# Endovia Health Sciences, Inc.: Form 10-Q for the period ended Sep 30, 2023 - Company: [Endovia Health Sciences, Inc.](/companies/edva.md) (CIK 1553788) - Form: 10-Q - Filed: 2023-11-14 - Accepted by EDGAR: Nov 14, 2023, 16:06 ET - Period: 2023-09-30 - Accession: 0001731122-23-002111 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/1553788/000173112223002111/e5206_10-q.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1553788/000173112223002111/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2023-09-30. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Revenue | 3 months, 2023-07-01 to 2023-09-30 | $5.1m | us-gaap:Revenues | | Revenue | 9 months, 2023-01-01 to 2023-09-30 | $16.2m | us-gaap:Revenues | | Cost of revenue | 3 months, 2023-07-01 to 2023-09-30 | $3.8m | us-gaap:CostOfRevenue | | Cost of revenue | 9 months, 2023-01-01 to 2023-09-30 | $11.3m | us-gaap:CostOfRevenue | | Gross profit | 3 months, 2023-07-01 to 2023-09-30 | $1.3m | us-gaap:GrossProfit | | Gross profit | 9 months, 2023-01-01 to 2023-09-30 | $4.8m | us-gaap:GrossProfit | | Selling, general and administrative | 3 months, 2023-07-01 to 2023-09-30 | $3.0m | us-gaap:SellingGeneralAndAdministrativeExpense | | Selling, general and administrative | 9 months, 2023-01-01 to 2023-09-30 | $8.6m | us-gaap:SellingGeneralAndAdministrativeExpense | | Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$4.3m | us-gaap:OperatingIncomeLoss | | Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$12.0m | us-gaap:OperatingIncomeLoss | | Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $221.5k | us-gaap:InterestExpense | | Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $561.2k | us-gaap:InterestExpense | | Income tax | 3 months, 2023-07-01 to 2023-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit | | Income tax | 9 months, 2023-01-01 to 2023-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit | | Net income | 3 months, 2023-07-01 to 2023-09-30 | −$5.7m | us-gaap:NetIncomeLoss | | Net income | 9 months, 2023-01-01 to 2023-09-30 | −$15.0m | us-gaap:NetIncomeLoss | | Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.13 | us-gaap:EarningsPerShareDiluted | | Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.36 | us-gaap:EarningsPerShareDiluted | | Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.13 | us-gaap:EarningsPerShareBasic | | Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.36 | us-gaap:EarningsPerShareBasic | | Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 42,812,058 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 41,991,259 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | −$8.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $12.6k | us-gaap:PaymentsToAcquireProductiveAssets | | Cash and equivalents | at 2023-09-30 | $96.1k | us-gaap:CashAndCashEquivalentsAtCarryingValue | | Current assets | at 2023-09-30 | $5.1m | us-gaap:AssetsCurrent | | Total assets | at 2023-09-30 | $11.2m | us-gaap:Assets | | Current liabilities | at 2023-09-30 | $11.1m | us-gaap:LiabilitiesCurrent | | Total liabilities | at 2023-09-30 | $11.9m | us-gaap:Liabilities | | Long-term debt | at 2023-09-30 | $408.8k | us-gaap:LongTermDebt | | Shareholders' equity | at 2023-09-30 | −$657.8k | us-gaap:StockholdersEquity | ## Management's discussion and analysis As filed, 9,853 characters. ### 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 Nine Months Ended September 30, 2023 compared to Three Months and Nine Months Ended September 30, 2022.** ### Net Revenue ### Three months ended September 30, 2023: Revenue increased by 5.6%, over same quarter last year $5,144,069 compared to $4,870,407. The increase of $273,662 was due to: - An increase from our e-commerce distribution platform called Qplash. - Increase in the Energy and Salt brands - Offset by a partial decline in sales in the Hydration, Copa and Pulpoloco brands ### Nine months ended September 30, 2023: Revenue increased by 21.6%, over same period last year $16,161,747 compared to $13,295,921. The increase of $2,865,826 was due to: - An increase from our e-commerce distribution platform called Qplash. - Increase in the Energy, Salt and Copa brands. - Offset by a partial decline in sales in the Hydration and Pulpoloco brands. ### Cost of Goods Sold ### Three months ended September 30, 2023: Cost of goods sold increased by 24%, over the same quarter last year $3,847,202compared to $3,101,807. The increase of $745,395 was due to: - Increase in sales - Higher production costs in the Hydration brand - Increase in cost associated with valuation allowances for expired, damaged, or impaired inventory. ### Nine months ended September 30, 2023: - Cost of goods sold increased by 27.5%, over the same nine months last year $11,326,298 compared to $8,886,508. The increase of $2,439,790 was due to: - Increase in sales - Higher production costs in the Hydration brand - Increase in cost associated with valuation allowances for expired, damaged, or impaired inventory. ### Operating Expenses ### Three months ended September 30: Operating expenses for the three months ended September 30, 2023, was $ 5,620,398 compared to $6,879,482 for the three months ended September 30, 2022, a decrease of $1,259,084. The decrease in operating expenses was primarily due to a decrease in consulting fees. ### Nine months ended September 30: Operating expenses for the nine months ended September 30, 2023, was $ 16,835,250 compared to $21,033,396 for the nine months ended September 30, 2022, a decrease of $4,198,146. The decrease in operating expenses was primarily due to: - Decrease in consulting fees. - Offset by increase in Employee cost due to new hires - Offset by increase in e-commerce shipping and handling directly attributive to increase in e-commerce sales ### Net Other Income and Expense Interest expense for the three and nine months ended September 30, 2023 was $221,488 and $561,249 respectively. For the three and nine months ended September 30, 2022 the interest expenses was $66,193 and $225,543 respectively due to additional convertible notes issued in December 2022. Included in Other Income for the three months ended September 30, 2023 was an insurance settlement of $57,429. For the three and nine months ended September 30, 2022 the other income / expense $0. Amortization of debt discount for the three months and nine months ended September 30, 2023 was $1,125,409 and $2,500,065 respectively. For the three and nine months ended September 30, 2022 the amortization of debt discount was $0. ### 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 expenditure. As of September 30, 2023, the Company had total cash and cash equivalents of $96,121, as compared with $4,431,745 at December 31, 2022. Net cash used for operating activities during the nine months ended September 30, 2023 was $8,503,765 as compared to the net cash used by operating activities for the nine months ended September 30, 2022 of $10,824,651. The driver for the change in net cash used is due to a reduction of inventory in 2023 and an increase of inventory to support sales commitments in 2022. Net cash provided by financing activities during the nine months ended September 30, 2023 was $4,168,730. During the nine months ended September 30, 2023, the Company received $4,500,000 for convertible notes and a $460,000 loan from a related party, which was offset by repayments to debt holders of $757,270. In order to have sufficient cash to fund 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 the Company. 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 new 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 issuance of incentive awards under equity 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 financial condition. The Company’s ability to obtain needed financing may be impaired by such factors as the capital markets and its 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 ### Share obligation: None. ### Minimum Royalty Payments: The Company has a licensing agreement with ABG TapouT, LLC (“TapouT”). Under the licensing agreement, the Company has minimum royalty payments to TapouT of $165,000 for the three months remaining in 2023. ### Inventory Purchase Commitments: None. ### Off-Balance Sheet Arrangements The Company does 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 None. ### Recently Issued Accounting Pronouncements None. ## Controls and procedures As filed, 2,001 characters. ### 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 September 30, 2023. 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 September 30, 2023, 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 as noted 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. ## Risk factors As filed, 2,802 characters. ***There can be no assurances that the common stock will not be subject to potential delisting if the Company do not continue to maintain the listing requirements of the NYSE American.*** Since June 11, 2021, the common stock has been listed on the NYSE American, under the symbol “SBEV”. The NYSE American has rules for continued listing, including, without limitation, minimum market capitalization and other requirements. Failure to maintain our listing (i.e., being de-listed from the NYSE American), would make it more difficult for shareholders to sell our common stock and more difficult to obtain accurate price quotations on our common stock. This could have an adverse effect on the price of common stock. The ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing the Company may need in the future, may also be materially and adversely affected if common stock is not traded on a national securities exchange. ***As of September 30, 2023, we have a negative stockholders’ equity. If we are unable to raise additional capital, or otherwise become unable to satisfy our obligations as they become due, we may become insolvent and face the risk of bankruptcy.*** Since our inception and throughout most of our history, we have incurred net losses, including but not limited to, a net loss of $16,897,065 incurred in Fiscal 2022. As of December 31, 2022, we also reported positive stockholders’ equity of $9,322,134 and a gross loss of $$112,331,027. However, as of September 30, 2023, our current shareholders’ equity is ($657,830). We incur substantial expenditures related to manufacturing products in the United States, sales and marketing, general and administrative and research and development purposes. Our ability to achieve profitability in the future will primarily depend on our ability to increase sales of our products. Stockholders’ equity improvement will also be dependent on our ability to increase sales which will increase the value of our assets and decrease our liabilities. Future profitability is dependent on our ability to reduce manufacturing costs. However, some manufacturing costs are fixed and cannot be reduced. ***Upon the occurrence of a breach relating to our outstanding notes, the lender may seek to remedy.*** We may have breached terms on certain of our outstanding loans by violating certain covenants. Although we have not been informed by any of our lenders that we are in default, such lenders could do so, and at such time the lenders may seek to remedy. It is possible that the occurrence of such an event could place us in breach of other outstanding agreements as well. At this time we are current on all of our outstanding payments with respect to all of our outstanding agreements. Filed Nov 14, 2023. Source: SEC EDGAR, the filing index for accession 0001731122-23-002111. Last ingested by Listed: Nov 4, 2026, 06:06 ET. No prices; not investment advice.