Endovia Health Sciences, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS Splash Beverage Group, Inc. Condensed Consolidated Financial Statements June 30, 2022 1 Splash Beverage Group, Inc. Condensed Consolidated Balance Sheets June 30, 2022 and December 31, 2021 (Unaudited) June 30, 2022 December 31, 2021 Assets Current assets: Cash and cash equivalents $ 4,206,208 $ 4,181,383 Accounts Receivable, net 1,612,131 1,114,452 Prepaid Expenses 609,703 607,178 Inventory, net 2,642,739 1,923,479 Other receivables 399,210 41,939 Assets from discontinued operations — 473,461 Total current assets 9,469,991 8,341,892 Non-current assets: Deposit $ 94,674 $ 330,886 Goodwill 256,823 256,823 Other Intangible, net 5,408,478 5,604,512 Investment in Salt Tequila USA, LLC 250,000 250,000 Right of use asset 880,718 1,031,472 Property and equipment, net 509,054 569,785 Total non-current assets 7,399,747 8,043,478 Total assets $ 16,869,738 $ 16,385,370 Liabilities and Stockholders’ Equity Liabilities: Current liabilities Accounts payable and accrued expenses 2,376,302 $ 1,913,459 Right of use liability – current 287,885 294,067 Related party notes payable — 653,081 Notes payable, current portion 1,320,500 2,967,812 Liability to issue common stock 308,400 — Shareholder advances — 390,500 Accrued interest payable 167,449 171,452 Liabilities from discontinued operations — 389,086 Total current liabilities 4,460,536 6,779,457 Long-term Liabilities: Notes payable – noncurrent 357,995 — Right of use liability – noncurrent 593,523 732,686 Total long-term liabilities 951,518 732,686 Total liabilities 5,412,054 7,512,143 Stockholders’ equity: Common Stock, $ 0.001 par, 150,000,000 shares authorized, 37,269,828 and 33,596,232 shares issued 37,269,828 and 33,596,232 outstanding, at June 30, 2022 and December 31, 2021, respectively 37,270 33,596 Additional paid in capital 113,820,805 99,480,188 Accumulated Comprehensive Income – Translation ( 6,570 ) — Accumulated deficit ( 102,393,821 ) ( 90,640,557 ) Total stockholders’ equity 11,457,684 8,873,227 Total liabilities, and stockholders’ equity $ 16,869,738 $ 16,385,370 The accompanying notes are an integral part of these condensed consolidated financial statements. 2 Splash Beverage Group, Inc. Condensed Consolidated Statements of Operations For the Three and Six Months Ended June 30, 2022 and June 30, 2021 (Unaudited) Three months ended June 30, Six months ended June 30, 2022 2021 2022 2021 Gross sales $ 4,861,700 $ 3,435,453 $ 8,933,056 $ 5,623,757 Customer discount ( 362,760 ) ( 147,693 ) ( 507,542 ) ( 197,073 ) Net revenues 4,498,940 3,287,760 8,425,514 5,426,684 Cost of goods sold ( 3,825,785 ) ( 2,382,707 ) ( 6,920,356 ) ( 4,004,211 ) Gross profit 673,155 905,053 1,505,158 1,422,473 Operating expenses: Contracted services 327,303 190,607 758,848 467,117 Salary and wages 1,131,612 637,778 1,917,263 1,310,221 Non-cash share-based compensation 2,772,369 4,150,044 5,342,494 6,078,682 Other general and administrative 1,605,961 2,459,603 3,828,199 4,206,796 Sales and marketing 665,059 174,727 1,171,455 216,605 Total operating expenses 6,502,304 7,612,759 13,018,259 12,279,421 Loss from continuing operations ( 5,829,148 ) ( 6,707,706 ) ( 11,513,100 ) ( 10,856,948 ) Other income/(expense): Interest income 2,709 1 2,709 115 Interest expense ( 73,471 ) ( 149,376 ) ( 159,350 ) ( 241,587 ) Gain from debt extinguishment — 96,077 — 97,396 Total other income/(expense) ( 70,762 ) ( 53,298 ) ( 156,641 ) ( 144,076 ) Provision for income taxes — — — — Net loss from continuing operations, net of tax ( 5,899,910 ) ( 6,761,004 ) ( 11,669,741 ) ( 11,001,024 ) Net income (loss) from discontinued operations, net of tax 25,421 200,404 ( 199,154 ) 240,486 Gain on sale of discontinued operations 115,632 — 115,632 — Income of discontinued operations 141,053 200,404 ( 83,522 ) 240,486 Net loss $ ( 5,758,857 ) $ ( 6,560,600 ) $ ( 11,753,264 ) $ ( 10,760,538 ) (Loss) per share - continuing operations Basic and dilutive $ ( 0.16 ) $ ( 0.25 ) $ ( 0.32 ) $ ( 0.42 ) Weighted average number of common shares outstanding - continuing operations Basic 36,675,323 27,356,918 35,935,972 26,003,605 Income/(Loss) per share - discontinuing operations Basic and dilutive $ 0.00 $ 0.01 $ ( 0.01 ) $ 0.01 Weighted average number of common shares outstanding - discontinuing operations Basic 36,675,323 27,356,918 35,935,972 26,003,605 Dilutive 38,703,365 30,482,999 35,935,972 29,061,257 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Splash Beverage Group, Inc. Condensed Consolidated Statements of Changes in Stockholders’ Equity For the Three and Six months ended June 30, 2022 and 2021 (Unaudited) Total Common Stock Treasury Stock Additional Paid-In Accumulated Stockholders’ Equity Shares Amount Shares Amount Capital Deficit (Deficit) Balances at December 31, 2020 21,157,043 21,157 — — 52,217,855 ( 61,589,735 ) ( 9,350,724 ) Issuance of warrants for services — — — — 1,186,596 — 1,186,596 Issuance of common stock for services 168,333 168 — — 730,867 — 731,035 Issuance of common stock and warrants for cash 1,174,476 1,174 — — 4,529,450 — 4,530,624 Mezzanine shares 4,201,761 4,202 — — 9,244,519 — 9,248,720 Net loss — — — — — ( 4,442,219 ) ( 4,442,219 ) Balances at March 31, 2021 26,701,613 26,702 — — 67,909,286 ( 66,031,954 ) 1,904,003 Issuance of warrants for services — — — — 1,186,596 — 1,186,595 Issuance of common stock for services — — — — 1,369,918 — 1,369,918 Issuance of common stock and warrants for cash 3,780,303 3,780 — — 15,096,160 — 15,099,940 Net loss — — — ( 6,560,600 ) ( 6,560,600 ) Balances at June 30, 2021 30,481,916 30,482 — — 85,561,961 ( 72,592,554 ) 12,999,887 Total Common Stock Treasury Stock Additional Paid-In Accumulated Stockholders’ Equity Shares Amount Shares Amount Capital Deficit (Deficit) Balances at December 31, 2021 33,596,232 33,596 — — 99,480,188 ( 90,640,557 ) 8,873,227 Issuance of common stock on convertible instruments 223,596 224 — — 1,206,287 — 1,206,510 Issuance of warrants for services — — — — 1,242,697 — 1,242,697 Issuance of common stock for services 550,000 550 — — 1,112,845 — 1,113,395 Issuance of common stock and warrants for cash 2,300,000 2,300 — — 8,065,100 — 8,067,400 Net loss — — — — — ( 5,994,407 ) ( 5,994,407 ) Balances at March 31, 2022 36,669,828 36,670 — — 111,107,116 ( 96,634,964 ) 14,508,823 Issuance of warrants for services — — — 1,174,289 — 1,174,289 Issuance of common stock for services 500,000 500 — — 1,429,500 — 1,430,000 Issuance of common stock and warrants for cash 100,000 100 — — 109,900 — 110,000 Accumulated Comprehensive Income - Translation ( 6,570 ) ( 6,570 ) Net loss — — — ( 5,758,857 ) ( 5,758,857 ) Balances at June 30, 2022 37,269,828 37,270 — — 113,820,805 ( 102,400,391 ) 11,457,684 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Splash Beverage Group, Inc. Condensed Consolidated Statements of Cash Flows For the Six -Months Ended June 30, 2022 and 2021 (Unaudited) 2022 2021 Net loss $ ( 11,753,264 ) $ ( 10,760,538 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 256,765 80,048 Gain from debt extinguishment — ( 97,396 ) Gain from sale of discontinued operation 115,632 Non-cash share-based compensation 5,070,833 3,941,904 Changes in working capital items: Accounts receivable, net ( 497,679 ) ( 732,998 ) Inventory, net ( 719,260 ) ( 437,827 ) Prepaid expenses and other current assets ( 81,462 ) 195,084 Deposits 236,212 — Accounts payable and accrued expenses 237,892 268,930 Accrued Interest payable 26,480 ( 130,329 ) Net cash used in operating activities - continuing operations ( 7,107,851 ) ( 7,673,122 ) Net cash used in operating activities - discontinued operations — ( 240,486 ) Cash Flows from Investing Activities: Net cash used in investing activities - continuing operations — — Cash Flows from Financing Activities: Net Proceeds from issuance of Common stock 8,075,074 19,630,565 Cash advance from shareholder — 469,500 Repayment of cash advance — ( 360,870 ) Proceeds from issuance of debt — 928,000 Principal repayment of debt ( 942,398 ) ( 1,189,832 ) Net cash provided by financing activities - continuing operations 7,132,676 19,477,363 Net cash provided by financing activities - discontinued operations — — Net Change in Cash and Cash Equivalents 24,825 11,563,755 Cash and Cash Equivalents, beginning of year 4,181,383 380,000 Cash and Cash Equivalents, end of year $ 4,206,208 $ 11,943,755 Supplemental Disclosure of Cash Flow Informati on: Cash paid for Interest $ 122,527 $ 173,363 Supplemental Disclosure of Non-Cash Investing and Financing Activities Notes payable and accrued interest converted to common stock ( 223,596 shares) 1,206,511 — The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Splash Beverage Group, Inc. Notes to the Condensed Consolidated Financial Statements Note 1 – Business Organization and Nature of Operations 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 February 2021, Management initiated a plan to divest its Canfied Medical Supply, Inc. (“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. On June 30, 2022, the Company entered into a Business Transfer and Indemnity Agreement (“Agreement”). Pursuant to the Agreement, the Company transferred and assigned the assets and liabilities from the CMS business. Pursuant to the Agreement the Company was paid $ 31,000 and recorded a gain of $ 115,632 for the three months ended June 30, 2022. 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 on a retrospective basis to reflect the split. 6 Splash Beverage Group, Inc. Notes to the Condensed Consolidated Financial Statements Note 2 – Summary of Significant Accounting Policies Basis of Presentation and Consolidation These condensed consolidated financial statements include the accounts of Splash Beverage Group and its wholly owned subsidiaries, Splash International Holdings LLC, Splash Beverage Group Holding LLC, Splash Beverage Group II, Inc., Copa di Vino Wine Group, Inc. (“CdV”) and Splash Mexico SA de CV. CMS is reflected as discontinued operations until its disposal on June 30, 2022. 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 condensed consolidated financial statements have been prepared by us without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the three and six months ended June 30, 2022 and 2021 have been made. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. The results of operations for the period ended June 30, 2022 are not necessarily indicative of the operating results for the full year. Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the 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 June 30, 2022 or December 31, 2021. Our cash in bank deposit amounts, at times, may exceed federally insured limits of $250,000. At June 30, 2022 we had $ 3,405,814 in excess of the federally insured limits. Our bank deposit amounts in Mexico of $ 2,000 are uninsured. 7 Splash Beverage Group, Inc. Notes to the Condensed Consolidated Financial Statements Note 2 – Summary of Significant Accounting Policies, continued Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are carried at their estimated recoverable amounts and are periodically evaluated for collectability based on past credit history with clients and other factors. We establish provisions for losses on accounts receivable on the basis of loss experience, known and inherent risk in the account balance, and current economic conditions. At June 30, 2022 and December 31, 2021, our accounts receivable amounts are reflected net of allowances of $ 13,855 and $ 45,203 , respectively. Inventory Inventory is stated at the lower of cost or net realizable value and accounted for using the weighted average cost method. The inventory balances at June 30, 2022 and December 31, 2021 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 $ 68,349 and $ 223,223 at June 30, 2022 and December 31, 2021, respectively. Property and Equipment We record property and equipment at cost when purchased. Depreciation is recorded for property, equipment, and software using the straight-line method over the estimated economic useful lives of assets, which range from 3 - 39 years. Company management reviews the recoverability of all long-lived assets, including the related useful lives, whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset might not be recoverable. Furniture and computer equipment of $ 60,626 were written off as of June 30, 2022 Depreciation expense totaled $ 43,534 and $ 36,561 for the three months ended June 30, 2022 and June 30, 2021, respectively. Depreciation expense totaled $ 74,229 and $ 80,048 for the six months ended June 30, 2022 and June 30, 2021, respectively. Property and equipment as of June 30, 2022 and December 31, 2021 consisted of the following: Schedule of Property and equipment June 30, 2022 December 31, 2021 Machinery & Equipment $ 1,108,870 1,108,870 Buildings $ 293,040 279,543 Leasehold Improvements $ 662,537 662,537 Office Furniture & Fixtures $ 10,334 70,960 Property and equipment, at cost $ 2,074,781 $ 2,121,910 Accumulated depreciation $ ( 1,565,727 ) ( 1,552,125 ) Property and equipment, net $ 509,054 569,785 Excise Taxes 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. 8 Splash Beverage Group, Inc. Notes to the Condensed 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 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: Level 1 - 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. Level 2 - 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 active). Level 3 - 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 condensed consolidated financial statements approximate fair values at June 30, 2022 and December 31, 2021, consistent with recent negotiations of notes payable and due to the short duration of maturities and market rates of interest. 9 Splash Beverage Group, Inc. Notes to the Condensed Consolidated Financial Statements Note 2 – Summary of Significant Accounting Policies, continued Revenue Recognition We recognize revenue under ASC 606, Revenue from Contracts with Customers (Topic 606). This guidance sets forth a five-step model which depicts the recognition of revenue in an amount that reflects what we expect to receive in exchange for the transfer of goods or services to customers. We recognize revenue when our performance obligations under the terms of a contract with the customer are satisfied. Product sales occur once control of our products is transferred upon delivery to the customer. Revenue is measured as the amount of consideration that we expect to receive in exchange for transferring goods and is presented net of provisions for customer returns and allowances. The amount of consideration we receive and revenue we recognize varies with changes in customer incentives we offer to our customers and their customers. Sales taxes and other similar taxes are excluded from revenue. Distribution expenses to transport our finished goods, where applicable, and warehousing expense are accounted for within operating expenses. Distribution expense is capitalized as part of inventory as the materials are received by our distillery, co-packer or internal/external warehouse. 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 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 award’s vesting period. We use the Black-Scholes option pricing model to determine the fair value of stock-based awards. 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. Income Taxes 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 more likely than not that the deferred tax assets will not 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 June 30, 2022 and December 31, 2021. 10 Splash Beverage Group, Inc. Notes to the Condensed 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 stock 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. Advertising 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 $ 131,327 and $ 150,753 for the three-months ended June 30, 2022 and 2021, respectively. We recorded advertising expense of $ 218,917 and $ 198,538 for the six months ended June 30, 2022 and 2021, respectively. Goodwill and Intangibles Assets Goodwill represents the excess of acquisition cost over the fair value of the net assets acquired and is not subject to amortization. The Company reviews goodwill annually in the fourth quarter for impairment or when circumstances indicate carrying value may exceed the fair value. This evaluation is performed at the reporting unit level. If a qualitative assessment indicates that it is more likely than not that the fair value is less than carrying value, a quantitative analysis is completed using either the income or market approach, or a combination of both. The income approach estimates fair value based on expected discounted future cash flows, while the market approach uses comparable public companies and transactions to develop metrics to be applied to historical and expected future operating results. Intangible assets consist of customer lists, brands and license agreements acquired in the acquisition of CdV. The Company amortizes intangible assets with finite lives on a straight-line basis over their estimated useful lives of 15 years. 11 Splash Beverage Group, Inc. Notes to the Condensed Consolidated Financial Statements Note 2 – Summary of Significant Accounting Policies, continued 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 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 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. Reclassifications Certain prior period amounts have been reclassified to conform with the current year presentation. 12 Splash Beverage Group, Inc. Notes to the Condensed Consolidated Financial Statements Note 3 – Notes Payable and Related Party Notes Payable Notes payable are generally nonrecourse and secured by all Company owned assets. Interest Rate June 30, 2022 December 31, 2021 Notes Payable and Convertible Notes Payable 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 unexercised on February 28, 2017 . The loan matured and remains in default. 8 % 200,000 200,000 In September 2021, we entered into a twelve-month loan with a company in the amount of $ 208,000 . The principal and interest was paid off in June 2022 4.8 % — 116,478 In December 2020, we entered into a 56 month loan with a company in the amount of $ 1,578,237 . The loan requires payments of 3.75 % of the previous months revenue. Note is due September 2025 17 % 1,250,495 1,423,334 In April 2021, we entered into a six-month convertible loan with an 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 August 2022. 7 % 84,000 84,000 In April 2021, we entered into a six-month convertible loan with an 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 August 2022. 7 % 84,000 84,000 In May 2021, we entered into a six-month convertible loan with an 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 August 2022. 7 % 50,000 50,000 In May 2021, we entered into a six-month convertible loan with an individual in the amount of $ 500,000 . The loan had an original maturity of October 2021 with principal and interest due at maturity. The principal and interest was converted into shares of common stock in February 2022. 7 % — 500,000 In May 2021, we entered into a six-month convertible loan with an 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 August 2022. 7 % 10,000 10,000 In May 2021, we entered into a six-month convertible loan with an individual in the amount of $ 200,000 . The loan had an original maturity of October 2021 with principal and interest due at maturity. The principal and interest was converted into shares of common stock in February 2022. 7 % — 200,000 In November 2021, we entered into a one-year convertible loan with an individual in the amount of $ 300,000 . The principal and interest was converted to shares of common stock in April 2022. 7 % 0 300,000 Total notes payable and convertible notes payable $ 1,678,495 $ 2,967,812 Less current portion ( 1,320,500 ) ( 2,967,812 ) Long-term notes payable and convertible notes payable $ 357,995 $ — Interest expense on notes payable was $ 69,015 and $ 133,702 for the three months ended June 30, 2022 and 2021, respectively. Interest expense on notes payable was $ 150,715 and $ 203,236 for the six months ended June 30, 2022 and 2021, respectively. Accrued interest was $ 167,449 at June 30, 2022. 13 Splash Beverage Group, Inc. Notes to the Condensed Consolidated Financial Statements Note 3– Notes Payable and Related Party Notes Payable Schedule of Related Party Notes Payable Interest Rate June 30, 2022 December 31, 2021 Related Parties Notes Payable In December 2020, we entered into an 18 month loan with an individual in the amount of $ 2,000,000 . The loan was paid off in June 2022. 2.0 % — 653,081 Less current portion — ( 653,081 ) Long-term notes payable $ — $ — Interest expense on related party notes payable was $ 2,805 and $ 7,804 for the three months ended June 30, 2022 and 2021, respectively. Interest expense on related party notes payable was $ 5,407 and $ 15,839 for the six months ended June 30, 2022 and 2021, respectively. Accrued interest was $ 0 as of June 30, 2022. 14 Splash Beverage Group, Inc. Notes to the Condensed Consolidated Financial Statements Note 4 – 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. military bases and Mexico. Under the terms of the agreement, we are required to pay a 6% royalty on net sales, as defined. We are required to make minimum royalty monthly payments of $ 54,450 in 2022 and $ 49,500 in 2021. There were no unpaid royalties at June 30, 2022. Royalty payments including the minimum totaling $ 381,150 and $ 346,500 were made for the six months ended June 30, 2022 and 2021, respectively, these costs are 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 CdV 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 our manufacturing process. In exchange for notes payable, 1/4 Vin granted us 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. The asset is being amortized over a 10 -year useful life. Note 5– Stockholders’ Equity Private Placement Memorandum (PPM) In January 2021, the Board of Directors approved a Private Placement Memorandum (PPM) 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, the Company issued a total of 1,212,355 shares and 606,178 warrants and received the gross proceeds of approximately $ 4,000,000 . During the quarter, the Company granted share-based awards to certain officers and consultants to purchase 146,000 shares of common stock at an exercise price of $ 2.31 . The options were valued at $ 337,260 . 15 Splash Beverage Group, Inc. Notes to the Consolidated Financial Statements Note 6 – Related Parties There is no outstanding balance as of June 30, 2022 and $ 653,081 was outstanding as of December 31,2021. See note 3. Note 7 – Investment in Salt Tequila USA, LLC We have a marketing and distribution agreement with SALT Tequila USA, LLC (“SALT”) for the manufacturing of our Tequila product line in Mexico. We have a 22.5 % percentage ownership interest in SALT and have the right to increase our ownership to 37.5 %. This investment is accounted for at cost, due to our inability to exercise significant influence over the assets and operations. 16 Splash Beverage Group, Inc. Notes to the Condensed Consolidated Financial Statements Note 8 – 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 and is scheduled to expire after 36 months, on June 30, 2021 . In July 2021, we executed a two-year renewal at the same monthly amount. Effective November 2019, we entered into a new lease with Interport Logistics, LLC. The lease term commenced on November 11, 2019 and is scheduled to expire on November 11, 2022 . Effective May 2019, we entered into a new lease in Mexico. The lease commenced May 1, 2019 and was renewed on April 1, 2022 for one year. Effective January 2021, we entered into a lease agreement for the right to use and occupy office space. The lease term commenced January 18, 2021 and was extended for 1 one year to July 31, 2023 . Effective January 2021, we entered into a lease agreement for the right to use and occupy office and manufacturing space. The lease term commenced January 1, 2021 and is scheduled to expire after 60 months, on December 31, 2025 . 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 condensed consolidated balance sheet at June 30, 2022: Schedule of maturities of lease liabilities Undiscounted Future Minimum Lease Payments 2022 (six months) 173,323 2023 276,318 2024 252,000 2025 252,000 Total 953,641 Amount representing imputed interest ( 72,233 ) Total Operating Lease Liability 881,408 Current portion operating lease liability 287,885 Operating lease liability, non-current 593,523 The table below presents information for lease costs related to our operating leases at June 30, 2022 Schedule of lease costs Amortization of leased assets 464,579 Interest of lease liabilities 83,188 Total operating lease cost 547,767 The table below presents lease-related terms and discount rates at June 30, 2022 Summary of lease-related terms and discount rates Summary of lease-related terms and discount rates Remaining term on leases 1 to 42 months Incremented borrowing rate 5.0 % 17 Splash Beverage Group, Inc. Notes to the Condensed Consolidated Financial Statements Note 9 – 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 CdV business is included in our Splash Beverage Group segment. Schedule of Segment Reporting Information Three-Months Ended Six-Months Ended Revenue Q2 2022 Q2 2021 Q2 2022 Q2 2021 Splash Beverage Group 1,355,388 1,565,865 2,833,546 2,391,608 E-Commerce 3,143,553 1,721,895 5,591,968 3,035,076 Total Revenues continuing operations 4,498,941 3,287,760 8,425,514 5,426,684 Total Revenues discontinued operations 271,103 369,442 385,174 648,219 Total assets 2022 2021 Splash Beverage Group 15,270,000 14,998,597 E-Commerce 1,599,738 913,312 Medical Devices - Discontinued — 473,461 Total Assets 16,869,738 16,385,370 Note 10 – Commitment and Contingencies The Company signed an agreement to acquire 80% of Pulpoloco Sangria in a transaction that will give Splash control over the manufacturing and distribution of Pulpoloco across the US while adding international markets and capturing the additional margin and revenue. On June 10, 2022, Copa Di Vino Corporation (“Copa”) filed a lawsuit against the Company in Broward County, Florida. The complaint alleges that the Company still owes part of the final payment under the December 24, 2020 Asset Purchase Agreement (“APA”) between Copa and the Company. Specifically, Copa maintains that 380,959 shares are owed. The parties are actively discussing amicable resolution on a framework both sides appear to be agreeable to. The Company will vigorously defend the case if a settlement is not reached. Litigation is uncertain, however, and no particular result can be assured. 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. Note 11– Subsequent Events Subsequent to June 30, 2022 the Company's Board approved the issuance of 250,000 shares as a performance bonus pursuant to a consulting agreement. 18