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.
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Unless the context otherwise requires, references in this Form 10-K 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
Audited Consolidated Financial Statements and Notes to Audited Consolidated
Financial Statements 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.
On December 24, 2020, we entered into an Asset Purchase Agreement (the "Purchase
Agreement") with Copa di Vino Corporation an Oregon company for a purchase price
of $5,980,000.
Results of Operations for the Year Ended December 31, 2020 compared to Year
Ended December 31, 2019.
Revenue
Revenues for the year ended December 31, 2020 were $2,975,939 compared to
revenues of $20,387 for the year ended December 31, 2019. The $2,955,552
increase in sales was due to Salt Tequila $240,786, Qplash - our vertically
integrated B2B and B2C e-commerce distribution platform which sells their
products on Amazon and Shopify $1,957,797 Canfield's medical device business
$675,213 and Copa di Vino business $101,544. Cost of goods sold for year ended
December 31, 2020 were $2,521,816 compared to cost of goods sold for the year
ended December 31, 2019 of $245,500. The $2,006,816 increase in cost of goods
sold for the year ended December 31, 2020 was primarily due to our increased
sales, and as our sales increased, our cost of sales for those sales
correspondingly increased.
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Operating Expenses
Operating expenses for the year ended December 31, 2020 were $18,025,359
compared to $4,261,946 for the year ended December 31, 2019. The $23,212,265
increase in our operating expenses was primarily a result of recording expenses
relating to warrants and share-based compensation for shares issued in exchange
for services. The net loss for the year ended December 31, 2020 was $28,674,556
as compared to a net loss of $ $5,135,731 for the year ended December 31, 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 expense for the year ended December 31, 2020 were $1,926,467 compared to
$648,672 for the year ended December 31, 2019. The $1,276,795 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 December 31, 2020, we had total cash and cash equivalents of $380,000, 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 continuing operating activities during the year ended December
31, 2020 was $21,316,556 as compared to the net cash used by continuing
operating activities for the year ended December 31, 2019 of $2,658,328. 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 discontinued operating activities during the year ended December
31, 2020, was $9,794.
Net cash used for continuing investing activities during the year ended December
31, 2020 was $768,624 as compared to the net cash used by continuing investing
activities for the year ended December 31, 2019 of $12,552. The net cash used in
the year 2020 was primarily due to the $250,000 payment made to SALT Tequila USA
and $500,000 of cash paid relating to the Copa di Vino acquisition offset by
$72,422 of cash obtained in the acquisition of Canfield Medical Supply, Inc. Net
cash used for discontinued investing activities was $11,628.
Net cash provided by financing activities during the year ended December 31,
2020 was $22,494,984 compared to $1,775,479 provided from financing activities
for the year ended December 31, 2019. During the year ended December 31, 2020,
we received $20,182,503 from investors and related parties and we issued
$2,439,472 of debt used for the Copa di Vino acquisition offset by $46.3k is
repayments to shareholder advances and $80.7K. of the right of use liability.
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