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OFFON

SPLASH BEVERAGE GROUP, INC.

(SBEV)
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SPLASH BEVERAGE : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

08/16/2021 | 04:54pm EDT

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 and its subsidiaries.

The following discussion and analysis should be read in conjunction with the Condensed Consolidated Financial Statements (unaudited) and Related Notes 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.

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.

Prior to the Merger, CMS was 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 and the Company continues to operate the home health supply business as a separate division.

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.



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As part of the recapitalization, previously issued shares of SBG preferred stock have been reflected as shares of common stock that were received in the Merger. These common shares have been retrospectively presented as outstanding for all periods.

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, the Company changes its name from Canfield Medical Supply, Inc. to Splash Beverage Group, Inc. Our new ticker symbol is SBEV.

On December 24, 2020, SBG consummated an Asset Purchase Agreement(the "APA") with Copa di Vino Corporation ("CdV"), to purchase certain assets and assume certain liabilities that comprise the Copa di Vino business for a total purchase price of $5,980,000, payable in the combination of $2,000,000 in cash ("Cash Consideration"), $2,000,000 convertible promissory note (the "Convertible Note") to Seller and a variable number of shares of the Company's common stock based on a attainment of revenue hurdles. CdV is one of the leading producers of premium wine by the glass in the United States with its primary offices and facilities in The Dalles, Oregon.

Results of Operations for the Three Months Ended June 30, 2021 compared to Three Months Ended June 30, 2020.



Revenue


Revenues for the three months ended June 30, 2021 were $3,287,760 compared to revenues of $412,729 for the three months ended June 30, 2020. The $2,875,031 increase in sales is due to an increase within our vertically integrated B2B and B2C e-commerce distribution platform called Qplash ($1,430,558). This platform sells goods on both Amazon and Shopify. In addition, we had increased sales from Copa di Vino Wine Group, Inc., our single-serve wine and Pulpoloco Sangria businesses ($1,462,000). Cost of goods sold for the three months ended June 30, 2021 were $2,382,707 compared to cost of goods sold for the three months ended June 30, 2020 of $218,751. The $2,163,956 increase in cost of goods sold for the three-month period ended June 30, 2021 is 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 June 30, 2021 were $7,612,759 compared to $609,457 for the three months ended June 30, 2020. The $7,003,302 increase in our operating expenses was primarily a result of recording the warrants issued pursuant to certain private placements conducted by the Company, increased headcount from the Copa acquisition and the addition of new sales reps, professional fees ($1,446,946) and shipping costs ($557,815). The net loss for the three months ended June 30, 2021 was $6,761,004 as compared to a net loss of $402,166 for the three months ended June 30, 2020. The increase in net loss is due to our increase in operating expenses offset by our increase in revenues.




Interest Expense



Interest expenses for the three months ended June 30, 2021 were $149,376 compared to $21,854 for the three months ended June 30, 2020. The $127,522 increase in our interest expenses was primarily a result of additional debt taken on in Q2 2021.





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Results of Operations for the Six Months Ended June 30, 2021 compared to Six Months Ended June 30, 2020.



Revenue


Revenues for the six months ended June 30, 2021 were $5,426,684 compared to revenues of $524,732 for the six months ended June 30, 2020. The $4,901,952 increase in sales is due to an increase within our vertically integrated B2B and B2C e-commerce distribution platform called Qplash ($2,631,737). This platform sells goods on both Amazon and Shopify. In addition, we had increased sales from Copa di Vino Wine Group, Inc., our single-serve wine and Pulpoloco Sangria businesses ($2,212,300). Cost of goods sold for the six months ended June 30, 2021 were $4,000,211 compared to cost of goods sold for the six months ended June 30, 2020 of $325,965. The $3,674,246 increase in cost of goods sold for the six-month period ended June 30, 2021 is 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 six months ended June 30, 2021 were $12,279,421 compared to $2,165,539 for the six months ended June 30, 2020. The $10,113,882 increase in our operating expenses was primarily a result of recording the warrants issued pursuant to certain private placements conducted by the Company, increased headcount from the Copa acquisition and the addition of new sales reps, professional fees ($6,666,141) and shipping costs ($882,795). The net loss for the six months ended June 30, 2021 was $11,241,510 as compared to a net loss of $3,850,945 for the six months ended June 30, 2020. The decrease in net loss is due to our increase in operating expenses offset by our increase in revenues.




Interest Expense



Interest expenses for the six months ended June 30, 2021 were $241,587 compared to $1,935,491 for the six months ended June 30, 2020. The $1,693,904 decrease in our interest expenses was primarily a result of recording a finance charge of $1,821,426 associated with warrants issued to one of our note holders in Q1 2020 offset by interest expense recorded in the period.

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 June 30, 2021, we had total cash and cash equivalents of $11,943,753, as compared with $380,000 at December 31, 2020. The increase is primarily due to cash received from private placements conducted by us and our S1/A registration statement where we raised $15,000,000.

Net cash used for operating activities during the six months ended June 30, 2021 was $7,664,506 as compared to the net cash used by operating activities for the six months ended June 30, 2020 of $1,783,007. The primary reasons for the change in net cash used is due to losses sustained and increases in inventory, offset by non-cash expenses relating to warrant expense ($2,010,615) and share-based compensation ($2,100,953).

Net cash used for investing activities during the six months ended June 30, 2021 was $0 as compared to the net cash used by operating activities for the six months ended June 30, 2020 of $154,341. The net cash used in the first quarter of 2020 was primarily due to the $150,000 payment made to SALT Tequila USA.

Net cash provided by financing activities during the six months ended June 30, 2021 was $19,468,746 compared to $1,941,018 provided from financing activities for the six months ended June 30, 2020. During the six months ended June 30, 2021, we received $21,028,065 from investors, which was offset by repayments to shareholders and debt holders of $1,159,319.





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CONTRACTUAL OBLIGATIONS



Minimum Royalty Payments:


We have a licensing agreement with ABG TapouT, LLC ("TapouT"). Under the licensing agreement, we have minimum royalty payments to TapouT for the next two years.



  ? 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.

© Edgar Online, source Glimpses

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Financials (USD)
Sales 2020 2,98 M - -
Net income 2020 -28,7 M - -
Net Debt 2020 4,04 M - -
P/E ratio 2020 -2,27x
Yield 2020 -
Capitalization 58,6 M 58,6 M -
EV / Sales 2019 -
EV / Sales 2020 30,1x
Nbr of Employees -
Free-Float 70,8%
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Managers and Directors
Robert Nistico Chairman, President & Chief Executive Officer
Dean Scott Huge Chief Financial Officer, Secretary & Treasurer
James Martin Chief Innovation Officer
Peter J. McDonough Independent Director
Justin W. Yorke Director
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