What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-31 compared with 2022-03-31 · 613 added, 594 removed, 400 unchanged (75% of the section changed)

Financial Statements and Supplementary

Report of Independent Registered Public Accounting Firm

Financial Statements

of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets December 31, 2022 and December 31, 2021

Consolidated Statements of Operations For the Years Ended December 31, 2022 and December 31 2021

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

Consolidated Statements of Changes in Stockholders’ Equity For the years ended December 31, 2022 and 2021

Consolidated Statements of Cash Flows For the Year Ended December 30, 2022 and 2021

Notes to the Consolidated Financial Statements

of Independent Registered Public Accounting Firm

the Board of Directors and Stockholders

Beverage Group, Inc.

Lauderdale, Florida

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 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.

Report of Independent Registered Public Accounting

To the Board of Directors and Stockholders

Splash Beverage Group, Inc.

Fort Lauderdale, Florida

Opinion on the Financial

We have audited the accompanying

consolidated balance sheets of Splash Beverage Group, Inc.

at December 31, 2022 and 2021, and the related consolidated statements operations,

stockholders’ equity and cash flows for each of the years in the two-year period ended December 31, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of

the years in the two-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States

Basis for Opinion

These 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.

We 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 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.

Accordingly, we express no such 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 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.

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.

Our 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

Critical Audit Matters

The 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.

Intangible Assets Impairment

As described in Notes 2 and

4 to the consolidated financial statements, the Company has intangible assets of approximately $4.9 million at December 31, 2022.

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

an estimate is derived indirectly and is based on valuation techniques utilizing undiscounted and discounted after-tax cash flows 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;

long-term forecasts;

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

The 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 assets.

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.

Addressing 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 estimate;

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 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.

/s/ Daszkal Bolton LLP

Daszkal Bolton LLP

have served as the Company’s auditor since 2020

Lauderdale, Florida

Beverage Group, Inc.

We have served as the Company’s

auditor since 2020

Fort Lauderdale, Florida

March 31, 2023

Splash Beverage Group, Inc.

Consolidated Balance Sheets

31, 2021 and December 31, 2020

and cash equivalents

Receivable, net

from discontinued operations

December 31, 2022 and December 31, 2021

December 31, 2022

December 31, 2021

Current assets:

Goodwill and Intangibles

in Salt Tequila USA, LLC

of use asset, net

and equipment, net

Cash and cash equivalents

Accounts Receivable, net

Prepaid Expenses

Other receivables

Assets from discontinued operations

Total current assets

Non-current assets:

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

Intangibles assets, net

Investment in Salt Tequila USA, LLC

Right of use asset

Property and equipment, net

Total non-current assets

Liabilities and Stockholders’ Equity

Current liabilities

party notes payable - noncurrent

payable - noncurrent

to issue shares in APA

of use liability - noncurrent

Accounts payable and accrued expenses

Right of use liability

Related party notes payable

Notes payable

Liability to issue shares

Shareholder advances

Accrued interest payable

Liabilities from discontinued operations

Total current liabilities

Long-term Liabilities:

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 )

Notes payable

Right of use liability

Total long-term liabilities

Total liabilities

Stockholders’ equity:

Preferred stock, $ 0.001 par value, 5,000,000 shares authorized, no shares issued

Common Stock, $ 0.001 par, 300,000,000 shares authorized, 41,085,520 and 33,596,232 shares issued and outstanding, at December 31, 2022 and December 31, 2021, respectively

Additional paid in capital

Accumulated Other Comprehensive Income

Accumulated deficit

( 112,331,027

Total deficiency

in stockholders’ equity

( 90,640,557 )

liabilities, mezzanine shares and deficiency in stockholders’ equity

Total stockholders’ equity

Total liabilities and stockholders’ equity

The accompanying notes are an integral part of these

consolidated financial statements.

Beverage Group, Inc.

Splash Beverage Group, Inc.

Consolidated Statements of Operations

the Years Ended December 31, 2021 and December 31 2020

For the Years Ended December 31, 2022 and December 31 2021

Cost of goods sold

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Salary and wages

Salary and wages - non-cash share-based compensation

Non-cash share-based compensation

Other general and administrative

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

Sales and marketing

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Interest expense

( 1,980,871 )

Gain from debt extinguishment

Total other expense

( 1,926,467 )

Provision for income taxes

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( 29,345,372 )

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

Gain on discontinued operations

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

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$ ( 29,050,822 )

Other Comprehensive loss

Foreign Currency Translation loss

Total Comprehensive Income

( 21,710,941 )

( 29,050,822 )

Loss per share - continuing operations

Basic and Diluted

Weighted average number of common shares outstanding - continuing operations

Basic and Diluted

Income (loss) per share - discontinued operations

Basic and Diluted

Weighted average number of common shares outstanding - discontinued operations

Basic and Diluted

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 )

Splash Beverage Group, Inc.

Statements of Changes in Stockholders ’ Equity

For the years ended December 31, 2022 and 2021

Additional Paid-in

Accumulated Other Comprehensive

Total Stockholders Equity

Balances at December 31, 2020

( 61,589,735 )

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

( 9,350,723 )

Issuance of warrants for services

Issuance of common stock for services

Issuance of common stock and warrants for cash

Mezzanine shares

( 29,050,822 )

beneficial conversion for preferred A

of warrants on convertible instruments

( 29,050,822 )

Balances at December 31, 2021

( 90,640,557 )

Issuance of common stock on convertible instruments

Issuance of warrants for services

Issuance of warrants on convertible instruments

Issuance of common stock for services

Issuance of common stock and warrants for cash

Accumulated Comprehensive Income - Translation

( 21,690,469 )

stockholders’ equity (deficit), ending balances

Balances at December 31, 2022

( 112,331,026 )

The accompanying notes are an

integral part of these consolidated financial statements

The accompanying notes are an integral part of these

consolidated financial statements

Splash Beverage Group, Inc.

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For the Year Ended December 30, 2022 and 2021

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

Depreciation and amortization

ROU asset, net

Gain from debt extinguishment

Non-cash warrant expense

Share-based compensation

Liability to issue shares in APA

Non-cash acquisition costs

Other noncash changes

Changes in working capital items:

Accounts receivable, net

Inventory, net

Prepaid expenses and other current assets

Accounts payable and accrued expenses

Royalty payable

Accrued Interest payable

Net cash used in operating activities - continuing operations

Net cash used in operating activities - discontinued operations

Cash Flows from Investing Activities:

Capital Expenditures

Investment in Salt Tequila USA, LLC

Cash used for Copa acquisition

Net cash acquired in Canfield merger

Net cash used in investing activities - continuing operations

Net cash used in investing activities - discontinued operations

Cash Flows from Financing Activities:

Proceeds from issuance of Common stock

Cash advance from shareholder

Repayment of cash advance

Proceeds from issuance of debt

Principal repayment of debt

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

Cash and Cash Equivalents, beginning of year

Cash and Cash Equivalents, end of year

Supplemental Disclosure of Cash Flow Information:

Cash paid for Interest

Supplemental Disclosure of Non-Cash Investing and Financing Activities

$ ( 21,710,941 )

$ ( 29,050,822 )

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

and amortization

from debt extinguishment

from sale of discontinued operation

warrant expense

in working capital items:

receivable, net

( 1,797,828 )

( 1,125,206 )

expenses and other current assets

payable and accrued expenses

Interest payable

cash used in operating activities - continuing operations

( 14,061,116 )

( 14,697,179 )

cash used in operating activities - discontinued operations

Flows from Investing Activities:

cash used in investing activities -– continuing operations

cash used in investing activities - discontinued operations

Flows from Financing Activities:

from issuance of Common stock

advance (repayment) from shareholder

of cash advance

from issuance of debt

repayment of debt

( 1,673,296 )

cash provided by financing activities - continuing operations

cash provided by financing activities - discontinued operations

Change in Cash and Cash Equivalents

and Cash Equivalents, beginning of year

and Cash Equivalents, end of year

Disclosure of Cash Flow Information:

paid for Interest

paid for Taxes

Disclosure of Non-Cash Investing and Financing Activities

notes payable and accrued interest converted to common stock (377,796 shares)

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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.

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

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been retrospectively presented as outstanding for all periods.

Splash specializes in the manufacturing, distribution,

Splash specializes in the manufacturing process, distribution,

and sales & marketing of various beverages across multiple channels.

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Company changed its state of Domicile from Colorado to Nevada.

In coordination with uplisting to the NYSE on

In coordination with up listing 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.

All common stock shares stated herein have been adjusted to reflect

Splash Beverage Group, Inc.

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period financial statements to conform to the current period classifications.

These reclassifications had no impact on net loss.

Use of Estimates

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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

At December 31, 2022 we had approximately $3.8m over

the federally insured limits.

Our cash in uninsured foreign bank accounts was $ 1,941 at

December 31, 2022.

Accounts Receivable and Allowance for Doubtful

Accounts receivable are carried at their estimated

Accounts receivables are carried at their estimated

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

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Notes to the Consolidated Financial Statements

Note 2 – Summary of Significant Accounting

Policies, continued

Inventory is stated at the lower of cost or net realizable

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Machinery & equipment

Buildings & Tanks

Leasehold improvements

12 unchanged sentences

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.

Employee Retention Credit (“ERC”)

The CARES Act provides an employee retention credit

(“CARES Employee Retention credit”), which is a refundable tax credit against certain employment taxes of up to $ 5,000 per

employee for eligible employers.

The tax credit is equal to 50 % of qualified wages paid to employees during a quarter, capped at $ 10,000

of qualified wages per employee through December 31, 2020.

Additional relief provisions were passed by the United States government, which

extend and slightly expand the qualified wage caps on these credits through December 31, 2021.

Based on these additional provisions, the

tax credit is now equal to 70 % of qualified wages paid to employees during a quarter, and the limit on qualified wages per employee has

been increased to $ 10,000 of qualified wages per quarter.

The Company qualified for the tax credit under the CARES Act.

Copa Di Vino received

$ 211,300 which represents refunds for the quarters ended March, June and September 2021 Form 941 Employer Quarterly Federal Tax Returns.

Splash Beverage Group, Inc.

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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).

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

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

and listed equities.

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.

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, 2022 and December 31, 2021, consistent with recent negotiations

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

Revenue Recognition

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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.

Distribution expenses to transport our products, and

warehousing expense after manufacture are accounted for in Other General and Administrative cost.

Splash Beverage Group, Inc.

5 unchanged sentences

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

cost of transportation from production site to other 3 rd party warehouses or customer is included in Other General and Administrative

Other General and Administrative Expenses

Other General and Administrative expenses includes

Amazon selling fees, royalty cost for selling TapouT, cost of transportation from production site to other 3 rd party warehouses

or customers, Insurance cost, consulting cost, legal and audit fees, Investor Relations expenses, travel & entertainment expenses,

occupancy cost and other cost.

Stock-Based Compensation

1 unchanged sentence

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.

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 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 measure stock-based awards at the grant-date fair

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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.

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 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

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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.

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.

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

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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

anti-dilutive common stock equivalents, including warrants to purchase shares of common stock and warrants granted by our Board but have

not been exercised totaling 14,343,896 .

We conduct advertising for the promotion of our products.

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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 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

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

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.

Splash Beverage Group, Inc.

Notes to the Consolidated Financial Statements

Note 2 – Summary of Significant Accounting

Policies, continued

Long-lived assets

12 unchanged sentences

from third party brokers or using other valuation techniques.

Currency Gain/Losses

Foreign Currency Gain/Losses — foreign subsidiaries’

functional currency is the local currency of operations and the net assets of foreign operations are translated into U.S.

dollars using

current exchange rates.

Gain or losses from these translation adjustments are included in the consolidated statement of operations and

other comprehensive (loss) income as foreign currency translation gains or losses.

Translation gains and losses that arise from the translation

of net assets from functional currency to the reporting currency, as well as exchange gains and losses on intercompany balances, are included

in Other Comprehensive Losses.

The Company incurred foreign currency translation net loss during the year ended December 31, 2022 of $ 20,472 .

Recent Accounting Pronouncements

5 unchanged sentences

and Going Concern Considerations

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

deficit of approximately $ 3.2 million.

During 2022, the Company received approximately $ 12.8

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.

million and $ 4.0

million from the proceeds from the issuance common stock and debt, respectively.

These events served to mitigate the

conditions that previously raised substantial doubt about

the Company’s ability to continue as a going concern.

The Company’s

consolidated financial statements have been prepared on the basis of US GAAP for a going concern, on the premise that Company’s

ability to meet its obligations as they come due in the normal course of business.

The Company sustained a net loss of approximately $ 21.7

million and negative cash flows from operating activities of approximately $ 14.1 million for the year ended December 31, 2022.

date the Company has generated cash flows from issuances of equity and indebtedness.

Management believes

that its current available resources will be sufficient to fund the Company’s planned expenditures over the next 12 months.

management recognizes that it may be required to obtain additional resources via issuances of indebtedness or equity to successfully execute

its business plans.

No assurances can be given that management will be successful in raising additional capital, if needed, or on acceptable

These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts

and classification of liabilities that might be necessary should the Company determine it shall be unable to continue as a going concern.

Splash Beverage Group, Inc.

1 unchanged sentence

Note 4 – Notes Payable, Related Party

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

Notes Payable, and Revenue Financing Arrangements

Notes payable are generally nonrecourse and secured

by all Company owned assets.

Schedule of debt

December 31, 2021

December 31, 2020

Notes Payable

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 .

Schedule of Notes payable

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

The note included warrants for

shares of common stock at $ 0.94

272,584 shares of common stock at $ 0.94 per share.

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 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 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

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

The loan and interest was paid off

in June 2022.

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% through

November 2022 and 4.00% through September 2025 of the previous months revenue

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 January 2023

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 January 2023

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 January 2023

May 2021, we entered into a six-month loan with a 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

May 2021, we entered into a six-month 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 January 2023.

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 principal and interest was converted into shares of common stock in

February 2022.

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 principal and interest was converted to shares of common stock

in April 2022

August 2022, we entered into a 56-months auto loan in the amount of $ 45,420 .

December 2022, we entered into an eighteen-month loan with an individual in the amount of $ 100,000 .

The note included 100% warrant

The loan matures in June 2024 with principal and interest due at maturity.

December 2022, we entered into an eighteen-month loan with an individual in the amount of $ 250,000 .

The note included 100% warrant

The loan matures in June 2024 with principal and interest due at maturity.

December 2022, we entered into an eighteen-month loan with an individual in the amount of $ 1,000,000 .

The note included 100% warrant

The loan matures in June 2024 with principal and interest due at maturity.

December 2022, we entered into an eighteen-month loan with an individual in the amount of $ 250,000 .

The note included 100% warrant

The loan matures in June 2024 with principal and interest due at maturity.

December 2022, we entered into an eighteen-month loan with an individual in the amount of $ 250,000 .

The note included 100% warrant

The loan matures in June 2024 with principal and interest due at maturity.

December 2022, we entered into an eighteen-month loan with an individual in the amount of $ 250,000 .

The note included 100% warrant

The loan matures in June 2024 with principal and interest due at maturity.

December 2022, we entered into an eighteen-month loan with an individual in the amount of $ 400,000 .

The note included 100% warrant

The loan matures in June 2024 with principal and interest due at maturity.

December 2022, we entered into an eighteen-month loan with an individual in the amount of $ 1,500,000 .

The note included 100% warrant

The loan matures in June 2024 with principal and interest due at maturity.

notes payable

notes discount

( 1,898,265 )

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

current portion

( 1,080,257 )

Long-term notes payable

( 2,967,812 )

notes payable

Interest expense on notes payable was $ 217,123 and $ 376,572 for the years

ended December 31, 2022 and 2021, respectively.

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

Accrued interest was $ 141,591 and $ 171,452 at December 31, 2022 and December 31, 2021,

respectively.

Notes discount of $ 1,898,265 for the year ending December 31, 2022 is related

to the discounted warrants on the December notes.

The year ending December 31, 2021 did not have discounted warrants.

Splash Beverage Group, Inc.

1 unchanged sentence

Note 4 – Notes Payable, Related Party

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

Notes Payable, and Revenue Financing Arrangements, continued

Schedule of Notes payable

2 unchanged sentences

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.

The loan was paid off in June 2022

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.

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

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.

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.

$ 5,407 and $ 26,409 for the years ended December 31, 2022 and 2021, respectively.

Splash Beverage Group, Inc.

Notes to the Consolidated Financial Statements

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 $ 594,000 and $ 540,000 for the years ended December 31, 2021 and 2020, which is

included in general and administrative expenses.

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

providing us with licensing rights to the brand “TapouT” on (i) energy drinks, (ii) energy bars, (iii) coconut water, (iv)

electrolyte gum/chews, (v) energy shakes, (vi) powdered drink mix, (viii) water (including enhanced water), (vii) energy shots, (viii)

teas, and (ix) sports drinks sold in the North America (including US Territories and Military Bases), United Kingdom, Brazil, South Africa,

Australia, Scandinavia, Peru, Colombia, Chile and Guatemala..

Under the terms of the agreement, we are required to pay a 6% royalty on

net sales, as defined.

In 2022 and 2021, we are required to make monthly payments of $ 54,450 and $ 49,500 , respectively.

There were no

unpaid royalties at December 31, 2022 and 2021.

We paid the guaranteed minimum royalty payments of $ 653,400

and $ 594,000

for the years ended December 31, 2022 and 2021, which is included in general and administrative expenses.

In connection with the Copa APA, we acquired the license

8 unchanged sentences

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.

Note 6 – Stockholders’ Equity

During the twelve-months ended December 31, 2022,

we issued 4,596,129 shares of common stock as part of the public offerings, 1,834,404 shares in exchange for services, 380,959 shares

in connection with the purchase of Copa di Vino, 377,796 shares on conversion of convertible instruments, and 300,000 shares for cash.

Splash Beverage Group, Inc.

Notes to the Consolidated Financial Statements

Note 6 – Deficiency in Stockholders’

Note 6 – 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

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.

In January 2021, the Board of Directors approved a

private placement offering of 1,212,121 shares of the common stock of the Company, a purchase price of $ 3.30 per share for aggregate gross

proceeds of $4,000,000 (“PPM”).

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 .

In July 2022, we issued 100,000

shares of common stock of the Company, at a purchase price of $ 1.10

In December 2022, we issued 200,000

shares of common stock of the Company, at a purchase price of $ 1.00

per share this placement included 100 %

warrant coverage.

In December 2022, we issued Convertible Notes for

4,000,000 shares at $ 1.00 per share with warrants to purchase 4,000,000 shares of common stock at $ 0.25 per share.

A summary of the Company’s stock option plan

6 unchanged sentences

Equity compensation plan approved by board of directors

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.

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

The following is a summary of the Company’s

stock option activity:

Schedule of stock option activity

December 31, 2022

December 31, 2021

Balance - beginning of the year

Balance - end of the year

Exercisable – end of year

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 two years.

In May 2022, we granted 146,000 options to purchase

common stock to employees and consultants, these options vest between one and four years.

The Company determined the grant date fair value of

the options granted using the Black Scholes Method using the following assumptions:

Schedule of stock option assumption

December 31, 2022

December 31, 2021

Risk-free interest rates

Exercise price

Expected life

Expected volatility

Expected dividends

During the year ended December 31, 2022, 397,748

options vested with a weighted average grant date fair value of $ 2.55 Stock compensation expense for the years ended December 31,

2022 and 2021 was $ 1,146,965

and $ 3,971,926 , respectively.

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

At December 31, 2022, there was 418,254

options unvested with an average grant date fair value of $ 2.54 and

unrecognized compensation costs related to stock options which will be recognized over the weighted average remaining years of

The following is a summary of the Company’s Warrant activity

Schedule of warrant activity

December 31, 2022

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.

In January 2021 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.

In May 2021 we granted 333,333 warrants to purchase

common stock of the Company to a director.

These warrants vest over two years.

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.

The fair value of warrants recognized in the period

has been estimated using the Black-Scholes option pricing model with the following assumptions.

Schedule of assumptions used in Black-Scholes option pricing model

December 31, 2022

December 31, 2021

Risk-free interest rates

Exercise price

Expected life

Expected volatility

Expected dividends

Splash Beverage Group, Inc.

Notes to the Consolidated Financial Statements

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

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

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.

In conjunction with the acquisition of Copa di Vino, the Company also entered into a Revenue Loan and Security

Agreement (the “Loan and Security Agreement”) by and among the Company, Robert Nistico, additional Guarantor and each of

the subsidiary guarantors from time-to-time party thereto (each a “Guarantor”, and, collectively, the “Guarantors”),

and Decathlon Alpha IV, L.P.

(the “Lender”).

The Loan and Security Agreement provided for a revenue-based credit facility

of $ 1,578,237 (the “Gross Amount”) with the Lender (the “Credit Facility”).

There were related party notes payable in the

amount of $ 0.7

million outstanding as of December 31, 2021 and were repaid in 2022.

Note 8 – Investment in Salt Tequila USA,

6 unchanged sentences

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 .

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:

Note 9 – Lease

We have various operating lease agreements primarily

related to real estate and office.

Our real estate leases represent a majority of our lease liability.

Our lease payments are mainly fixed.

Any variable lease payments, including utilities, common area maintenance are expensed during the period incurred.

Variable lease costs

were immaterial for the years ended December 31, 2022 and 2021.

A majority of our real estate leases include options to extend the lease.

We review all options to extend at the inception of the lease and account for these options when they are reasonably certain of being

Operating lease expense is recognized on a straight-line

basis over the lease term and is included in operating expense on our consolidated statement of operations.

Operating lease cost was $ 315,980

and $ 277,525 during the years ended December 31, 2022 and 2021, respectively.

The following table sets for the maturities of our operating lease liabilities and reconciles the respective undiscounted payments to

the operating lease liabilities in the consolidated balance sheet at December 31, 2022:

Maturities of lease liabilities

Undiscounted Future Minimum Lease Payments

Operating Lease

Amount representing imputed interest

Total operating lease liability

Current portion of operating lease liability

Operating lease liability, non-current

Future Minimum Lease Payments

representing imputed interest

Total operating

lease liability

portion of operating lease liability

lease liability, non-current

The table below presents information for lease costs

related to our operating leases at December 31, 2022:

Schedule of lease costs

of leased assets

of lease liabilities

operating lease cost

Amortization of leased assets

Interest of lease liabilities

Total operating lease cost

The operating lease cost at December 31, 2022 was

$ 315,980 and at December 31, 2021 was $ 277,525 .

The table below presents lease- related terms and

1 unchanged sentence

Summary of lease-related terms and discount rates

Remaining term on leases

7 to months 48

Incremented borrowing rate

Splash Beverage Group, Inc.

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.

term on leases

borrowing rate

Splash Beverage Group, Inc.

1 unchanged sentence

Note 10 – 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

Total Revenues continuing operations

Total Revenues discontinuing operations

Splash Beverage Group

Medical Devices - Discontinued

Splash Beverage Group, Inc.

Notes to the Consolidated Financial Statements

We have two reportable operating segments:

manufacture and distribution of non-alcoholic and spirits brand beverages, and (2) the retail sale of beverages and groceries online.

These operating segments are managed separately and each segment’s major customers have different characteristics.

Segment Reporting

is evaluated by our Chief Executive Officer and Chief Financial Officer.

Our medical device business was discontinued in 2021.

of Segment Reporting Information

the period ended, December 31,

Beverage Group

Revenues continuing operations

Revenues discontinuing operations

after Marketing expenses

Beverage Group

Contribution after Marketing expenses continuing operations

share-based compensation

general and administrative

from continuing operations

( 21,394,633 )

( 29,082,922 )

Beverage Group

Devices – Discontinued

Splash Beverage Group revenue increased for the year ending December 31,

2022 versus December 31, 2021 by $0.3m or 6.7% with largest contribution from TapouT and Pulpoloco.

Contribution after Marketing expenses

declined by $2.4m for the year ending December 31, 2022 versus December 31, 2021 driven by raw material cost increases and faster growth

of lower margin brands affecting the overall mix of sales.

E-Commerce revenue increased for the year ending December 31, 2022 versus

December 31, 2021 by $6.4m driven by expanded territory coverage, new products being sold and increased cart size when customers checking

Contribution after Marketing expenses increased by $2.4m due to increased sales partially offset by cost increases.

Note 11 – Commitment and Contingencies

4 unchanged sentences

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.

The stock price guarantee expired March 2021.

No additional shares were needed

to be issued under the Stock Price Guarantee.

Splash Beverage Group, Inc.

2 unchanged sentences

Underwriting Agreement

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

On June 10, 2021, we 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.

(the “Common Stock”) and warrants to purchase one share of Common Stock (the “Warrants”).

Pursuant to the Offering,

we 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, we received net proceeds of approximately $13.2 million.

On February 17, 2022, we entered into an underwriting

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

(the “Common Stock”) to purchase one share of Common Stock.

Pursuant to the Offering, we sold 2,300,000 shares of Common Stock

for total gross proceeds of approximately $9.2 million.

After deducting the underwriting commissions, discounts, and offering expenses

payable by we, we received net proceeds of approximately $7.9 million.

On September 22, 2022, we

entered into an underwriting agreement (“Underwriting Agreement”) relating to an underwritten public offering (the

“Offering”) of common stock, (the “Common Stock”) to purchase one share of Common Stock.

Pursuant to the

Offering, we sold 2,296,129

shares of Common Stock for total gross proceeds of approximately $ 3.6

After deducting the underwriting commissions, discounts, and offering expenses, we received net proceeds of

approximately $ 3.1

Representative’s Warrants

17 unchanged sentences

be carried forward indefinitely.

There was no income tax expense or benefit

for the years ended December 31, 2021 and 2020 due to the full valuation allowance recorded.

The reconciliation of the income tax benefit

is computed at the U.S.

There was no income tax expense or benefit for the

years ended December 31, 2022 and 2021 due to the full valuation allowance recorded.

Splash Beverage Group, Inc.

Notes to the Consolidated Financial Statements

The reconciliation of the income tax benefit is computed

federal statutory rate as follows:

22 unchanged sentences

Company’s operations are 2015 through 2022.

– 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 14 – 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

In February 2023 the $ 200,000

note payable that was in default was settled via payment of $ 302,667

In February 2023 the Company received $ 2.0 million

from a Private Placement issuance of convertible notes.

The notes convert into 3.5 M shares of our common stock.

In February 2023 the Company transferred cash in

bank deposits accounts to the maximum federally insured limits of $ 250,000

to minimize unissued funds.

At March 29, 2023 we had $ 563,498

over the federally insured limits.

We have notes that expire in 2023 that we will extend

Changes in and Disagreements with Accountants on Accounting

and Financial Disclosure.

On March 9, 2023, the Company

was advised by Daszkal Bolton, LLP (“Daszkal”), the Company’s independent registered public accounting firm, that Daszkal

completed a business combination agreement with CohnReznick LLP (“CohnReznick”).

As a result of this transaction, Daszkal

will resign as the Company’s independent registered public accounting firm upon the Company filing its annual report on Form 10-K

for the year ended December 31, 2022.

The Company’s current Daszkal audit team is now part of CohnReznick and the Company expects

it will likely engage CohnReznick to serve as the Company’s independent registered public accounting firm for the Company’s

fiscal year ending December 31, 2023, but has not engaged CohnReznick at this time.

Daszkal’s reports on

the Company’s financial statements for the past two years did not contain an adverse opinion or a disclaimer of opinion, and were

not qualified or modified as to uncertainty, audit scope, or accounting principles.

During the years ended December 31, 2021 and 2020, and the subsequent interim periods through November 14, 2022,

there were (i) no disagreements (as described in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company

and Daszkal on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which,

if not resolved to Daszkal’s satisfaction, would have caused Daszkal to make reference thereto in its reports on the financial statements

for such years;

and (ii) no “reportable events” within the meaning of Item 304(a)(1)(v) of Regulation

S-K, except that Daszkal advised the Company of material weaknesses in its internal control over financial reporting as of December 31,

2021 and 2020.

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