Cautionary Statement Regarding 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 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. We 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, Inc.
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
Splash Beverage Group ("SBG"), f/k/a Canfield Medical Supply, Inc. (the "CMS"),
was incorporated in the State of Ohio on September 3, 1992, and changed domicile
to Colorado on April 18, 2012. CMS is in the business of home health services,
primarily the selling of durable medical equipment and medical supplies to the
public, nursing homes, hospitals and other end users.
On December 31, 2019, CMS entered into an Agreement and Plan of Merger (the
"Merger Agreement") with SBG Acquisition Inc. ("Merger Sub"), a Nevada
Corporation wholly-owned by CMS, and Splash Beverage Group, 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 CMS. The Merger was consummated on March 31, 2020.
As the owners and management of Splash have voting and operating control of CMS
following the Merger, the Merger transaction was accounted for as a reverse
acquisition (that is with Splash as the acquiring entity), followed by a
recapitalization.
Splash specializes in the manufacturing, distribution, and sales & marketing of
various beverages across multiple channels. Splash operates in both the
non-alcoholic and alcoholic beverage segments. Additionally, Splash operates its
own vertically integrated B-to-B and B-to-C e-commerce distribution platform
called Qplash, further expanding its distribution abilities and visibility.
In July 2020, we filed a Certificate of Amendment of Articles of Incorporation
to change our name to Splash Beverage Group Inc. On July 31, 2020, we received
approval from FINRA regarding our name change.
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Results of Operations for the Three Months Ended September 30, 2020 compared to
Three Months Ended September 30, 2019.
Revenue
Revenues for the three months ended September 30, 2020 were $1,009,615 compared
to revenues of $0 for the three months ended September 30, 2019. The $1,009,615
increase in sales was due to Salt Tequila ($91,782), Qplash -our vertically
integrated B2B and B2C e-commerce distribution platform which sells their
products on Amazon and Shopify ($704,388) and Canfield's medical device business
($290,638). Cost of goods sold for the three months ended September 30, 2020
were $570,979 compared to cost of goods sold for the three months ended
September 30, 2019 of $13,947. The $557,032 increase in cost of goods sold for
the three-month period ended September 30, 2020 was primarily due to our
increased sales, and as our sales increased, our cost of sales for those sales
correspondingly increased.
Operating Expenses
Operating expenses for the three months ended September 30, 2020 were $2,733,434
compared to $847,657 for the three months ended September 30, 2019. The
$1,885,777 increase in our operating expenses was primarily a result of
recording $1,236,254 in consulting fees relating to the issuance of warrants and
$730,085 in other consulting related expenses. The net loss for the three months
ended September 30, 2020 was $2,283,682 as compared to a net loss of $1,067,246
for the three months ended September 30, 2019. The increase in net loss is due
to our increase in operating expenses slightly offset by our increase in
revenues.
Other Income/(Expense)
Other income/(expense) for the three months ended September 30, 2020 were
$11,116 compared to ($205,642) for the three months ended September 30, 2019.
The $216,758 decrease in our interest expenses was primarily a result converting
the majority of our debt into common stock in Q1 2020 as part of our merger.
Results of Operations for the Nine Months Ended September 30, 2020 compared to
Nine Months Ended September 30, 2019.
Revenue
Revenues for the nine months ended September 30, 2020 were $ $1,733,926 compared
to revenues of $47,086 for the nine months ended September 30, 2019. The
$1,686,840 increase in sales was due to Salt Tequila $213,933, Qplash - our
vertically integrated B2B and B2C e-commerce distribution platform which sells
their products on Amazon and Shopify $1,004,536 and Canfield's medical device
business $490,217. Cost of goods sold for the nine months ended September 30,
2020 were $965,966 compared to cost of goods sold for the nine months ended
September 30, 2019 of $88,365. The $877,638 increase in cost of goods sold for
the nine-month period ended September 30, 2020 was primarily due to our
increased sales, and as our sales increased, our cost of sales for those sales
correspondingly increased.
Operating Expenses
Operating expenses for the nine months ended September 30, 2020 were $5,000,715
compared to $ 2,025,184 for the nine months ended September 30, 2019. The
$2,975,530 increase in our operating expenses was primarily a result of
recording $500,000 in consulting fees for one of our investors, $465,511 in
increased salaries, and $1,966,339 in consulting fees of which $1,236,254 was
for the issuance of warrants. The net loss for the nine months ended September
30, 2020 was $6,105,812 as compared to a net loss of $ $2,692,629 for the nine
months ended September 30, 2019. The increase in net loss is due to our increase
in operating expenses slightly offset by our increase in revenues.
Other Income/(Expense)
Other income/(expense) for the nine months ended September 30, 2020 were
$1,873,057 compared to $626,166 for the nine months ended September 30, 2019.
The $1,246,891 increase in our interest expenses was primarily a result of
recording a finance charge of $1,236,254 associated with warrants issued to one
of our note holders.
LIQUIDITY AND CAPITAL RESOURCES
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. Significant factors in the management of liquidity are funds
generated by operations, levels of accounts receivable and accounts payable and
capital expenditures.
As of September 30, 2020, we had total cash and cash equivalents of $ $725,811,
as compared with $42,639 at December 31, 2019. The increase was primarily due to
issuances of notes payable and subscription agreements offset by expenses
relating to the operating the business.
Net cash used for operating activities during the nine months ended September
30, 2020 was $ 4,311,170 as compared to the net cash used by operating
activities for the nine months ended September 30, 2019 of $1,909,725. The
primary reasons for the change in net cash used was due to losses sustained and
increases for stock-based compensation, offset by other non-cash expenses.
Net cash used for investing activities during the nine months ended September
30, 2020 was $87,251 as compared to the net cash used by investing activities
for the nine months ended September 30, 2019 of $9,942. The net cash used in the
first nine months of 2020 was primarily due to the $150,000 payment made to SALT
Tequila USA, offset by $72,422 of cash obtained in the acquisition of Canfield
Medical Supply, Inc.
Net cash provided by financing activities during the nine months ended September
30, 2020 was $5,081,594 compared to $1,011,991 provided from financing
activities for the nine months ended September 30, 2019. During the nine months
ended September 30, 2020, we received $6,191,406 from investors and related
parties, of which $1,000,000 of funds are held in escrow.
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CONTRACTUAL OBLIGATIONS
Minimum Royalty Payments:
As stated in Note 5, we have a licensing agreement with ABG TapouT, LLC
("TapouT"). Under the licensing agreement, we have minimum royalty payments to
TapouT for the next three years.
? 2020 $540,000
? 2021 $594,000
? 2022 $653,400
Inventory Purchase Commitments:
None.
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, capital expenditures or capital resources.
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SPLASH BEVERAGE GROUP, INC. 
