What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-14 compared with 2024-05-15 · 105 added, 73 removed, 95 unchanged (65% of the section changed)

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

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Regarding Forward-Looking

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Results of Operations

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.

for the Three Months and Six Months Ended June 30, 2024 compared to Three Months and Six Months Ended June 30, 2023.

Revenues for the three months ended June 30, 2024

were approximately $1.1 million compared to revenues of approximately $5.2 million for the three months ended June 30, 2023.

$4.1 million decrease in sales is due to a decrease in our beverage sales of $0.1 million.

Additionally, revenues from our vertically

integrated B2B and B2C e-commerce distribution platform called Qplash decreased approximately $4.0 million or 97.5% due to low inventory.

Total sales declined due to limited liquidity to procure inventory to drive third-party sales.

Revenue for the six months ended June 30, 2024 was $2.6 million compared

to revenues of $11 million for the six months ended June 30, 2023.

The $8.4 million decrease in sales is driven by decreases in both the

e-commerce and beverage businesses which decreased $7.6 million and $0.8 million respectively.

Qplash’s decreased revenue due to

low inventory.

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.

Cost of goods sold for the three months ended June

30, 2024 was $0.8 million compared to cost of goods sold for the three months ended June 30, 2023 of $3.4 million.

The $2.6 million decrease

in cost of goods sold for the three-month period ended June 30, 2023 was driven by decreased sales.

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

2024 was $2.2 million compared to cost of goods sold for the six months ended June 30, 2023 of $7.5 million.

The $5.3 million decrease

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

Operating Expenses

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.

Operating expenses for the three months ended June

30, 2024 was $3.9 million compared to $6.0 million for the three months ended June 30, 2023 a decrease of $2.1 million.

The decrease in

operating expenses was primarily due to a reduction in marketing expense, freight cost and Amazon selling fees partially offset by increases

for the non-cash expenses.

Operating expenses for the six months ended June 30,

2024 was $7.3 million compared to $11.2 million for the six months ended June 30, 2023 a decrease of $3.9 million.

The decrease in operating

expenses was primarily due to marketing expense, contracted services, freight cost and Amazon selling fees partially offset by increases

for the non-cash expenses.

The net loss for the three months ended June 30, 2024

was $5.3 million as compared to a net loss of approximately $5.6 million for the three months ended June 30, 2023.

The decrease in net

loss is due to lower debt discount expense.

The net loss for the six months ended June 30, 2024 was $10 million as compared to a net loss

of approximately $9.4 million for the six months ended June 30, 2023.

The increase in net loss is due to higher debt discount and interest

Net Other Income and Expense

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.

Interest expense for the three and six months ended

June 30, 2024 was $0.6 million and $1.2 million respectively.

For the three and six months ended June 30, 2023 the interest expenses was

$0.2 million and $0.3 million respectively due to additional convertible notes issued in 2024.

Interest expenses for the three months ended June

30, 2024 was $0.6 million compared to $0.2 million for the three months ended June 30, 2023.

The $0.4 million increase in interest expense

is due to new loans with a principal of $3.2 million.

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

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

Interest expenses for the six months ended June 30, 2024 was $1.2 million compared

to $0.3 million for the three months ended June 30, 2023.

The $0.9 million increase in interest expense is due to new loans with a principal

of $4.7 million with higher interest rates.

Other expenses were $0.0 and $0.1 million for the

three months ended June 30, 2024 and June 30, 2023 respectively..

Other expenses were $0.2 and other income was $0.05 million for the

six months ended June 30, 2024 and June 30, 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.

ended June 30, 2024 was approximately $1.0 million compared to $1.1 million for three months ended June 30, 2023.

Amortization of debt

discount for the six months ended June 30, 2024 was approximately $1.9 million compared to $1.4 million for six months ended June 30,

LIQUIDITY, GOING CONCERN CONSIDERATIONS AND CAPITAL

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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

As of June 30, 2024, the Company had total cash and

cash equivalents of $8,298, 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.

six months ended June 30, 2024 was $3.8 million as compared to the net cash used by operating activities for the six months ended June

30, 2023 of $6.5 million.

The primary reasons for the change in net cash used were reduced operating expenses, lower procurement of raw

material and finished goods.

For the period ending June 30, 2024, $1,500 furniture

was returned to vendor.

For the period June 30, 2023, the Company had leasehold improvements of $12,613 related to our Copa Di Vino production

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.

six months ended June 30, 2024 was $3.4 million compared to $3.0 million provided from financing activities for the six months ended June

During the six months ended June 30, 2024, the Company received $4.7 million for convertible note, which was offset by repayments

to debt holders of $1.3 million and $0.03 million to related party cash advance.

The Company plans 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,

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LLC (“TapouT”).

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

Under the licensing agreement, the Company has minimum royalty payments to TapouT of $330,000 for the six

months remaining in 2024.

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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.

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.

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.

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.

Allowance for Doubtful Accounts

The allowance for doubtful

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

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 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.

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 comparable, and third-party appraisals

to determine fair values.

QUANTITATIVE AND

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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