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Item 2. Management’s Discussion and Analysis

2023-08-14 compared with 2023-06-06 · 108 added, 109 removed, 33 unchanged (87% of the section changed)

1 unchanged sentence

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

The information

in this discussion may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended,

and Section 21E of the Securities Exchange Act of 1934, as amended.

These forward-looking statements involve risks and uncertainties,

including statements regarding our capital needs, business strategy and expectations.

Any statements that are not of historical

fact may be deemed to be forward-looking statements.

These forward-looking statements involve substantial risks and uncertainties.

In some cases you can identify forward-looking

statements by terminology such as “may,” “will,” “should,” “expect,” “plan,”

“intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,”

or “continue”, the negative of the terms or other comparable terminology.

Actual events or results may differ materially from

the anticipated results or other expectations expressed in the forward-looking statements.

In evaluating these statements, you should

consider various factors, including the risks included from time to time in other reports or registration statements filed with the United

States Securities and Exchange Commission.

These factors may cause our actual results to differ materially from any forward-looking statements.

The Company 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

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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(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.

Qplash markets well known beverage brands to customers throughout the US that prefer

delivery direct to their office, facilities, and or homes.

Results of Operations

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.

for the Three Months and Six Months Ended June 30, 2023 compared to Three Months and Six Months Ended June 30, 2022.

Net Revenues for the three months ended June 30, 2023 was $5,194,951 compared to revenues of $4,498,940 for the three

months ended June 30, 2022.

The $696,011 increase in sales is due to an increase from our vertically integrated B2B and B2C e-commerce

distribution platform called Qplash which increased $924,428 offset by a decline in sales in the beverage business of $228,417 driven

by phasing of purchases of Salt Tequila and Copa di Vino from our distributors.

Revenue for the six months ended June 30, 2023 was $11,017,678 compared to revenues

of $8,425,514 for the six months ended June 30, 2022.

The $2,592,164 increase in sales is driven by increases in both the e-commerce and

beverage businesses which increased $2,399,772 and $192,392 respectively.

Qplash increased revenue was based on expanded territory coverage,

new products being sold and increased cart size for customers.

The beverage business largest contributors to the increase in revenues

were TapouT and Pulpoloco.

Cost of Goods Sold

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.

Cost of goods sold for the three months ended June

30, 2023 was $3,417,868 compared to cost of goods sold for the three months ended June 30, 2022 of $3,149,275.

The $268,593 increase in

cost of goods sold for the three-month period ended June 30, 2023 is driven by increased sales and product mix shifting to lower margin

items in e-commerce business.

Cost of goods sold for the six months ended June 30,

2023 was $7,479,096 compared to cost of goods sold for the six months ended June 30, 2022 of $5,784,701.

The $1,694,395 increase in cost

of goods sold for the six-month period ended June 30, 2023 is driven by increased sales in both the e-commerce and beverage business.

Improvement in cost of goods sold compared to net

revenue for the three month and six-month period ended June 30, 2023 versus June 30, 2022 is driven by higher margin products sold.

Operating Expenses

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.

Operating expenses for the three months ended June 30, 2023 was $5,998,432 compared

to $7,178,813 for the three months ended June 30, 2022 a decrease of $1,180,381.

The decrease in 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.

Operating expenses for the six months ended June 30, 2023 was $11,214,852 compared

to $14,153,913 for the six months ended June 30, 2022 a decrease of $2,939,061.

The decrease in operating expenses was primarily due to

non-cash expenses partially offset by increases for the incorporation of new staff, benefit cost, marketing expense, freight cost and

Amazon selling fees.

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

Interest expense for the three and six months ended

June 30, 2023 was $172,641 and $339,762 respectively.

For the three and six months ended June 30, 2022 the interest expenses was $73,472

and $159,350 respectively due to additional convertible notes issued in December 2022.

Included in Other Income for the three months ended June 30, 2023 was an insurance settlement of $57,429.

three and six months ended June 30, 2022 the other income / expense $0.

Amortization of debt discount for the three months and six months ended June 30, 2023

was $1,126,994 and $1,374,655 respectively.

For the three and six months ended June 30, 2022 the amortization of debt discount was $0.

LIQUIDITY, GOING CONCERN CONSIDERATIONS

AND CAPITAL RESOURCES

Liquidity is the ability of a company to generate

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capital expenditures.

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.

As of June 30, 2023, the Company had total

cash and cash equivalents of $903,235, as compared with $4,431,745 at December 31, 2022.

Net cash used for operating activities during the six months ended June 30,

2023 was $6,522,091 as compared to the net cash used by operating activities for the six months ended June 30, 2022 of $7,107,851.

driver for the change in net cash used is due to a reduction of inventory in 2023 and an increase of inventory to support sales commitments

Net cash provided by financing activities during the six months ended June

30, 2023 was $3,023,576.

During the six months ended June 30, 2023, the Company received $3,150,000 for convertible notes, $200,000 from

a shareholder advance and a $250,000 loan from a related party, which was offset by repayments to debt holders

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 the Company.

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 new 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 issuance of incentive awards under equity 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

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:

The Company have a licensing agreement with ABG TapouT,

LLC (“TapouT”).

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

months remaining in 2023

Purchase Commitments :

The Company has a licensing agreement with

ABG TapouT, LLC (“TapouT”).

Under the licensing agreement, the Company has minimum royalty payments to TapouT of $330,00

for the six months remaining in 2023.

Inventory Purchase Commitments :

Off-Balance Sheet Arrangements

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.

The Company does 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.

Critical Accounting Estimates

Recently Issued Accounting Pronouncements

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