Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis
of Financial Condition and Results of Operations.
The following discussion and analysis should be read
in conjunction with the Audited Consolidated Financial Statements and Notes to Audited Consolidated Financial Statements filed herewith.
Business Overview
Canfield Medical Supply, Inc. a company’s whose
common stock was quoted on the OTCQB entered into an Agreement and Plan of Merger with SBG Acquisition Inc. (“Merger Sub”),
a Nevada Corporation wholly-owned by Canfield, and Splash Beverage Group, II 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 Canfield. The Merger was consummated on March 31, 2020.
As the owners and management of Splash had voting
and operating control of CMS following the Merger, the Merger transaction was accounted for as a reverse acquisition (that is with Splash
as the acquiring entity), followed by a recapitalization.
On July 31, 2020, CMS changed its name to Splash Beverage
Group, Inc. (“SBG”). On June 11, 2021, SBG’s common stock and warrant to purchase common stock began trading on the
NYSE American under the symbols “SBEV” and SBEV WT,” respectively
On November 8, 2021, SBG reincorporated into the State
of Nevada and became a Nevada corporation.
Our principal offices are located at 1314 E. Las Olas Blvd, Suite 221,
Fort Lauderdale, Florida 33301. Our main telephone number is (954) 745-5815. Our website address is www.splashbeveragegroup.com. We have
not incorporated by reference into this Annual Report on Form 10-K the information that can be assessed through our website and you should
not consider it to be part of this Annual Report on Form 10-K.
Results of Operations for the Year Ended December
31, 2022, compared to Year Ended December 31, 2021.
Revenue
Revenues for the year ended December 31, 2022 were
$18.1m compared to revenues of $11.3m for the year ended December 31, 2021. The $6.8m increase in sales was mainly due to the increase
in our ecommerce division distribution platform, Qplash of $6.4m.
Cost of Goods Sold
Cost of goods sold for year ended December 31, 2022
were $12.1m compared to cost of goods sold for the year ended December 31, 2021 of $8.3m. The $4.7m increase in cost of goods sold was
due to our increased sales and inflation.
Operating Expenses
Operating expenses for the year ended December 31,
2022 were $27.3m compared to $33m for the year ended December 31, 2021. Non cash operating expenses related to share issuance was $7.4m
as of December 31, 2022 compared $18.4m in December 31, 2021. The cash expense increase of $5.3m is mainly driven by an increase in sales
and marketing cost of $2.0m to drive sales and promote the brands, delivery fees of $2.0m and an increase in Amazon selling fees of $0.6m
associated with higher sales of Qplash division.
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Other Income/(Expense)
Other expense for the year ended December 31, 2022
were $245,429 compared to $262,450 for the year ended December 31, 2021. These cost are mainly interest expense.
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.
In addition, the Company has an active registration statement on Form S-3 to facilitate raising additional funds.
As of December 31, 2022, we had total cash of $4,431,745,
as compared with $4,181,383 at December 31, 2021. The increase was primarily due to issuances of notes payable and stock subscription
agreements offset by expenses relating to the operating the business.
Net cash used for continuing operating activities
during the year ended December 31, 2022, was $14,061,116 as compared to the net cash used by continuing operating activities for the year
ended December 31, 2021, of $14,697,179. The primary reason for the change in net cash used due to an increase of $0.4m in operating loss
operating losses of the business, offset by a decrease of $1.2m in working capital Net cash used for discontinued operating activities
during the year ended December 31, 2022, was $32,774 as compared to $515,952 for the year ended December 31, 2021 due to discontinuing
the business on June 30, 2022.
Net cash used for investing activities during the
year ended December 31, 2022, was $102,698 as compared to the net cash used for investing activities during the year ended December 31,
2021, of $0. The net cash used in the year 2022 was for a capital expenditure for out of home used for advertising and building improvements.
Net cash provided by financing activities during the
year ended December 31, 2022, was $14,446,951 compared to $19,014,524 provided from financing activities for the year ended December 31,
2021. During the year ended December 31, 2022, we received $11,428,591 from the issuance of common stock compared to $19,630,565 during
the year ending December 31, 2021. We received $4,045,420 and $928,000 proceeds from the issuance of debt in years ending December 31,
2022 and 2021 respectively. In the year ending December 31, 2022 $390,500 shareholder advance was repaid and in year ending December 31,
2021 $390,500 cash advance from shareholder was received. Principal repayment of debt $636,560 and $1,673,296 were made in years ending
December 31, 2022 and 2021 respectively. In year ending December 31, 2021 a cash advance repayment of $261,245 was made.
In order to have sufficient cash to fund our operations,
we will need to raise additional equity or debt capital. There can be no assurance that additional funds will be available when needed
from any source or, if available, will be available on terms that are acceptable to us. We will be required to pursue sources of additional
capital through various means, including debt or equity financings. Future financings through equity investments are likely to be dilutive
to existing stockholders. Also, the terms of securities we may issue in future capital transactions may be more favorable for new investors.
Newly issued securities may include preferences, superior voting rights, the issuance of warrants or other derivative securities, and
the issuances of incentive awards under equity employee incentive plans, which may have additional dilutive effects. Further, we may incur
substantial costs in pursuing future capital and/or financing, including investment banking fees, legal fees, accounting fees, printing
and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities
we may issue, such as convertible notes and warrants, which will adversely impact our financial condition. Our ability to obtain needed
financing may be impaired by such factors as the capital markets and our history of losses, which could impact the availability or cost
of future financings. If the amount of capital we are able to raise from financing activities together with our revenues from operations,
is not sufficient to satisfy our capital needs, even to the extent that we reduce our operations accordingly, we may be required to curtail
or cease operations.
Item 7A. Quantitative and Qualitative Disclosures
about Market Risk.
Not applicable for smaller reporting companies.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.