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Item 7. Management’s Discussion and Analysis

2024-03-29 compared with 2023-03-31 · 97 added, 54 removed, 53 unchanged (74% of the section changed)

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.

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.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains statements that are forward-looking.

These statements are based on current expectations and assumptions that are subject to risk, uncertainties, and other factors.

statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,”

“anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar expressions

or variations.

Actual results could differ materially because of the factors discussed in “Risk Factors” elsewhere in this

Annual Report, and other factors that we may not know.

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

a company’s whose common stock was quoted on the OTCQB entered into an Agreement and Plan of Merger with SBG Acquisition Inc.

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.

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as the acquiring entity), followed by a recapitalization.

On July 31, 2020, CMS changed its name to Splash Beverage

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.

On July 31, 2020, CMS changed its name to Splash

Beverage Group, Inc.

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.

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Fort Lauderdale, Florida 33301.

Our main telephone number is (954) 745-5815.

Our website address is www.splashbeveragegroup.com.

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.

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

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Revenues for the year ended December 31, 2023 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.

$18.9 million compared to revenues of $18.1 million for the year ended December 31, 2022.

The increase in sales was mainly due to an

increase in our E-commerce segment of $0.4 million and an increase in our Splash Beverage Group segment of $0.3 million.

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.

Cost of goods sold for the year ended December 31,

2023 were $13.3 million compared to cost of goods sold for the year ended December 31, 2022 of $12.2 million.

The $1.1 million 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.

2023 were $20.9 million compared to $27.3 million for the year ended December 31, 2022.

Non cash-operating expenses related to share

issuance was $1.2 million as of December 31, 2023 compared to $7.4 million in December 31, 2022.

The remaining operating expense decrease

of $0.2 million was due to decreases in sales and marketing expense and other general and administrative expenses of $1.0 million, which

were offset by an increase of $0.8 million in salary and wages.

Other Income/(Expense)

Other expense for the year ended December 31, 2023

were $245,429 compared to $262,450 for the year ended December 31, 2021.

These cost are mainly interest expense.

were $5.7 million compared to $0.2 million for the year ended December 31, 2022.

The other expense increase of $5.5 million is mainly

driven by an increase in amortization of debt discount of $3.8 million and a $1.9 million increase in interest expense.

LIQUIDITY AND CAPITAL RESOURCES

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as compared with $4,431,745 at December 31, 2022.

The increase was primarily due to issuances of notes payable and stock subscription

agreements offset by expenses relating to the operating the business.

The decrease was primarily due to expenses relating to 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.

during the year ended December 31, 2023, was $10.2 million as compared to the net cash used by continuing operating activities for the

year ended December 31, 2022, of $14.0 million.

The primary reason for the change in net cash used was due to an increase of $3.8 million

in amortization of debt and a decrease of $0.6 million in losses of the business, offset by a decrease of $16.5 million in working capital.

Net cash used for discontinued operating activities during the year ended December 31, 2023, was $0 as compared to $0.03 million for

the year ended December 31, 2022.

Net cash used for investing activities during the

year ended December 31, 2023, was $0.01 as compared to the net cash used for investing activities during the year ended December 31,

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,

During the year ended December 31, 2022, we received $11,428,591 from the issuance of common stock compared to $19,630,565 during

2022, of $0.1 million.

The net cash used in the year 2023 was for a capital expenditure for building improvements.

Net cash provided by financing activities during

the year ended December 31, 2023, was $6.1 million compared to $14.4 million provided from financing activities for the year ended December

During the year ended December 31, 2023, we received $0 from the issuance of common stock compared to $11.4 million during

the year ending December 31, 2022.

We received $4,045,420 and $928,000 proceeds from the issuance of debt in years ending December 31,

We received $6.6 million and $4.0 million proceeds from the issuance of debt in years ending December

31, 2023 and 2022, 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 the year ending December 31, 2023, $0.2 million was received from a shareholder advance and a $0.4

million shareholder advance was repaid in the year ending December 31, 2022.

Principal repayment of debt of $1.0 million and $0.6 million

were made in years ending December 31, 2023 and 2022 respectively.

In the year ending December 31, 2023 a cash advance from related party

of $0.4 million was received.

In order to have sufficient cash to fund our operations,

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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.

the issuance of incentive awards under equity employee incentive plans, which may have additional dilutive effects.

Further, we may incur

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or cease operations.

Quantitative and Qualitative Disclosures

about Market Risk.

Critical Accounting Estimates

The preparation of our consolidated financial statements

in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and

assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, as well as the disclosure of contingent assets

and liabilities.

Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable

under the circumstances.

Actual results could differ from those estimates.

The Company faces significant judgment

in revenue recognition due to the complexities of the beverage industry’s competitive landscape and diverse distribution channels.

Determining the timing of revenue recognition involves assessing factors such as control transfer, returns, allowances, trade promotions,

and distributor sell-through data.

Historical analysis, market trends assessment, and contractual term evaluations inform revenue recognition

However, inherent uncertainties persist, underscoring the critical nature of revenue recognition as it significantly impacts

financial statements and performance evaluation.

Allowance for Doubtful Accounts

The allowance for doubtful accounts is established

based on historical experience, current economic conditions, and specific customer collection issues.

Management evaluates the collectability

of accounts receivable on an ongoing basis and adjusts the allowance as necessary.

Changes in economic conditions or customer creditworthiness

could result in adjustments to the allowance for doubtful accounts, impacting our reported financial results.

Inventory Valuation

We value inventory at the lower of cost or net realizable

Estimating the net realizable value of inventory involves significant judgment, particularly when market conditions change rapidly

or when excess or obsolete inventory exists.

Management regularly assesses inventory quantities on hand, future demand forecasts, and

market conditions to determine whether write-downs to inventory are necessary.

Fair Value Measurements

We measure certain financial assets and liabilities

at fair value on a recurring basis.

Fair value measurements involve significant judgment and estimation, particularly when observable

inputs are limited or not available.

Management utilizes valuation techniques such as discounted cash flow models, market comparables,

and third-party appraisals to determine fair values.

Quantitative and

Qualitative Disclosures about Market Risk.

Not applicable for smaller reporting companies.

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 7. Management’s Discussion and Analysis