Splash(US:SBEV)2022-03-31 19:00Financial Performance - The company incurred a net loss of $29.1 million for the year ended December 31, 2021, with an accumulated deficit increasing to $91.0 million[79]. - Revenue for the year ended December 31, 2021, was $11,316,002, a significant increase of $9,015,876 compared to $2,300,126 for the year ended December 31, 2020[167]. - Cost of goods sold for the year ended December 31, 2021, was $8,734,413, up from $1,936,533 in 2020, reflecting a $6,797,880 increase due to higher sales[167]. - Operating expenses for the year ended December 31, 2021, were $31,664,511, an increase of $13,639,152 compared to $18,025,359 in 2020, primarily due to non-cash warrants and share-based compensation[168]. - The net loss from continuing operations for the year ended December 31, 2021, was $29,345,372, compared to a net loss of $19,588,233 for the year ended December 31, 2020[168]. - The net loss for the year was $29,050,822 in 2021, compared to a net loss of $28,674,556 in 2020, showing a slight increase in losses[192]. - Total stockholders' equity improved to $8,873,227 in 2021 from a deficit of $(9,350,723) in 2020, marking a significant recovery[193]. - The company reported a net cash used in operating activities of $(14,616,448) for continuing operations in 2021, an improvement from $(21,316,556) in 2020[194]. Acquisition and Expansion - The company has acquired Copa di Vino for a total purchase price of $5,980,000, which includes $2,000,000 in cash and a convertible promissory note[53]. - Copa di Vino is recognized as the leading producer of premium wine by the glass in the U.S., offering seven varietals of wine[52]. - The valuation of intangible assets from the Copa di Vino acquisition was approximately $6 million, with significant assumptions involved in estimating fair value[185]. - Splash Beverage Group operates a vertically integrated B-to-B and B-to-C e-commerce distribution platform called Qplash, expanding its market reach[200]. - Splash's e-commerce platform, Qplash, aims to expand its product listings from over 350 to 1,500 items by fall 2022, enhancing its direct-to-consumer sales strategy[57]. Operational Challenges - The company operates within a "Three Tier Distribution System," which has seen significant consolidation, limiting options for new brands to gain distribution[65]. - The company relies on third-party bottlers and co-packers for manufacturing its products, which are generally on a month-to-month basis[62]. - The unpredictability of sales due to "just in time" ordering by independent distributors may lead to challenges in inventory management and fulfillment, impacting revenue[97]. - Inadequate inventory management could result in either excess inventory or stock shortages, adversely affecting relationships with distributors and future sales opportunities[98]. - The company faces competition from larger beverage manufacturers, which may adversely affect its distribution relationships and market expansion[91]. - The company emphasizes the importance of brand recognition and acceptance in a highly competitive beverage industry[88]. Financial Position and Liquidity - Total cash and cash equivalents as of December 31, 2021, were $4,181,383, a significant increase from $380,000 at December 31, 2020[171]. - Cash and cash equivalents increased to $4,181,383 in 2021 from $380,000 in 2020, indicating improved liquidity[190]. - The company raised $19,630,565 through the issuance of common stock in 2021, compared to $20,182,503 in 2020, showing continued investor interest[194]. Regulatory and Market Risks - The company is subject to various regulations that could require material expenses and negatively affect financial results through lower sales or higher costs[87]. - The company may face reduced demand for its products due to health concerns and legislative initiatives against sweetened beverages, which could materially affect its financial condition and results of operations[93]. - New taxes on sugar-sweetened beverages implemented by various municipalities could lead to a shift in consumer purchasing behavior, adversely impacting the company's business and financial results[94]. - The beverage alcohol industry is under public scrutiny due to concerns over harmful use, which could expose the company to product liability lawsuits and adversely affect its financial condition[117]. - International operations contribute to revenue and profitability, but the company faces risks related to competition, economic volatility, and regulatory changes in foreign markets[118]. Management and Human Resources - The management team has over 120 years of combined experience in the beverage industry, enhancing Splash's ability to navigate distribution challenges[27]. - The company has 21 full-time employees and has not experienced any work stoppages, maintaining good relations with its employees[67]. - Changes in management personnel could create uncertainties and negatively impact the company's ability to execute its business plan effectively[105]. Supply Chain and Production - The company relies on key flavor suppliers for its products, and any inability to source flavors could disrupt business operations and negatively impact results[103]. - The company relies on a distiller in Mexico for its tequila production, and any failure in this relationship could result in lost sales and increased costs[131]. - Disruptions in the supply chain due to external factors could impair the company's ability to manufacture, distribute, and sell products, adversely affecting financial results[102]. - Volatility in energy prices and increased regulations may lead to higher shipping rates and energy surcharges, potentially affecting gross margins[100]. - Water scarcity and poor quality could increase costs and capacity constraints, negatively impacting profitability and net operating revenues in the long run[120]. - Fluctuations in grape supply due to weather, diseases, and other factors could reduce wine production, adversely affecting sales and operational results[121]. - Contamination risks could lead to product recalls and damage the company's reputation for quality, despite existing insurance coverage[122].