What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-16 compared with 2021-11-15 · 94 added, 146 removed, 15 unchanged (94% of the section changed)

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Regarding Forward-Looking

The information

in this discussion may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended,

and Section 21E of the Securities Exchange Act of 1934, as amended.

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

Statement Regarding Forward-Looking Statements

information in this discussion may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933,

as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

These forward-looking statements involve risks and uncertainties,

including statements regarding our capital needs, business strategy and expectations.

Any statements that are not of historical

fact may be deemed to be forward-looking statements.

Any statements that are not of historical fact

may be deemed to be forward-looking statements.

These forward-looking statements involve substantial risks and uncertainties.

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

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

“expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,”

“predict,” “potential,” or “continue”, the negative of the terms or other comparable terminology.

Actual events or results may differ materially from the anticipated results or other expectations expressed in the forward-looking

In evaluating these statements, you should consider various factors, including the risks included from time to time

in other reports or registration statements filed with the United States Securities and Exchange Commission.

These factors may

cause our actual results to differ materially from any forward-looking statements.

We disclaim any obligation to publicly update

these statements or disclose any difference between actual results and those reflected in these statements.

Unless the context

otherwise requires, references in this Form 10-Q to “we,” “us,” “our,” or the “Company”

Actual events or results may differ materially from the anticipated results or other expectations expressed in the forward-looking statements.

In evaluating these statements, you should consider various factors, including the risks included from time to time in other reports

or registration statements filed with the United States Securities and Exchange Commission.

These factors may cause our actual results

to differ materially from any forward-looking statements.

We disclaim any obligation to publicly update these statements or disclose

any difference between actual results and those reflected in these statements.

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

refer to Splash Beverage Group and its subsidiaries.

The following discussion and analysis should

be read in conjunction with the Condensed Consolidated Financial Statements (unaudited) and Related Notes herewith.

Business Overview

Splash Beverage Group (“SBG” or “Splash”),

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.

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.

Merger was consummated on March 31, 2020.

Prior to the Merger, CMS was in the business

of home health services, primarily the selling of durable medical equipment and medical supplies to the public, nursing homes,

hospitals and other end users and the Company continues to operate the home health supply business as a separate division.

As the owners and management of Splash have

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

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

Splash specializes in the manufacturing, distribution,

and sales & marketing of various beverages across 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.

In July, 2020, the Company changes its name

from Canfield Medical Supply, Inc.

to Splash Beverage Group, Inc.

Our new ticker symbol is SBEV.

On December 24, 2020,

SBG consummated an Asset Purchase Agreement(the “APA”) with Copa di Vino Corporation (“CdV”), to purchase

certain assets and assume certain liabilities that comprise the Copa di Vino business for a total purchase price of $5,980,000,

payable in the combination of $2,000,000 in cash (“Cash Consideration”), $2,000,000 convertible promissory note (the

“Convertible Note”) to Seller and a variable number of shares of the Company’s common stock based on a attainment

of revenue hurdles.

CdV is one of the leading producers of premium wine by the glass in the United States with its primary offices

and facilities in The Dalles, Oregon.

Results of Operations

for the Three Months Ended September 30, 2021 compared to Three Months Ended September 30, 2020.

Revenues for the three months ended September

30, 2021 were $2,827,393 compared to revenues of $692,974 for the three months ended September 30, 2020.

A significant portion

of the $2,134,419 increase in sales is due to an increase within our vertically integrated B2B and B2C e-commerce distribution

platform called Qplash.

This platform sells goods on both Amazon and Shopify.

In addition, we had increased sales from Copa di

Vino Wine Group, Inc., our single-serve wine and Pulpoloco Sangria businesses.

Cost of goods sold for the three months ended September

30, 2021 were $2,007,544 compared to cost of goods sold for the three months ended September 30, 2020 of $349,037.

The $1,658,507

increase in cost of goods sold for the three-month period ended September 30, 2021 is primarily due to our increased sales, and

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

Operating Expenses

Operating expenses for the three months ended September

30, 2021 were $12,892,079 compared to $2,733,435 for the three months ended September 30, 2020.

The $10,158,644 increase in our operating

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

options and stock approved by the Board ($3,010,013), increased headcount from the Copa acquisition and the addition of new sales reps,

professional fees ($6,391,514) and shipping costs ($521,315).

The net loss for the three months ended September 30, 2021 was $12,169,894

as compared to a net loss of $2,351,814 for the three months ended September 30, 2020.

The increase in net loss is due to our increase

in operating expenses offset by our increase in revenues.

Interest Expense

Interest expenses for the three months ended September

30, 2021 were $100,128 compared to $23,110 for the three months ended September 30, 2020.

The $77,018 increase in our interest expenses

was primarily a result of additional debt taken on in Q2 2021.

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

Financial Statements (unaudited) filed herewith.

Splash seeks to identify, acquire, and build early

stage or under-valued beverage brands that have strong growth potential within its distribution system.

Splash’s distribution system

is comprehensive in the US and is now expanding to select attractive international markets.

The Splash brand portfolio is growing and

diverse, covering multiple categories that are exhibiting strong growth in both the non-alcohol and alcohol sectors.

Through its wholly

owned subsidiary Qplash, Splash’s distribution reach includes e-commerce access to both B-to-B and B-to-C customers.

Q-plash markets

well known beverage brands to customers throughout the US that prefer delivery direct to their office, facilities and or homes.

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.

The 2020 Plan has an “EVERGREEN” feature,

which provides for the annual increase in the number of shares issuable under the plan by an amount equal to 5% of the number of issued

and outstanding common shares at year end, unless otherwise adjusted by the board.

At January 1, 2021 AND 2022, the number of shares issuable

under the 2020 plan increased by 1,057,852 and 1,679,812 shares, respectively.

Results of Operations

for the Nine Months Ended September 30, 2021 compared to Nine Months Ended September 30, 2020.

Revenues for the nine months ended September

30, 2021 were $8,254,078 compared to revenues of $1,217,709 for the nine months ended September 30, 2020.

The $7,036,369increase

in sales is due to an increase within our vertically integrated B2B and B2C e-commerce distribution platform called Qplash ($4,902,088).

This platform sells goods on both Amazon and Shopify.

In addition, we had increased sales from Copa di Vino Wine Group, Inc., our

single-serve wine and Pulpoloco Sangria businesses ($3.085,299).

Cost of goods sold for the nine months ended September 30, 2021

were $6,011,755 compared to cost of goods sold for the nine months ended September 30, 2020 of $744,024.

The $5,267,731 increase

in cost of goods sold for the nine-month period ended September 30, 2021 is primarily due to our increased sales, and as our sales

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

for the Three Months Ended March 31, 2022 compared to Three Months Ended March 31, 2021.

Revenues for the three months ended March 31, 2022

were $3,926,573 compared to revenues of $2,138,924 for the three months ended March 31, 2021.

The $1,787,649 increase in sales is due

to an increase from CdV ($505105) and within our vertically integrated B2B and B2C e-commerce distribution platform called Qplash ($1,135,233).

Qp;ash sells goods on both Amazon and Shopify.

Cost of goods sold for the three months ended March 31, 2022 were $3,094,571 compared

to cost of goods sold for the three months ended March 31, 2021 of $1,621,504.

The $1,473,066 increase in cost of goods sold for the three-month

period ended March 31, 2022 is primarily due to our increased sales, and as our sales increased, our cost of sales for those sales correspondingly

Operating Expenses

Operating expenses for the nine months ended September

30, 2021 were $25,171,500 compared to $4,774,571 for the nine months ended September 30, 2020.

The $20,396,929 increase in our operating

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

options and stock approved by the Board ($7,407,976), increased headcount from the Copa acquisition and the addition of new sales reps,

professional fees ($8,996,732) and shipping costs ($1,404,110).

The net loss for the nine months ended September 30, 2021 was $23,170,917

as compared to a net loss of $6,173,943 for the nine months ended September 30, 2020.

The decrease in net loss is due to our increase

in operating expenses offset by our increase in revenues.

Operating expenses for the three months ended March

31, 2022 were $6,515,955 compared to $5,066,349 for the three months ended March 31, 2021.

The $1,449,606 increase in our operating expenses

was primarily a result of recording the warrants issued pursuant to certain private placements conducted by the Company ($888,158), marketing

spend ($633,389) and shipping costs ($296,941) offset by other operating expenses.

The net loss for the three months ended March 31, 2022

was $5,994,407 as compared to a net loss of $4,442,219 for the three months ended March 31, 2021.

The increase in net loss is due to our

increase in operating expenses offset by our increase in revenues.

Interest Expense

Interest expenses for the nine months ended September

30, 2021 were $341,715 compared to $1,958,601 for the nine months ended September 30, 2020.

The $1,616,886 decrease in our interest expenses

was primarily a result of recording a finance charge of $1,821,426 associated with warrants issued to one of our note holders in Q1 2020

offset by interest expense recorded in the period.

Interest expenses for the three months ended March

31, 2022 were $85,879 compared to $92,211 for the three months ended March 31, 2021.

LIQUIDITY AND CAPITAL RESOURCES

3 unchanged sentences

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

As of September 30, 2021, we had total cash and cash

equivalents of $8,144,171, as compared with $380,000 at December 31, 2020.

The increase is primarily due to cash received from private

placements conducted by us and our S1/A registration statement where we raised $15,000,000.

Net cash used for operating activities during

the nine months ended September 30, 2021 was $11,615,297 as compared to the net cash used by operating activities for the nine

months ended September 30, 2020 of $4,311,170.

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

increases in inventory, offset by non-cash expenses relating to warrant expense ($5,665,464) and share-based compensation ($8,212,864).

Net cash used for investing activities during the

nine months ended September 30, 2021 was $0 as compared to the net cash used by operating activities for the nine months ended September

of March 31, 2022, we had total cash and cash equivalents of $8,495,672, as compared with $4,181,383 at December 31, 2021.

is primarily due to the gross proceeds of $8,100,000 received from the sale of 2.3 million shares of the Company’s registered common

stock in February 2022 pursuant to the Company’s shelf registration statement on Form S-3.

Net cash used for operating activities during the

three months ended March 31, 2022 was $4,675,886 as compared to the net cash used by operating activities for the three months ended March

31, 2021 of $3,620,039.

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

Net cash provided by financing activities during

the nine months ended September 30, 2021 was $19,597,565 compared to $5,081,594 provided from financing activities for the nine

months ended September 30, 2020.

During the nine months ended September 30, 2021, we received $21,393,065 from investors, which

was offset by repayments to shareholders and debt holders of $1,795,188.

CONTRACTUAL OBLIGATIONS

Minimum Royalty Payments:

We have a licensing agreement with ABG TapouT,

LLC (“TapouT”).

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

2021 $594,000

2022 $653,400

Inventory Purchase Commitments :

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements

(as that term is defined in Item 303 of Regulation S-K) that are reasonably likely to have a current or future material effect

on our financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required for Smaller

Reporting Companies.

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

by non-cash expenses relating to warrant expense ($1,242,697) and share-based compensation ($1,112,845).

For the period March 31, 2022 and 2021, did not use

or receive cash relating to investing activities.

Net cash provided by financing activities during the

three months ended March 31, 2022 was $8,765,000 compared to $4,505,526 provided from financing activities for the three months ended

March 31, 2021.

During the three months ended March 31, 2022, we received $9,203,074 from investors, which was offset by repayments debt

holders of $437,474.

Share obligation:

company has a obligation to issue 500K

shares to two marketing firms of which the cost associated to 167K shares was accrued for in Q1 2022.

Royalty Payments:

have a licensing agreement with ABG TapouT, LLC (“TapouT”).

Under the licensing agreement, we have minimum royalty payments

to TapouT for the next two years.

Purchase Commitments :

Sheet Arrangements

do not have any off-balance sheet arrangements (as that term is defined in Item 303 of Regulation S-K) that are reasonably likely to

have a current or future material effect on our financial condition, revenue or expenses, results of operations, liquidity, capital expenditures

or capital resources.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

required for Smaller Reporting Companies.

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-Q

Item 2. Management’s Discussion and Analysis