Series A Convertible

Preferred Stock

As an incentive to convert their Series A preferred

stock, in March 2020, we issued 333,333 new warrants to the holders of our Series A preferred stock to purchase shares of SBG common stock.

Concurrently with the consummation of the Merger, these warrants were exchanged for warrants to purchase 454,064 of Splash Beverage Group,

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

These warrants have a 3 -year term and expire March 2023.

[B] Warrant Issuance-Series B Convertible

Preferred Stock

As part of the sale and issuance of 1,777,892 shares

of our Series B Convertible Preferred Stock, we issued 888,946 warrants to purchase shares our common stock.

The warrants have a 5 -year

term and at December 31, 2021, there are 124,162 warrants outstanding.

[C] Warrant Issuance-GMA Bridge Holdings,

LLC Consulting Services

We issued 454,307 warrants to purchase shares of our

common stock as part of our consulting agreement with GMA Bridge Holdings, LLC (“GMA), at December 31, 2019.

These warrants subsequently

were exchanged for 908,615 warrants in March 2020 as an incentive for GMA to convert indebtedness and accrued interest into shares of

our common stock.

At December 31, 2021 all 908,615 warrants remain outstanding.

[D] We issued 650,000 warrants to purchase common

stock of the Company in connection with the July 2020 private placement offering of 930,303 shares of common stock

[E] We issued 606,179 warrants to purchase common

stock of the Company in connection with the January 2021 private placement offering of 1,212,121 shares of common stock.

[F] We issued 374,803 warrants to purchase common

stock, as a replacement of cancelled outstanding options concurrent with the March 2020 Merger

Splash Beverage Group, Inc.

Notes to the Consolidated Financial Statements

[G] In December 2020 we granted 1,884,833 warrants

to purchase common stock of the Company to employees, consultants, and directors.

These warrants vest over three years

[H] In December 2020 we granted 833,333 warrants to

purchase common stock of the Company to our board of directors.

These warrants vest over two years

[I] In May 2021 we granted 333,333 warrants to purchase

common stock of the Company to a director.

These warrants vest, equally, over two years

[J] We issued 3,750,000 warrants to purchase common

stock of the Company in connection with the June 2021 underwritten public offering of 3,750,000 shares of common stock, in addition to

150,000 warrants to purchase common stock of the Company to the representative underwriter.

[K] In September 2021 we granted 1,065,000 options

to purchase common stock of the Company to employees, consultants, and directors.

These options vest over three years.

[L] In September 2021 we granted 29,998 warrants to

purchase common stock of the Company to consultants.

These warrants vest over three years.

A summary of the Company’s stock option plan

and warrants and their respective changes during the year ended is as follows:

Schedule of options and warrants

December 31, 2021

Balance - beginning of the year

Balance - end of the year

- beginning of the year

- end of the year

Shareholder Advances and Liability to Issue

Stock and Warrants

We have multiple agreements with consultants in the

amount of $ 0.4

million to be paid by the issuance of the common stock of the Company.

We incurred $ 0.3 million is investor relations costs

which will be settled by us issuing the consultant common stock.

The stock price will be valued using the 10-day average price of the

company’s stock from the issuance date.

As part of our private placement memoranda, we owe an investor 33,333 shares at $ 3.30 of

the Company’s common stock.

Note 7 – Related Parties

During the normal course of business, we incurred

expenses related to services provided by our CEO or Company expenses paid by our CEO, resulting in related party payables.

There are related party notes payable of $ 0.7

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

Note 9 –

Investment in Salt

Tequila USA, LLC

On December 9, 2013, we entered into a

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

product line.

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

On December 28, 2015, the agreement was

extended through 2020.

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

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

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

SALT also has product at a unrelated international

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

are government-controlled alcohol resellers.

In 2019 we had no sales for SALT Tequila.

On December 31, 2018, we created a Mexican

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

Central Americas.

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

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

Federal and State levels.

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

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

On March 26, 2020, we entered into an

amended stock sale and purchase agreement.

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

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

Tranche 1 –

Tranche 2 –

Tranche 3 –

Tranche 4 –

Once all tranches are paid-out we will

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

During 2020, we paid the first tranche

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

and $ 1.3 million outstanding as of December 31, 2021 and 2020, respectively.

Note 8 – Investment in Salt Tequila USA,

The Company has a marketing and distribution agreement

with SALT in Mexico for the manufacturing of our Tequila product line.

The Company has a 22.5 % percentage interest in SALT

Tequila USA, LLC (“SALT”), and has the right to increase its ownership to 37.5 %.

This investment is accounted for at cost.

Splash Beverage Group, Inc.

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

Notes to the Consolidated Financial

Note 10 –

Operating Lease

Effective July 2018, we entered into a

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

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

after 36 months, on June 30, 2021.

Effective November 2019, we entered into

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

Effective November 2019, we entered into

a new lease with Interport Logistics, LLC.

Notes to the Consolidated Financial Statements

Note 9 – Operating Lease Obligations

Effective July 2018, we entered into a lease agreement

for the right to use and occupy office space.

The lease term commenced July

1, 2018 , with original expiration on June

We renewed the lease which is for an additional 36 months which expires on June 30, 2024.

Effective November 2019, we entered into a lease with

Interport Logistics, LLC.

The lease term commenced on November 11, 2019 and is scheduled to expire on November 11, 2022 .

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

Effective May 2019, we entered into a

new lease in Mexico.

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

We are in the

process of negotiating a new lease for our Mexican warehouse.

The following table presents the discounted

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

the consolidated balance sheet at December 31, 2020:

Effective May 2019, we entered into a warehouse lease in Mexico.

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

We have negotiated a one-year extension for our Mexican warehouse.

Effective January 2021, we entered into a lease agreement

for the right to use and occupy office space in Sarasota Florida.

The lease term commenced January 18, 2021 and is scheduled to expire

after 18 months, on July 31, 2022 .

Effective January 2021, we entered into a lease agreement

for the right to use and occupy office space located in Miami Florida.

The lease term commenced January 1, 2021 and

is scheduled to expire after 60 months, on December 31, 2025 .

The following table presents the discounted present

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

balance sheet at December 31, 2021:

Maturities of lease liabilities

Undiscounted Future Minimum Lease Payments

4 unchanged sentences

Operating lease liability, non-current

The table below presents information for

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

The table below presents information for lease costs

related to our operating leases at December 31, 2021:

Operating lease cost:

2 unchanged sentences

Total operating lease cost

The table below presents lease-related

terms and discount rates at December 31, 2020:

The table below presents lease- related terms and

discount rates at December 31, 2021:

Summary of lease-related terms and discount rates

Remaining term on leases

1 unchanged sentence

Incremented borrowing rate

Note 11 –

Line of Credit

At December 31, 2020 SBG owed $68,000 to

a financial institution under a revolving line of credit.

The line of credit is secured by the assets of SBG is due on demand,

and bears interest at variable rates approximately 6.1% at December 31, 2020.

As part of the acquisition of Copa di Vino the LOC

was paid off.

Note 12 –

On January 30, 2020, the World Health

Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan,

China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond

the point of origin.

On March 20, 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in

exposure globally.

In response to the COVID-19 outbreak in

the United States, the CARES Act (the “Act”) was passed by Congress and signed into law on March 27, 2020.

In connection

with the CARES Act, the Company and its subsidiary applied for and received loans with an original aggregate principal balance

of approximately $158,000.

These loans and interest will be forgiven as long as the funds are used for qualifying expenditures

as outlined in the Act.

The loans bear interest at 1%, with an 18 month term, and has a 6-month initial payment deferral.

Splash Beverage Group, Inc.

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

Notes to the Consolidated Financial

Note 13 –

Business Combinations

CMS-SGB Merger:

As stated in Note 1, we consummated the

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

The value of our merger was approximately

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

The following summarizes our allocation

of the purchase price for the acquisition:

Cash and cash equivalents

Accounts receivable

Property and equipment

Accounts payable, accrued expenses and other liabilities

Purchase price

During 2020, the goodwill associated with

the CMS merger was impaired.

SBG-Copa Acquisition:

As stated in Note 1, we consummated the

acquisition of Copa di Vino Company on December 24, 2020.

The purchase price consideration was comprised of $1.5 million in debt,

$0.5 million in cash and $2.0 million in contingent shares, for total consideration of approximately $6.0 million.

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

Purchase Accounting

Accounts receivable, net

Other current assets

Property and equipment, net

License agreement, net

Total identifiable assets

Accounts payable and accrued expenses

Total liabilities and equity

Note 14 –

Segment Reporting

The Company evaluates segment reporting

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

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

The Copa di Vino business is included

in our Splash Beverage Group segment.

Notes to the Consolidated Financial Statements

Note 10 – Line of Credit

At December 31, 2020 SBG owed $ 68,000 to a financial

institution under a revolving line of credit.

The line of credit is secured by the assets of SBG is due on demand, and bears interest

at variable rates approximately 6.1 % at December 31, 2020.

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

Note 11 – PPP Loan

On January 30, 2020, the World Health Organization

(“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19

outbreak”) and the risks to the international community as the virus spreads globally beyond the point of origin.

On March 20, 2020,

the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.

In response to the COVID-19 outbreak in the United

States, the CARES Act (the “Act”) was passed by Congress and signed into law on March 27, 2020.

In connection with the CARES

Act, the Company and its subsidiary applied for and received loans with an original aggregate principal balance of approximately $ 158,000 .

These loans and interest will be forgiven as long as the funds are used for qualifying expenditures as outlined in the Act.

bear interest at 1 %, with an 18 -month term and has a 6-month initial payment deferral.

In April 2021, we received notification of forgiveness

for the entire outstanding balance.

Splash Beverage Group, Inc.

Notes to the Consolidated Financial Statements

Note 12 – Segment Reporting

The Company evaluates segment reporting in accordance

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

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

The Copa di Vino business is included in our

Splash Beverage Group segment.

Schedule of Segment Reporting Information

Splash Beverage Group

Medical Devices (Discontinued)

Total Revenues

Total Revenues continuing operations

Total Revenues discontinuing operations

Splash Beverage Group

Medical Devices - Discontinued

Note 15 –

Commitment and Contingencies

We are a party to asserted claims and

are subject to regulatory actions in the ordinary course of business.

The results of such proceedings cannot be predicted with

certainty, but we do not anticipate that the outcome, if any, arising out of any such matter will have a material adverse effect

on its business, financial condition or results of operations.

Capital Raise

In connection with the CMS merger we are

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

defined in the agreements.

Splash Beverage Group, Inc.

Notes to the Consolidated Financial Statements

Note 13 – Commitment and Contingencies

We are a party to asserted claims and are subject

to regulatory actions in the ordinary course of business.

The results of such proceedings cannot be predicted with certainty, but we do

not anticipate that the outcome, if any, arising out of any such matter will have a material adverse effect on its business, financial

condition or results of operations.

Stock Price Guarantee

We have a commitment to issue additional

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

Note 16 –

The Company has evaluated the positive

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

This assessment included the evaluation of scheduled

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

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

Due to uncertainty to the Company’s ability to

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

At December 31, 2020, the Company’s

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

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

2018 and after, which can be carried forward indefinitely.

We have a commitment to issue additional shares associated

with specific stock price guarantee granted to an investor.

The stock price guarantee expired March 2021.

No additional shares were needed

to be issued under the Stock Price Guarantee.

Splash Beverage Group, Inc.

Notes to the Consolidated Financial Statements

Note 14 – Registration Statement

Underwriting Agreement

On June 10, 2021, the Company entered into an underwriting

agreement ( “Underwriting Agreement”) relating to an underwritten public offering (the “Offering”) of common stock,

no par value per share (the “Common Stock”) and warrants to purchase one share of Common Stock (the “Warrants”).

Pursuant to the Offering, the Company sold 3,750,000 shares of Common Stock and 4,312,500 Warrants, which include 562,500 Warrants sold

upon the partial exercise of the Underwriters’ over-allotment, for total gross proceeds of approximately $15 million.

After deducting

the underwriting commissions, discounts, and offering expenses payable by the Company, the Company received net proceeds of approximately

$13.2 million.

Representative’s Warrants

On June 15, 2021, pursuant to the Underwriting Agreement,

the Company issued the Representative’s Warrants to purchase up to an aggregate of 150,000 shares of Common Stock.

The Representative’s

Warrants may be exercised beginning on December 10, 2021 until June 10, 2026.

The initial exercise price of each Representative Warrant

is $ 4.60 per share, which represents 115% of the Offering Price.

Note 15 – Tax Provision

The Company has evaluated the positive and negative

evidence in assessing the realizability of its deferred tax assets.

This assessment included the evaluation of scheduled reversals of

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

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

Due to uncertainty to the Company’s ability to utilize its deferred tax assets,

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

At December 31, 2021, the Company’s net operating

loss carryforward for Federal income tax purposes was $ 72,717,718 , which will be available to offset future taxable income.

these carry forwards will begin to expire in 2032, except for the net operating losses generated January 1, 2018 and after, which can

be carried forward indefinitely.

There was no income tax expense or benefit

3 unchanged sentences

federal statutory rate as follows:

Schedule of Effective Income Tax Rate Reconciliation

Federal Statutory Tax Rate

2 unchanged sentences

Net deferred tax asset

The tax effects of temporary differences

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

The tax effects of temporary differences which give

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

Schedule of Deferred Tax Assets and Liabilities

Deferred Tax Assets:

7 unchanged sentences

( 19,436,237 )

( 13,397,525 )

Total Net Deferred Tax Assets

The Company continually evaluates expiring

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

The open tax years subject

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

Note 17 –

In accordance with ASC 350, Intangibles—Goodwill

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

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

Our goodwill represents the excess of

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

The goodwill generated

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

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

Such changes may include,

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

We have the option of performing a qualitative

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

The option of whether

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

Factors we consider in the qualitative

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

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

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

If the management determines on the basis of

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

a quantitative test for that reporting unit.

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

value, including goodwill.

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

2017-04, Intangibles—Goodwill and Other:

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

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

of goodwill allocated to that reporting unit.

At December 31, 2020, our management determined

that an impairment charge of approximately $9.5 million, was necessary to reduce the goodwill relating to our Medical Device Segment

The impairment charge was primarily related to the net cash flow projection of that business unit.

Note 18 –

Subsequent Events

During the first quarter of 2021 we

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

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

Pursuant to the PPM,

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

price of $1.10 per share.

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

As of February 22, 2021, we have raised

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

their conversion agreements.

In June 2020, we entered into a six-month

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

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

interest in the amount of $108,000.

in and Disagreements with Accountants on Accounting and Financial Disclosure.

The Company continually evaluates expiring statutes of limitations, audits,

proposed settlements, changes in tax law and new authoritative rulings.

The open tax years subject to examination with respect to the

Company's operations are 2019 through 2021.

– Business Combinations

As stated in Note 1, we consummated the acquisition

of Copa di Vino Company on December 24, 2020.

The purchase price consideration was comprised of $1.5 million in debt, $0.5 million in

cash and $2.0 million in contingent shares, for total consideration of approximately $6.0 million.

The following summarizes our allocation of

the updated purchase price for the acquisition:

Schedule of purchase price for the acquisition

Purchase Accounting

Accounts receivable, net

Other current assets

Property and equipment, net

License agreement, net

Customer relationships

Total identifiable assets

Accounts payable and accrued expenses

Total liabilities and equity

Note 17 – Subsequent Events

In February 2022, the Company received

approximately $ 9 million

as part of a drawdown of their S-3 in connection with the sale of 2.3

million common shares.

Signed distribution agreement since December 31,

Distributing – Southern California

Changes in and Disagreements with Accountants on Accounting

and Financial Disclosure.

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data