Endovia Health Sciences, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cautionary Statement Regarding Forward-Looking Statements 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. 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. 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,” “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 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. Unless 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 Financial Statements (unaudited) and Notes to Condensed Financial Statements (unaudited) filed herewith. Business Overview 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. 20 Results of Operations for the Three Months Ended March 31, 2022 compared to Three Months Ended March 31, 2021. Revenue 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 increased. Operating Expenses 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 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 Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures. As of March 31, 2022, we had total cash and cash equivalents of $8,495,672, as compared with $4,181,383 at December 31, 2021. The increase 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 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. 21 CONTRACTUAL OBLIGATIONS Share obligation: · The 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. 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. ● 2022 $653,000 ● 2023 $653,000 Inventory Purchase Commitments : None. 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. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not required for Smaller Reporting Companies.