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 B2B and B2C customers. Q-plash markets well known beverage brands to customers throughout the US that prefer delivery direct to their office, facilities and or homes. Splash was originally incorporated in the State of Nevada under the name TapouT Beverages, Inc. for the purpose of acquiring the rights under a license agreement with TapouT, LLC (Authentic Brands Group) for the right to use the TapouT brand in connection with manufacturing and selling certain beverages. On March 31, 2020, a wholly-owned subsidiary of a public entity called Canfield Medical Supply, Inc. (“CMS”) merged with and into Splash and Splash became a wholly-owned subsidiary of CMS. At the time of the merger CMS’s state of incorporation was Colorado. At the time of the merger CMS’s common stock was quoted on the OTCQB. On July 31, 2020, we changed our name from Canfield Medical Supply, Inc. to Splash Beverage Group, Inc. On June 11, 2021, our common stock and warrants to purchase common stock began trading on the NYSE American under the symbols “SBEV” and SBEV WS,” respectively On November 8, 2021, we changed our state of incorporation from Colorado to Nevada. On June 30, 2022, Management completed its plan to divest its CMS’s business. In coordination with uplisting to the NYSE American on June 11, 2021 the Company consummated a 1.0 for 3.0 reverse stock split. 18 Results of Operations for the Three and Nine Months Ended September 30, 2022 compared to Three and Nine Months Ended September 30, 2021. Net Revenue Net revenues for the three and nine months ended September 30, 2022 were higher compared to revenues for the three and nine months ended September 30, 2021 due to an increase from our vertically integrated B2B and B2C e-commerce distribution platform called Qplash (Qplash sells goods on both Amazon and Shopify), a number of retail chain authorizations has led to increased distribution on the beverage portfolio and a price increase on CdV. Cost of Goods Sold Cost of goods sold for the three and nine months ended September 30, 2022 were higher compared to cost of goods sold for the three and nine months ended September 30, 2021. The increase in cost of goods sold is primarily due to higher sales at Qplash, incremental volumes in the beverage portfolio and higher supply chain costs on both ingredients and freight. Operating Expenses Operating expenses for the three months ended September 30, 2022 were lower compared to the three months ended September 30, 2021 due to a decrease in share based compensation partially offset by increases in marketing expenses. Operating expenses for the nine months ended September 30, 2022 were higher compared to the nine months ended September 30, 2021 driven by an increase in sales and marketing cost partially offset by lower non-cash compensation for services cost. 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. Interest Expense Interest expenses for the three and nine months ended September 30, 2022 were lower compared to the three and nine months ended September 30, 2021 due to the paydown of notes payable. Net Loss The net loss for the three months ended September 30, 2022 was lower compared to the three months ended September 30, 2021. The decrease in the net loss is due to our lower operating expenses and an increase in revenues. The net loss for the nine months ended September 30, 2022 was lower compared to the nine months ended September 30, 2021. The decrease in the net loss is due to our increase in e-commerce revenue and lower operating expenses. 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 September 30, 2022, we had total cash and cash equivalents of $2,601,270 as compared with $4,181,383 at December 31, 2021. Net cash used for operating activities during the nine months ended September 30, 2022 was $10,626,135 as compared to the net cash used by operating activities for the nine months ended September 30, 2021 of $11,615,297. The primary reasons for the change in net cash used is due to losses sustained, increases in inventory and costs incurred in connection with the company’s shelf registration statement on Form S-3. For the nine months ended September 30, 2022, an SUV was purchased and financed with a loan. We did not use or receive cash relating to investing activities during the nine months ended September 30,2021 Net cash provided by financing activities during the nine months ended September 30, 2022 was $9,091,442 compared to $19,597,565 provided from financing activities for the nine months ended September 30, 2021. During the nine months ended September 30, 2022, we received $12,300,000 from investors from the Company Shelf Registration Statement on Form S-3, which was offset by repayments to debt holders of $1,285,861 and financing fees associated with the Shelf Registration Statement $1,738,896. Inventory increased for the three months ended September in preparation to fulfil orders related to new retail chain authorizations. 19 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 $653,400 in 2022. 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, and capital expenditures or capital resources. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not required for Smaller Reporting Companies.