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Item 2. Management’s Discussion and Analysis

2024-05-15 compared with 2023-11-14 · 150 added, 136 removed, 18 unchanged (94% of the section changed)

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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.

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

otherwise requires, references in this Form 10-Q to “we,” “us,” “our,” or the “Company”

refer to Splash Beverage Group and its subsidiaries.

The following discussion and analysis should

be read in conjunction with the Condensed Financial Statements (unaudited) and Notes to Condensed Financial Statements (unaudited)

filed herewith.

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 otherwise

requires, references in this Form 10-Q to “we,” “us,” “our,” or the “Company” refer to

Splash Beverage Group and its subsidiaries.

The following discussion and analysis should be read

in conjunction with the Condensed Financial Statements (unaudited) and Notes to Condensed Financial Statements (unaudited) filed herewith.

Business Overview

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(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”) 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.

Results of Operations

for the Three Months and Nine Months Ended September 30, 2023 compared to Three Months and Nine Months Ended September 30, 2022.

Three months ended September 30, 2023:

Revenue increased by 5.6%, over same quarter

last year $5,144,069 compared to $4,870,407.

The increase of $273,662 was due to:

· An increase from our e-commerce distribution platform called Qplash.

· Increase in the Energy and Salt brands

· Offset by a partial decline in sales in the Hydration, Copa and Pulpoloco brands

Nine months ended September 30, 2023:

Revenue increased by 21.6%, over same period

last year $16,161,747 compared to $13,295,921.

The increase of $2,865,826 was due to:

· An increase from our e-commerce distribution platform called Qplash.

· Increase in the Energy, Salt and Copa brands.

· Offset by a partial decline in sales in the Hydration and Pulpoloco brands.

Cost of Goods

Three months ended September 30, 2023:

Cost of goods sold increased by 24%, over the same quarter last year $3,847,202compared

to $3,101,807.

The increase of $745,395 was due to:

· Increase in sales

· Higher production costs in the Hydration brand

· Increase in cost associated with valuation allowances for expired, damaged, or impaired inventory.

Nine months ended September 30, 2023:

· Cost of goods sold increased by 27.5%, over the same nine months last year $11,326,298 compared

to $8,886,508.

The increase of $2,439,790 was due to:

· Increase in sales

· Higher production costs in the Hydration brand

· Increase in cost associated with valuation allowances for expired, damaged, or impaired inventory.

for the Three Months Ended March 31, 2024 compared to Three Months Ended March 31, 2023.

Revenues for the three months ended March 31, 2024 were approximately $1.5 million

compared to revenues of approximately $5.8 million for the three months ended March 31, 2023.

The $4.3 million decrease in sales is due

to a decrease in our beverage sales of $0.7 million.

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

called Qplash decreased approximately $3.5 million or 91% due to low inventory.

Total sales declined due to limited liquidity to procure

inventory to drive third-party sales.

Cost of Goods Sold

Cost of goods sold for the three months ended March

31, 2024 were $1.4 million compared to cost of goods sold for the three months ended March 31, 2023 of approximately $4.1 million.

$2.7 million decrease in cost of goods sold for the three-month period ended March 31, 2024 is primarily due to our decreased sales.

Operating Expenses

Three months ended September 30:

Operating expenses for the three months ended

September 30, 2023, was $ 5,620,398 compared to $6,879,482 for the three months ended September 30, 2022, a decrease of $1,259,084.

The decrease in operating expenses was primarily due to a decrease in consulting fees.

Nine months ended September 30:

Operating expenses for the nine months ended

September 30, 2023, was $ 16,835,250 compared to $21,033,396 for the nine months ended September 30, 2022, a decrease of $4,198,146.

The decrease in operating expenses was primarily due to:

· Decrease in consulting fees.

· Offset by increase in Employee cost due to new hires

· Offset by increase in e-commerce shipping and handling directly attributive to increase in e-commerce

Operating expenses for the three months ended March

31, 2024 were $3.4 million compared to $5.2 million for the three months ended March 31, 2022 a decrease of $1.8 million.

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, 2024 was $5.1 million as compared to a net

loss of approximately $3.7 million for the three months ended March 31, 2023.

The increase in net loss is due to higher debt discount

and interest expenses.

Net Other Income and Expense

Interest expense for the three and nine months

ended September 30, 2023 was $221,488 and $561,249 respectively.

For the three and nine months ended September 30, 2022 the interest

expenses was $66,193 and $225,543 respectively due to additional convertible notes issued in December 2022.

Included in Other Income for the three months

ended September 30, 2023 was an insurance settlement of $57,429.

For the three and nine months ended September 30, 2022 the other

income / expense $0.

Amortization of debt discount for the three

months and nine months ended September 30, 2023 was $1,125,409 and $2,500,065 respectively.

For the three and nine months ended

September 30, 2022 the amortization of debt discount was $0.

LIQUIDITY, GOING CONCERN CONSIDERATIONS

AND CAPITAL RESOURCES

Interest expenses for the three months ended March

31, 2024 was $0.5 million compared to $0.2 million for the three months ended March 31, 2023.

The $0.3 million increase in interest expense

is due to new loans with a principal of $6.3 million.

Other income was $0 and $0.1 million for the three

months ended March 31, 2024 and March 31, 2023 respectively.

The income in 2023 was related to an insurance settlement.

Amortization of debt discount for the three months

ended March 31, 2024 was approximately $0.9 million compared to $0.25 million for three months ended March 31, 2023.

LIQUIDITY, GOING CONCERN CONSIDERATIONS AND CAPITAL

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.

factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and

capital expenditure.

As of September 30, 2023, the Company had total

cash and cash equivalents of $96,121, as compared with $4,431,745 at December 31, 2022.

Net cash used for operating activities during

the nine months ended September 30, 2023 was $8,503,765 as compared to the net cash used by operating activities for the nine months

ended September 30, 2022 of $10,824,651.

The 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 in 2022.

Net cash provided by financing activities during

the nine months ended September 30, 2023 was $4,168,730.

During the nine months ended September 30, 2023, the Company received

$4,500,000 for convertible notes and a $460,000 loan from a related party, which was offset by repayments to debt holders of $757,270.

In order to have sufficient cash to fund operations,

Significant factors

in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.

As of March 31, 2024, the Company had total cash and

cash equivalents of $14,757, as compared with $379,978 at December 31, 2023.

Net cash used for operating activities during the

three months ended March 31, 2024 was $1.3 million as compared to the net cash used by operating activities for the three months ended

March 31, 2023 of $4.0 million.

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 ending March 31, 2024, there were no

capital asset transactions.

For the period March 31, 2023, the Company had leasehold improvements of $10,571 related to our Copa Di Vino

production site.

Net cash provided by financing activities during the

three months ended March 31, 2024 was $2.0 million compared to $1.8 million provided from financing activities for the three months ended

March 31, 2023.

During the three months ended March 31, 2024, the Company received $1.5 million for convertible note, which was offset

by repayments to debt holders of $0.51 million and $0.05 million to related party cash advance.

The Company Board has approved raising 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 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

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 financial condition.

The Company’s ability

to obtain needed financing may be impaired by such factors as the capital markets and its 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.

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.

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:

Minimum Royalty Payments:

The Company has a licensing agreement with

ABG TapouT, LLC (“TapouT”).

Under the licensing agreement, the Company has minimum royalty payments to TapouT of $165,000

for the three months remaining in 2023.

The Company have a licensing agreement with ABG TapouT,

LLC (“TapouT”).

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

months remaining in 2024.

Inventory Purchase Commitments :

Off-Balance Sheet Arrangements

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

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.

Accounting Estimates

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.

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 judgments.

However, inherent uncertainties persist, underscoring the critical nature of revenue

recognition as it significantly impacts financial statements and performance evaluation.

for Doubtful Accounts

allowance for doubtful accounts is established based on historical experience, current economic conditions, and specific customer collection

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

in economic conditions or customer creditworthiness could result in adjustments to the allowance for doubtful accounts, impacting our

reported financial results.

value inventory at the lower of cost or net realizable value.

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.

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 required for Smaller

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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