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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2024

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______ to _________

 

Commission File No. 001-40471

 

SPLASH BEVERAGE GROUP, INC.
(Exact name of registrant as specified in its charter)

 

Nevada   34-1720075
(State or other jurisdiction of
incorporation or formation)
  (I.R.S. employer
identification number)

 

1314 E Las Olas Blvd. Suite 221
Fort Lauderdale, FL 33301
(Address of principal executive offices) (Zip code)

  

(954) 745-5815
(Registrant’s telephone number, including area code)

 

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

  

Title of each class   Trading Symbol   Name of each exchange on which registered
Common Stock, $0.001 value per share   SBEV   NYSE American LLC
Warrants to purchase common stock, $0.001 par value per share   SBEV-WT   NYSE American LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

 Yes  No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 

 Yes  No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

  

Large accelerated filer   Accelerated filer
Non-accelerated filer   Smaller reporting company
Emerging growth company

  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

 Yes  No

 

Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.  Yes  No

 

 As of August 14, 2024, there were 57,467,762 shares of Common Stock issued and outstanding.

 

 

 

SPLASH BEVERAGE GROUP, INC.
FORM 10-Q
June 30, 2024

  

TABLE OF CONTENTS

  

  Page
PART I: FINANCIAL INFORMATION  
ITEM 1: FINANCIAL STATEMENTS 1
  Condensed Consolidated Balance Sheets 2
  Condensed Consolidated Statements of Operations and Comprehensive Loss 3
  Condensed Consolidated Statement of Changes in Shareholders’ Equity 4
  Condensed Consolidated Statements of Cash Flows 5
  Notes to the Condensed Consolidated Financial Statements 6
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 19
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 22
ITEM 4: CONTROLS AND PROCEDURES 22
PART II: OTHER INFORMATION  
ITEM 1 LEGAL PROCEEDINGS 23
ITEM 1A: RISK FACTORS 23
ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 23
ITEM 3: DEFAULTS UPON SENIOR SECURITIES 23
ITEM 4: MINE SAFETY DISCLOSURES 23
ITEM 5: OTHER INFORMATION 23
ITEM 6: EXHIBITS 24
SIGNATURES 25

 

i

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

Splash Beverage Group, Inc. 
Condensed Consolidated Financial Statements

 

June 30, 2024

 

1

 

 

Splash Beverage Group, Inc.
Condensed Consolidated Balance Sheets
June 30, 2024 and December 31, 2023

 

           
   June 30,
2024
  December 31, 2023
Assets   (unaudited)      
Current assets:          
Cash and cash equivalents  $8,298   $379,978 
Accounts receivable, net   669,130    890,631 
Prepaid expenses   315,782    220,320 
Inventory   1,305,691    2,252,469 
Other receivables   238,687    233,850 
Total current assets   2,537,588    3,977,248 
           
Non-current assets:          
Deposits  $49,351   $49,446 
Goodwill   256,823    256,823 
Intangible assets, net   4,263,275    4,459,309 
Investment in Salt Tequila USA, LLC   250,000    250,000 
Right of use assets   426,702    556,140 
Property and equipment, net   274,073    349,802 
Total non-current assets   5,520,224    5,921,520 
           
Total assets  $8,057,812   $9,898,768 
           
Liabilities and Stockholders’ Equity          
           
Liabilities:          
Current liabilities          
Accounts payable and accrued expenses  $4,923,607   $4,444,286 
Right of use liability, current portion   270,606    262,860 
Related party notes payable   350,000    380,000 
Notes payable, net of discounts   8,719,203    7,748,518 
Shareholder advances   200,000    200,000 
Accrued interest payable   2,356,838    1,714,646 
Total current liabilities   16,820,254    14,750,310 
           
Long-term liabilities:          
Notes payable, net of discounts   1,432,409    457,656 
Right of use liability – net of current portion   158,987    296,128 
Total long-term liabilities   1,591,396    753,784 
           
Total liabilities   18,411,650    15,504,094 
           
Stockholders’ equity:          
Preferred stock, $0.001 par value, 5,000,000 shares authorized, no shares issued        
Common Stock, $0.001 par, 300,000,000 shares authorized, 53,886,610 shares issued, 44,330,099 shares outstanding at June 30, 2024 and December 31, 2023   53,887    44,330 
Additional paid in capital   131,689,440    127,701,710 
Accumulated other comprehensive loss   (23,838)   (16,583)
Accumulated deficit   (142,073,327)   (133,334,783)
Total stockholders’ equity   (10,353,838)   (5,605,326)
           
Total liabilities and stockholders’ equity  $8,057,812   $9,898,768 

  

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

 

 

Splash Beverage Group, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
For the Three Months and Six Months Ended June 30, 2024 and 2023
(Unaudited)

 

                                 
    Three months ended June 30   Six months ended June 30,
    2024   2023   2024   2023
Net revenues     1,046,782       5,194,951       2,587,462       11,017,678  
Cost of goods sold     (802,352 )     (3,417,868 )     (2,179,417 )     (7,479,096 )
Gross profit     244,430       1,777,083       408,045       3,538,582  
                                 
Operating expenses:                                
Contracted services     201,036       331,297       419,865       712,302  
Salary and wages     1,243,175       1,364,136       2,478,101       2,598,263  
Non-cash share-based compensation     1,342,317       641,097       1,898,989       856,857  
Other general and administrative     934,010       2,919,533       2,135,041       5,568,234  
Sales and marketing     214,812       742,369       417,266       1,479,196  
Total operating expenses     3,935,350       5,998,432       7,349,262       11,214,852  
                                 
Loss from operations     (3,690,920 )     (4,221,349 )     (6,941,217 )     (7,676,270 )
                                 
Other income/(expense):                                
Interest income     503       1,320       835       1,320  
Interest expense     (622,063 )     (172,641 )     (1,154,661 )     (339,762 )
Other Income/Expense     (406 )     (90,585 )     (1,902 )     49,819  
Amortization of debt discount     (1,013,816 )     (1,126,994 )     (1,900,654 )     (1,374,655 )
Total other income/(expense)     (1,635,782 )     (1,388,900 )     (3,056,382 )     (1,663,278 )
                                 
Provision for income taxes                        
                                 
Net loss   $ (5,326,702 )   $ (5,610,249 )   $ (9,997,599 )   $ (9,339,548 )
                                 
Other Comprehensive Income (Loss)                                
Foreign currency translation loss     182       (15,774 )     (7,255 )     (17,382 )
                                 
Total Comprehensive Income (Loss)   $ (5,326,520 )   $ (5,626,023 )   $ (10,004,854 )   $ (9,356,930 )
                                 
(Loss) per share - continuing operations                                
Basic and diluted   $ (0.11 )   $ (0.13 )   $ (0.21 )   $ (0.22 )
                                 
Weighted average number of common shares outstanding - continuing operations                                
Basic and diluted     49,115,864       42,058,047       46,949,819       41,575,470  

  

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3

 

 

Splash Beverage Group, Inc. 

 Condensed Consolidated Statement of Changes in Stockholders’ Equity

For the Six months ended June 30, 2024 and 2023

(Unaudited)

  

                                                 
    Common Shares   Amount   Additional paid-in capital   Accumulated other comprehensive loss   Accumulated deficit   Total
stockholders’ equity
Balances at December 31, 2022     41,085,520     $ 41,086     $ 121,632,546     $ (20,472 )   $ (112,331,026 )   $ 9,322,134  
                                                 
Common stock issuable and beneficial conversion feature on convertible 12-month promissory note                 1,786,468                   1,786,468  
Share based compensation                 215,760                   215,760  
Accumulated Comprehensive loss – translation, net                       (1,609 )           (1,609 )
Net loss                             (3,729,299 )     (3,729,299 )
                                                 
Balances at March 31, 2023     41,085,520     $ 41,086     $ 123,634,774     $ (22,081 )   $ (116,060,325 )   $ 7,593,454  
                                                 
Issuance of common stock on convertible instruments     1,500,000       1,500       (1,500 )                  
Share based compensation                 509,232                   509,232  
Issuance of common stock for services     216,666       216       223,449                   223,665  
Issuance of warrants on convertible instruments                 1,269,669                   1,269,669  
Accumulated Comprehensive loss – translation, net                       (15,773 )           (15,773 )
Net loss                             (5,610,249 )     (5,610,249 )
                                                 
Balances at June 30, 2023     42,802,186       42,802     $ 125,635,624     $ (37,854 )   $ (121,670,574 )   $ 3,969,998  
                                                 
                                                 
Balances at December 31, 2023     44,330,099     $ 44,330     $ 127,701,710     $ (16,583 )   $ (133,334,783 )   $ (5,605,326 )
                                                 
Issuance of common stock for note extension     200,000       200       107,800                   108,000  
Share based compensation                 271,672                   271,672  
Adoption of ASU 2020-06                     (2,191,103 )             1,259,057       (932,046 )
Issuance of warrants on convertible instruments                 768,346                   768,346  
Conversion of notes payable to common stock     1,552,000       1,552       386,448                   388,000  
Issuance of common stock for services     300,000       300       176,700                   177,000  
Accumulated Comprehensive loss – translation, net                       (7,437 )           (7,437 )
Net loss                             (4,670,897 )     (4,670,897 )
Balances at March 31, 2024     46,382,099     $ 46,382     $ 127,221,573     $ (24,020 )   $ (136,746,623 )   $ (9,502,688 )
                                                 
Issuance of common stock for New note     925,000       925       295,075                   296,000  
Share based compensation                 893,648                   893,648  
                                                 
Issuance of warrants on convertible instruments                 1,751,400                   1,745,328  
Conversion of notes payable to common stock     6,059,511       6,060       1,375,597                   1,387,726  
Issuance of common stock for services     520,000       520       152,150                   152,670  
Accumulated Comprehensive loss – translation, net                       182             182  
Net loss                             (5,326,702 )     (5,326,703 )
Balances at June 30, 2024     53,886,610     $ 53,887     $ 131,689,440     $ (23,838 )   $ (142,073,327 )   $ (10,353,838 )

  

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4

 

 

Splash Beverage Group, Inc.
Condensed Consolidated Statement of Cash Flows
For the Six Months Ended June 30, 2024 and 2023
(Unaudited)

 

           
   2024  2023
Net loss  $(9,997,599)  $(9,339,548)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   270,263    267,690 
Amortization of debt discount   1,900,654    1,374,655 
ROU assets, net   42    616 
Non-cash share-based compensation   1,898,989    1,080,523 
Changes in working capital items:          
Accounts receivable, net   221,501    (142,398)
Inventory, net   946,778    274,016 
Prepaid expenses and other current assets   (100,299)   102,444 
Deposits   96    (141)
Accounts payable and accrued expenses   479,322    (299,016)
Accrued interest payable   642,192    159,068 
Net cash used in operating activities   (3,738,061)   (6,522,091)
           
Cash flows from investing activities:          
Capital expenditures   1,500    (12,613)
Net cash provided by investing activities   1,500    (12,613)
           
Cash flows from financing activities:          
Cash advance from related party   125,000    250,000 
Cash advance repayment from related party   (155,000)     
Cash advance from shareholder       200,000 
Proceeds from convertible promissory note   4,705,000    3,150,000 
Principal repayment of debt   (1,302,864)   (576,424)
Net cash provided by financing activities   3,372,136    3,023,576 
           
Net cash effect of exchange rate changes on cash   (7,255)   (17,382)
           
Net change in cash and cash equivalents   (371,680)   (3,528,510)
           
Cash and cash equivalents, beginning of year   379,978    4,431,745 
           
Cash and cash equivalents, end of period  $8,298   $903,235 
           
Supplemental disclosure of cash flow information:          
Cash paid for Interest  $479,463   $180,695 
           
Supplemental disclosure of non-cash investing and financing activities          
Notes payable and accrued interest converted to common stock (6,861,422 shares in 2024)   1,769,656     
           
Creation of debt discounts from the issuance of equity instruments   2,815,743    2,388,767 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5

 

 

Splash Beverage Group, Inc.

 Notes to the Condensed Consolidated Financial Statements

 

Note 1 – Business Organization and Nature of Operations

 

Splash Beverage Group, Inc. (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 planning to expand 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.

Note 2 – Summary of Significant Accounting Policies

 

Basis of Accounting

 

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), and the requirements of the U.S. Securities and Exchange Commission (the “SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. Accordingly, they do not include all of the information and footnotes normally included in financial statements prepared in conformity with U.S. GAAP. They should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2023 Annual Report on Form 10-K, filed with the SEC on March 31,2024 (the “Form 10-K”).

 

The accompanying condensed consolidated financial statements are unaudited and include all adjustments (consisting of normal recurring adjustments) that management considers necessary for a fair presentation of its condensed financial position and results of operations for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the entire year.

 

Basis of Presentation and Consolidation

 

These consolidated financial statements include the accounts of Splash and its wholly owned subsidiaries Splash Beverage Holdings LLC (“Holdings”), Splash International Holdings LLC (“International”), Splash Mex SA de CV (“Splash Mex”), and Copa di Vino Wine Group, Inc. (“Copa di Vino”). All intercompany balances have been eliminated in consolidation.

 

Our investment in Salt Tequila USA, LLC is accounted for at cost, as the company does not have the ability to exercise significant influence.

 

Our accounting and reporting policies confirm to accounting principles generally accepted in the United States of America (GAAP).

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

  

Cash Equivalents and Concentration of Cash Balance

 

The Company considers all highly liquid securities with an original maturity of three months or less to be cash equivalents. The Company had no cash equivalents at June 30, 2024 or December 31, 2023.

 

Our cash in bank deposit accounts, at times, may exceed federally insured limits of $250,000. At June 30, 2024 and December 31, 2023, the Company’s cash on deposit with financial institutions, at times, had not exceeded federally insured limits of $250,000.

 

6

 

 

Splash Beverage Group, Inc.

  Notes to the Condensed Consolidated Financial Statements

 

Note 2 – Summary of Significant Accounting Policies, continued

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Accounts receivable are carried at their estimated recoverable amounts and are periodically evaluated for collectability based on past credit history with clients and other factors. The Company establishes provisions for losses on accounts receivable on the basis of loss experience, known and inherent risk in the account balance, and current economic conditions. At June 30, 2024 and December 31, 2023, our accounts receivable amounts are reflected net of allowances of $669,130 and $890,631, respectively.

 

Inventory

 

Inventory is stated at the lower of cost or net realizable value, accounted for using the weighted average cost method. The inventory balances at June 30, 2024 and December 31, 2023 consisted of raw materials, work-in-process, and finished goods held for distribution. The cost elements of inventory consist of purchase of products, transportation, and warehousing. The Company establish provisions for excess or inventory near expiration are based on management’s estimates of forecast turnover of inventories on hand and under contract. A significant change in the timing or level of demand for certain products as compared to forecast amounts may result in recording additional provisions for excess or expired inventory in the future. Provisions for excess inventory are included in cost of goods sold and have historically been adequate to provide for losses on inventory. The Company manages inventory levels and purchase commitments in an effort to maximize utilization of inventory on hand and under commitments. The amount of our reserve was $236,100 and $290,524 at June 30, 2024 and December 31, 2023, respectively.

 

Property and Equipment

 

The Company records property and equipment at cost when purchased. Depreciation is recorded for property, equipment, and software using the straight-line method over the estimated economic useful lives of assets, which range from 3-39 years. Company management reviews the recoverability of all long-lived assets, including the related useful lives, whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset might not be recoverable.

 

Depreciation expense totaled $37,015 and $31,665 for the three months ended June 30, 2024 and June 30, 2023, respectively. For the six months ended June 30, 2024 and June 30, 2023 depreciation expense totaled $74,229 and $78,366 respectively. Property and equipment as of June 30, 2024 and December 31, 2023 consisted of the following:

  

          
   2024  2023
Auto   45,420    45,420 
Machinery & equipment   1,160,578    1,160,578 
Buildings   233,323    233,323 
Leasehold improvements   723,639    723,638 
Computer Software   5,979    5,979 
Office furniture & equipment   7,657    9,157 
Total cost   2,176,596    2,178,095 
Accumulated depreciation   (1,902,522)   (1,828,293)
Property, plant & equipment, net   274,074    349,802 

  

Excise taxes

 

The Company pays alcohol excise taxes based on product sales to both the Oregon Liquor Control Commission and to the U.S. Department of the Treasury, Alcohol and Tobacco Tax and Trade Bureau (TTB). The Company also pays taxes to the State of Florida – Division of Alcoholic Beverages and Tobacco. The Company is liable for the taxes upon the removal of product from the Company’s warehouse on a per gallon basis. The federal tax rate is affected by a small winery tax credit provision which decreases based upon the number of gallons of wine production in a year rather than the quantity sold.

 

7

 

 

Splash Beverage Group, Inc.

Notes to the Condensed Consolidated Financial Statements

 

Note 2 – Summary of Significant Accounting Policies, continued

 

Fair Value of Financial Instruments

 

Financial Accounting Standards (“FASB”) guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows:

 

  Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed equities.
     
  Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (e.g., quoted prices of similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active).
     
  Level 3 - Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable.

 

The liabilities and indebtedness presented on the condensed consolidated financial statements approximate fair values at June 30, 2024 and December 31, 2023, consistent with recent negotiations of notes payable and due to the short duration of maturities and market rates of interest.

 

Embedded debt costs in convertible debt instruments

 

In August 2020, the FASB issued “ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”) which simplifies the accounting for convertible instruments. The guidance removes certain accounting models which separate the embedded conversion features from the host contract for convertible instruments. Either a modified retrospective method of transition or a fully retrospective method of transition was permissible for the adoption of this standard. Update No. 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption was permitted no earlier than the fiscal year beginning after December 15, 2020. The Company has adopted ASU 2020-06 effective January 1, 2024 and has removed the effects of any embedded conversion features from certain of our convertible instruments.

 

Revenue Recognition

 

The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers (Topic 606). This guidance sets forth a five-step model which depicts the recognition of revenue in an amount that reflects what the Company expects to receive in exchange for the transfer of goods or services to customers.

 

The Company recognizes revenue when the Company’s performance obligations under the terms of a contract with the customer are satisfied. Product sales occur for the Splash Beverage and E-commerce businesses once control of the Company’s products are transferred upon delivery to the customer. Revenue is measured as the amount of consideration that the Company expects to receive in exchange for transferring goods, and revenue is presented net of provisions for customer returns and allowances. The amount of consideration the Company receives and revenue the Company recognizes varies with changes in customer incentives offered to the Company’s customers and their customers. Sales taxes and other similar taxes are excluded from revenue.

 

8

 

 

Splash Beverage Group, Inc.

 Notes to the Condensed Consolidated Financial Statements

 

Note 2 – Summary of Significant Accounting Policies, continued

 

Distribution expenses to transport our products, and warehousing expense after manufacture are accounted for in Other General and Administrative cost.

 

Cost of Goods Sold

 

Cost of goods sold include the costs of products, packaging, transportation, warehousing, and costs associated with valuation allowances for expired, damaged or impaired inventory. The cost of transportation from production site to other 3rd party warehouses or customer is included in Other General and Administrative cost.

 

Other General and Administrative Expenses

 

Other General and Administrative expenses includes Amazon selling fees, royalty cost for selling TapouT, cost associated with the outbound shipping and handling of finished goods, insurance cost, consulting cost, legal and audit fees, investor relations expenses, travel & entertainment expenses, occupancy cost and other costs.

 

Stock-Based Compensation

 

The Company accounts for stock-based compensation in accordance with ASC 718, ”Compensation - Stock Compensation”. Under the fair value recognition provisions, cost is measured at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period, which is generally the award’s vesting period. The Company uses the Black-Scholes option pricing model to determine the fair value of stock-based awards.

 

We measure stock-based awards at the grant-date fair value for employees, directors and consultants and recognize compensation expense on a straight-line basis over the vesting period of the award. Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions, including the fair value of our common stock, and for stock options and warrants, the expected life of the option and warrant, and expected stock price volatility and exercise price. We used the Black-Scholes option pricing model to value its stock-based awards. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards. The expected life of stock options/warrants were estimated using the “simplified method,” which calculates the expected term as the midpoint between the weighted average time to vesting and the contractual maturity, we have limited historical information to develop reasonable expectations about future exercise patterns. The simplified method is based on the average of the vesting tranches and the contractual life of each grant. For stock price volatility, we use comparable public companies as a basis for its expected volatility to calculate the fair value of award. The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected life of the award. The estimation of the number of awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from the Company’s current estimates, such amounts are recognized as an adjustment in the period in which estimates are revised.

 

Income Taxes

 

The Company uses the liability method of accounting for income taxes as set forth in ASC 740, ”Income Taxes”. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. The Company records a valuation allowance when it is more likely than not that the deferred tax assets will be realized.

 

Company management assesses its income tax positions and records tax benefits for all years subject to examination based upon its evaluation of the facts, circumstances and information available at the reporting date. In accordance with ASC 740-10, for those tax positions where there is a greater than 50% likelihood that a tax benefit will be sustained, our policy is to record the largest amount of tax benefit that is more likely than not to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information.

 

9

 

 

Splash Beverage Group, Inc.

 Notes to the Condensed Consolidated Financial Statements

 

Note 2 – Summary of Significant Accounting Policies, continued

 

For those income tax positions where there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit will be recognized in the financial statements. Company management has determined that there are no material uncertain tax positions at June 30, 2024 and December 31, 2023.

  

Net income (loss) per share

 

The net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding. Warrants, stock options, and common stock issuable upon the conversion of the Company’s convertible debt or preferred stock (if any), are not included in the computation if the effect would be anti-dilutive.

 

Weighted average number of shares outstanding excludes anti-dilutive common stock equivalents, including warrants to purchase shares of common stock and warrants granted by our Board that have not been exercised totaling 99,532,833.

 

Advertising

 

The Company conducts advertising for the promotion of its products. In accordance with ASC 720-35, advertising costs are charged to operations when incurred. For the three months ended June 30, 2024 and June 30, 2023 the Company recorded advertising expenses of $109,624 and $194,415, respectively. The Company recorded advertising expense of $187,251 and $389,462 for the six months ended June 30, 2024 and 2023, respectively.

 

Goodwill and Intangibles Assets

 

Goodwill represents the excess of acquisition cost over the fair value of the net assets acquired and is not subject to amortization. The Company reviews goodwill annually in the fourth quarter for impairment or when circumstances indicate carrying value may exceed the fair value. This evaluation is performed at the reporting unit level. If a qualitative assessment indicates that it is more likely than not that the fair value is less than carrying value, a quantitative analysis is completed using either the income or market approach, or a combination of both. The income approach estimates fair value based on expected discounted future cash flows, while the market approach uses comparable public companies and transactions to develop metrics to be applied to historical and expected future operating results.

 

The gross amounts and accumulated amortization of the Company’s acquired identifiable intangible assets with finite useful lives, included in other intangible assets, net in the accompanying consolidated balance sheets, were as follows:

  

               
   June 30, 2024   
   Gross
Amount
  Accumulated
Amortization
  Amortization
Period
Finite:             (in years) 
Brands  $4,459,000   $1,040,437    15 
Customer Relationships   957,000    223,300    15 
License   360,000    248,988    11 
Total Intangible Assets  $5,776,000   $1,512,725      

  

At the time of acquisition, the Company estimates the fair value of the acquired identifiable intangible assets based upon the facts and circumstances related to the particular intangible asset. Inherent in such estimates are judgments and estimates of future revenue, profitability, cash flows and appropriate discount rates for any present value calculations. The Company preliminarily estimates the value of the acquired identifiable intangible assets and then finalizes the estimated fair values during the purchase allocation period, which does not extend beyond 12 months from the date of acquisition. The Company’s amortization expense for acquired identifiable intangible assets with finite useful lives was $98,017 for the three months ended June 30, 2024 and 2023. Estimated amortization expense for acquired identifiable intangible assets for fiscal year 2024 and the succeeding years is as follows:

 

10

 

 

Splash Beverage Group, Inc.

 Notes to the Condensed Consolidated Financial Statements

 

Note 2 – Summary of Significant Accounting Policies, continued

 

      
   Future Intangible Asset
Amortization Expense
Fiscal Year:      
2024 (6 months)   $196,034 
2025    392,068 
2026    392,068 
2027    392,068 
2028    363,580 
Thereafter    2,527,457 
Total    $4,263,275 

 

Long-lived assets

 

The Company evaluates long-lived assets for impairment when events or changes in circumstances may indicate the carrying amount of the asset group, generally an individual warehouse, may not be fully recoverable. For asset groups held and used, including warehouses to be relocated, the carrying value of the asset group is considered recoverable when the estimated future undiscounted cash flows generated from the use and eventual disposition of the asset group exceed the respective carrying value. In the event that the carrying value is not considered recoverable, an impairment loss is recognized for the asset group to be held and used equal to the excess of the carrying value above the estimated fair value of the asset group. For asset groups classified as held-for-sale (disposal group), the carrying value is compared to the disposal group’s fair value less costs to sell. The Company estimates fair value by obtaining market appraisals from third party brokers or using other valuation techniques.

 

Foreign Currency Gains/Losses

 

Foreign Currency Gains/Losses — foreign subsidiaries’ functional currency is the local currency of operations and the net assets of foreign operations are translated into U.S. dollars using current exchange rates. Gains or losses from these translation adjustments are included in the condensed consolidated statement of operations and other comprehensive loss as foreign currency translation gains or losses. Translation gains and losses that arise from the translation of net assets from functional currency to the reporting currency, as well as exchange gains and losses on intercompany balances, are included in foreign currency translation in the condensed consolidated statement of operations and comprehensive loss. The Company incurred foreign currency translation net gain of $182 and net loss of $15,774 for the three months ending June 30, 2024 and 2023, respectively and net loss of $7,255 and $17,382 for the six months ending June 30, 2024 and 2023, respectively.

 

Liquidity, Capital Resources and Going Concern Considerations

 

The Company’s consolidated financial statements have been prepared on the basis of US GAAP for a going concern, on the premise that the Company is able to meet its obligations as they come due in the normal course of business. The Company historically has incurred significant losses and negative cash flows from operation since inception and had net-loss of approximately $10.0 million for six-month period ended June 30, 2024 and accumulated deficit of approximately $142.1 million through June 30, 2024. During the six-month period ended June 30, 2024, the Company’s net cash used in operating activities totaled approximately $3.7 million. Additionally, the Company’s current liabilities exceed its current assets, and it has a working capital deficit.

 

During the year ended December 31, 2023, the Company sustained a net loss of approximately $21.0 million and used cash in operating activities of $10.2 million, which excludes non-cash charges and financing activities. To date the Company has generated cash flows from issuances of equity and indebtedness.

 

11

 

 

Splash Beverage Group, Inc.

 Notes to the Condensed Consolidated Financial Statements

 

Note 2 – Summary of Significant Accounting Policies, continued

 

The Company received approximately $4.7 million from the issuance of debt for the six months ending June 30, 2024. This event served to ensure liquidity of the business through June 30, 2024.

 

Management’s plans in regard to these matters include actions to sustain the Company’s operations, such as seeking additional funding to meet its obligations and implement its business plan. However, there is no assurance that the Company will be successful in implementing its plans or in raising additional funds. If the Company is unable to raise additional funding to meet its working capital needs in the future, it may be forced to delay, reduce, or cease its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

 

The financial statements do not include any adjustments that might result from the outcome of this uncertainty. If the Company is unable to continue as a going concern, adjustments would be necessary to the carrying values of its assets and liabilities and the reported amounts of revenues and expenses could be materially affected.

 

Recent Accounting Pronouncements

 

In August 2020, the FASB issued “ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”) which simplifies the accounting for convertible instruments. The guidance removes certain accounting models which separate the embedded conversion features from the host contract for convertible instruments. Either a modified retrospective method of transition or a fully retrospective method of transition was permissible for the adoption of this standard.

 

Update No. 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption was permitted no earlier than the fiscal year beginning after December 15, 2020. The Company has adopted ASU 2020-06 effective January 1, 2024, the Company recorded approximately $2.2 million as a reduction to the additional paid in capital and added approximately $1.3 million to the opening retained earnings in accordance with the authoritative guidance under ASU 2020-06.

 

All other newly issued but not yet effective accounting pronouncements have been deemed to be not applicable or immaterial to the Company.

 

12

 

 

Splash Beverage Group, Inc.

 Notes to the Condensed Consolidated Financial Statements

 

Note 3 – Notes Payable, Related Party Notes Payable, Convertible Bridge Loans Payable, Revenue Financing Arrangements and Bridge Loan Payable

 

Notes payable are generally nonrecourse and secured by all Company owned assets.

  

                       
    Interest
Rate
  June 30,
2024
  December 31,
2023
Notes Payable and Convertible Notes Payable                        
                         
In December 2020, the Company entered into a 56- month loan with a company in the amount of $1,578,237. The loan requires payments of 3.75% through November 2022 and 4.00% through September 2025 of the previous month’s revenue. Note is due September 2025. Note is guaranteed by a related party see note 6.     17 %     268,192       371,693  
                         
In April 2021, the Company entered into a six-month loan with an individual in the amount of $84,000. The loan had an original maturity of October 2021 with principal and interest due at maturity. The loan was extended to October 31, 2024.     7 %     168,000       168,000  
                         
In May 2021, the Company entered into a six-month loan with an individual in the amount of $50,000. The loan had an original maturity of October 2021 with principal and interest due at maturity. The loan was extended to October 31, 2024.     7 %     60,000       60,000  
                         
In August 2022, the Company entered into a 56-months auto loan in the amount of $45,420.     2.35 %     28,213       32,996  
                         
In December 2022, the Company entered into various eighteen-month loans with individuals totaling in the amount of $4,000,000. The notes included 100% warrant coverage. The loans mature in June 2025 with principal and interest due at maturity with conversion price of $1.00 per share.     12 %     4,000,000       4,000,000  
                         
In February 2023, the Company entered into a twelve-month loan with an entity in the amount of $2,000,000. The convertible note included the issuance of 1,500,000 shares of common stock. The loan matures in February 2024 with conversion price of $0.85 per share and is non-interest bearing. The loan was extended to May, 2024. As of June 2024, the loan was fully converted.     %           1,769,656  
                         
In May 2023, the Company entered into various eighteen-month loans with individuals totaling in the amount of $800,000. The notes included 50% warrant coverage. The loans mature in November 2024 with principal and interest due at maturity with conversion price of $1.00 per share.     12 %     800,000       800,000  
                         
In June 2023, the Company entered into various eighteen-month loans with individuals totaling in the amount of $350,000. The notes included 50% warrant coverage. The loans mature in December 2024 with principal and interest due at maturity with conversion price of $1.00 per share.     12 %     350,000       350,000  
                         
In July 2023, the Company entered into a twelve-month loan with an individual in the amount of $750,000. The note included 50% warrant coverage. The loan matures in July 2024 with principal and interest due at maturity with conversion price of $1.00 per share. The loan was extended to September 2024.     12 %     750,000       750,000  
                         
In July 2023, the Company entered into a twelve-month loan with an individual in the amount of $100,000. The note included 50% warrant coverage. The loan matures in January 2025 with principal and interest due at maturity with conversion price of $1.00 per share.     12 %     100,000       100,000  
                         
In August 2023, the Company entered into a twelve-month loan with an individual in the amount of $300,000. The convertible note included the issuance of 150,000 shares of common stocks. The loan matures in August 2024 with principal and interest due at maturity with conversion price of $0.85 per share and is non-interest bearing.     %     300,000       300,000  
                         
In October 2023, the Company entered into a three-month loan with an individual in the amount of $500,000. The loan matures in January 2024 with principal and interest due at maturity. The loan was extended to September 2024.     10 %     500,000       500,000  
                         
In October 2023, the Company entered into a loan with an individual in the amount of $196,725 The loan matures in March 2024. Note is guaranteed by a related party. As of March 2024, the loan was fully paid off.     %           91,785  
                         
In October 2023, the Company entered into a loan with an individual in the amount of $130,000. The loan requires payment of 17% of daily Shopify sales.     %     70,783       88,431  
                         
In October 2023, the Company entered into a eighteen-month loan with individuals totaling in the amount of $1,250,000. The note included 100% warrant coverage. The loan matures in April 2025 with principal and interest due at maturity with conversion price of $1.00 per share     12 %     1,250,000       1,250,000  
                         
In December 2023, we entered into a 2.5-month loan with an individual in the amount of $450,000. The loan had a maturity of March 2024 with principal and interest due at maturity. The loan was extended to September 2024.     10 %     450,000       450,000  
                         
In January 2024, we entered into a loan in the amount of $500,000. The loan had a maturity of March 2024 with principal and interest due at maturity. It was paid off with a new loan in April 2024     %            
                         
In January 2024, we entered into a 18-month loan with an individual in the amount of $250,000. The note included 100% warrant coverage. The loan had a maturity of July 2025 with principal and interest due at maturity with conversion price of $0.50 per share.     12 %     250,000        
                         
In February 2024, we entered into a 18-month loan with an individual in the amount of $150,000. The note included 100% warrant coverage. The loan had a maturity of August 2025 with principal and interest due at maturity with conversion price of $0.40 per share.     12 %     150,000        
                         
In February 2024, we entered into a 6-month loan with an individual in the amount of $315,000. The note included 60% warrant coverage. The loan had a maturity of August 2024 with principal and interest due at maturity with conversion price of $0.38 per share     12 %     315,000        
                         
In February 2024, the Company entered into a 18-month loan with an entity in the amount of $250,000. The note included 100% warrant coverage. The loan matures in August 2025 with principal and interest due at maturity with conversion price of $0.46 per share     12 %     250,000        
                         
In April 2024, we entered into a commercial financing agreement in the amount of $815,000 and will be paid weekly until the loan is paid in full.     %     595,496        
                         
In May 2024, the Company entered into an eighteen-month loan with individuals totaling in the amount of $1,850,000. The note included warrant coverage. The loan matures in November 2026 with principal and interest due at maturity with conversion price of $0.40 per share     12 %     1,850,000        
                         
In June 2024, we entered into a merchant cash advance agreement in the amount of $325,000  to be paid weekly until the loan is paid in full.     %     255,357        
                         
In June 2024, we entered into a revenue purchase agreement in the amount of $250,000. 4% of revenue will be paid weekly until the loan is paid in full.     %     250,000        
                         
      Total notes payable     $ 13,011,041     $ 11,082,561  
                         
      Less notes discount       (2,859,429 )     (2,876,387 )
      Less current portion       (8,719,203 )     (7,748,518 )
                         
      Long-term notes payable     $ 1,432,409     $ 457,656  

 

13

 

 

Splash Beverage Group, Inc.

 Notes to the Condensed Consolidated Financial Statements

 

Note 3 – Notes Payable, Related Party Notes Payable, Convertible Bridge Loans Payable, Revenue Financing Arrangements and Bridge Loan Payable, continued

 

Interest expense on notes payable was $607,903 and $170,078 for the three months ended June 30, 2024 and 2023, respectively. Interest expense on notes payable was $1,130,480 and $333,985 for the six months ended June 30, 2024 and 2023, respectively.

 

The Company recognized approximately $1,013,815 and approximately $891,608 of interest expense attributable to the amortization of the debt discount during the three months ended June 30, 2024 and 2023, respectively. The Company recognized approximately $1,900,656 and approximately $1,374,655 of interest expense attributable to the amortization of the debt discount during the six months ended June 30, 2024 and 2023, respectively.

 

As of June 30, 2024, and December 31, 2023, the balance of the unamortized debt discount was $2,859,430 and $1,944,348 respectively. The Company adopted ASU 2020-06 on January 1, 2024, which resulted in the reversal of the original bifurcated derivative (BCF) amount to additional paid in capital for $2,191,103, reversal of the unamortized debt discount related to the bifurcated derivative (BCF) for $932,047 with the balance being recorded through retained earnings for $1,259,056.

  

             
   Interest Rate  June
30, 2024
  June
30, 2023
Shareholder Notes Payable             
              
In April 2024, revised Feb 2023 shareholder advance in the amount of $200,000. The annual interest rate is 12% with a conversion price of $0.35 per share. The revised note included 571,429 share of warrant coverage. The loan matures in July 2025 with interest due semi-annually.  12%   200,000    200,000 
              
   Less current portion   (200,000)   (200,000)
              
   Long-term notes payable  $   $ 

 

Interest expense on related party notes payable was $6,000 and $0 for the three months ended June 30, 2024 and 2023, respectively. Interest expense on related party notes payable was $12,000 and $0 for the six months ended June 30, 2024 and 2023, respectively. The Company’s effective interest rate was 25.32% for the six months ended June 30, 2024.

 

As of June 30, 2024, the Company’s convertible note balances are convertible into 16,357,324 shares of common stock

 

Note 4 – Licensing Agreement and Royalty Payable

 

The Company has a licensing agreement with ABG TapouT, LLC (“TapouT”), providing the Company with licensing rights to the brand “TapouT” (i)energy drinks, (ii) energy bars, (iii) coconut water, (iv) electrolyte gum/chews, (v) energy shakes, (vi) powdered drink mix, (viii) water (including enhanced water), (vii) energy shots, (viii) teas, and (ix) sports drinks sold in the North America (including US Territories and Military Bases), United Kingdom, Brazil, South Africa, Australia, Scandinavia, Peru, Colombia, Chile and Guatemala. The Company is required to pay a 6% royalty on net sales, as defined, and are required to make minimum monthly payments of $55,000 in 2024 and 2023.

 

The Company has accrued guaranteed minimum royalty payments of $165,000 for the three months ended June 30, 2024 and there were no unpaid royalties at June 30, 2023. The royalty payment is included in general and administrative expenses in the condensed consolidated statement of operations and comprehensive loss.

 

In connection with the Copa di Vino APA, the Company acquired the license to certain patents from 1/4 Vin SARL (“1/4 Vin”) On February 16, 2018, Copa di Vino entered into three separate license agreements with 1/4 Vin. 1/4 Vin has the right to license certain patents and patent applications relating to inventions, systems, and methods used in the Company’s manufacturing process. In exchange for notes payable, 1/4 Vin granted the Company a nonexclusive, royalty-bearing, non-assignable, nontransferable, terminable license which would continue until the subject equipment is no longer in service or the patents expire. Amortization is approximately $31,000 annually until the license agreement is fully amortized in 2027. The asset is being amortized over a 10-year useful life.

 

14

 

 

Splash Beverage Group, Inc.

 Notes to the Condensed Consolidated Financial Statements

 

Note 5– Stockholders’ Equity

 

Common Stock

 

On September 29, 2023, the Company entered into a securities purchase agreement with certain accredited investors. Pursuant to such agreements, the Company sold: (i) senior convertible notes in the aggregate original principal amount of $1,250,000, convertible into up to 1,470,588 shares of common stock of the Company, par value $0.001 per share (“Common Stock”), subject to adjustments as provided in the Notes, (ii) 625,000 shares of Common Stock (the “Commitment Shares”), (ii) warrants to acquire up to an aggregate of 1,250,000 additional shares of Common Stock (the “Warrants”) at an exercise price of $0.85 per Warrant Share.

 

On May 1, 2024, the Company entered into a securities purchase agreement with certain accredited investors. Pursuant to such agreements, the Company sold: (i) senior convertible notes in the aggregate original principal amount of $1,850,000, convertible into up to 4,625,000 shares of Common Stock, subject to adjustments as provided in the Notes, (ii) 925,000 shares of Common Stock (the “Commitment Shares”), (ii) warrants to initially acquire up to an aggregate of 4,625,000 additional shares of Common Stock (the “Warrants”) at an exercise price of $0.85 per Warrant Share.

 

During the six-months ended June 30, 2024, the Company granted share-based awards to certain consultants totaling 530,000 shares of common stock at a weighted average price of $0.41, 200,000 shares for extension of note, 7,611,511 shares on conversion of convertible instruments, 925,000 shares on debt discount and 290,000 shares for non-cash compensation.

 

A convertible promissory note was issued to shareholder on April 15, 2024 to cover advance $200,000 at 12% with conversion price of $0.35 per share. The note included 571,429 share of warrant coverage. The loan matures in July 2025 with principal and interest due semi-annually. Accrued interest of advance $27,370 will be made on or before August 15, 2024.

 

Stock Plan

 

2020 Plan

 

In July 2020, the Board adopted the 2020 Stock Incentive Plan (the “2020 Plan”), which provides for the grant of Options, Restricted Stock Awards, Stock Appreciation Rights, Performance Units and Performance Bonuses to consultants and eligible recipients. The total number of shares that may be issued under the 2020 plan was 1,685,825 at the time the 2020 plan was adopted as of June 30, 2024.

 

The 2020 Plan has an “evergreen” feature, which provides for the annual increase in the number of shares issuable under the plan by an amount equal to 5% of the number of issued and outstanding common shares at year end, unless otherwise adjusted by the board. At January 1, 2023 and 2024, the number of shares issuable under the 2020 plan increased by 2,054,276 and 2,984,276 shares, respectively.

 

In October 2023, the shareholders voted to increase the number of shares issuable under the Plan to 7.5%.

 

The following is a summary of the Company’s stock option activity:

  

                     
Options   June 30, 2024  June 30, 2023
   Number of Options  Weighted Average Exercise Price  Number of Options  Weighted Average Exercise Price
             
 Balance - January 1*    4,259,008   $1.13    1,151,000   $1.12 
                       
 Granted    630,000    0.59    65,000    1.08 
 Exercises                 
 Cancelled                 
                       
 Balance – March 31,     4,889,008   $1.06    1,216,000   $1.12 
                       
 Granted    3,855,000    0.33    3,376,008    1.13 
 Exercises                 
 Cancelled                 
                       
 Balance – June 30,     8,744,008   $0.74    4,592,008   $1.13 
                       
 Exercisable – June 30,     6,855,155   $0.82    3,608,923   $1.12 

  

15

 

 

Splash Beverage Group, Inc.

 Notes to the Condensed Consolidated Financial Statements

 

Note 5– Stockholders’ Equity, continued

 

During the three-month period ended June 30, 2024 and June 30, 2023, the company granted 3,855,000 and 3,376,008 options to employees and directors at weighted average strike price of $0.33 under the 2020 plan. 1,200,000 shares were granted to CEO, Robert Nistico, 750,000 shares to CMO, William Meissner, 750,000 shares to CFO, Julius Ivancsits and 475,000 shares to the Board director, Bill Caple.

 

The fair value of stock options granted in the period has been measured at $3,855,000 using the Black-Scholes option pricing model with the following assumptions: exercise price $0.33 - $0.53, expected life 5 to 7 years, expected volatility 254%, expected dividends 0%, risk free rate 4.64%.

 

Note 6 – Related Parties

 

During the normal course of business, the Company incurred expenses related to services provided by the CEO or Company expenses paid by the CEO, resulting in related party payables. In conjunction with the acquisition of Copa di Vino, the Company also entered into a Revenue Loan and Security Agreement (the “Loan and Security Agreement”) by and among the Company, Robert Nistico, additional Guarantor and each of the subsidiary guarantors from time-to-time party thereto (each a “Guarantor”, and, collectively, the “Guarantors”), and Decathlon Alpha IV, L.P. (the “Lender”). The Note Payable with a balance of $268,192 at June 30, 2024 and $672,695 at June 30,2023.

 

There were related party advances from our chief executive officer in the amount of approximately $0.4 million outstanding as of June 30, 2024 and approximately $0.4 million as of December 31, 2023. A shareholder note payable outstanding in the amount of $0.2 million as of June 30, 2024.

 

Note 7 – Investment in Salt Tequila USA, LLC

 

The Company has a marketing and distribution agreement with SALT Tequila USA, LLC (“SALT”) for the manufacturing of our Tequila product line in Mexico.

 

The Company has a 22.5% percentage ownership interest in SALT, this investment is carried at cost less impairment, the investment does not have a readily determinable fair value. The Company has the right to increase our ownership to 37.5%.

 

Note 8 –Leases

 

The Company has various operating lease agreements primarily related to real estate and office. The Company’s real estate leases represent a majority of the lease liability. Lease payments are mainly fixed. Any variable lease payments, including utilities, and common area maintenance are expensed during the period incurred. Variable lease costs were immaterial for the quarter ended June 30, 2024 and 2023. A majority of the real estate leases include options to extend the lease. Management reviews all options to extend at the inception of the lease and account for these options when they are reasonably certain of being exercised.

 

Operating lease expense is recognized on a straight-line basis over the lease term and is included in operating expense on the Company’s condensed consolidated statement of operations and comprehensive loss. Operating lease cost was $163,590 and $182,658 during the six-month period ended June 30, 2024 and 2023, respectively.

 

The following table sets for the maturities of our operating lease liabilities and reconciles the respective undiscounted payments to the operating lease liabilities in the consolidated balance sheet at June 30, 2024

  

       
Undiscounted Future Minimum Lease Payments   Operating Lease
     
2024 (Six months remaining)     143,336  
2025     287,193  
2026     17,857  
Total     448,386  
Amount representing imputed interest     (18,793 )
Total operating lease liability     429,593  
 Current portion of operating lease liability     270,606  
Operating lease liability, non-current   $ 158,986  

 

16

 

 

Splash Beverage Group, Inc.

 Notes to the Condensed Consolidated Financial Statements

 

Note 8 –Leases, continued

 

The table below presents lease-related terms and discount rates at June 30, 2024:

 

     
Remaining term on leases   1 to 24 months 
Incremental borrowing rate   5.0%

  

Note 9 – Segment Reporting

 

The Company has two reportable operating segments: (1) the manufacture and distribution of non-alcoholic and alcoholic brand beverages, and (2) the e-commerce sale of beverages. These operating segments are managed separately and each segment’s major customers have different characteristics. Segment Reporting is evaluated by our Chief Executive Officer and Chief Financial Officer.

 

Note: The Copa di Vino business is included in our Splash Beverage Group segment.

  

                    
   Three Months Ended June 30  Six Months Ended June 30
Revenue  2024  2023  2024  2023
Splash Beverage Group  $1,023,405   $1,126,971   $2,223,687   $3,025,939 
E-Commerce   23,377    4,067,980    363,775    7,991,739 
                     
Net revenues, continuing operations   1,046,782    5,194,951    2,587,462    11,017,678 
                     
Contribution after Marketing                    
Splash Beverage Group   34,576    (528,905)   1,095    (815,836)
E-Commerce   (4,958)   1,563,619    (10,316)   2,875,222 
Total contribution after marketing   29,618    1,034,714    (9,221)   2,059,386 
                     
Contracted services   201,036    331,297    419,865    712,302 
Salary and wages   1,243,175    1,364,136    2,478,101    2,598,263 
Non-cash share-based compensation   1,342,317    641,097    1,898,989    856,857 
Other general and administrative   934,010    2,919,533    2,135,041    5,568,234 
 Loss from continuing operations  $(3,690,920)  $(4,221,349)  $(6,941,217)  $(7,676,270)

  

Total assets  June 30, 2024  December 31, 2023
Splash Beverage Group   7,995,774    9,188,213 
E-Commerce   62,038    710,555 
           
Total assets  $8,057,812   $9,898,768 

 

17

 

 

Splash Beverage Group, Inc.

Notes to the Condensed Consolidated Financial Statements

 

Note 10 – Commitment and Contingencies

 

The Company is a party to asserted claims and are subject to regulatory actions in the ordinary course of business. The results of such proceedings cannot be predicted with certainty, but the Company does not anticipate that the outcome, if any, arising out of any such matter will have a material adverse effect on its business, financial condition or results of operations.

 

On June 5, 2024, the Company received notification from the NYSE American LLC (“NYSE American”) indicating that it is not in compliance with the NYSE American’s continued listing standards under Section 1003(a)(iii) of the NYSE American Company Guide (the “Company Guide”), requiring a listed company to have stockholders’ equity of $6 million or more if the listed company has reported losses from continuing operations and/or net losses in its five most recent fiscal years. The Company is now subject to the procedures and requirements of Section 1009 of the Company Guide. If the Company is not in compliance with the continued listing standards by April 6, 2025 or if the Company does not make progress consistent with the Plan during the plan period, the NYSE American may commence delisting procedures.

 

Note 11 – Subsequent Events

 

In July 2024, the Company entered into an approximately $0.3 million merchant cash advance agreement for a period of 13 weeks until the loan is paid in full.

 

In July 2024, a $0.4 million convertible note with accrued interest matured in June 2024 was converted into common stocks at $0.25 per share.

 

The Company granted 358,334 shares in July in exchange for services under the 2020 plan.

 

The maturity dates of the related party notes were extended to October 2024 with 4% interest.

 

At the Special Meeting of Stockholders held on July 31, 2024, The Company’s Stockholders approved the issuance of shares of our common stock, representing more than 20% of our Common Stock outstanding upon the conversion of Convertible Notes and Warrants issued to certain accredited investors on May 1, 2024, respectively convertible into up to 4,625,000 shares of Common Stock and exercisable into 4,625,000 shares of Common Stock, which amount would be in excess of 19.99% of the issued and outstanding shares of Common Stock, in accordance with section 713 of the NYSE American LLC Company Guide.

 

18

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

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. 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

 

Splash Beverage Group, Inc. (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.

 

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

 

Revenue

 

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. Part of the $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 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.

 

19

 

 

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 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 expenses.

 

Net Other Income and Expense

 

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. 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 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, 2023.

 

LIQUIDITY, GOING CONCERN CONSIDERATIONS 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, 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 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.

 

20

 

 

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 site.

 

Net cash provided by financing activities during the 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 30, 2023. 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, 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 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.

 

CONTRACTUAL OBLIGATIONS

 

Minimum Royalty Payments:

 

The Company have a licensing agreement with ABG TapouT, LLC (“TapouT”). Under the licensing agreement, the Company has minimum royalty payments to TapouT of $330,000 for the six months remaining in 2024.

 

Inventory Purchase Commitments:

 

None.

 

Off-Balance Sheet Arrangements

 

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.

 

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.

 

21

 

 

Revenue

 

The 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.

 

Allowance for Doubtful Accounts

 

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

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not required for Smaller Reporting Companies.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of the principal executive and principal financial officers, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a – 15(e) and 15d – 15(e) under the Securities Exchange Act of 1934, as amended, or Exchange Act, as of the end of the period covered by this Report. Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, because of certain material weaknesses in our internal controls over financial reporting, our disclosure controls and procedures were not effective as of June 30, 2024. The material weaknesses relate to a lack of segregation of duties between accounting and other functions and the absence of sufficient depth of in-house accounting personnel with the ability to properly account for complex transactions.

 

The Company plans to implement additional internal controls or enhance existing internal controls to strengthen its control environment. Subsequent to the quarter ended June 30, 2024, the company is reviewing a plan to engage additional internal staff, external staff, or an advisory firm to provide support on technical issues related to U.S. GAAP as related to the maintenance of our accounting books and records and the preparation of our financial statements.

 

Changes in Internal Control Over Financial Reporting

 

Except with respect to the above, during the quarter ended June 30, 2024, there were no additional changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

22

 

 

PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

None.

 

ITEM 1A. RISK FACTORS

 

No new risk factors noted since our Annual Report on Form 10-K for the year ended December 31, 2023 was filed with the SEC.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

No disclosure required.

 

ITEM 5. OTHER INFORMATION

 

Rule 10b5-1 Trading Arrangement

 

During the six months ended June 30, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

 

23

 

 

ITEM 6. EXHIBITS

 

(a) Exhibits required by Item 601 of Regulation S-K.

  

Exhibits   Description
4.1   Form of Warrant (incorporated by reference herein to Exhibit 4.1 filed with Form 8-K filed with the SEC on May 7, 2024)
10.1   Form of the Purchase Agreement (incorporated by reference herein to Exhibit 10.1 filed with Form 8-K filed with the SEC on May 7, 2024)
10.2   Form of the Note (incorporated by reference herein to Exhibit 10.2 filed with Form 8-K filed with the SEC on May 7, 2024)
10.3   Form of the Registration Rights Agreement (incorporated by reference herein to Exhibit 10.3 filed with Form 8-K filed with the SEC on May 7, 2024)
31.1   Certification of CEO and Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a)*
31.2   Certification of CFO and Principal Financial and Accounting Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a)*
32.1   Certification of CEO and Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Filed herewith electronically**
32.2   Certification of CFO and Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Filed herewith electronically**
101   XBRL Exhibits

  

* Filed herewith

 

** Furnished herewith

 

24

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

  

  SPLASH BEVERAE GROUP, INC.
     
Date: August 14, 2024 By: /s/ Robert Nistico
    Robert Nistico, Chairman and CEO
    (Principal Executive Officer)
     
Date: August 14, 2024 By: /s/ Julius Ivancsits
    Julius Ivancsits, CFO
    (Principal Accounting Officer and Principal Financial Officer) 

 

25

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 31.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER 

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Robert Nistico, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Splash Beverage Group Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

 

(a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within the registrant, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

  

Date: August 14, 2024  
   
/s/ Robert Nistico  
Robert Nistico  
Chief Executive Officer  
(Principal Executive Officer)  

 

 

 

 

Exhibit 31.2

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Julius Ivancsits, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Splash Beverage Group Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

 

(a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within the registrant, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 14, 2024  
   
/s/ Julius Ivancsits  
Julius Ivancsits  
Chief Financial Officer  
(Principal Accounting Officer and Principal Financial Officer)  

 

 

 

 

Exhibit 32.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Form 10-Q of Splash Beverage Group Inc., a company duly formed under the laws of Nevada (the “Company”), for the quarter ended June 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Robert Nistico, President (Chief Executive Officer) of the Company, hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge, that:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: August 14, 2024 /s/ Robert Nistico
  Robert Nistico, Chief Executive Officer
(Principal Executive Officer) 

  

This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

 

 

 

 

Exhibit 32.2

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Form 10-Q of Splash Beverage Group, Inc., a company duly formed under the laws of Nevada (the “Company”), for the quarter ended June 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Julius Ivancsits, Chief Financial Officer of the Company, hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of her knowledge, that:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: August 14, 2024 /s/ Julius Ivancsits
  Julius Ivancsits
Chief Financial Officer
(Principal Accounting Officer and Principal Financial Officer) 

  

This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

 

 

 

v3.24.2.u1
Cover - shares
6 Months Ended
Jun. 30, 2024
Aug. 14, 2024
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Jun. 30, 2024  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2024  
Current Fiscal Year End Date --12-31  
Entity File Number 001-40471  
Entity Registrant Name SPLASH BEVERAGE GROUP, INC.  
Entity Central Index Key 0001553788  
Entity Tax Identification Number 34-1720075  
Entity Incorporation, State or Country Code NV  
Entity Address, Address Line One 1314 E Las Olas Blvd. Suite 221  
Entity Address, City or Town Fort Lauderdale  
Entity Address, State or Province FL  
Entity Address, Postal Zip Code 33301  
City Area Code 954  
Local Phone Number 745-5815  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   57,467,762
Common Stock, $0.001 value per share [Member]    
Title of 12(b) Security Common Stock, $0.001 value per share  
Trading Symbol SBEV  
Security Exchange Name NYSE  
Warrants to purchase common stock, $0.001 par value per share [Member]    
Title of 12(b) Security Warrants to purchase common stock, $0.001 par value per share  
Trading Symbol SBEV-WT  
Security Exchange Name NYSE  
v3.24.2.u1
Condensed Consolidated Balance Sheets - USD ($)
Jun. 30, 2024
Dec. 31, 2023
Current assets:    
Cash and cash equivalents $ 8,298 $ 379,978
Accounts receivable, net 669,130 890,631
Prepaid expenses 315,782 220,320
Inventory 1,305,691 2,252,469
Other receivables 238,687 233,850
Total current assets 2,537,588 3,977,248
Non-current assets:    
Deposits 49,351 49,446
Goodwill 256,823 256,823
Intangible assets, net 4,263,275 4,459,309
Investment in Salt Tequila USA, LLC 250,000 250,000
Right of use assets 426,702 556,140
Property and equipment, net 274,073 349,802
Total non-current assets 5,520,224 5,921,520
Total assets 8,057,812 9,898,768
Current liabilities    
Accounts payable and accrued expenses 4,923,607 4,444,286
Right of use liability, current portion 270,606 262,860
Related party notes payable 350,000 380,000
Notes payable, net of discounts 8,719,203 7,748,518
Shareholder advances 200,000 200,000
Accrued interest payable 2,356,838 1,714,646
Total current liabilities 16,820,254 14,750,310
Long-term liabilities:    
Notes payable, net of discounts 1,432,409 457,656
Right of use liability – net of current portion 158,987 296,128
Total long-term liabilities 1,591,396 753,784
Total liabilities 18,411,650 15,504,094
Stockholders’ equity:    
Preferred stock, $0.001 par value, 5,000,000 shares authorized, no shares issued 0 0
Common Stock, $0.001 par, 300,000,000 shares authorized, 53,886,610 shares issued, 44,330,099 shares outstanding at June 30, 2024 and December 31, 2023 53,887 44,330
Additional paid in capital 131,689,440 127,701,710
Accumulated other comprehensive loss (23,838) (16,583)
Accumulated deficit (142,073,327) (133,334,783)
Total stockholders’ equity (10,353,838) (5,605,326)
Total liabilities and stockholders’ equity $ 8,057,812 $ 9,898,768