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Item 2. Management’s Discussion and Analysis

2023-06-06 compared with 2022-11-14 · 117 added, 97 removed, 25 unchanged (90% of the section changed)

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Cautionary Statement Regarding Forward-Looking

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.

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

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

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.

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.

The Company disclaim any obligation to publicly update these statements or disclose any difference between actual results and those reflected

in these statements.

Unless the context

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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

Splash Beverage Group, Inc.

(the “Company”,

“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.

Through its division Qplash, Splash’s distribution reach includes e-commerce access to both business-to-business

(B2B) and business-to-consumer (B2C) customers.

Qplash 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

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.

Results of Operations

for the Three and Nine Months Ended September 30, 2022 compared to Three and Nine Months Ended September 30, 2021.

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.

for the Three Months Ended March 31, 2023 compared to Three Months Ended March 31, 2022.

Revenues for the three months ended March 31,

2023 were $5,822,727 compared to revenues of $3,926,573 for the three months ended March 31, 2022.

The $1,896,154 increase in sales

is due to an increase in our beverage sales of $420,810 with all brands growing versus last year with largest contribution from

TapouT and Copa di Vino.

Our revenues from our vertically integrated B2B and B2C e-commerce distribution platform called Qplash

increased $1,475,344 or 60% driven by expanded territory coverage, new products being sold and increased cart size when customers

are checking out.

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.

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.

Cost of goods sold for the three months ended

March 31, 2023 were $4,061,228 compared to cost of goods sold for the three months ended March 31, 2022 of $2,635,310.

The $1,425,918

increase in cost of goods sold for the three-month period ended March 31, 2023 is primarily due to our increased sales and product

mix shifting to lower margin items in e-commerce business.

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

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

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

LIQUIDITY AND CAPITAL RESOURCES

Operating expenses for the three months ended March

31, 2023 were $5,216,420 compared to $6,975,215 for the three months ended March 31, 2022 a decrease of $1,758,795.

The decrease in our

operating expenses was primarily due to non-cash expenses partially offset by increases for the incorporation of new staff, benefit cost,

freight cost and Amazon selling fees.

The net loss for the three months ended March 31, 2023 was $3,729,299 as compared to a net loss

of $5,994,408 for the three months ended March 31, 2022.

The decrease in net loss is due to higher sales offsetting lower gross margins

and lower operating expenses.

Net Other Income and Expense

Interest expenses for the three months ended

March 31, 2023 was $167,121 compared to $85,879 for the three months ended March 31, 2022.

Other income was $140,404 and $0 for the three

months ended March 31, 2023 and March 31, 2022 respectively.

The income was related to an insurance settlement.

Amortization of debt discount for the three

months ended March 31, 2023 was $247,661 compared to $0 for three months ended March 31, 2022.

LIQUIDITY, GOING CONCERN CONSIDERATIONS AND CAPITAL RESOURCES

Liquidity is the ability of a company to generate

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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

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.

As of March 31, 2023, the Company had total cash and

cash equivalents of $2,145,797, as compared with $4,431,745 at December 31, 2022.

Net cash used for operating activities during the

three months ended March 31, 2023 was $4,103,827 as compared to the net cash used by operating activities for the three months ended March

31, 2022 of $4,675,886.

The primary reasons for the change in net cash used are decreases in inventory, accrued expenses and accounts

payable partially offset by increases in account receivables.

For the period March 31, 2023, the Company

had leasehold improvements of $10,571 related to our Copa Di Vino production site.

For the period ending March 31, 2022, there

were no capital asset transactions.

Net cash provided by financing activities during the

three months ended March 31, 2023 was $1,830,059 compared to $8,765,000 provided from financing activities for the three months ended

March 31, 2022.

During the three months ended March 31, 2023, the Company received $2,000,000 for convertible note, $200,000 from a shareholder

advance, which was offset by repayments to debt holders of $369,941.

The Company has a Securities Purchase Agreement

approved by the Board to raise up to $8.0 million to fund acquisitions, equipment purchases and working capital.

In order to have sufficient cash to fund our operations,

the Company 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.

The Company 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 the Company 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, the Company 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.

The Company may also be required to recognize non-cash

expenses in connection with certain securities the Company 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 the Company 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

the Company reduce our operations accordingly, the Company may be required to curtail or cease operations.

As a result, there is uncertainty regarding the Company’s ability

to maintain liquidity sufficient to operate its business effectively, which raises substantial doubt as to the Company’s ability

to continue as a going concern for at least twelve months from the date of the consolidated financial

statements being available to be issued.

CONTRACTUAL OBLIGATIONS

Share obligation:

At March 31, 2023 the company had an obligation

to issue 1,500,000 shares related to the February Private Placement, which was issued in May, 2023.

The company has an obligation

to issue 100,000 shares to a consultant for services provided.

Minimum Royalty Payments:

We have a licensing agreement with ABG TapouT,

The Company 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 :

Under the licensing agreement, the Company have minimum royalty payments to TapouT of $495,000 for the nine

months remaining in 2023

Purchase Commitments :

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.

The Company do not have any off-balance sheet arrangements

(as that term is defined in Item 303 of Regulation S-K) that are reasonably likely to have a current or future material effect on our

financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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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-Q

Item 2. Management’s Discussion and Analysis