Document:

Exhibit 10.1

 

Execution Version

 

 

REVENUE LOAN AND SECURITY AGREEMENT

 

THIS REVENUE LOAN
AND SECURITY AGREEMENT (as amended from time to time, this “Agreement”) is made as of December 24, 2020 (the
“Effective Date”), by and among:

 

Robert Nistico

(the “Key Person”),

 

SPLASH BEVERAGE GROUP, INC., a Colorado
corporation, 1314 East Las Olas Boulevard, Suite 221

Fort Lauderdale, FL 33301
(“Company”),

 

the parties listed under the heading
“Guarantors” on the signature pages attached hereto (each, a “Guarantor,” collectively, the “Guarantors;”
each of Company and each Guarantor are referred to herein as a “Company Entity,” and together as the “Company
Entities”),

 

and

 

DECATHLON ALPHA IV, L.P., a Delaware
limited partnership, 1441 West Ute Boulevard, Suite 240

Park City, UT 84098 (“Lender”).

 

BACKGROUND

 

Company wishes
to obtain financing from Lender to finance the acquisition of substantially all of the assets of Copa di Vino Corporation, an Oregon
corporation (“Copa di Vino”), through Company’s indirectly wholly owned subsidiary, Copa di Vino Wine
Group, Inc., a Nevada corporation (“Buyer”). In connection with the foregoing, Company wishes to borrow from
Lender and Lender wishes to lend to Company an amount up to the Revenue Loan Amount (as defined below) on the terms and conditions
of this Agreement. In connection with and as a material inducement to Lender to lend the Revenue Loan Amount to Company, Company
desires to make certain representations and warranties to Lender.

 

AGREEMENT

 

The parties hereby agree as follows:

 

ARTICLE 1

DEFINITIONS
AND ACCOUNTING PRINCIPLES

 

1.1              
Definitions. Capitalized words and phrases used in
this Agreement but not otherwise defined herein have the definitions given in Article 11.

 

1.2               Accounting
Principles. The character or amount of any asset,
liability, capital account or reserve and of any item of income or expense required to be determined pursuant to this
Agreement, and any consolidation or other accounting computation required to be made pursuant to this Agreement, and the
construction of any definition in this Agreement containing a financial term, will be determined or made, as the case may be,
in accordance with United States generally accepted accounting principles (“GAAP”), to the extent
applicable, unless such principles are inconsistent with the express requirements of this Agreement.

 

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ARTICLE 2

ADVANCE, INTEREST AND PAYMENTS

 

2.1              
Revenue Loan Advance. Upon the terms and subject
to the conditions of this Agreement:

 

(a)               
Initial Advance. Lender will make the
Initial Advance to the parties identified on Schedule 4.1 on behalf of Company on or within one banking day after the date
of Closing.

 

(b)               
Subsequent Advance. Any time beginning
15 days prior to an Advance Period through the end of such Advance Period as set forth
on Schedule 2.1(b), Company may by delivering to Lender a written Advance Request in the form
provided by Lender to Company (“Advance Request”) request
one or more Subsequent Advances in accordance with the Schedule 2.1(b) up to
a maximum for all Advances equal to the Revenue Loan Amount. If all of the conditions
set forth on Schedule 2.1(b) are satisfied on the date of the Advance Request, Lender will advance to Company the requested
amount within 15 business days of receipt of the Advance Request. Contemporaneously with each Subsequent Advance, Company shall
deliver to Lender a certificate signed on behalf of Company by the Key Person (or other officer of Company acceptable to Lender)
confirming that Company is not in default and no Event of Default has occurred and that all representations and warranties of the
Company Entities in Article 3 are true as of such date (except to the extent such representations and warranties expressly
relate to an earlier date, in which case as of such earlier date). Lender may, in its sole discretion, waive or modify any one
or more of the conditions to any Subsequent Advance.

 

(c)               
Not a Revolving Facility. Company acknowledges
and agrees that the credit facility granted hereunder is a multiple advance facility, but is not a revolving facility, and Company
may not borrow, repay and re-borrow Advances.

 

2.2              
Interest. Interest on the Amount Advanced shall accrue
from and after the date of Closing at such rate as is necessary to generate an amount equal to the Minimum Interest (the “Interest”),
provided, however, in no case shall such rate exceed the maximum rate allowable under applicable law.

 

2.3              
Promise to Pay. Company promises to pay to the order
of Lender, or its assigns in lawful money of the United States of America, for application against the Amount Advanced, together
with the Interest as follows (with all payments to be applied first to fees and expenses
incurred by the Lender that are expressly provided for pursuant to this Agreement, then to accrued interest, and finally to principal,
which Lender shall enter in its records of payments made by Company, and such records will be deemed conclusive evidence of the
subject matter thereof unless proven otherwise):

 

(a)               
Maturity. The Amount Advanced and accrued
but unpaid Interest will be immediately due on the Maturity Date and will be payable on demand any time thereafter.

 

(b)               
Monthly Payments. Commencing on the
Payment Commencement Date and continuing thereafter until maturity or earlier prepayment in full, Company shall pay to Lender,
on the 15th day of each month (or the next business day if such date is not a business day) (each a “Payment Date”),
by wire transfer or Automated Clearing House (ACH) transfer to the Lender Account described on Schedule 2.3(b)(1) an amount
equal to the product of (i) all Revenue for the immediately preceding month multiplied by (ii) the Applicable Revenue Percentage.

 

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Notwithstanding anything to the
contrary in the preceding sentence, payments made by ACH transfer must be initiated no later than three business days prior to
the applicable Payment Date. Lender, in its sole discretion, may apply any monthly payment first to offset any outstanding invoices
for legal or other fees that are 60 or more days overdue and then toward satisfaction of the Obligations. If any payment due pursuant
to this Agreement is not paid when due, then Company will be assessed on the following day, automatically and without notice from
Lender, a service fee of $500 payable to Lender (or other loan servicing agent). All service fees for missed payments are due on
the day they arise. Successive service fees will be assessed and due on the 15th day of each month until Company has paid such
past due amounts. All service fees will bear interest at the rate set forth in Section 12.7 from the date they arise. A
pro-forma payment schedule that is based on Company’s financial projections is attached as Schedule 2.3 (b)(2).

 

(c)               
Annual Payment Cap. Notwithstanding
Section 2.3(b), for each calendar year during the term of this Agreement, Company will not be
required to make aggregate monthly payments under Section 2.3(b) in excess of the amount equal to 120% of the aggregate
dollar amount for such calendar year set forth in the column labeled “Projected Annual Debt Service” of Schedule 2.3(b)(2)
(the “Annual Payment Cap”). Once the monthly payments received by Lender for a calendar year equal the Annual
Payment Cap, Company will not be obligated to make additional monthly payments pursuant to Section 2.3(b) for the remainder of
such calendar year and the next monthly payment due under Section 2.3(b) would be payable on January 15th of the following year.

 

(d)               
Prepayment. Company may at its option
prepay the Amount Advanced balance and accrued but unpaid Interest on any Payment
Date without penalty or premium (other than payment of the Minimum Interest).

 

(e)               
Termination of Payment Obligation.
The payment obligation shall terminate upon Lender receiving payments from Company equal to the Amount Advanced plus the Interest
and all other amounts due pursuant to this Agreement (the “Payoff Date”).

 

2.4              
Security Interest. Company hereby assigns and grants
to Lender, a continuing security interest in all of its right, title and interest in and to the Collateral. Upon indefeasible payment
in full of the Obligations and termination of Lender’s obligation to make Advances hereunder, Lender shall promptly release
such security interest. Company hereby authorizes Lender to take all such actions as are reasonably necessary to, in Lender’s
sole discretion, perfect its security interest in the Collateral, including the filing of such financing statements and amendments
and continuations thereof as may be useful in order to perfect such security interest and, if any Collateral is covered by a certificate
of title, Company will from time to time upon request of Lender execute such documents as may be required to have such security
interest properly noted on a certificate of title. In addition, Company authorizes Lender to file, from time to time, (and reaffirms
its authorization of the filing of any financing statements filed prior to the date of this Agreement) such financing statements
against the Collateral described as “all assets” or the like as Lender reasonably deems necessary or useful to perfect
such security interest.

 

2.5              
Guaranty & Security Interest. Each Guarantor,
jointly and severally with each other Guarantor, hereby irrevocably, unconditionally and absolutely guarantees the punctual payment
in full when due and the performance of the Obligations, in accordance with the terms of this Agreement (with respect to each individual
Guarantor, the “Guaranty”). Subject to the foregoing, each Guarantor hereby further agrees that if Company fails
to pay in full when due (whether at stated maturity, by acceleration or otherwise) all or any part of the Obligations, each Guarantor
will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or
renewal of any Obligations, it will promptly pay the same in full when due (whether at extended maturity, by acceleration

 

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or otherwise) in accordance with
the terms of that extension or renewal. Each Guaranty is a continuing guaranty and shall apply to each Guarantor and all Obligations
whenever arising and regardless of any intermediate payment or discharge in part thereof. As security for the performance of each
Guarantor’s Guaranty obligations, each Guarantor hereby assigns and grants to Lender a continuing security interest in all
of its right, title and interest in and to the Collateral of such Guarantor (in each case, substituting the name of the applicable
Guarantor for the “Company” on Schedule 11.2) subject to the same rights and obligations as set forth in Section
2.4. For avoidance of doubt the Guaranty shall immediately terminate upon satisfaction of the Obligations.

 

2.6              
Revival and Reinstatement of Indebtedness. If the
payment of all or any part of the Obligations by Company or the transfer to Lender
of any Collateral or other property should for any reason subsequently be declared
to be void or voidable under any state or federal law relating to creditors’ rights (a “Voidable Transfer”),
and if Lender is required to repay or restore, in whole or in part, any such Voidable Transfer, or elects to do so upon the advice
of its counsel, then the amount of such Voidable Transfer or the amount of such Voidable Transfer that Lender is required or elects
to repay or restore, including all reasonable costs, expenses and attorneys’
fees incurred by Lender in connection therewith, and the Obligations shall automatically be revived, reinstated and restored by
such amount and shall exist as though such Voidable Transfer had never been made.

 

ARTICLE
3 REPRESENTATIONS AND WARRANTIES

 

3.1              
Representations and Warranties of the Company
Entities. As a material inducement to Lender
to enter into this Agreement and to make one or more Advances to Company, each Company Entity, jointly and severally, represents
and warrants to Lender as follows:

 

(a)               
Organization, Good Standing and Qualification.
Each Company Entity is duly organized, validly existing and in good standing under
the laws of the state of its organization. Each Company Entity is duly qualified to transact business and is in good standing in
each jurisdiction in which the failure to so qualify would have a Material Adverse Effect. Each Company Entity has all
required power and authority necessary to own and operate its properties, to carry on its business as now conducted and
presently proposed to be conducted and to carry out the transactions contemplated by this Agreement.

 

(b)               
Subsidiaries. Except as disclosed on
Schedule 3.1(b), no Company Entity presently owns or controls, directly or indirectly, or holds any rights to acquire,
any interest in any other entity. Other than as set forth on Schedule 3.1(b), no Company Entity is a participant in any joint venture,
partnership or similar arrangement.

 

(c)               
Authorization. All
action necessary on the part of each Company Entity, its officers, directors, managers and members, for the authorization,
execution and delivery of the Transaction Documents, the performance of all Obligations of such Company Entity hereunder and thereunder
has been taken or will be taken prior to the Closing. The Transaction Documents and all other agreements contemplated thereby to
which a Company Entity is a party constitute valid and legally binding obligations of such Company Entity, enforceable in accordance
with their respective terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability
of specific performance, injunctive relief or other equitable remedies, and (iii) to the extent the indemnification provisions
may be limited by applicable laws.

 

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(d)               
Litigation. There is no material action,
suit, proceeding or investigation pending or, to Company’s knowledge, threatened against any Company Entity. The foregoing
includes, without limitation, actions, suits, proceedings or investigations pending or, to Company’s knowledge, threatened
involving the prior employment of any Company Entity’s employees or their obligations under any agreements with prior employers.
No Company Entity is subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency
or instrumentality. There is no action, suit, proceeding or investigation by a Company Entity currently pending or that a Company
Entity intends to initiate.

 

(e)               
Compliance with Other Instruments.
No Company Entity is: (i) in violation of or default under any provision of its organizational documents, as amended, (ii) other
than as set forth on Schedule 3.1(e) to its knowledge in violation of or default
under, in any Material respect, any instrument, judgment, order, writ, decree or contract to which it is a party or by which it
is bound, or (iii) to its knowledge in violation of or default under, in any Material respect, any provision of any federal or
state statute, rule or regulation applicable to such Company Entity. The execution, delivery and performance of the Transaction
Documents and the consummation of the transactions contemplated thereby will not result in any such violation, or be in Material
conflict with or constitute, with or without the passage of time and giving of notice, either a Material default under any such
provision, instrument, judgment, order, writ, decree or contract or an event that results in the creation of any lien, charge or
encumbrance upon any assets of a Company Entity or the suspension, revocation, impairment, forfeiture or non-renewal of any permit,
license, authorization or approval applicable to a Company Entity, its business or operations or any of its assets or properties,
other than the security interests arising under the Transaction Documents.

 

(f)                
Related-Party Transactions. No employee,
member, manager, officer or director of a Company Entity or member of his or her immediate family is indebted to a Company Entity,
nor is a Company Entity indebted (or committed to make loans or extend or guarantee credit) to any of them. To each Company Entity’s
knowledge, none of such persons has any direct or indirect ownership interest in any firm or corporation with which a Company Entity
is affiliated or with which a Company Entity has a Material business relationship, or any firm or corporation that competes with
any Company Entity, except that employees, shareholders, officers or directors of a Company Entity and members of their immediate
families may own up to 2% of the outstanding stock of one publicly traded company that may compete with a Company Entity.

 

(g)               
Financial Statements. The consolidated
financial statements for Company’s most recently completed fiscal year and year-to-date for the current year as of the most
recently ended month are attached hereto as Schedule 3.1(g), are correct in
all Material respects, and fairly present Company’s operating results and financial conditions as of dates and for the periods
indicated therein. As of the dates of such financial statements, no Company Entity
had any Material obligation, contingent liability, liability for taxes or long-term lease obligation that is not reflected in such
financial statements or the notes thereto. Since the date of such financial statements: (i) each Company Entity has operated its
businesses only in the ordinary course;

(ii) there has not been
individually or in the aggregate any change that may result in a Material Adverse Effect; (iii) no Company Entity has guaranteed
any Indebtedness of any other Person;

(iv) no Company Entity has any
Indebtedness for borrowed money other than pursuant to this Agreement; and (v) no event has occurred that could have a Material
Adverse Effect. Each Company Entity is solvent.

 

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(h)               
Tax Returns; Taxes. (i) Each Company
Entity has timely filed all returns, declarations, reports, estimates, information returns, and
statements, including any schedules and amendments to such documents (“Returns”), required to be filed
or sent by it in respect of any Taxes or required to be filed or sent by it by any taxing authority having jurisdiction; (ii) all
such Returns are complete and accurate in all material respects; (iii) each Company Entity has timely and properly paid all
Taxes required to be paid by it; and (iv) each Company Entity has complied
with all applicable laws, rules, and regulations relating to the collection or withholding of Taxes from third parties and the
payment thereof; (v) there are no liens for Taxes upon any assets of any Company Entity; (vi) no deficiency for any Taxes has been
asserted, assessed or proposed in writing against any Company Entity that has not been resolved and paid in full or is not
being contested in good faith; (vii) no waiver, extension or comparable consent given by
any Company Entity regarding the application of the statute of limitations with respect to any Taxes or Returns is outstanding,
nor is any request for any such waiver or consent pending; and (viii) there has been
no Tax audit or other administrative proceeding or court proceeding with regard to any Taxes or Returns, nor is any such Tax audit
or other proceeding pending, nor has there been any notice to any Company Entity by any taxing authority regarding any such Tax
audit or other proceeding.

 

(i)                 
Permits. Each Company Entity has all
franchises, permits, licenses and any similar authority necessary for the conduct of its business the lack of which would have
a Material Adverse Effect, and each Company Entity believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as planned to be conducted. No Company Entity is in default in any Material respect under any of
such franchises, permits, licenses or other similar authority.

 

(j)                
Compliance with Laws. Each Company
Entity, the operation of its business and all premises controlled by such Company Entity is in Material compliance with all applicable
laws and orders or directives of any governmental authorities having jurisdiction over such Company Entity, its properties or operations,
except where the failure to comply could not reasona

 

(k)               
bly be expected to have a Material Adverse Effect. No Company Entity has received
any citation, directive, letter or other communication (whether oral or written) or any notice of any proceeding, claim, lawsuit
or investigation, from any Person arising out of such Company Entity’s ownership or occupation of its premises or the conduct
of its operations.

 

(l)                 
Disclosure. Each Company Entity has
provided Lender with all the information available to it that Lender has requested for deciding whether to make Advances. To the
best of each Company Entity’s knowledge, neither this Agreement (including all the exhibits attached hereto) nor any certificates
delivered in connection herewith contains any untrue statement of a Material fact or omits to state a Material fact necessary to
make the statements herein or therein not misleading in light of the circumstances under which they were made.

 

(m)            
Title to Property and Assets. Except
as set forth in Schedule 3.1(l), the property and assets owned by a Company Entity are owned solely by such Company Entity free
and clear of all mortgages, liens, loans and encumbrances. With respect to a Company Entity’s leased property and assets,
such Company Entity is in compliance with the applicable leases in all Material respects and, to such Company Entity’s knowledge,
it holds valid leasehold rights in and to such leased property and assets. Other than as set forth on Schedule 3.1, there are no
financing statements reflecting the perfection of any security interest in favor of any creditor other than

 

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Lender covering all or any
part of any Company Entity’s assets in existence or on file in any public office other than those representing the Permitted
Liens.

 

(n)               
Name and Location of Company. Each
Company Entity has provided to Lender in writing its legal name, state of organization, entity type, and chief executive office
address. Company maintains all of its books and records regarding its assets at its chief executive office. Each Company Entity
has such business and financial experience as is necessary to enable it to protect its interests in connection with the transactions
contemplated by this Agreement.

 

(o)               
Collateral. Subject to the Permitted
Liens and/or except as set forth Schedule 3.1(n) and/or Schedule 11.5 , each Company Entity has
full power and authority to create a first- priority lien on the Collateral pursuant to this Agreement and no disability
or contractual obligation exists that would prohibit any Company Entity from pledging the Collateral pursuant to this Agreement.
There are no subscriptions, warrants, rights of first refusal, or other restrictions on transfer relative to, or options exercisable
with respect to, the Collateral. The Collateral is not the subject of any present or threatened suit, action, arbitration, administrative
or other proceeding, and no Company Entity knows of any reasonable grounds for the institution of any such proceedings. The Collateral
consisting of equipment and inventory is in good operating condition and repair, subject to ordinary wear and tear, and the Company
Entity owning such Collateral has made all economically reasonable and necessary repairs thereto. The Collateral consisting of
inventory is of good and marketable quality, free from defects, except for inventory for which adequate reserves have been made
in accordance with GAAP.

 

(p)               
Intellectual Property. Each Company
Entity owns or is a licensee of all intellectual property rights used in or necessary for the conduct of its business and operations,
as currently conducted and as proposed to be conducted, or that are Material to the
condition (financial or otherwise), business, or operations of such Company Entity.

 

(q)               
Customers and Suppliers. None of the
customers or suppliers of a Company Entity have indicated to any Company Entity that they intend to terminate, discontinue, or
materially reduce their business relationship with such Company Entity. There have
been no developments with any customers or suppliers of any Company Entity that may serve as the basis for such customer or supplier
to Materially change its relationship with a Company Entity. No Company Entity has any overdue payables to any supplier for services,
materials, equipment or other products previously provided to any Company Entity.

 

(r)               
Ordinary Course of Business. Each Company
Entity intends to run its business in the ordinary course of business and will continue to use commercially reasonable efforts
to preserve substantially intact the business organization and assets of the Company
Entities and preserve the current relationships of the Company Entities with customers, suppliers and other persons with which
any Company Entity has significant business relations. No Company Entity has any current intention to make, nor is any such Company
Entity evaluating or contemplating making, any Material changes to such Company Entity’s business, including its business
model, pricing model, or product offering.

 

(s)                
Recent Developments. As of the Effective
Date, (i) all actions by each Company Entity necessary to authorize the execution, delivery and
performance of the Transaction Documents have been taken (including the adoption of appropriate resolutions of the Governing
Body), (ii) no Event of Default has occurred, and (iii) no Company Entity has incurred
any additional Indebtedness since the Term Sheet Date.

 

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(t)                
Purchase Agreement. The representations
and warranties given by Copa di Vino, Buyer, and Company pursuant to the Purchase
Agreement are hereby incorporated into this Agreement by reference as though provided herein by Company to Lender. To the knowledge
of Company, there are no material inaccuracies in the representations and warranties of Copa di
Vino in the Purchase Agreement (including the disclosure schedules thereto) or in any related documents, or of any material
noncompliance with the affirmative covenants binding upon Buyer or Company pursuant to the Purchase Agreement.

 

3.2              
Representations and Warranties of the Key Person. As
a material inducement to Lender to enter into this Agreement and to make one or more Advances to Company, the Key Person hereby
represents and warrants to Lender:

 

(a)               
Financial Interest. The
Key Person has a financial interest in Company and will receive a direct or indirect financial and other benefit from this Agreement
and the Advances made to Company hereunder.

 

(b)               
Non-Contravention. The
execution, delivery and performance by the Key Person of this Agreement
and the consummation of the transactions contemplated hereunder do not, and
will not, contravene or conflict with any law, statute or regulation whatsoever to which the Key Person is subject or constitute
a default (or an event which with notice or lapse of time or both would constitute a default) under, or result in the breach
of, any court order, indenture, mortgage, deed to secure debt, deed of trust, trust deed, charge, lien, or any contract,
agreement or other instrument to which the Key Person is a party or which may be binding on
or applicable to the Key Person. This Agreement is
a legal, valid and binding obligation of the Key Person and is enforceable in accordance with its terms, except to the extent that
enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of general
application relating to or affecting the enforcement of the rights of creditors and by general principles of equity.

 

(c)               
Authorization. No
authorization or approval or other action by, and no notice to or filing with, any governmental authority or any Person (other
than those that have been duly obtained or made and which are in full force and effect) is required for the consummation of this
Agreement or the execution, delivery or performance by the Key Person of this Agreement.

 

(d)               
Financial Condition; Litigation. There
has been no material adverse change in the net worth, assets, financial condition, or prospective financial position of the Key
Person since the Term Sheet Date. No litigation, investigation, or proceeding of or before any arbitrator, court or governmental
authority is pending or, to the knowledge of the Key Person, threatened by or against
the Key Person or against any of the Key Person’s assets.

 

(e)               
Accuracy of Information. None
of the factual information heretofore or contemporaneously furnished in writing to Lender by or
on behalf of the Key
Person in connection with this Agreement or
any of the Transaction Documents contains any untrue statement of a material fact, or omits to state any material fact necessary
to make any information not misleading, and no other factual information hereafter
furnished in connection with

this Agreement
or any of the Transaction Documents by or on behalf of the
Key Person to Lender will contain any untrue statement of a material fact or will omit to state
any material fact necessary to make any information not misleading on the date as of which such information is dated or certified.

 

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ARTICLE
4 CLOSING

 

4.1              
Closings. The closing of the Initial Advance pursuant
to this Agreement (the “Closing”) shall take place at the offices of Fredrikson & Byron, P.A., 200 South
Sixth Street, Suite 4000, Minneapolis, MN 55402-1425, by an electronic exchange of executed counterpart copies of this Agreement
and the other Transaction Documents between counsel for Company and Lender. At the Closing, the Company Entities and Lender shall
exchange signature pages to this Agreement by facsimile, portable document format (.pdf), DocuSign or other electronic transmission,
and Lender will thereafter make the Initial Advance. Distributions of proceeds of the Initial Advance pursuant to this Section
4.1 shall be made in accordance with Schedule 4.1 to the parties set forth thereon by wire transfer and, in Lender’s
sole discretion, are subject to off-set of the Company’s Share of Transaction Costs.

 

4.2              
Lender’s Conditions to Closing. Lender’s
Advances pursuant to this Agreement are subject to the condition that on or before the Closing, Lender has received evidence of
the following actions and or executed original copies of the following documents, in form and substance satisfactory to Lender:

 

(a)               
a Non-Compete, Non-Solicitation and Confidential Information Agreement from the
Key Person;

 

(b)               
a copy of resolutions duly adopted by the governing body (e.g., board of
directors, board of governors, managing members, general partner or the like) (the “Governing Body”) of each
Company Entity authorizing this Agreement and the transactions contemplated hereby;

 

(c)               
an executed copy of the Purchase Agreement and all transaction documents related
thereto;

 

(d)               
Subordination Agreements in favor of Lender executed by (i) John P. McGrain &
Justin W. Yorke TRS FBO San Gabriel Advisors, LLC DBP FBO Justin Yorke, (ii) San Gabriel Fund, LLC, a California limited liability
company, (iii) Richland Fund, LLC, a Nevada limited liability company, and (iv) JMW Fund, LLC, a Delaware limited liability company.

 

(e)               
A payoff letter from KeyBank National Association evidencing full and final satisfaction
of all obligations owed by Company Entities to KeyBank National Association and authorizing Company and Lender to terminate any
UCC-1 financing statements and other liens associated therewith;

 

(f)                
a Certificate of Perfection from Company with respect to each Company Entity in
the form provided by Lender to Company; and

 

(g)               
a copy of Company’s current operating budget including, without limitation,
projected revenues, expenses, wages, and uses of loan proceeds, and if applicable, approved by Company’s Governing Body.

 

4.3              
Subsequent Closings. The closing of each Subsequent
Advance pursuant to this Agreement, if any (each, a “Subsequent Closing”) shall take place at the offices of
Fredrikson & Byron, P.A., 200 South Sixth Street, Suite 4000, Minneapolis, MN 55402-1425 by electronic exchange of documents
deemed necessary by Lender in connection with such Subsequent Closing, including a Subsequent Closing certificate from a Key Person
in form and substance satisfactory to Lender certifying

 

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that the conditions to the Subsequent
Advance set forth on Schedule 2.1(b) have been satisfied and each Company Entity shall execute and deliver to Lender any
other agreement or document as reasonably requested by Lender to consummate the transactions contemplated by this Agreement in
connection with such Subsequent Closing.

 

ARTICLE
5 AFFIRMATIVE COVENANTS

 

Unless otherwise
agreed in writing by Lender, each Company Entity shall, so long as any of the Obligations remain unsatisfied, comply with the covenants
in this Article 5.

 

5.1              
Financial Information, etc. Upon written request
from Lender, each Company Entity will furnish to Lender copies of the following financial statements, reports and information:

 

(a)               
as soon as available and in any event within 90 days after the end of each fiscal
year of Company, (or 105 days if the Company files an extension to file with the Securities and Exchange Commission) a copy of
its annual consolidated financial statements (balance sheet, cash flow statement and income statement), detailed on
a monthly basis, which will be reviewed (or audited if Company has its financial statements audited by Company’s accounting
firm) (the “Financial Statements”) and prepared in all Material respects, in accordance with GAAP, as well as
a complete version of Lender’s required annual operational survey;

 

(b)               
as soon as available and in any event within 30 days (or 45 days if the Company
files an extension with the Securities and Exchange Commission) after the end of each of the first three quarters of each fiscal
year of Company, a copy of Company’s consolidated quarterly Financial Statements from the beginning of such fiscal year to
the end of such quarter, detailed on a monthly basis, prepared by Company’s accounting firm, in all
Material respects, in accordance with GAAP, except for the presence of footnotes and subject to normal year-end adjustments;

 

(c)               
with each quarterly and annual financial statement or report required by Sections
5.1(a) and 5.1(b), a certificate signed by the Chief Executive Officer or any Key Person of Company stating that, to
the best of his or her knowledge after reasonable investigation, no Event of Default has occurred and is continuing with respect
to any Company Entity, or if an Event of Default has occurred and is continuing, a statement of the nature thereof and the action
which Company proposes to take with respect thereto;

 

(d)               
copies of all reports that any Company Entity sends to any of its equity holders
(as an equity holder) promptly after the sending or filing thereof;

 

(e)               
within 45 days of the conclusion of each calendar year, Company’s consolidated
annual operating and capital expenditure budgets and cash flow forecast for the following
year presented on a monthly basis;

 

(f)                
within five days of receipt by, or delivery to, copies of all material notices
to or from any other lender to any Company Entity;

 

(g)               
within 10 days of filing with the applicable taxing authority, a copy of all tax
returns; and

 

(h)               
such other information and financial reports with respect to the Collateral, the
Key Person and/or the financial condition and operations of each Company Entity as Lender may

 

    10

     

    

 

reasonably request, and, when
so requested, each Company Entity will make available for inspection and copy by duly authorized representatives of Lender, any
of such Company Entity’s books and records; and

 

(i)                 
as soon as available and in any event within 30 days after the end of each calendar
month, a copy of Company’s monthly consolidated Financial Statements as of the end of such month prepared by Company, in
all Material respects, in accordance with generally accepted accounting principles, except for the omission of footnotes and subject
to normal year-end adjustments.

 

		5.2	Maintenance of Corporate Existence and Properties.

 

(a)               
Each Company Entity will at all times do or cause to be done all things necessary
to maintain, preserve and renew its charter and its leases, privileges, franchises, qualifications and rights that are necessary
or useful in the ordinary conduct of its business, and conduct its business as presently conducted in an orderly and efficient
manner in accordance with good business practices;

 

(b)               
Each Company Entity will provide or cause to be provided for itself insurance against
loss or damage of the kinds customarily insured against by businesses similarly situated and located, with reputable insurers,
in such amounts, with such deductibles and by such methods as are adequate in the judgment of such Company Entity’s Governing
Body, and in any event in amounts not less than amounts generally maintained by other companies of similar size engaged in similar
businesses;

 

(c)               
Each Company Entity will keep true books of records and accounts in which full
and correct entries will be made of all its business transactions, and will reflect
in its financial statements adequate accruals and appropriations to reserves, all in accordance with generally accepted accounting
principles; and

 

(d)               
Each Company Entity will comply in all Material respects with all applicable laws,
statutes, rules, regulations, orders and restrictions in respect of the conduct of its business and the ownership of its properties,
except such as are being contested in good faith.

 

5.3              
Payment of Indebtedness, Taxes and Claims. Each Company
Entity will pay (i) its Indebtedness, the Obligations, and all other obligations promptly and in accordance with their terms; (ii)
file all tax returns and reports which are required by law to be filed by it; (iii) pay before they become delinquent, all taxes
(including payroll taxes), assessments and governmental charges and levies imposed upon it or its property; and (iv) pay all claims
or demands of any kind (including but not limited to those of suppliers, mechanics, carriers, warehousemen, landlords and other
like persons) which, if unpaid, might result in the creation of a lien upon its property other than a Permitted Lien.

 

5.4              
Nature of Relationship. Lender is entering into this
Agreement and making one or more advances to Company based on its confidence in the Key Person
and the Key Person’s integrity and ability to manage the Company Entities. Given the Key Person’s experience and expertise
operating the Company Entities and his greater access to information, Lender is entrusting the Key Person with broad discretion
in the control and management of the Company Entities. The Key Person acknowledges Lender’s confidence in him/her and hereby
agrees to act with the utmost good faith for the benefit of Lender. For avoidance of doubt nothing in this Section or Agreement
shall be construed as any guarantee of the Key Person and no such guarantee is conveyed. Further the Key Person is not making any
personal guarantee pursuant to this Agreement or otherwise.

 

    11

     

    

 

5.5              
Litigation and Other Notices. Company and/or the
Key Person
shall furnish to Lender written notice of the following promptly after any officer (or similar) of any Company Entity becomes aware
of the same:

 

(a)               
any Event of Default or the occurrence of any event or condition that would likely
result in an Event of Default, specifying the nature and extent thereof and the corrective action (if any) proposed to be taken
with respect thereto; provided, however, that Company shall provide written notice to Lender not later than 48 hours
prior to the occurrence of an Event of Default described in Section 7.3 of this Agreement;

 

(b)               
the filing or commencement of, or receipt of notice of intention of any Person
to file or commence, any action, suit or proceeding, whether at law or in equity or by or before any governmental authority, against
any Company Entity which has had or would likely have a Material Adverse Effect;

 

(c)               
any development, event or condition affecting or relating to any Company Entity
that has had, or would likely have, a Material Adverse Effect; provided, however, notice for events which occur on
a frequent basis may be aggregated into one monthly or quarterly notice as agreed upon in writing by
Lender; and

 

(d)               
the issuance by any governmental authority of any injunction, order or decision,
or the entry by any Company Entity into an agreement with any governmental agency, Materially restricting the business of any Company
Entity or concerning any Material business practice of any Company Entity; provided, however, notices regarding regulatory
changes will be provided only quarterly.

 

5.6              
Inspection. Each Company Entity shall permit Lender,
at Lender’s expense, to visit and inspect such Company Entity’s properties; examine its books of account and records;
and discuss such Company Entity’s affairs, finances, and accounts with its officers during normal business hours of such
Company Entity as may be reasonably requested by Lender; provided, however, that such Company Entity shall not be
obligated pursuant to this Section 5.6 to provide access to any information that it reasonably and in good faith considers
to be a trade secret or confidential information (unless covered by an enforceable confidentiality agreement, in form acceptable
to Company) or the disclosure of which would or could reasonably be expected to adversely affect the attorney-client privilege
between Company and its counsel.

 

5.7              
Audit Right.

 

(a)               
Upon reasonable advance notice from Lender, Company shall, not more than once every
12 months, make the financial books and records of each Company Entity available to Lender and its designated representatives for
review and audit so that Lender may verify (i) the amount of payments made by Company to Lender and (ii) the aggregate Revenues.
Lender shall provide the full written results of such review and audit to Company within 10 days after the completion of such review
and audit. Subject in each case to Section 5.7(b), in the event that a review and audit by Lender or its designated representatives
results in a determination that the amounts that were paid to Lender (A) were underpaid by
less than 10%, Company shall pay to Lender the amount unpaid plus interest at the rate of 1%
per month on the amount unpaid, but Lender shall bear all of the costs, fees and expenses incurred by Lender as a result
of the review and audit or (B) were underpaid by 10% or more, Company shall pay to Lender, in addition to the amount unpaid plus
interest at the rate of 1% per month on the amount unpaid, all of the costs, fees and expenses actually incurred by Lender as a
result of the review and audit.

 

    12

     

    

 

(b)               
Notwithstanding the foregoing, if Company disputes or disagrees with any of the
results of Lender’s review and audit, Company may deliver to Lender, within 15 days of its receipt of the written results
of Lender’s review and audit, a written dispute notice of its specific objections to Lender’s review and audit (a “Dispute
Notice”). Upon the delivery by Company of a Dispute Notice, Company and Lender shall in good faith, and in consultation
with their respective accountants, work together to resolve all disputed issues set
forth in such Dispute Notice. To the extent that the disputed items set forth in the Dispute Notice remain unresolved after 20
business days following the receipt of the Dispute Notice, Company and Lender shall submit such unresolved items to an accounting
firm of national or regional reputation that is mutually agreed upon by Company and Lender (the “Accountants”).
If the issues in dispute are submitted to the Accountants for resolution: (i) Company
and Lender shall each furnish to the Accountants such documents and information relating to the disputed issues as the Accountants
may reasonably request and are available to that party and shall be afforded the opportunity
to present to the Accountants any material relating to the review and audit in question and to discuss such review and audit with
the Accountants; (ii) the determination by the Accountants of the actual amounts that should have been paid to Lender during the
period subject to review and audit (the “Settled Audit Amount”), as set forth in a notice delivered to both
parties by the Accountants within 30 days of the Accountants’ engagement, will be binding and conclusive on the parties;
and (iii) Company and Lender shall bear the costs, fees and expenses of the Accountants for such determination in the same manner
they would bear the costs, fees and expenses of Lender for the review and audit in accordance with Section 5.7(a). Within
10 business days following the determination of the Settled Audit Amount, the appropriate payments shall be made by Company, if
any, in accordance with Section 5.7(a), based solely on the Settled Audit Amount.

 

5.8              
Subsidiaries and Related Businesses. Company shall
cause all of the Company Entities and all Related Businesses to comply with the provisions of Article 5 and Article 6.
Company shall deliver prior written notice to Lender of the formation or acquisition of any subsidiary and/or purchase of equity
investment or lending or advancing of funds to any other entity. All such subsidiaries
of Company and Related Businesses shall execute and deliver to Lender such joinders, pledge agreements and other documents as Lender
requests.

 

5.9              
Further Assurances.

 

(a)               
Each Company Entity will at any time or times promptly execute and shall cause
any Related Business to promptly execute, such instruments and perform such acts as Lender may reasonably request to establish
and maintain an attached and perfected security interest in the Collateral and will pay all costs of filing and recording.

 

(b)               
Company will reimburse Lender for all reasonable costs, fees and expenses (including
attorneys’ fees) for the perfection and the continuation of the perfection of Lender’s security interest in the Collateral
and the cost of any terminations, extensions, renewals, amendments and releases thereof, and shall promptly pay
all reasonable costs, fees and expenses of any record searches for financing statements Lender may reasonably require.

 

5.10          
Records Regarding Collateral. Each Company Entity
shall maintain all records, instruments or other documentation evidencing or otherwise relating to the Collateral at Company’s
chief executive office and will not (i) remove any part thereof, or (ii) change such Company Entity’s name, state of organization,
or location of its chief executive office, without the prior written consent of Lender (which consent shall not be unreasonably
withheld or delayed).

 

    13

     

    

 

5.11          
Company Bank Account. Company shall use its best
efforts to: (i) maintain a banking relationship with Company Bank or other qualified commercial bank; (ii) ensure that all payments
to Company from whatever source shall be deposited into Company account described in Schedule 5.11, or successor account
thereto; (iii) ensure that such account has a balance in excess of the amount due to Lender on each date that a payment pursuant
to this Agreement is due; and (iv) ensure that the Applicable Revenue Percentage is transferred to Lender Account on
a monthly basis in accordance with this Agreement. Company shall within five business days notify Lender in writing of any
change in its banking relationship (whether such change is within Company’s current bank or to another bank) and shall provide
Lender with new contact information and account details for all new bank accounts.

 

5.12          
Key Person Insurance; Background Check. Within 90
days following the Effective Date, Company shall hold from one or more “A or better” insurers, “key-person”
life insurance on the Insured Executive(s) in the Insurance Amount and on other terms and conditions reasonably acceptable to Lender
and Company. The key-person policy, whether obtained prior to or following the Effective Date, shall be collaterally assigned to
Lender, name Lender as loss payee, and continuously maintained in force and shall not be cancelable by Company without prior approval
from Lender prior to full satisfaction of the Obligations. If at any time following such 60 day period Company does not hold a
key-person policy in compliance with the preceding two sentences, Lender may obtain a key-person policy as owner and beneficiary
on the life of the Insured Executive(s) in the Insurance Amount. Insured Executive(s) and Company shall fully cooperate with Lender
in obtaining such policy and Company shall reimburse Lender for all related fees and expenses. All or any portion, in Lender’s
sole discretion, of the insurance proceeds received by Lender as loss payee or beneficiary on any one or more key-person life insurance
policies shall be applied against the outstanding Obligations with the excess being returned to the insurance company for redistribution.
Proceeds of key-person life insurance policies received by Company while any Obligations are outstanding will, in the sole discretion
of Lender, be used, in whole or in part, to satisfy the Obligations. Failure to obtain key-person insurance within such 60 day
period will be considered an Event of Default under Section 7.2 of this Agreement. It is further agreed that prior to any
person assuming any office, position, or responsibilities currently held by the Key Person, Company will use commercially reasonable
efforts to ensure that such person provides Lender with written authorization to conduct a background check within 30 days after
such person’s appointment; provided that such background check shall only be for informational purposes and shall
not give Lender any rights to veto such replacement Key Person. Failure by such person to provide written consent within such 30
day period will be considered an Event of Default under Section 7.2 of this Agreement.

 

5.13          
Compliance. Each Company Entity shall comply with
the requirements of all applicable state and federal laws, and of all rules, regulations, orders, writs, judgments, injunctions,
decrees or awards to which it may be subject.

 

5.14          
Government Regulation. No Company Entity will be
or become subject at any time to any law, regulation, or list of any government agency (including, without limitation, the U.S.
Office of Foreign Asset Control list) that prohibits or limits Lender from making any advance or extension of credit to Company
or from otherwise conducting business with any Company Entity, or fail to provide documentary and other evidence of any Company
Entity’s identity as may be requested by Lender at any time to enable Lender
to verify any Company Entity’s identity or to comply with any applicable law or regulation, including, without limitation,
Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318.

 

5.15           Annual
Survey. Company shall complete Lender’s annual compliance survey within 30
days of receipt of such compliance survey from Lender by Company for the applicable year. For each time Company fails to
submit an annual compliance survey within 30 days after the date on which it is due, Company will automatically, and without
notice from Lender, be assessed a $500 service charge and each such service charge will bear interest at the rate set forth
in Section 12.7 from the date such service charge arises (i.e., 30 days after delivery of the compliance survey
by Lender (or its representatives) to Company).

 

    14

     

    

5.16          
Expenses Related to Non-Compliance with Covenants.
If after five days’ notice from Lender, any Company Entity fails to comply with any one or more of the covenants provided
for in this Agreement, Lender may, but has no obligation to, take such reasonable actions as Lender, in its sole discretion, deems
appropriate to ensure such Company Entity remains in or returns to compliance with this Agreement and to protect Lender’s
interest under this Agreement, including without limitation, paying premiums, taxes, unpermitted Indebtedness and/or judgments.
Company shall thereafter promptly reimburse Lender for all reasonable costs, fees and expenses incurred by Lender in connection
therewith together with interest at the rate set forth in Section 12.7 from the date of disbursement.

 

5.17          
Registration of Intellectual Property Rights. Each
Company Entity will register with the United States Patent and Trademark Office or the United States Copyright Office its intellectual
property rights including revisions or additions thereto with any product before the sale or licensing of the product to any third
party, in each case to the extent registrable and the Governing Body of such Company Entity in good faith deems appropriate for
the development of such Company Entity’s business and in the best interest of the Company Entity and its equity holders.
To the extent that the Governing Body of a Company Entity in good faith determines appropriate for the development of such Company
Entity’s business and in the best interests of Company and its equity holders, each such Company Entity will: (i) protect,
defend, and maintain the validity and enforceability of the intellectual property rights and promptly advise Lender in writing
of any known or claimed infringements thereof, and (ii) not allow any intellectual property rights to be abandoned, forfeited or
dedicated to the public without Lender’s prior written consent.

 

5.18          
[Reserved.]

 

5.19          
Monthly Questionnaires. On or before each Payment
Date, Company shall accurately and fully complete and submit Lender’s online financial data questionnaire reporting the information
requested by Lender about the most recently completed month (each, a “Monthly Questionnaire”). If any Monthly
Questionnaire due pursuant to this Agreement is not submitted within 30 days of its due date, then Company will be assessed on
the following day, automatically and without notice from Lender, a $500 service fee payable to Lender (or other loan servicing
agent). All service fees for late Monthly Questionnaires are due on the day that they arise. Successive service fees will be charged
and due on the 15th day of each month until Company has submitted all past due Monthly
Questionnaires. All service fees will bear interest at the rate set forth in Section
12.7 from the date they arise.

 

5.20          
Use of Proceeds. $1,500,000 of the proceeds of the
Initial Advance will be transferred by Lender directly to the account of Copa di Vino on behalf of Company and Buyer to acquire
substantially all of the assets of Copa di Vino in accordance with the terms of the
Purchase Agreement. Promptly following the Closing, Company shall deliver evidence satisfactory to Lender that the $500,000 balance
of the “Closing Cash” (as defined in the Purchase Agreement) has been paid to Copa di Vino in accordance with the terms
of the Purchase Agreement.

 

5.21          
PPP Indebtedness. Company must take all
actions necessary to preserve its eligibility for 100% loan forgiveness with respect to the PPP Indebtedness. In addition,
Company must request the maximum eligible amount of loan forgiveness promptly after becoming eligible under applicable Small Business
Administration regulations and guidance.

 

    15

     

    

 

 

ARTICLE
6 NEGATIVE COVENANTS

 

Unless
otherwise agreed in writing by Lender, each Company Entity and each Related Business shall, so long as any of the Obligations remain
unsatisfied, comply with the covenants in this Article 6.

 

6.1              
Indebtedness.

 

(a)               
Other than as set forth on Schedule 6.1, no
Company Entity will (i) create, incur, assume, guarantee, or otherwise become liable for any Indebtedness after the date
of this Agreement, (ii) create any lien, security interest, mortgage or pledge of its assets, or (iii) waive, forgive, release,
amend, terminate or fail to enforce any material amount owed to a Company Entity or other right held by a Company Entity. Notwithstanding
the preceding sentence, during any period of time in which no Event of Default exists, a Company Entity may create Permitted Indebtedness
and Permitted Liens.

 

(b)               
Without the prior written approval of Lender, Company will not (i) increase the
advance rate or interest rate in respect of any Indebtedness, (ii) increase the maximum principal amount of any Indebtedness, or
(iii) shorten the dates upon which payments of principal or interest of any Indebtedness are due.

 

		6.2	Restricted Payments.

 

(a)               
No Company Entity or any Related Business will, at any time, make or become obligated
to make, directly or indirectly, any: (i) payment or distribution in respect of any capital stock, units or other equity interests
in any Company Entity; (ii) payment or distribution on account of the purchase, repurchase, redemption or other
retirement of any capital stock, units or other interests in any Company Entity; (iii) loans, advances or payments to any
affiliate, stockholder, or member, including, without limitation, any officer or member of the Governing Body of any Company Entity
or any Related Business; and/or (iv) investment in third parties other than in money market funds for purposes of cash management.

 

(b)               
Notwithstanding Section 6.2(a), each Company Entity may pay reasonable compensation
(including reasonable salary, bonus and equity compensation for a company of similar size, financial condition, location and industry),
reimburse expenses incurred on behalf of a Company Entity, and, if the Company Entity is, for tax
purposes, a partnership (including a limited liability company taxed as a partnership) or Subchapter S corporation, distributions
in such amounts as reasonably determined to be necessary to allow equity holders to pay federal, state and local income taxes with
respect to the income allocated to such equity holder from such Company Entity with respect to the applicable tax year.

 

6.3               Ownership;
Maintenance of Collateral. No Company Entity shall transfer or otherwise dispose of all or
any portion of the Collateral, other than in the ordinary course of business, or enter into any lease or license for the use
of the Collateral without fair and reasonable consideration. Each Company Entity shall keep the Collateral free and clear of
all levies, attachments, liens, charges, encumbrances and security interests of every kind or character (except for the
security interest granted to Lender hereunder and except for Permitted Liens). Each Company Entity shall promptly pay and
discharge when due all license fees, registration fees, taxes, assessments and other charges
which may be levied upon or assessed against the ownership, possession or uses of the Collateral or any portion thereof,
except as otherwise permitted in this Agreement. Each Company Entity shall keep accurate and complete records of the
Collateral and shall, upon Lender’s reasonable request, promptly affix on any Collateral constituting chattel paper, a
notice, in form satisfactory to Lender, of Lender’s security interest created hereunder. Each Company Entity shall use
commercially reasonable efforts to maintain all Collateral in good working order, subject to ordinary wear and tear, and,
with respect to intellectual property, make such filings, prosecute such applications, pay necessary fees (including
maintenance fees), and take such other actions as necessary to properly maintain and protect such Company Entity’s
intellectual property rights. For the avoidance of doubt, no Company Entity shall, without Lender’s prior written
consent, sell or otherwise transfer or cease operations of any business unit, operating division, or other Material portion
of such Company Entity’s business operations.

    16

     

    

 

 

6.4              
New Subsidiaries. The Company Entities shall provide
Lender with at least 10 days’ advance written notice before creating any new subsidiary or entering into any joint venture
(each, an “Approved Subsidiary”). Upon creation or entry into an Approved Subsidiary, such Approved Subsidiary
(a) shall execute and deliver the joinder contemplated by Section 5.8 hereof and (b) will be considered a Guarantor and
Company Entity for all purposes under this Agreement. By executing and delivering the
joinder required under clause (a) above, such Approved Subsidiary will be deemed to have granted a security interest as contemplated
under Section 2.4 of this Agreement in all of such Approved Subsidiary’s
assets and Lender will be permitted to take such actions and make such filings as are contemplated in Section 2.4 of this
Agreement with respect to such Approved Subsidiary.

 

6.5              
Related Party Transactions. No Company Entity will
enter into any agreement with a Related Business or any officer, director or employee of
any Company Entity or a Related Business, or any member of the immediate family of any such officer, director or employee,
or any entity in which any of such persons owns any beneficial interest (other than a publicly traded business of which any of
the foregoing persons or entities owns less than 2% of the outstanding voting securities thereof)., provided however this Section
6.5 shall not apply to employment or consulting agreements entered into with the Company’s officers to perform their services
as an officer of the Company Entity nor shall this Section apply to compensation o the Company’s officers and directors for
performance of their duties to the Company Entities.

 

6.6              
Splash Mex SA de CV. Without
Lender’s prior written consent, no Company Entity will

(i) make any capital contribution
or contribution of assets to Splash Mex SA de CV, a Mexican corporation and subsidiary of(“Splash Mex”),
other than contributions in the ordinary course of business to manufacture and sell through Splash Mex consistent with past
practice, (ii) loan or other advance to Splash Mex other than in the ordinary course of business to fund operations consistent
with past practice, or (iii) guarantee of any Indebtedness incurred by Splash Mex. If, during the term of this Agreement, Splash
Mex materially increases its business operations or experiences a material increase in its revenues, then the Company Entities
shall cause Splash Mex to execute a joinder to this Agreement and become a Guarantor of the Obligations. All revenues generated
by Splash Mex will be included in the calculation of the Company Entities’ consolidated Revenue for all purposes of this
Agreement.

 

ARTICLE
7 EVENTS OF DEFAULT

 

The term “Event of Default”
means the occurrence of any one or more of the following events:

 

7.1              
Payment of Obligations. The failure or refusal of
Company to pay any portion of the Obligations on the due date in accordance with the terms of the Transaction Documents (each,
a “Payment Event of Default”); provided that, subject to Section 8.2 and Section 12.7 hereof,
Company will have 15 days following the due date thereof to cure any such Payment Event of Default.

 

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7.2              
Other Covenants. The failure or refusal of any Company
Entity to punctually and properly perform, observe and comply with any Material affirmative covenant, agreement or condition contained
in any of the Transaction Documents and such failure continues for a period of 30 days after the earliest of: (a) the date Company
gives notice of such failure to Lender; (b) the date Company should have given notice of such failure to Lender pursuant to this
Agreement; and (c) the date Lender gives notice of such failure to Company; provided there will be no cure period for (i)
any breach of any negative covenant contained in any of the Transaction Documents, (ii) the Events of Default provided in Section
7.3, (iii) failure to obtain “key person” insurance within the time period prescribed by Section

5.12 of this Agreement,
or (iv) failure to obtain written consent to a background check within the time period prescribed by Section 5.12 of this
Agreement.

 

7.3              
Bankruptcy; Insolvency.

 

(a)               
any Company Entity commences a voluntary case under Title 11 of the United States
Code as now or hereafter in effect, or any successor thereto;

 

(b)               
an involuntary case under Title 11 of the United States Code is commenced against
any Company Entity and the petition is not dismissed within 30 days after commencement of the case;

 

(c)               
a custodian is appointed for, or takes charge of, all or any substantial part of
the property of any Company Entity;

 

(d)               
any Company Entity commences any other proceeding under any reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to any Company Entity;

 

(e)               
any Company Entity shall fail to pay, or shall state that it is unable to pay,
or is unable to pay, its debts generally as they become due; or

 

(f)                
the Company Entities (taken as a whole) shall cease or substantially change or
reduce their operations.

 

7.4              
Judgments. A judgment for the payment of money in
excess of $100,000 is rendered against a Company Entity, and such judgment remains unpaid or undischarged for more than 30 days
from the date of entry thereof or such longer period during which execution of such judgment is stayed during an appeal from such
judgment.

 

7.5              
False Statement. Any representation or warranty made
by or on behalf of a Company Entity in this Agreement or any other Transaction Documents or in any certificate, statement, report
or document herewith or hereafter furnished to Lender pursuant to this Agreement or any other Transaction Documents shall prove
to have been false or misleading in any Material respect on the date as of which the facts set forth are stated or certified, if
the facts are not remedied to reflect the representation or warranty made within 30 days of any officer of a Company Entity becoming
aware of such false or misleading representation or warranty.

 

		7.6	Key Person Events.

 

(a)               
Without written consent of Lender, the Key Person:

 

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(i)                 
ceases full-time employment with Company other than for reason of death or disability;

 

		(ii)	provides services to a business that is competitive with a Company

Entity;

 

(iii)             
improperly uses intellectual property or confidential information of a Company
Entity for the benefit of any Person other than a Company Entity; or

 

(iv)             
violates any provision of his or her Non-Competition, Non-Solicitation and Confidential
Information Agreement.

 

(b)               
If an Event of Default under Section 7.6(a)(i) occurs, Company and Lender
will use their commercially reasonable efforts to identify a mutually acceptable replacement Key
Person, and Company will cause such replacement Key Person to promptly execute a joinder to this Agreement and to enter
into a Non-Compete, Non-Solicitation and Confidential Information Agreement in substantially the same form as is delivered by the
Key Person pursuant to Section 4.2(a) hereof (if not previously executed by
such replacement Key Person). The replacement Key Person will be required to fulfill
the duties and obligations of the Key Person set forth in this Agreement. Company will not, without Lender’s prior written
consent, hire or compensate a replacement Key Person on terms substantially different from those applicable to the prior Key
Person. Additionally, Company shall obtain “key-person” life insurance in the amount required under Section
5.12 hereof within 60 days of the date on which the Key Person is mutually agreed upon by Company and Lender. Failure to obtain
such “key-person” life insurance within such 60 day period will constitute an Event of Default under Section 7.2
of this Agreement.

 

7.7              
Cross Default. (a) The maturity of any Indebtedness
of any Company Entity (other than Indebtedness under this Agreement) owed to Lender that is not paid when due, after giving effect
to any grace or cure period, (b) the maturity or default of any Indebtedness of any Company Entity (other than the Indebtedness
disclosed on Schedule 7.7) in an aggregate amount equal to or greater than $100,000 owed to others is accelerated, or (c)
any Company Entity fails to pay any such Indebtedness when due or, in the case of such Indebtedness payable on
demand when demanded, after giving effect to any grace or cure period.

 

7.8              
Material Adverse Effect. Any other event that Lender
deems to have had a Material Adverse Effect on a Company Entity.

 

ARTICLE
8 RIGHTS AND REMEDIES

 

8.1              
General Remedies. If any Event of Default specified
in Section 7.3 shall occur, any commitment to make Advances hereunder shall automatically terminate and all Obligations
of the Company Entities to Lender hereunder and under the other Transaction Documents shall automatically become immediately due
and payable without notice. Upon the occurrence of any Event of Default, Lender may, without notice of any kind (including, without
limitation, notice of acceleration or of intention to accelerate, presentment and demand or protest, all of which are hereby expressly
waived by Company) do any one or more of the following:

 

(a)               
declare the entire Amount Advanced, Interest and all other Obligations, or any
part thereof, immediately due and payable (provided that the Minimum Interest used to determine the Interest in such event will
be the maximum Minimum Interest determined in accordance with

 

    19

     

    

 

Schedule 11.3, which will
include all actual adjustments to the Minimum Interest in accordance with the terms of this Agreement, but will exclude speculative
adjustments);

 

(b)               
terminate any commitment to make Advances hereunder;

 

(c)               
exercise any and all other legal or equitable rights afforded by the Transaction
Documents and the laws of the Applicable Jurisdiction or any other jurisdiction as Lender shall deem appropriate; and

 

(d)               
take any action permitted by this Agreement or by applicable law, including the
Uniform Commercial Code then in effect in the Applicable Jurisdiction, to satisfy the Obligations of the Company Entities owed
to Lender, including, but not limited to:

 

(i)                 
Without limiting the generality of the foregoing Lender, may, to the fullest extent
permitted by applicable law, without notice, hearing or process except as specified below, take possession and maintain control
over the Collateral. Within two business days following demand by Lender for possession and control of the Collateral following
an Event of Default, each Company Entity shall, at its sole cost and expense, assemble and turn over to Lender all Collateral of
such Company Entity and any Related Business then held by such Company Entity and/or any Related Business.

 

(ii)               
Lender may in its sole discretion sell the Collateral or any part thereof in one
or more parcels at public or private sale, for cash, on credit or for future delivery,
and upon such other terms as Lender may deem commercially reasonable, and Lender may purchase all or any part of the Collateral
at public or, if permitted by law, private sale, and in lieu of actual payment of such purchase price, may
set off the amount of such purchase price against the Obligations. Lender may adjourn any public or private sale from time
to time by announcement at the time and place fixed therefor, and such sale may, with notice, be made at the time and place to
which it was so adjourned. Lender may abandon any such proposed sale. Each Company Entity acknowledges that any private sales of
Collateral effected by Lender may result in terms less favorable to a seller than public sales but each Company Entity agrees that
such private sales shall nevertheless be deemed commercially reasonable. The Company Entities shall pay all reasonable costs, fees
and expenses incurred by Lender, including reasonable attorney’s fees and court costs, in connection with any such sale.

 

(iii)             
Lender may enter upon and into and take possession of all or such part or parts
of the properties owned or occupied by any Company Entity, including lands, buildings, equipment and other property as may be necessary
or appropriate in the judgment of Lender to permit or enable Lender to complete the processing or collection of all or any part
of the Collateral as Lender may elect, and use and operate such properties for such purposes and for such length of time as Lender
may deem reasonably necessary or appropriate for such purposes without the payment of any compensation to any Company Entity therefor.

 

		8.2	Minimum Interest Multiple Remedies.

 

(a)               
Minimum Interest Increase on Payment Event of Default.
Following the occurrence of any Payment Event of Default and in addition to all other
rights and remedies provided by this Agreement or applicable law, for each payment not timely made under this Agreement, the applicable
Minimum Interest multiple will be increased by 0.015 on the Payoff

 

    20

     

    

 

Date; provided that
for the first two Payment Events of Default and for purposes of this Section

8.2  
only, Company will have 15 days to cure such instances of a Payment Event of Default without
a corresponding increase to the Minimum Interest multiple. The applicable Minimum Interest multiple will be increased regardless
of whether Lender notifies Company of any Payment Event of Default. If Company has not fully cured such Payment Event of Default
at the end of such 15 day period, the applicable Minimum Interest multiple will increase
as described above. Beginning with the third Payment Event of Default and continuing with each Payment Event of Default thereafter,
the applicable Minimum Interest multiple will increase by 0.015 on the Payoff Date upon the occurrence of each such Payment Event
of Default regardless of whether or not such Payment Event of Default is subsequently cured.

 

		(b)	[Reserved.]

 

(c)               
Indebtedness. During the term of this
Agreement, in addition to all other rights and remedies provided by this Agreement or applicable law, for each instance of noncompliance
with Section 6.1 of this Agreement (an “Additional Indebtedness Breach”), the greater of the following remedies
(in terms of dollar amount) will be applied automatically and regardless of whether
Lender notifies any Company Entity of the Additional Indebtedness Breach: (i) the applicable Minimum Interest multiple will increase
by 0.10 on the Payoff Date or (ii) Company will be assessed a service fee equal to
50% of the principal amount of the unauthorized Indebtedness incurred by the Company Entity.

 

(d)               
Increases Cumulative. For the avoidance
of doubt, any increases to the Minimum Interest made pursuant to this Section 8.2
will be cumulative and will apply throughout the remainder of the term of this Agreement for all periods set forth in the table
on Schedule 11.3.

 

8.3               
Notice of Sale. If any notification of intended disposition of any of the Collateral
is required by law, such notification will be deemed reasonably and properly given if provided in accordance with Section 12.6
at least 15 days before such disposition, postage prepaid, addressed to Company at the address set forth in the introduction to
this Agreement. Such disposition shall be established by affidavit of a representative of Lender, receipts or other reasonable
method.

 

8.4               
Remedies Cumulative; No Waiver. The rights and remedies of Lender hereunder are cumulative
and nonexclusive and the exercise of any one or more of the remedies provided for herein or under applicable law shall not be construed
as a waiver of any of the other remedies of Lender so long as any part of the Obligations remain unsatisfied. No failure on the
part of Lender to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, power or remedy by Lender
preclude any other or further exercise thereof or the exercise of any other right, power or remedy.

 

8.5               
Application of Proceeds. Any payments or proceeds received by Lender from the Collateral
shall be applied to the payment of reasonable costs, fees and expenses incurred by Lender in connection with performing, managing,
maintaining or selling the Collateral, including reasonable attorneys’ fees and expenses, and the balance, if any, shall
be applied by Lender to payment of the Obligations, in order of application as Lender shall reasonably determine.

 

8.6               
Notice to Account Debtors. Upon the occurrence and during the continuance of (i) any
Event of Default under Section 7.3, or (ii) upon any other Event of Default, provided Lender has declared all Obligations
immediately due and payable, Lender may notify any or all account debtors of the existence
of Lender’s security interest in the Collateral and require such account debtors to pay or remit all sums due or to become
due directly to Lender or its nominee.

 

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8.7               
[Reserved.]

 

8.8               
Delegation of Duties and Rights. Lender may perform any of its duties or exercise any
of its rights under the Transaction Documents by or through its officers, members of its Governing Body, employees, attorneys,
agents or other representatives.

 

8.9               
Expenditures by Lender. Each Company Entity shall indemnify Lender for all court costs,
attorneys’ fees, other reasonable costs of collection and other sums spent by Lender pursuant to the exercise of any right
(including, without limitation, any effort to collect amounts due or otherwise enforce this Agreement) provided herein. All such
amounts will be payable to Lender on demand and will bear interest at the rate set forth in Section 12.7 from the date spent
until the date repaid.

 

		8.10	Lender’s Authority. Lender has the authority, but is not obligated to:

 

(a)               
place on any chattel paper received as proceeds a notation or legend showing Lender’s
security interest;

 

(b)               
demand, collect, receive and receipt for, compound, compromise, settle and give
acquittance for, and prosecute and discontinue any suits or proceedings in respect of any or all of the Collateral in the name
of the Company Entities;

 

(c)               
upon prior written notice to Company, take any action which Lender may deem necessary
or desirable in order to realize on the Collateral, including, without limitation, performance of any contract and endorsement
in the name of any Company Entity of any checks, drafts, notes or other instruments or documents received in payment of or on account
of the Collateral; and

 

(d)               
place upon each Company Entity’s books and records relating to the Collateral
covered by the security interest granted hereby a notation or legend stating that such are subject to a security interest held
by Lender.

 

		8.11	Power of Attorney.

 

(a)               
Each Company Entity hereby irrevocably appoints Lender as its lawful attorney-
in-fact, exercisable upon the occurrence and during the continuance of an Event of Default, to: (a) endorse such Company Entity’s
name on any checks or other forms of payment or security; (b) sign such Company Entity’s name on any invoice or bill of lading
for any account or drafts against account debtors; (c) settle and adjust disputes and claims
about the accounts directly with account debtors, for amounts and on terms Lender determines reasonable; (d) make, settle, and
adjust all claims under such Company Entity’s insurance policies; (e) pay, contest or settle any lien, charge, encumbrance,
security interest, and adverse claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to terminate
or discharge the same; and (f) transfer the Collateral into the name of Lender or a third party as the UCC
permits.

 

(b)               
Each Company Entity hereby appoints Lender as its lawful attorney-in-fact to sign
such Company Entity’s name on any documents necessary to perfect or continue the perfection of Lender’s security interest
in the Collateral regardless of whether an Event of Default has occurred until all Obligations have been satisfied in full and
Lender is under no further obligation to make Advances hereunder.

 

 

    22

     

    

 

(c)               
Lender’s foregoing appointment as attorney in fact of each
Company Entity, and all of Lender’s rights and powers, coupled with an interest, are irrevocable until all Obligations
have been fully repaid and performed and Lender’s obligation to provide Advances terminates.

 

8.12            
Notification to Company. Lender may, but is under no obligation, to use reasonable
efforts to notify Company of any of the foregoing actions by Lender in this Article 8; provided, however, the parties
hereto expressly agree that the failure of Lender to provide notice shall not in any way affect or impair any action taken by Lender,
it being understood that any absolute obligation of notice is hereby waived by Company and each other Company Entity.

 

ARTICLE
9

[Reserved.]

 

ARTICLE
10 INDEMNIFICATION

 

10.1          
Indemnification. Company agrees to indemnify and
hold harmless Lender and its successors and assigns, together with any of its officers, members of its Governing Body, shareholders,
partners, members, and/or managers (such persons, the “Indemnified Parties”), from and against all losses, damages,
liabilities, obligations, costs or expenses (any one such item being herein called a “Loss” and all such items
being herein collectively called “Losses”) which are caused by or arise out of, or (in the case of claims asserted
against any Indemnified Parties by a third party) alleged to result from, arise out of or have been incurred with respect to, (a)
any breach or default in the performance by any Company Entity of any covenant or
agreement of any Company Entity contained in this Agreement, (b) any breach of warranty or inaccurate or erroneous representation
made by any Company Entity herein or in any certificate or other instrument delivered
by or on behalf of any Company Entity pursuant hereto, and (c) any and all actions, suits, proceedings, claims, demands, judgments,
costs and expenses (including costs and attorneys’ fees) arising out of the foregoing except when such actions, suits, proceedings,
claims, demands, judgments, costs and expenses arise as a result of the grossly negligent
or intentional actions or omissions of Lender.

 

10.2          
Survival. The indemnification provided in this Article
10 shall only apply, without limitation, to any act, omission, event or circumstance existing or occurring on or prior to the
date of payment in full of the Obligations.

 

ARTICLE
11 DEFINITIONS

 

“Accountants” has
the meaning given in Section 5.7(b).

 

“Advance(s)” means
the Initial Advance, each Subsequent Advance or any one or more of them,

if any.

 

“Advance
Period” means each period listed on Schedule 2.1(b) during which Company may receive a Subsequent Advance.

 

“Amount
Advanced” means, as of any date of determination, the aggregate amount of all Advances actually advanced by Lender to
Company.

 

“Applicable
Revenue Percentage” means that percentage with respect to any given time as provided for on Schedule 11.1.

 

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“Applicable Jurisdiction”
means the State of Utah.

 

“Certificate
of Perfection” means a Certificate of Perfection in the form provided by Lender to Company.

 

“Change
of Control” means either (a) a merger or consolidation of Company with or into another entity, or other transaction,
following which the stockholders of Company immediately prior to such transaction hold securities representing less than a majority
of the voting power of the surviving entity or parent of the surviving entity immediately following such transaction, or (b) the
sale, lease, license or other disposition of all or substantially all of Company’s assets. Notwithstanding the prior sentence,
the sale of Company’s equity securities in a bona fide equity financing transaction shall not be deemed a “Change of
Control”. Further, for avoidance of doubt, any corporate entity change or structural transitions that retain the same beneficial
owners and shareholder ownership percentage shall not be deemed a “Change of Control”

 

“Closing” has the meaning
given in Section 4.1.

 

“Collateral” means
those assets listed on Schedule 11.2 of each Company Entity.

 

“Company Bank” means
Centennial Bank.

 

“Company’s
Share of Transaction Costs” means up to $15,000, which may include all or a portion of the legal fees, filing fees, due
diligence expenses, and/or other costs or expenses incurred by Lender in connection with the transactions contemplated by this
Agreement.

 

“Dispute Notice” has
the meaning given in Section 5.7(b).

 

“Event of Default”
has the meaning given in Article 7.

 

“Financial Statements”
has the meaning given in Section 5.1(a).

 

“Indebtedness”
means (i) indebtedness for borrowed money or the deferred price of property or services, and other obligations to pay, (ii) obligations
evidenced by notes, bonds, debentures or similar instruments and (iii) capital lease obligations. FOR THE AVOIDANCE OF DOUBT,
“INDEBTEDNESS” INCLUDES, WITHOUT LIMITING THE FOREGOING, MERCHANT CASH ADVANCES, FACTORING OBLIGATIONS, PRE-SALE OF
FUTURE ACCOUNTS RECEIVABLE AND/OR PURCHASE ORDERS, CREDIT CARD ADVANCES, AND ANY OFF- BALANCE SHEET ARRANGEMENTS.

 

“Initial Advance” means
$1,578,236.64.

 

“Insured Executive(s)”
means Robert Nistico and any successor Key Person.

 

“Insurance
Amount” means, as of any date of determination, an amount equal to the Amount Advanced.

 

“Interest” has the meaning
given in Section 2.2.

 

“Key Person” means
each of Robert Nistico and any successor Key Person.

 

“Lender
Account” means the account with Silicon Valley Bank held in Lender’s name with the account details as set forth
in Schedule 2.3(b).

 

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“Lien”
means a claim, mortgage, deed of trust, levy, charge, pledge, security interest, or other encumbrance of any kind, whether voluntarily
incurred or arising by operation of law or otherwise against any property.

 

“Material”
means material in relation to the properties, business, prospects, operations, earnings, assets, liabilities and/or condition (financial
or otherwise) of the Company Entities taken as a whole, whether or not in the ordinary course of business.

 

“Material
Adverse Effect” means a Material adverse effect on (x) the properties, business, prospects, operations, earnings, assets,
liabilities and/or the condition (financial or otherwise) of the Company Entities taken as a whole, whether or not in the ordinary
course of business.

 

“Maturity
Date” means the earliest of: (i) August 15, 2025, (ii) immediately prior to a Change of Control, and (iii) acceleration
of the Obligations as provided in Article 8.

 

“Merits
Lien” means the lien on the assets of Splash Beverage Group, Inc. (Colorado) in favor of Merits Health Group, Inc. as
evidenced by UCC-1 Financing Statement No. 20192030283 filed with the Colorado Secretary State on April 10, 2019.

 

“Minimum Interest” means
those amounts set forth in Schedule 11.3.

 

“Navitas
Lien” means the lien on the assets of Splash Beverage Group, Inc. (Colorado) in favor of Navitas Credit Corp. as evidenced
by UCC-1 Financing Statement No. 20192031786 filed with the Colorado Secretary State on April 16, 2019.

 

“Obligations”
means the payment when due of the principal amount of all Advances and Interest and all other amounts due under this Agreement
when due, whether at maturity, by acceleration, prepayment or otherwise, together with all other costs, fees, expenses, indemnities
and reimbursements, as well as all other obligations of any Company Entity now or hereafter existing under this Agreement or any
other Transaction Document.

 

“Payment
Commencement Date” means February 15, 2021, but only if the Closing has occurred and the Initial Advance has been made
to Company prior to such date.

 

“Payoff Date” has the
meaning given in Section 2.3(d).

 

“Permitted
Indebtedness” means those liabilities and Indebtedness listed on Schedule 11.4 attached hereto.

 

“Permitted Liens”
means liens listed on Schedule 11.5 attached hereto.

 

“Person” means
any individual, entity or association.

 

“PPP
Indebtedness” means Indebtedness to Centennial Bank under the Promissory Note dated May 5, 2020 in the principal amount
of $94,833.32 under the Paycheck Protection Program of the CARES Act.

 

“Projected
Revenue” means the Company Entities’ projected Revenue for the applicable period as outlined in the “Revenue
Assumptions” on Schedule 2.3(b)(2).

 

“promptly” means
within 10 calendar days following the applicable event.

 

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“Purchase
Agreement” means that certain Asset Purchase Agreement dated December 24, 2020, by and among Copa di Vino, Buyer, Company,
and Splash Beverage Group, Inc., a Nevada corporation, pursuant to which Buyer agrees to acquire substantially all of the assets
of Copa di Vino as described therein.

 

“Related
Business” means any business (whether operated as a sole proprietorship, partnership, corporation or other entity or
association) operating in a market or market segment that is substantially similar to any Company Entity’s business or that
is a logical extension of any Company Entity’s business and which is owned and/or operated by any Company Entity (whether
or not as a subsidiary), the Key Person, officer, member of its Governing Body, member or manager of any Company Entity or any
affiliated entities or direct family members of the foregoing; provided, however, a Related Business does not include a publicly
traded business of which any of the foregoing persons or entities owns less than 2% of the outstanding voting securities thereof.

 

“Reported
Revenue” means the amount of Revenue reported as being generated by the Company Entities during the applicable period
as stated in the Monthly Questionnaire(s) delivered by Company to Lender pursuant to Section 5.19.

 

“Revenue”
means all non-financing related cash and cash equivalents (without duplication) received by any Company Entity during the applicable
period; provided that intercompany amounts shall not be considered “Revenue.”

 

“Revenue Loan Amount”
means $1,578,236.64.

 

“Revenue
Test Period” means each calendar year during the term of this Agreement, including any partial calendar years (e.g.,
(i) for the year in which this Agreement is executed, the Revenue Test Period will be the period from the Effective Date through
December 31 of the year of the Effective Date and (ii) for the year in which all outstanding Obligations are paid in full, the
Revenue Test Period will be the period from January 1 of the year through the date on which all outstanding Obligations are paid
in full).

 

“Settled Audit Amount”
has the meaning given in Section 5.7(b).

 

“Subsequent
Advances” mean all Advances made by Lender to Company following the Initial Advance.

 

“Tax”
or “Taxes” means any federal, state, local or foreign income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, property or windfall profits taxes, environmental taxes, customs duties, capital
stock, franchise, employees’ income withholding, foreign or domestic withholding, social security, unemployment, disability,
workers’ compensation, employment- related insurance, real property, personal property, sales, use, transfer, value added,
alternative or add-on minimum or other governmental tax, fee, assessment or charge of any kind whatsoever including any interest,
penalties or additions to any Tax or additional amounts in respect of the foregoing.

 

“Term Sheet Date”
means August 4, 2020.

 

“Transaction
Documents” means this Agreement and all exhibits and schedules to this Agreement, as well as all other agreements executed
or delivered by any Company Entity, any guarantor or party granting security interests or providing credit enhancements in connection
with this Agreement, one or more of the Advances or any Collateral for the Obligations.

 

    26

     

    

 

ARTICLE
12 MISCELLANEOUS

 

12.1          
Survival and Confirmation of Representations and Warranties.
The warranties, representations and covenants of each Company Entity and Lender and the indemnification obligations of each party
contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing and
shall in no way be affected by any investigation of the subject matter thereof made by or on behalf of Lender or any Company Entity.
All of the representations and warranties set forth herein will be deemed to be repeated and reaffirmed on the day of each Advance.

 

12.2          
Successors and Assigns. No Company Entity may assign
its rights or delegate its Obligations under this Agreement without Lender’s prior written consent, except in connection
with a Change of Control. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the parties’ respective successors and assigns. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties hereto or their respective successors and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement.

 

12.3          
Governing Law. This Agreement is governed by and
construed under the substantive laws of the Applicable Jurisdiction without regard to the conflicts of law provisions thereof.
The state and federal courts in the Applicable Jurisdiction have exclusive jurisdiction of any and all actions or suits commenced
by Lender or any Company Entity arising under or with respect to this Agreement.

 

12.4          
Jurisdiction and Venue. Each of Lender and each Company
Entity irrevocably consents to the exclusive jurisdiction and venue of any court within the Applicable Jurisdiction, in connection
with any matter based upon or arising out of this Agreement, the Transaction Documents or the matters contemplated herein or therein,
and agrees that process may be served upon them in any manner authorized by the laws of the Applicable Jurisdiction for
such persons.

 

12.5          
Titles and Subtitles. The titles and subtitles used
in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

12.6          
Notices. All notices required or permitted hereunder
shall be in writing and will be deemed effectively given: (i) upon personal delivery to the party to be notified; (ii) when sent
by confirmed electronic mail or facsimile if sent during normal business hours of
the recipient, if not, then on the next business day; (iii) five days after having been sent by registered or certified mail, return
receipt requested, postage prepaid; or (iv) one day after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt. All communications shall be sent
to the address as set forth on the first page of this Agreement or at such other address as such party may designate by ten days’
advance written notice to the other parties hereto.

 

12.7          
Fees and Expenses. Irrespective of whether the Closing
is completed, Company shall pay all costs and expenses that it incurs with respect to the negotiation, execution, delivery and
performance of this Agreement. If the Closing is completed, Company shall, at the Closing, pay the fees and expenses of Lender
(including reasonable fees and expenses of counsel for Lender) up to the Company’s Share of Transaction Costs. Lender will
submit an invoice to Company no less frequently than annually for out-of-pocket costs, fees and expenses incurred by Lender in
the administration of the transactions contemplated by this Agreement. Following Closing,
Company shall promptly reimburse Lender for all reasonable, documented out-of-pocket costs, fees and expenses (including accounting,
appraisal, consulting, and attorneys’ fees) incurred by Lender in connection with (i) the administration of the transactions
contemplated by this Agreement, (ii) any breach or default by Company under the

 

    27

     

    

 

Transaction Documents, and
(iii) any request by Company to modify or waive the Transaction Documents and otherwise change or affect the rights of Lender or
Obligations of Company pursuant to the Transaction Documents. All fees and expenses assessed or incurred by Lender under this Agreement
will accrue interest at a rate of 18% from the date they arise or the date on which Lender incurs such expense. Accrued but unpaid
service fees, whether previously noticed or not, will be billed in writing to Company at Lender’s discretion.

 

12.8          
Amendments and Waivers. No failure on the part of
Lender to exercise and no delay in exercising any power or right hereunder or under any other Transaction Document shall operate
as a waiver thereof; nor shall any single or partial exercise of any power or right preclude any other or further exercise thereof
or the exercise of any other power or right. The remedies herein and in any other instrument, document or agreement delivered or
to be delivered to Lender hereunder or in connection herewith are cumulative and not exclusive of any remedies provided by
law. No notice to or demand on any Company Entity not required hereunder shall in any
event entitle any Company Entity to any other or further notice or demand in similar or other circumstances or constitute
a waiver of the right of Lender to any other or further action in any circumstances without notice or demand. No amendment, modification
or waiver of any provision of this Agreement or any other Transaction Document or consent to any departure by a Company Entity
therefrom will be effective unless the same is in writing and signed by Lender and each Company Entity.

 

12.9          
Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision will be excluded from this
Agreement and the balance of the Agreement will be interpreted as if such provision were so excluded and will be enforceable in
accordance with its terms.

 

12.10       
Entire Agreement. This Agreement and the documents
referred to herein constitute the entire agreement among the parties and supersede any prior agreements or understandings (whether
written or oral) regarding the subject matter hereof.

 

12.11       
Representation of Lender. Lender is an accredited
investor as defined in Rule 501(a) of Regulation D and has such business and financial experience as necessary to enable it to
protect its interests in connection with the transactions contemplated by this Agreement. Lender has had the opportunity to ask
questions and to receive answers and to obtain the information concerning the Company Entities and the transactions contemplated
by this Agreement that it has deemed material and necessary to evaluate the merits and risks of the transactions contemplated by
this Agreement.

 

12.12       
Termination. This Agreement shall terminate upon
indefeasible satisfaction of the Obligations; provided, however, Sections 5.1,
5.2, 5.3, 5.5, 5.6, 6.1 and 6.2, shall
terminate upon indefeasible payment to Lender in full of the principal amount of all Advances
and Interest thereon.

 

12.13       
Counterparts. This Agreement may be executed in two
or more counterparts, each of which will be deemed an original, but all of which together shall constitute one and the same instrument.
Delivery of an executed counterpart of a signature page to this Agreement by facsimile, portable document format (.pdf), DocuSign
or other electronic transmission is equally as effective as delivery of a manually executed counterpart of this Agreement.

 

12.14       
Costs of Enforcement. Company agrees to pay all reasonable costs, fees and expenses of enforcement, collection, or preservation
of collateral (including reasonable attorneys’ fees) that Lender incurs in connection with any default or Event of Default
hereunder (whether before or after any cure). Additionally, Company agrees to pay all costs, fees and expenses (including reasonable
attorneys’ fees) that Lender incurs, before or after any default or Event of Default as a result of any litigation or other
action in which Lender becomes involved as a party, witness or otherwise as a result of making the Advances evidenced by this
Agreement.

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12.15       
Waiver of Jury Trial. Each Company Entity hereby
knowingly, voluntarily and intentionally WAIVES THE RIGHT TO TRIAL BY JURY in
respect of any litigation based herein, arising out of, under or in connection with this Agreement or any other Transaction Document
or any course of conduct, course of dealings, statements (whether verbal or written) or acts of either party, or any exercise by
any party of their respective rights under this Agreement or any other Transaction Document. Each Company Entity hereby acknowledges
that this waiver of jury trial is a material inducement to Lender in extending credit to Company, that Lender would not have extended
credit without this waiver of jury trial, and that each Company Entity has had an opportunity to consult with an attorney in connection
with this waiver of jury trial and understands the legal effect of this waiver.

 

12.16       
Waiver of Notices and Hearing. Each Company Entity
by entering into this Agreement and negotiating the terms hereof, voluntarily, intelligently and knowingly waives any rights it
may have to demand any notices other than those provided for herein and any right to a hearing as a condition precedent to Lender’s
exercise of its rights to foreclose on any Collateral. All makers, endorsers, sureties, guarantors and other accommodation parties
hereby waive presentment for payment, protest and notice of nonpayment and consent, without affecting their liability hereunder,
to any and all extensions, renewals, substitutions and alterations of any of the terms of this Agreement and to the release of
or failure by Lender to exercise any rights against any party liable for or any property
securing payment thereof.

 

12.17       
Confidentiality. No Company or any of their respective
officers, members of its Governing Body, employees, agents, or equity holders shall disclose this Agreement, the terms hereof or
any related transactions or agreements to any third party other than Company’s accountants and attorneys, without the prior
written approval of Lender. Nothing will prevent Lender from disclosing this Agreement or the terms hereof for marketing
purposes, press releases or other transactional
announcements or updates provided to investor or trade publications,
including the placement of “tombstone” advertisements in financial and other newspapers and journals.

 

12.18       
Credit Reporting. Each Company Entity hereby authorizes
Lender (but Lender has no obligation) (i) to provide to credit reporting agencies a report of the amount of the Obligations owed
to Lender, the Revenue Loan Amount, Company’s payment history with respect to the Obligations, and any other information
regarding the Company Entities or the Obligations or otherwise related to this Agreement that is customarily reported to credit
reporting agencies, and (ii) to respond to usual and customary credit inquiries from third parties concerning any Company Entity
or any of Related Businesses.

 

12.19       
Rescission. For a period of 90 calendar days following
the Closing, Lender has the right to rescind this Agreement by delivering written
notice to Company, and to promptly have returned to it the entire Amount Advanced, if (i) Lender discovers that any Company Entity,
or any officer, director, employee or other Person acting on behalf of Company Entity, made a Material misstatement, misrepresentation
or omission or (ii) Lender determines, in its reasonable discretion, that an event has occurred which has had a Material Adverse
Effect on a Company Entity.

 

12.20       
Time. Time is of the essence for the performance
of each and every covenant of each Company Entity under this Agreement.

 

The signature page
follows.

 

 

    29

     

    

 

The parties have executed this Agreement
as of the Effective Date.

 

COMPANY:

 

SPLASH BEVERAGE GROUP, INC.

 

		By:	Robert Nistico, Chief Executive Officer

 

 

LENDER:

 

DECATHLON ALPHA IV, L.P.

 

   By:
Decathlon Alpha GP IV, LLC

   Its: General Partner

 

 

 

 

		By:	Wayne Cantwell, Managing Director

 

   KEY
PERSON:

		By:	Robert Nistico

 

Signatures continue on the
next page.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Signature Page to Revenue Loan
and Security Agreement]

 

 

    30

     

    

 

GUARANTORS:

 

SPLASH BEVERAGE GROUP, INC.

a
Nevada corporation

 

 

		By:	Robert Nistico, Chief Executive Officer

 

 

SPLASH BEVERAGE HOLDINGS, LLC

a
Nevada limited liability company

 

 

		By:	Robert Nistico, Chief Executive Officer

 

 

SPLASH INTERNATIONAL HOLDINGS, LLC

a
Nevada limited liability company

 

 

		By:	Robert Nistico, Chief Executive Officer

 

 

CANFIELD MEDICAL SUPPLY & SERVICES,
LLC

an
Ohio limited liability company

 

 

		By:	Robert Nistico, Chief Executive Officer

 

 

COPA DI VINO WINE GROUP, INC.

a
Nevada corporation

 

 

		By:	Robert Nistico, Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Signature Page to Revenue Loan
and Security Agreement]

 

 

    31

     

    

 

SCHEDULE
2.1(b) SUBSEQUENT ADVANCE AMOUNT

 

Not applicable.

 

 

    32

     

    

 

SCHEDULE
2.3(b)(1) LENDER’S ACCOUNT DETAILS

 

Beneficiary:           Decathlon Alpha
IV, L.P.

1441 West Ute Boulevard,
Suite 240 Park City, UT 84098 

                                

Account No:***

Routing
No:***      SWIFT No:***

 

		Bank:	Silicon Valley Bank 3000 Tasman Drive Santa Clara, CA 95054

 

    33

     

    

 

SCHEDULE
2.3(b)(2)

PRO-FORMA
PAYMENT SCHEDULE

 

	Splash
    Beverage Group, Inc.	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 

         

        Mth
	 

         

        Date
	 

        Projected
        Revenue
	 

        Revenue
        % PMT
	 

        Projected
        Payment
	 

        Loan
        Advancement
	Projected

        Annual
        Debt Service

	Summary	 	 	 	 	 	 	 	 	 
	Total
    Principal	$
    1,578,237	 	0	12/28/2020	$
    1,495,156	 	 	$
    1,578,237	 
	Total
    Interest	$
    1,578,237	 	1	1/15/2021	$515,280	 	 	$-	 
	Total
    Payments	$
    3,156,473	 	2	2/15/2021	$650,666	3.75%	$19,323	$-	 
	 	 	 	3	3/15/2021	$590,461	3.75%	$24,400	$-	 
	Projected
    cash-on-cash multiple	2.00x	 	4	4/15/2021	$716,918	3.75%	$22,142	$-	 
	Projected
    term in months	56	 	5	5/15/2021	$772,857	3.75%	$26,884	$-	 
	 	 	 	6	6/15/2021	$721,904	3.75%	$28,982	$-	 
	Minimum
    Cash-on-Cash Multiple	 	 	7	7/15/2021	$906,154	3.75%	$27,071	$-	 
	0
    - 6 Months	1.50x	 	8	8/15/2021	$
    1,135,995	3.75%	$33,981	$-	 
	7
    - 12 Months	1.65x	 	9	9/15/2021	$
    1,018,753	3.75%	$42,600	$-	 
	13
    - 18 Months	1.75x	 	10	10/15/2021	$
    1,145,833	3.75%	$38,203	$-	 
	19
    - 24 Months	1.90x	 	11	11/15/2021	$
    1,284,320	3.75%	$42,969	$-	2021
	24
    + Months	2.00x	 	12	12/15/2021	$
    1,287,536	3.75%	$48,162	$-	$354,718
	 	 	 	13	1/15/2022	$725,350	3.75%	$48,283	$-	 
	Revenue
    Assumptions	 	 	14	2/15/2022	$925,158	3.75%	$27,201	$-	 
	2020	$
    1,495,156	 	15	3/15/2022	$868,334	3.75%	$34,693	$-	 
	2021	$
    10,746,678	 	16	4/15/2022	$
    1,061,418	3.75%	$32,563	$-	 
	2022	$
    14,114,292	 	17	5/15/2022	$
    1,021,501	3.75%	$39,803	$-	 
	2023	$
    17,604,053	 	18	6/15/2022	$
    1,066,305	3.75%	$38,306	$-	 
	2024	$
    22,744,581	 	19	7/15/2022	$
    1,201,146	3.75%	$39,986	$-	 
	2025	$
    17,538,995	 	20	8/15/2022	$
    1,121,497	3.75%	$45,043	$-	 
	 	 	 	21	9/15/2022	$
    1,337,937	3.75%	$42,056	$-	 
	 	 	 	22	10/15/2022	$
    1,489,320	3.75%	$50,173	$-	 
	 	 	 	23	11/15/2022	$
    1,624,601	3.75%	$55,850	$-	2022
	 	 	 	24	12/15/2022	$
    1,671,725	3.75%	$60,923	$-	$514,879
	 	 	 	25	1/15/2023	$
    1,091,931	4.00%	$66,869	$-	 
	 	 	 	26	2/15/2023	$
    1,093,943	4.00%	$43,677	$-	 
	 	 	 	27	3/15/2023	$
    1,146,659	4.00%	$43,758	$-	 
	 	 	 	28	4/15/2023	$
    1,200,207	4.00%	$45,866	$-	 
	 	 	 	29	5/15/2023	$
    1,303,716	4.00%	$48,008	$-	 
	 	 	 	30	6/15/2023	$
    1,356,693	4.00%	$52,149	$-	 
	 	 	 	31	7/15/2023	$
    1,512,205	4.00%	$54,268	$-	 
	 	 	 	32	8/15/2023	$
    1,490,118	4.00%	$60,488	$-	 
	 	 	 	33	9/15/2023	$
    1,721,250	4.00%	$59,605	$-	 
	 	 	 	34	10/15/2023	$
    1,774,138	4.00%	$68,850	$-	 
	 	 	 	35	11/15/2023	$
    1,955,085	4.00%	$70,966	$-	2023
	 	 	 	36	12/15/2023	$
    1,958,109	4.00%	$78,203	$-	$692,707
	 	 	 	37	1/15/2024	$
    1,761,438	4.00%	$78,324	$-	 
	 	 	 	38	2/15/2024	$
    1,772,418	4.00%	$70,458	$-	 
	 	 	 	39	3/15/2024	$
    1,783,496	4.00%	$70,897	$-	 
	 	 	 	40	4/15/2024	$
    1,882,122	4.00%	$71,340	$-	 
	 	 	 	41	5/15/2024	$
    1,893,398	4.00%	$75,285	$-	 
	 	 	 	42	6/15/2024	$
    1,686,826	4.00%	$75,736	$-	 
	 	 	 	43	7/15/2024	$
    1,870,296	4.00%	$67,473	$-	 
	 	 	 	44	8/15/2024	$
    1,878,934	4.00%	$74,812	$-	 
	 	 	 	45	9/15/2024	$
    1,887,641	4.00%	$75,157	$-	 
	 	 	 	46	10/15/2024	$
    1,983,867	4.00%	$75,506	$-	 
	 	 	 	47	11/15/2024	$
    2,167,614	4.00%	$79,355	$-	2024
	 	 	 	48	12/15/2024	$
    2,176,531	4.00%	$86,705	$-	$901,046
	 	 	 	49	1/15/2025	$
    2,038,537	4.00%	$87,061	$-	 
	 	 	 	50	2/15/2025	$
    2,049,981	4.00%	$81,541	$-	 
	 	 	 	51	3/15/2025	$
    2,061,516	4.00%	$81,999	$-	 
	 	 	 	52	4/15/2025	$
    2,173,711	4.00%	$82,461	$-	 
	 	 	 	53	5/15/2025	$
    2,185,431	4.00%	$86,948	$-	 
	 	 	 	54	6/15/2025	$
    2,197,244	4.00%	$87,417	$-	 
	 	 	 	55	7/15/2025	$
    2,410,287	4.00%	$87,890	$-	 
	 	 	 	56	8/15/2025	$
    2,422,290	4.00%	$96,411	$-	 
	 	 	 	 	8/28/2025	 	 	$1,394	$-	2025
	 	 	 	 	 	 	 	 	 	$693,123

 

 

    34

     

    

 

SCHEDULE
3.1(b) SUBSIDIARIES

 

		1.	The Company owns a 5% interest in SALT Tequila USA,
LLC. The Company also owns the rights to acquire up a 37.5% interest in SALT Tequila USA, LLC. Refer to Note 9 of the Company’s
Financial Statements in the Company’s Quarterly Report for the six-month period ending June 30, 2020 filed with the Securities
and Exchange Commission.

 

		2.	Splash Beverage Group, Inc., a Nevada corporation.

 

		3.	Splash Beverage Holdings LLC, a Nevada limited liability company.

 

		4.	Canfield Medical Supply & Services, LLC, an Ohio limited liability company.

 

		5.	Splash International Holdings, LLC, a Nevada limited liability company.

 

		6.	Copa di Vino Wine Group, Inc., a Nevada corporation.

 

 

    35

     

    

 

SCHEDULE
3.1(e) COMPLIANCE WITH OTHER INSTRUMENTS

 

1.       See
Schedule 7.7.

 

    36

     

    

 

 

SCHEDULE
3.1(f) RELATED PARTY TRANSACTIONS

 

		1.	In exchange for paying off the Key Bank Line of Credit, the Splash
Beverage Group Inc. (the “Company”) received a secured promissory note in the amount of $68,000 from Canfield Medical
Supply and Services LLC a subsidiary of the Company. In connection with the execution of the Promissory Note Michael West executed
a personal guarantee in favor of the Company and Canfield Medical Supply and Services LLC executed a Security Agreement with the
Company pursuant to which Canfield Medical Supply and Services LLC gave the Company a security interest in its assets and Company
intends to file a UCC to evidence the security interest.

 

 

    37

     

    

 

SCHEDULE
3.1(g) FINANCIAL STATEMENTS

 

See attached.

 

    38

     

    

	Splash
    Beverage Group, Inc. and Subsidiaries
	Consolidated
    Statements of Operations
	For
    the Year Ended December 31, 2020

 

	 	 	Actuals
    (Unaudited)
	 	 	January	 	February	 	March	 	Q1
    2020	 	April	 	May	 	June	 	Q2
    2020
	Net
    revenues	 	$	24,916	 	 	 	19,486	 	 	$	67,602	 	 	 	112,003	 	 	 	102596	 	 	 	58,087	 	 	 	257,087	 	 	 	417,722	 
	Cost
    of goods sold	 	 	(17,957	)	 	 	(20,321	)	 	 	(68,935	)	 	 	(107,214	)	 	 	(97,277	)	 	 	(41,847	)	 	 	(96,239	)	 	 	(235,363	)
	Negative
    gross margin	 	 	6,958	 	 	 	(835	)	 	 	(1,334	)	 	 	4,789	 	 	 	5,318	 	 	 	16,240	 	 	 	160,801	 	 	 	182,359	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Operating
    expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Contracted
    services	 	 	51,611	 	 	 	86,393	 	 	 	119,977	 	 	 	257,981	 	 	 	38,301	 	 	 	68,256	 	 	 	85,736	 	 	 	192,294	 
	Salary
    and wages	 	 	10,492	 	 	 	100,653	 	 	 	130,531	 	 	 	241,676	 	 	 	80,745	 	 	 	91,984	 	 	 	130,332	 	 	 	303,060	 
	Other
    general and administrative	 	 	81,155	 	 	 	109,053	 	 	 	841,055	 	 	 	1,031,264	 	 	 	104,061	 	 	 	(204,986	)	 	 	166,068	 	 	 	65,142	 
	Sales
    and marketing	 	 	13,298	 	 	 	9,127	 	 	 	587	 	 	 	23,012	 	 	 	788	 	 	 	14,773	 	 	 	8,669	 	 	 	24,230	 
	Total
    operating expenses	 	 	156,557	 	 	 	305,226	 	 	 	1,092,150	 	 	 	1,553,934	 	 	 	223,895	 	 	 	-29,974	 	 	 	390,806	 	 	 	584,726	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Loss
    from operations	 	 	(149,599	)	 	 	(306,062	)	 	 	(1,093,484	)	 	 	(1,549,145	)	 	 	(218,577	)	 	 	46,214	 	 	 	(230,005	)	 	 	(402,367	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Other
    income/(expense):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Interest
    income	 	 	101	 	 	 	—  	 	 	 	16,050	 	 	 	16,151	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	Interest
    expense	 	 	—  	 	 	 	—  	 	 	 	(1,913,637	)	 	 	(1,913,637	)	 	 	—  	 	 	 	(4,000	)	 	 	21,549	 	 	 	17,549	 
	Gain/Loss
    from debt extinguishment	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	Total
    other income/(expense)	 	 	101	 	 	 	—  	 	 	 	(1,897,587	)	 	 	(1,897,486	)	 	 	—  	 	 	 	(4,000	)	 	 	21,549	 	 	 	17,549	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Provision
    for income taxes	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	Net
    loss	 	($	149,498	)	 	($	306,062	)	 	($	2,991,071	)	 	($	3,446,630	)	 	($	218,577	)	 	$	42,214	 	 	($	208,456	)	 	($	384,818	)

 

    39

     

    

 

 

 

 

 

Splash
Beverage Group, Inc.

 

Consolidated
Financial Statements

 

 

December
31, 2019 and 2018

 

 

Table
of Contents

  

	Reports of Independent Registered
    Public Accounting Firms	F-2 - F-3
	 	 
	Financial Statements	 
	 	 
	Consolidated
    Balance Sheets	F-4
	 	 
	Consolidated
    Statements of Operations	F-5
	 	 
	Consolidated
    Statements of Changes in Deficiency in Stockholders’ Equity	F-6
	 	 
	Consolidated
    Statements of Cash Flows	F-7
	 	 
	Notes to the Consolidated
    Financial Statements	F-8 – F-27

 

 

     F-40

     

    

 

	

 

	

grant
        thornton llp

        101 E KENNEDY
        BLVD, SUITE 3850

        TAMPA, FL 33602

        D
        +1 813 229 7201

        F +1 813 223 3015

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

Board
of Directors and Shareholders

Splash
Beverage Group, Inc. (formerly Canfield Medical Supply, Inc.)

 

Opinion
on the financial statements 

We
have audited the accompanying consolidated balance sheet of Splash Beverage Group, Inc. (a Colorado corporation) and subsidiaries
(the “Company”) as of December 31, 2018, the related consolidated statements of operations, changes in deficiency
in stockholders’ equity, and cash flows for the year ended December 31, 2018, and the related notes (collectively referred
to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects,
the financial position of the Company as of December 31, 2018, and the results of its operations and its cash flows for the year
ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

 

Going
concern

The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 3 to the financial statements, the Company incurred a net loss of approximately $3.8 million during the year ended December
31, 2018. This condition, along with other matters as set forth in Note 3, raise substantial doubt about the Company’s ability
to continue as a going concern.  Management’s plans in regards to these matters are also described in Note 3. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis
for opinion 

These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.

 

We
conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting, but not
for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.

 

Our
audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audit provides a reasonable basis for our opinion.

 

/s/ GRANT THORNTON LLP

 

We
served as the Company’s auditor from 2018 to 2019.

 

Tampa,
Florida

August
18, 2020

 

 

     F-41

     

    

 

REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and

Stockholders of Splash Beverage Group, Inc.

(FKA
Canfield Medical Supply, Inc.)

Opinion
on the Financial Statements

We
have audited the accompanying consolidated balance sheets of Splash Beverage Group, Inc. (formerly known as Canfield Medical Supply,
Inc.) (the “Company”) at December 31, 2019, and the related consolidated statements operations, changes in deficiency
in stockholders’ equity and cash flows for the year ended December 31, 2019, and the related notes (collectively referred
to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 2019, and the results of its operations and its cash flows for
the year ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

Going
Concern Uncertainty

 The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 3 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency
that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are
also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis
for Opinion

These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.

We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether
due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting,
but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.

Our
audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

	/s/
    Daszkal Bolton LLP
	Daszkal
                                         Bolton LLP

         
	 
	 

        April
        3, 2020, except for note 1 to which the date is July 31, 2020

         

        Boca
        Raton, Florida

         

        We
        have served as the Company’s auditor since 2020.

 

 

 

     F-42

     

    

  

Splash Beverage Group, Inc. and Subsidiaries

Consolidated Balance Sheets

December 31, 2019 and 2018

 

 

	 	 	2019	 	2018
	Assets	 	 	 	 
	Current assets:	 	 	 	 	 	 	 	 
	Cash and cash equivalents	 	$	42,639	 	 	$	938,040	 
	Accounts receivable, net	 	 	11,430	 	 	 	—  	 
	Prepaid expenses	 	 	5,449	 	 	 	5,648	 
	Inventory	 	 	304,012	 	 	 	276,788	 
	Other receivables	 	 	7,132	 	 	 	5,700	 
	Total current assets	 	 	370,662	 	 	 	1,226,176	 
	 	 	 	 	 	 	 	 	 
	Non-current assets:	 	 	 	 	 	 	 	 
	Deposit	 	 	34,915	 	 	 	14,402	 
	Right of use asset, net	 	 	162,008	 	 	 	—  	 
	Property and equipment, net	 	 	37,729	 	 	 	34,513	 
	Total non-current assets	 	 	234,652	 	 	 	48,915	 
	 	 	 	 	 	 	 	 	 
	Total assets	 	$	605,314	 	 	$	1,275,091	 
	 	 	 	 	 	 	 	 	 
	Liabilities and Deficiency in Stockholders' Equity	 	 	 	 	 	 	 	 
	Liabilities:	 	 	 	 	 	 	 	 
	Current liabilities	 	 	 	 	 	 	 	 
	Accounts payable and accrued expenses	 	$	703,885	 	 	$	831,070	 
	Right of use liability – current	 	 	81,502	 	 	 	—  	 
	Due to related parties	 	 	429,432	 	 	 	302,934	 
	Bridge loan payable, net	 	 	2,200,000	 	 	 	1,858,385	 
	Related party notes payable – current	 	 	1,505,100	 	 	 	—  	 
	Convertible bridge loan payable – current	 	 	2,202,664	 	 	 	100,000	 
	Notes payable	 	 	875,000	 	 	 	875,000	 
	Royalty payable	 	 	39,000	 	 	 	21,062	 
	Revenue financing arrangements	 	 	45,467	 	 	 	77,108	 
	Shareholder advances	 	 	46,250	 	 	 	16,250	 
	Accrued interest payable	 	 	1,604,498	 	 	 	1,119,909	 
	Accrued interest payable - related parties	 	 	546,362	 	 	 	426,740	 
	Total current liabilities	 	 	10,279,160	 	 	 	5,628,458	 
	 	 	 	 	 	 	 	 	 
	Long-term Liabilities:	 	 	 	 	 	 	 	 
	Related party notes payable - non-current	 	 	—  	 	 	 	1,375,100	 
	Convertible bridge loan payable - non-current	 	 	—  	 	 	 	2,102,664	 
	Right of use liability – noncurrent	 	 	82,238	 	 	 	—  	 
	Total long-term liabilities	 	 	82,238	 	 	 	3,477,764	 
	 	 	 	 	 	 	 	 	 
	Total liabilities	 	 	10,361,398	 	 	 	9,106,222	 
	 	 	 	 	 	 	 	 	 
	Deficiency in stockholders' equity:	 	 	 	 	 	 	 	 
	Common Stock, $0.001 par, 100,000,000 shares authorized, 44,021,389
and 40,165,002 issued and 43,885,096 and 39,892,417 outstanding for the years ended December 31, 2019 and 2018, respectively	 	 	44,021	 	 	 	40,165	 
	Additional paid in capital	 	 	22,095,403	 	 	 	18,938,480	 
	Treasury Stock, $0.001 par, 136,293 and 272,585 shares for the years ended December 31 2019 and 2018, respectively	 	 	(50,000	)	 	 	(100,000	)
	Accumulated deficit	 	 	(31,845,506	)	 	 	(26,709,776	)
	Total deficiency in stockholders' equity	 	 	(9,756,083	)	 	 	(7,831,131	)
	 	 	 	 	 	 	 	 	 
	Total liabilities and deficiency in stockholders' equity	 	$	605,314	 	 	$	1,275,091	 

  

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

 

     F-43

     

    

  

Splash Beverage Group, Inc. and Subsidiaries

Consolidated Statements of Operations

For the Years Ended December 31, 2019 and 2018

 

 

	 	 	2019	 	 	2018	 
	Net revenues	 	$	20,387	 	 	$	16,176	 
	Cost of goods sold	 	 	(245,500	)	 	 	(109,706	)
	Negative gross margin	 	 	(225,113	)	 	 	(93,530	)
	 	 	 	 	 	 	 	 	 
	Operating expenses:	 	 	 	 	 	 	 	 
	Contracted services	 	 	2,109,146	 	 	 	1,493,076	 
	Salary and wages	 	 	1,078,730	 	 	 	508,769	 
	Other general and administrative	 	 	1,006,603	 	 	 	888,817	 
	Sales and marketing	 	 	67,467	 	 	 	112,506	 
	Total operating expenses	 	 	4,261,946	 	 	 	3,003,168	 
	 	 	 	 	 	 	 	 	 
	Loss from operations	 	 	(4,487,059	)	 	 	(3,096,698	)
	 	 	 	 	 	 	 	 	 
	Other income/(expense):	 	 	 	 	 	 	 	 
	Interest income	 	 	132	 	 	 	-	 
	Interest expense	 	 	(665,195	)	 	 	(684,833	)
	Gain/(loss) from debt extinguishment	 	 	16,391	 	 	 	(42,382	)
	Total other income/(expense)	 	 	(648,672	)	 	 	(727,215	)
	 	 	 	 	 	 	 	 	 
	Provision for income taxes	 	 	-	 	 	 	-	 
	 	 	 	 	 	 	 	 	 
	Net loss	 	$	(5,135,731	)	 	$	(3,823,913	)
	 	 	 	 	 	 	 	 	 
	Net loss per share (basic and diluted)	 	$	(0.12	)	 	$	(0.11	)
	 	 	 	 	 	 	 	 	 
	Weighted average number of common shares outstanding	 	 	42,154,947	 	 	 	36,108,948	 

 

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

 

     F-44

     

    

  

Splash Beverage Group, Inc. and Subsidiaries

Consolidated Statements of Changes in Deficiency in Stockholders’
Equity

For the Year Ended December 31, 2019

 

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Deficiency in
	 	 	Common Stock	 	Treasury Stock	 	Additional	 	Accumulated	 	Stockholders'
	 	 	Shares	 	Amount	 	Shares	 	Amount	 	Paid-In Capital	 	Deficit	 	Equity
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balances at December 31, 2017	 	 	35,150,103	 	 	$	35,150	 	 	 	408,877	 	 	$	(150,000	)	 	$	15,716,749	 	 	$	(22,885,863	)	 	$	  (7,283,964)	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Issuance of Common stock for cash	 	 	4,878,607	 	 	 	4,879	 	 	 	—  	 	 	 	—  	 	 	 	2,180,444	 	 	 	—  	 	 	 	2,185,323	 
	Issuance of Common stock from treasury	 	 	136,292	 	 	 	136	 	 	 	(136,292	)	 	 	50,000	 	 	 	49,864	 	 	 	—  	 	 	 	100,000	 
	Warrants issued with debt	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	991,423	 	 	 	—  	 	 	 	991,423	 
	Net loss	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	(3,823,913	)	 	 	(3,823,913	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balances at December 31, 2018	 	 	40,165,002	 	 	$	40,165	 	 	 	272,585	 	 	$	(100,000	)	 	$	18,938,480	 	 	$	(26,709,776	)	 	$	  (7,831,131	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Issuance of Common stock for cash	 	 	2,146,601	 	 	 	2,146	 	 	 	—  	 	 	 	—  	 	 	 	1,572,854	 	 	 	—  	 	 	$	  1,575,000	 
	Issuance of Common stock for services	 	 	1,709,785	 	 	 	1,709	 	 	 	—  	 	 	 	—  	 	 	 	1,252,914	 	 	 	—  	 	 	 	1,254,623	 
	Issuance of Common stock from treasury	 	 	—  	 	 	 	—  	 	 	 	(136,292	)	 	 	50,000	 	 	 	49,900	 	 	 	—  	 	 	 	99,900	 
	Warrants issued in connection with debt modification	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	15,667	 	 	 	—  	 	 	 	15,667	 
	Share-based compensation	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	265,589	 	 	 	—  	 	 	 	265,589	 
	Net loss	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	(5,135,731	)	 	 	(5,135,731	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balances at December 31, 2019	 	 	44,021,389	 	 	$	44,021	 	 	 	136,293	 	 	$	(50,000	)	 	$	22,095,403	 	 	$	(31,845,506	)	 	$	(9,756,083	)

 

 

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

 

     F-45

     

    

    

Splash Beverage Group, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

December 31, 2019 and 2018

 

 

	 	 	2019	 	 	2018	 
	Cash Flows from Operating Activities		 	 	 	 	 	 	 
	Net loss	 	$	(5,135,731	)	 	$	(3,823,913	)
	Adjustments to reconcile net loss to net cash used in operating activities:	 	 	 	 	 	 	 	 
	Depreciation and amortization	 	 	9,334	 	 	 	7,257	 
	Amortization of right-of-use asset	 	 	53,194	 	 	 	-	 
	Gain from debt extinguishment	 	 	(16,391	)	 	 	-	 
	Deferred loan cost amortization	 	 	-	 	 	 	130,055	 
	Noncash finance charge in connection with a debt modification	 	 	15,667	 	 	 	-	 
	Share-based compensation	 	 	265,589	 	 	 	-	 
	Shares issued in exchange for services	 	 	1,354,503	 	 	 	664,815	 
	Warrants issued for services	 	 	-	 	 	 	991,423	 
	Other noncash charges	 	 	360,923	 	 	 	32,252	 
	Changes in assets and liabilities:	 	 	 	 	 	 	 	 
	Accounts receivable	 	 	(11,428	)	 	 	-	 
	Inventory	 	 	(27,224	)	 	 	(276,788	)
	Prepaid expenses and other current assets	 	 	(1,233	)	 	 	(20,049	)
	Due to related party	 	 	-	 	 	 	5,496	 
	Deposits	 	 	(20,513	)	 	 	-	 
	Accounts payable and accrued expenses	 	 	(127,167	)	 	 	255,352	 
	Royalty payable	 	 	17,938	 	 	 	(326,750	)
	Accrued interest payable	 	 	604,211	 	 	 	(110,345	)
	Net cash used in operating activities	 	 	(2,658,328	)	 	 	(2,471,195	)
	 	 	 	 	 	 	 	 	 
	Cash Flows from Investing Activities:	 	 	 	 	 	 	 	 
	Capital expenditures	 	 	(12,552	)	 	 	(1,336	)
	Net cash used in investing activities	 	 	(12,552	)	 	 	(1,336	)
	 	 	 	 	 	 	 	 	 
	Cash Flows from Financing Activities:	 	 	 	 	 	 	 	 
	Proceeds from issuance of common stock	 	 	1,575,000	 	 	 	1,398,197	 
	Shareholder advances	 	 	153,582	 	 	 	-	 
	Proceeds from issuance of debt	 	 	130,000	 	 	 	2,702,664	 
	Principal repayment of debt	 	 	(31,641	)	 	 	(422,425	)
	Debt issuance costs	 	 	-	 	 	 	(271,670	)
	Reduction of right-of-use liability	 	 	(51,462	)	 	 	-	 
	Net cash provided by financing activities	 	 	1,775,479	 	 	 	3,406,766	 
	 	 	 	 	 	 	 	 	 
	Net Decrease in Cash and Cash Equivalents	 	 	(895,401	)	 	 	934,235	 
	 	 	 	 	 	 	 	 	 
	Cash and Cash Equivalents, beginning of year	 	 	938,040	 	 	 	3,805	 
	 	 	 	 	 	 	 	 	 
	Cash and Cash Equivalents, end of year	 	$	42,639	 	 	$	938,040	 
	 	 	 	 	 	 	 	 	 
	Supplemental Disclosure of Cash Flow Information:	 	 	 	 	 	 	 	 
	Cash paid for interest	 	$	23,851	 	 	$	586,075	 
	Cash paid for taxes	 	$	-	 	 	$	-	 
	 	 	 	 	 	 	 	 	 
	Supplemental Disclosure of Non-Cash Investing
    and Financing Activities	 	 	 	 	 	 	 	 
	Notes converted to common stock	 	$	-	 	 	$	684,450	 
	Loss on debt extinguishment	 	$	-	 	 	$	42,382	 

   

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

 

     F-46

     

    

 

Splash
Beverage Group, Inc.

Notes
to the Consolidated Financial Statements

  

Note 1 – Business Organization and Nature of Operations

 

Splash Beverage Group (“SBG”),
f/k/a Canfield Medical Supply, Inc. (the “CMS”), was incorporated in the State of Ohio on September 3, 1992, and changed
domicile to Colorado on April 18, 2012. CMS is in the business of home health services, primarily the selling of durable medical
equipment and medical supplies to the public, nursing homes, hospitals and other end users.

 

On December 31, 2019, CMS entered into
an Agreement and Plan of Merger (the “Merger Agreement”) with SBG Acquisition Inc. (“Merger Sub”), a Nevada
Corporation wholly-owned by CMS, and Splash Beverage Group, Inc. a Nevada corporation (“Splash”) pursuant to which
Merger Sub merged with and into Splash (the “Merger”) with Splash as the surviving company and a wholly-owned subsidiary
of CMS. The Merger was consummated on March 31, 2020.

 

As the owners and management of Splash
have voting and operating control of CMS following the Merger, the Merger transaction was accounted for as a reverse acquisition
(that is with Splash as the acquiring entity), followed by a recapitalization.

 

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

 

Splash specializes in the manufacturing,
distribution, and sales & marketing of various beverages across multiple channels. Splash operates in both the non-alcoholic
and alcoholic beverage segments. Additionally, Splash operates its own vertically integrated B-to-B and B-to-C e-commerce distribution
platform called Qplash, further expanding its distribution abilities and visibility.

 

On July 2, 2020, CMS received a Certificate
of Good Standing from the State of Colorado. This certificate allowed us to change our name from Canfield Medical Supply, Inc.
to Splash Beverage Group, Inc. a Colorado company. On July 31, 2020, we received approval from FINRA to change the Company’s
name from Canfield Medical Supply, Inc. to Splash Beverage Group, Inc.

 

These financial statements represent the
operations of SBG and do not include the operations of CMS.

 

Note 2 –
Summary of Significant Accounting Policies

 

Basis of Presentation and Consolidation

Our accounting and reporting policies conform
to accounting principles generally accepted in the United States of America (“GAAP”). These consolidated financial
statements include the accounts of Splash and its wholly owned subsidiaries, Splash International Holdings, LLC, Splash Beverage
Holdings, LLC and Splash Mex SA de CV. All intercompany balances have been eliminated in consolidation. 

 

Use of Estimates

The preparation of 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 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

We consider all highly liquid securities with
an original maturity of three months or less to be cash equivalents. We had no cash equivalents at December 31, 2019. Our cash
in bank deposit accounts, at times, may exceed federally insured limits of $250,000. Our bank deposit accounts in Mexico are uninsured.

 

Accounts Receivable and Allowance
for Doubtful Accounts

Accounts receivable are carried at their estimated
collectible amounts and are periodically evaluated for collectability based on past credit history with clients and other factors.
We establish 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 December 31, 2019 and 2018, our accounts receivable amounts are reflected net
of allowances of $11,430 and $0, respectively.

 

     F-47

     

    

 

Splash
Beverage Group, Inc.

Notes
to the Consolidated Financial Statements

 

Note
2 – Summary of Significant Accounting Policies, continued

 

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 December 31, 2019 and 2018
consisted of finished goods held for distribution. The cost elements in inventory consist of purchase of products, transportation,
and warehousing. Inventory valuation is impacted by excess or inventory near expiration based on management’s estimates for
excess or inventory near expiration 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 expense for excess or expired inventory in the future. The costs for excess inventory are included in cost of goods
sold and have historically been adequate to provide for losses on inventory. We manage inventory levels and purchase commitments
in an effort to maximize utilization of inventory on hand and under commitments.

 

Property
and Equipment

We
record 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 3-10 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 $19,781 and $7,257 for the years ended December 31, 2019 and 2018, respectively. Property and equipment as of
December 31, 2019 and 2018 consisted of the following:

 

	 	 	2019	 	 	2018	 
	Property and equipment, at cost	 	$	88,758	 	 	$	76,205	 
	Accumulated depreciation	 	 	(51,029	)	 	 	(41,692	)
	Property and equipment, net	 	$	37,729	 	 	$	34,513	 

  

Licensing
Agreements

We
capitalize the costs for our licensing agreements with ABG TapouT, LLC and Salt Tequila USA, LLC, which are amortized to expense
on a straight-line basis over the term of the agreements.

 

The
initial amount of the TapouT agreement as entered into by a related party prior to the Company’s assumption in 2013 was
$4,000,000 to be paid over several years pursuant to a guaranteed minimum royalty agreement. Royalty costs incurred under the
agreements, guaranteed minimum royalty amounts, are expensed as incurred. See Notes 5 and 13 for further information.

 

We
have not made any payments to Salt Tequila USA, LLC under the licensing agreement due to the immaterial nature of our sales from
the brand. See Note 10 for further information.

 

     F-48

     

    

  

Splash
Beverage Group, Inc.

Notes
to the Consolidated Financial Statements

 

Note
2 – Summary of Significant Accounting Policies, continued

 

Fair
Value of Financial Instruments 

Financial
Accounting Standards Board (“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 consolidated financial statements approximate fair values at December 31, 2019 and
2018, consistent with recent negotiations of notes payable and due to the short duration of maturities.

 

Convertible
Instruments

U.S.
GAAP requires the bifurcation of certain conversion rights contained in convertible indebtedness and account for them as free
standing derivative financial instruments according to certain criteria. This criteria include circumstances in which (a) the
economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics
and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host
contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in
fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative
instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be
conventional as that term is described under applicable U.S. GAAP.

 

When
bifurcation is required, the embedded conversion options are bifurcated from the convertible note, resulting in the recognition
of discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences
between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion
price embedded in the note.  Debt discounts under these arrangements are amortized over the term of the related debt to their
stated date of redemption.

 

     F-49

     

    

 

Splash
Beverage Group, Inc.

Notes
to the Consolidated Financial Statements

 

Note
2 – Summary of Significant Accounting Policies, continued

 

Convertible
Instruments, continued

 

With
respect to convertible preferred stock, we record a dividend for the intrinsic value of conversion options embedded in preferred
securities based upon the differences between the fair value of the underlying common stock at the commitment date of the transaction
and the effective conversion price embedded in the preferred shares.

 

Revenue
Recognition

We
recognize 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 we expect to receive in exchange for the transfer of
goods or services to customers.

 

We
recognize revenue when our performance obligations under the terms of a contract with the customer are satisfied. Product sales
occur once control of our products is transferred upon delivery to the customer. Revenue is measured as the amount of consideration
that we expect to receive in exchange for transferring goods and is presented net of provisions for customer returns and allowances.
The amount of consideration we receive and revenue we recognize varies with changes in customer incentives we offer to our customers
and their customers. Sales taxes and other similar taxes are excluded from revenue.

 

Distribution
expenses to transport our products, where applicable, and warehousing expense after manufacture are accounted for within operating
expenses.

 

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.

 

Stock-Based
Compensation

We account for stock-based compensation in
accordance with ASC 718, “Compensation - Stock Compensation” and ASU 2018-07, “Improvements to Nonemployee
Share-Based Payment Accounting”. 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 option
vesting period. The Company uses the Black-Scholes option pricing model to determine the fair value of stock options.

 

Income
Taxes

We
use 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.  We
record a valuation allowance when it is not 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.

 

     F-50

     

    

 

Splash
Beverage Group, Inc.

Notes
to the Consolidated Financial Statements

 

Note
2 – Summary of Significant Accounting Policies, continued

 

Income
Taxes, 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 as
of December 31, 2019 and 2018.

 

Advertising

We
conduct advertising for the promotion of our products. In accordance with ASC 720-35, advertising costs are charged to operations
when incurred; such amounts aggregated to $4,767 and $8,148 during the years ended December 31, 2019 and 2018, respectively.

 

Related
Parties

We
are indebted to certain members of our Board of Directors as of December 31, 2019 and 2018. Transactions between the Company and
its Board members are summarized in Notes 4 and 9.

 

Recent
Accounting Pronouncements

In
May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” (Topic 606). This
ASU supersedes the previous revenue recognition requirements in ASC Topic 605—Revenue Recognition and most industry-specific
guidance. The core principle within Topic 606 is to recognize revenues when promised goods or services are transferred to customers
in an amount that reflects the consideration expected to be received for those goods or services. Transition methods under ASU
2014-09 must be through either (i) retrospective application to each prior reporting period presented, or (ii) retrospective application
with a cumulative effect adjustment at the date of initial application.

 

On January 1, 2018, we adopted ASU 2014-09
Revenue from Contracts with Customers and all subsequent amendments to the ASU (collectively, “ASC 606”), using the
retrospective application with a cumulative effect adjustment at the date of initial application, which (i) creates a single framework
for recognizing revenue from contracts with customers that fall within its scope and (ii) revises when it is appropriate to recognize
a gain (loss) from the transfer of nonfinancial asset. The adoption did not have a material effect on our Consolidated Financial
Statements.

 

In February 2016, the FASB issued ASU
2016-02, “Leases” (Topic 842). We adopted the standard effective January 1, 2019 using the modified retrospective
method. The adoption of this standard resulted in recognition of a right-of-use asset and a lease liability, initially measured
at the present value of the lease payments, for all leases with a term greater than 12 months. When available, we would use the
rate implicit in the lease to discount lease payments to present value. However, our leases generally do not provide a readily
determinable implicit rate. Therefore, our management estimates the incremental borrowing rate to discount lease payments based
on the information at the lease commencement. The accounting for finance leases is substantially unchanged. Given the nature of
our operation, the adoption of Topic 842 did not have a material impact on our balance sheet, statement of operations, or liquidity.
Refer to Note 11 – Operating Lease Obligations for information regarding our adoption of Topic 842 and the Company’s
undiscounted future lease payments and the timing of those payments.

 

     F-51

     

    

 

Splash
Beverage Group, Inc.

Notes
to the Consolidated Financial Statements

 

Note
2 – Summary of Significant Accounting Policies, continued

 

Recent
Accounting Pronouncements, continued

Management
does not believe that any other recently issued, but not yet effective, accounting standards could have a material effect on the
accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under
the circumstances.

 

Management’s Evaluation

Management has evaluated subsequent events
through the date the financial statements were issued.

 

Net
Loss Per Share 

 

Basic
net loss per common share (“Basic EPS’’) excludes dilution and is computed by dividing net loss by the weighted
average number of common shares outstanding during the year. Diluted net loss per common share (“Diluted EPS’’)
reflects the potential dilution that could occur if stock options or other contracts to issue shares of common stock were exercised
or converted into common stock. The computation of Diluted EPS does not assume exercise or conversion of securities that would
have an anti-dilutive effect on net loss per common share

  

	 	 	2019	 	 	2018	 
	Numerator	 	 	 	 	 	 
	Net loss applicable to common shareholders	 	$	(5,135,731	)	 	$	(3,823,913	)
	 	 	 	 	 	 	 	 	 
	Denominator	 	 	 	 	 	 	 	 
	Weighted average number of common shares outstanding	 	 	42,154,948	 	 	 	36,108,948	 
	 	 	 	 	 	 	 	 	 
	Net loss per share (basic and diluted)	 	$	(0.12	)	 	$	(0.11	)

 

Note
3 – Going Concern

 

The accompanying financial statements have
been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the
normal course of business.  Our business operations have not yet generated significant revenues, and we have sustained net
losses of approximately $5.1 million and $3.8 million during the years ended December 31, 2019 and 2018, respectively, and have
an accumulated deficit of approximately $35.6 million and $30.5 million as of December 31, 2019 and 2018, respectively. In addition,
we have current liabilities in excess of current assets of approximately $9.8 million at December 31, 2019. Further, we are in
default on approximately $3.8 million of indebtedness, including accrued interest.

 

Our
ability to continue as a going concern in the foreseeable future is dependent upon our ability to generate revenues and obtain
sufficient long-term financing to meet current and future obligations and deploy such to produce profitable operating results.
Management has evaluated these conditions and plans to raise capital as needed and to generate revenues to satisfy our capital
needs. No assurance can be given that we will be successful in these efforts.

 

These
factors, among others, raise substantial doubt about our ability to continue as a going concern for a reasonable period of time.
These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset
amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

 

     F-52

     

    

 

Splash
Beverage Group, Inc.

Notes
to the Consolidated Financial Statements

 

Note
4 – 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	 	 	 	 	 	 	 
	Notes Payable	 	Rate	 	 	2019	 	 	2018	 
	 	 	 	 	 	 	 	 	 	 
	In October 2013, we entered
    into a short-term loan agreement with an entity in the amount of $25,000. The note matured and in March 2020 the full outstanding
    principal balance of $25,000 and unpaid accrued interest of $11,345 was converted into 234,767 shares of common stock according
    to the Merger Agreement.	 	 	7	%	 	$	25,000	 	 	$	25,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	In February 2014, we entered into a 12-month
    term loan agreement with an individual in the amount of $200,000. The note included warrants for 68,146 shares of common stock
    at $0.73 per share.  The warrants expired on February 28, 2017 and none were exercised at that date. The note matured
    and remains unpaid.	 	 	15	%	 	 	150,000	 	 	 	150,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	In March 2014, we entered into a 12-month
    term loan agreement with an individual in the amount of $500,000.  The note included warrants for 681,461 shares
    of common stock at $0.92 per share. The warrants expired on February 28, 2017 and none were exercised at that date.  The
    note matured and in March 2020 the full outstanding principal balance of $500,000 and unpaid accrued interest of $373,065
    was converted into 1,124,802 shares of common stock according to the Merger Agreement.	 	 	15	%	 	 	500,000	 	 	 	500,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	In March 2014, we entered into a short-term
    loan agreement with an entity in the amount of $200,000. The note included warrants for 272,584 shares of common stock at
    $0.92 per share. The warrants expired on February 28, 2017 and none were exercised at that date. The loans matured and remain
    unpaid.	 	 	8	%	 	 	200,000	 	 	 	200,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	$	875,000	 	 	$	875,000	 

  

 

Interest
expense on notes payable was $105,966 and $115,250 for the years ended December 31, 2019 and 2018, respectively, and accrued interest
was $581,693 and $475,728 as of December 31, 2019 and 2018, respectively.

 

     F-53

     

    

 

Splash
Beverage Group, Inc.

Notes
to the Consolidated Financial Statements

 

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

 

	 	 	Interest	 	 	 	 	 	 	 
	Related
    Parties Notes Payable	 	Rate	 	 	2019	 	 	2018	 
	 	 	 	 	 	 	 	 	 	 
	During 2012, we entered into
    two 6-month term loan agreements with an entity, totaling $150,000. The notes included warrants for 68,146 shares of common
    stock at $0.73 per share which expired unexercised in 2017. The note matured and in March 2020 the full outstanding principal
    balance of $41,500 and unpaid accrued interest of $31,515 was converted into 98,726 shares of common stock according to the
    Merger Agreement.	 	 	7	%	 	$	41,500	 	 	$	41,500	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	In March 2014, we entered into a $50,000
    12-month term loan agreement. The note included warrants for 136,292 shares of common stock at $0.92 per share. The warrants
    expired unexercised on February 28, 2017.  The note matured and in March 2020 the full outstanding principal balance
    of $50,000 and unpaid accrued interest of $24,145 was converted into 99,252 shares of common stock according to the Merger
    Agreement.	 	 	8	%	 	 	50,000	 	 	 	50,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	During 2015, we entered into a 12-month
    term loan agreement with an individual in the amount $250,000.  The note matured and in March 2020 the full outstanding
    principal balance of $250,000 and unpaid accrued interest of $101,850 was converted into 98,726 shares of common stock according
    to the Merger Agreement.	 	 	8	%	 	 	250,000	 	 	 	250,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	In February 2012, we entered into a loan
    agreement with an officer of the Company in the amount of $100. On September 25, 2018 an additional $10,500 loan agreement
    was entered into. The note matured and in March 2020 the full outstanding principal balance of $10,600 and unpaid accrued
    interest of $1,189 was converted into 15,734 shares of common stock according to the Merger Agreement.	 	 	7	%	 	 	10,600	 	 	 	10,600	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	During 2013, 2014, 2015, and 2016, we entered
    into several 12-month term loan agreements with an officer of the Company in the amounts of $57,000, $225,000, $105,000, and
    $9,000, respectively. The note matured and in March 2020 the full outstanding principal balance of $396,000 and unpaid accrued
    interest of $146,828 was converted into 727,344 shares of common stock according to the Merger Agreement.	 	 	7	%	 	 	396,000	 	 	 	396,000	 

 

Continued on next page

 

     F-54

     

    

 

Splash
Beverage Group, Inc.

Notes
to the Consolidated Financial Statements

 

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

 

	 	 	Interest	 	 	 	 	 	 	 
	Related Parties Notes Payable,
    continued	 	Rate	 	 	2019	 	 	2018	 
	 	 	 	 	 	 	 	 	 	 
	During 2012, 2013, 2014, and
    2016, we entered into 6-month term loan agreements with an officer of the Company in the amounts of $155,000, $210,000, $150,000
    and $40,000, all respectively. The notes included warrants for issuances of 204,438 shares of common stock at $0.92 per share.
    The warrants expired unexercised on March 1, 2017. The note matured and in March 2020 the full outstanding principal balance
    of $495,000 and unpaid accrued interest of $213,010 was converted into 942,504 shares of common stock according to the Merger
    Agreement.	 	 	7	%	 	 	495,000	 	 	 	495,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	During 2013, 2014 and 2017, we entered
    into 12-month term loan agreements with an officer of the Company in the amounts of $60,000, $50,000 and $10,000. The note
    matured and in March 2020 the full outstanding principal balance of $120,000 and unpaid accrued interest of $50,305 was converted
    into 228,328 shares of common stock according to the Merger Agreement.	 	 	7	%	 	 	120,000	 	 	 	120,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	During 2018, we entered into a long term
    note payable with an entity owned by an officer for $12,000 to be payable on July 10, 2020. In March 2020 the full outstanding
    principal balance of $12,000 and unpaid accrued interest of $1,050 was converted into 17,407 shares of common stock according
    to the Merger Agreement.	 	 	12	%	 	 	12,000	 	 	 	12,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	During 2019, we entered into a term note
    payable with an entity owned by an officer for $130,000 to be paid on August 8, 2019. The note matured and in March 2020 the
    full outstanding principal balance of $130,000 and unpaid accrued interest of $9,078 was converted into 182,525 shares of
    common stock according to the Merger Agreement.	 	 	12	%	 	 	130,000	 	 	 	-	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	$	1,505,100	 	 	$	1,375,100	 

  

Interest
expense on related party notes payable was $95,183 and $99,532 for the years ended December 31, 2019 and 2018, respectively, and
accrued interest was $546,362 and $426,740 as of December 31, 2019 and 2018, respectively.

 

     F-55

     

    

 

Splash
Beverage Group, Inc.

Notes
to the Consolidated Financial Statements

 

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

  

	 	 	Interest	 	 	 	 	 	 	 
	Convertible Bridge Loans
    Payable	 	Rate	 	 	2019	 	 	2018	 
	 	 	 	 	 	 	 	 	 	 
	In May 2015, we entered into
    a 3-month term loan agreement with an individual in the amount of $100,000. The annual interest rate for this bridge loan
    was 32% for the first 90 days, and 4% thereafter, compounded monthly.	 	 	See left	 	 	$	100,000	 	 	$	100,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	In October 2015, we entered into a 3-month
    term loan agreement with two individuals in the amount of $25,000. On December 26, 2018, the outstanding principal and accrued
    interest of $14,388 was consolidated into a new $39,388 term loan due August 26, 2020. In March 2020 the full outstanding
    principal balance of $39,388 and unpaid accrued interest of $5,973 was converted into 59,694 shares of common stock according
    to the Merger Agreement.	 	 	12	%	 	 	39,388	 	 	 	39,388	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	In June 2015, we entered into a 3-month
    term loan with two individuals in the amount of $100,000. On December 26, 2018, the outstanding principal amount of $100,000
    and accrued interest of $64,307 was consolidated into a new $164,307 term loan due August 26, 2020. In March 2020 the full
    outstanding principal balance of $164,307 and unpaid accrued interest of $24,916 was converted into 249,013 shares of common
    stock according to the Merger Agreement.	 	 	12	%	 	 	164,307	 	 	 	164,307	 

 

Continued on next page  

 

     F-56

     

    

  

Splash
Beverage Group, Inc.

Notes
to the Consolidated Financial Statements

 

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

 

	 	 	Interest	 	 	 	 	 	 	 
	Convertible Bridge Loans
    Payable, continued	 	Rate	 	 	2019	 	 	2018	 
	 	 	 	 	 	 	 	 	 	 
	During 2016, 2017 and 2018,
    we entered into multiple loan agreements with an entity in varying amounts. On December 26, 2018, the outstanding principal
    of $235,500 and accrued interest of $155,861 was consolidated into a new $391,361 term due August 26, 2020. In March 2020
    the full outstanding principal balance of $391,361 and unpaid accrued interest of $43,823 was converted into 435,184 shares
    of common stock according to the Merger Agreement.	 	 	12	%	 	 	391,361	 	 	 	391,361	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	During 2016, we entered into 3-month term
    loan agreements with an individual totaling $20,000. The loan was extended to August 14, 2020. In March 2020 the full outstanding
    principal balance of $20,000 and unpaid accrued interest of $10,096 was converted into 41,336 shares of common stock according
    to the Merger Agreement.	 	 	9	%	 	 	20,000	 	 	 	20,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	During 2014 through 2018, we entered into
    convertible promissory note agreements with various terms ranging from 90 days to 18 months at 18% interest with an entity
    which were consolidated into one loan at 12% in 2018 totaling $795,137 with a due date of August 26, 2020. In March 2020 the
    full outstanding principal balance of $795,137 and unpaid accrued interest of $89,037 was converted into 884,174 shares of
    common stock according to the Merger Agreement.	 	 	12	%	 	 	795,137	 	 	 	795,137	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	During 2015 and 2016, we entered into a
    series of 3-month term convertible promissory note agreements at 18% interest with an entity which were consolidated into
    one loan at 12% in 2018 totaling $692,471 with a due date of August 26, 2020. In March 2020 the full outstanding principal
    balance of $692,471 and unpaid accrued interest of $77,541 was converted into 770,012 shares of common stock according to
    the Merger Agreement.	 	 	12	%	 	 	692,471	 	 	 	692,471	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	$	2,202,664	 	 	$	2,202,664	 

  

Interest
expense on the convertible bridge loans payable was $310,865 and $430,317 for the years ended December 31, 2019 and 2018, respectively,
and accrued interest was $439,344 and $489,015 as of December 31, 2019 and 2018, respectively.

 

     F-57

     

    

 

Splash
Beverage Group, Inc.

Notes
to the Consolidated Financial Statements

 

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

 

	 	 	Interest	 	 	 	 	 	 	 
	Revenue Financing Arrangements	 	Rate	 	 	2019	 	 	2018	 
	 	 	 	 	 	 	 	 	 	 
	During August 2015, we entered into a 3-month term loan agreement
    with an entity in the amount of $50,000, with required daily payments of $999. We entered into two additional 3-month loan
    agreements with the entity in 2016 in the amounts of $60,000 and $57,000, with required daily payments of $928 and $713, respectively.   The
    term loans matured and remains unpaid.	 	 	10	%	 	 	28,032	 	 	 	28,032	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	During September 2016, the Company entered into a short-term loan agreement
    with an entity in the amount of $55,000 with required daily payments of $929. The note was paid off in 2019.	 	 	15	%	 	 	-	 	 	 	15,009	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	During November 2016, we entered into a short-term loan agreement with
    an entity in the amount of $55,000 with required daily payments of $1,299. The note was in default as of December 31, 2018.
    In 2019, we entered into a settlement agreement with monthly installment payments of $6,000.  The loan is scheduled
    to be fully repaid in 2020.	 	 	12	%	 	 	17,435	 	 	 	34,067	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	$	45,467	 	 	$	77,108	 

 

Interest
expense on the revenue financing arrangements was $2,577 and $11,132 for the years ended December 31, 2019 and 2018, respectively,
and accrued interest was $32,154 and $126,333 as of December 31, 2019 and 2018, respectively.

 

Bridge
Loan Payable

We
issued an additional bridge loan in October 2018 for $2 million with a one-year maturity to GMA Bridge Fund LLC (“GMA”).
This bridge loan contains a 10% administration fee of which the full $200,000 was accrued at December 31, 2019 and included in
bridge loan payable, net. We incurred $271,670 of loan costs, which was fully amortized at December 31, 2019. Interest on the
bridge loan was 0.5% monthly for the first six months and 0.75% monthly for the next six months. At the same time the debt was
issued, we entered into a separate agreement in which GMA provided consulting services for one year (“Consulting Agreement”).
We compensated GMA for the Consulting Agreement services by issuance of a warrant with a 5-year term to acquire 1,362,922 shares
of our common stock at an exercise price of $0.007 per share. The warrant vested immediately. The value of the warrant, based
on a Black-Scholes option pricing model, was $991,423 and was expensed in full in 2018. Interest expense on the bridge loan for
the years ended December 31, 2019 and 2018 was $137,637 and $28,603, respectively, and accrued interest at December 31, 2019 was
$166,240. As part of the merger, these warrants were retired.

 

     F-58

     

    

 

Splash
Beverage Group, Inc.

Notes
to the Consolidated Financial Statements

 

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

 

Future
Minimum Debt Payments

Future
minimum debt payments under the Company’s outstanding loans are as follows as of December 31, 2019:

 

	 	 	Related	 	 	 	 	 	 	 
	 	 	Party	 	 	Other	 	 	Total	 
	 	 	 	 	 	 	 	 	 	 
	2020	 	 	1,505,100	 	 	 	5,277,664	 	 	 	6,782,764	 
	Thereafter	 	 	-	 	 	 	-	 	 	 	-	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total	 	$	1,505,100	 	 	$	5,277,664	 	 	$	6,782,764	 

 

Note
5 – Licensing Agreement and Royalty Payable

 

During
2012, we entered into an assignment agreement with ABG TapouT, LLC (“TapouT”) to obtain the licensing rights of the
brand “TapouT” on energy drinks, energy shots, water, teas and sports drinks for beverages sold in the United States
of America, its territories, possessions, U.S. military bases and Mexico. Under the terms of the agreement, we are required to
pay ABG Tapout, LLC a 6% royalty on net sales (gross revenue less discounts and allowances). The agreement requires us to make
varying guaranteed minimum royalty payments in the total amount of $3,500,000 for the initial period of 5 years beginning in 2012.
The terms of the license agreement were subsequently amended on several occasions between 2012 and 2016. During April 2017, the
license agreement was again amended, to extend the term through December 31, 2018 with a 5-year renewal option if $5 million of
net sales were achieved in 2018. The amendment also stated we were required to make a $30,000 payment on the date of the executed
amendment, monthly payments of $30,000 starting on April 30, 2017 through December 31, 2017, and monthly payments of $26,484 starting
on January 31, 2018 through December 31, 2018. We did not achieve the minimum net sales requirement per the amendment terms for
2018. In 2019 the agreement was once again amended extending the term through December 31, 2019. Per the 2019 amendment, the Company
is required to make twelve monthly payments of $39,000. See Note 13.

 

The
unpaid amount of royalties was $39,000 and $21,062 as of December 31, 2019 and 2018, respectively. Guaranteed minimum royalty
payments totaled $468,000 and $326,750 for the years ended December 31, 2019 and 2018, respectively, which is included in other
general and administrative expenses.

 

Note
6 – Income Taxes

 

We
have evaluated the positive and negative evidence in assessing the realizability of its deferred tax assets. This assessment included
the evaluation of scheduled reversals of deferred tax liabilities, estimates of projected future taxable income and tax planning
strategies to determine which deferred tax assets are more likely than not to be realized in the future.

 

     F-59

     

    

 

Splash
Beverage Group, Inc.

Notes
to the Consolidated Financial Statements

 

Note
6 – Income Taxes, continued

 

At December 31, 2019, our net operating loss
carryforward for Federal income tax purposes was approximately $23.2 million, which will be available to offset future taxable
income subject to potential annual limitations. If not used, these carry forwards will begin to expire in 2032, except for the
current year net operating loss generated which can be carried forward indefinitely.

 

There was no income tax expense or benefit
for the year ended December 31, 2019 and 2018 due to the full valuation allowance recorded in each period.

 

The
reconciliation of the income tax benefit is computed at the U.S. federal statutory rate as follows:

 

	 	 	2019	 	 	2018	 
	 	 	 	 	 	 	 
	US federal statutory tax rate	 	 	21.00	%	 	 	21.00	%
	Permanent differences	 	 	-6.56	%	 	 	-0.03	%
	Change in valuation allowance	 	 	-14.44	%	 	 	-20.97	%
	Total	 	 	0.00	%	 	 	0.00	%

 

The
tax effects of temporary differences which give rise to the significant portions of deferred tax assets or liabilities at December
31 are as follows:

 

	 	 	2019	 	 	2018	 
	 	 	 	 	 	 	 
	Deferred tax assets:	 	 	 	 	 	 
	Net operating losses	 	$	5,887,022	 	 	$	5,315,433	 
	Deferred rent	 	 	1,381	 	 	 	-	 
	Accrued expenses/interest expense limitation	 	 	962,838	 	 	 	641,141	 
	Total deferred tax assets	 	 	6,851,241	 	 	 	5,956,574	 
	 	 	 	 	 	 	 	 	 
	Deferred tax liabilities:	 	 	 	 	 	 	 	 
	Depreciation	 	 	(7,354	)	 	 	(7,666	)
	Total deferred tax liabilities	 	 	(7,354	)	 	 	(7,666	)
	Less: valuation allowance	 	 	(6,843,887	)	 	 	(5,948,908	)
	 	 	 	 	 	 	 	 	 
	Total net deferred tax liabilities	 	$	-	 	 	$	-	 

 

We
continually evaluate expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative
rulings. The open tax years subject to examination with respect to our operations are 2015 through 2019. 

 

     F-60

     

    

 

Splash
Beverage Group, Inc.

Notes
to the Consolidated Financial Statements

 

Note
7 – Deficiency in Stockholders’ Equity

 

Common
Stock

In
2019, we issued 1,846,078 shares of our common stock in exchange for services provided to us. The shares were valued at $0.73
per share. We recognized share-based compensation expense of $1,354,500, which is classified within the contracted services line
on the Statement of Operations.

 

In 2018, we issued 906,090 shares of common
stock valued at $0.73 per share in exchange for services provided to the Company.

 

On May 28, 2018, we issued to a consultant
or its designees common stock equal to 718,682 shares in exchange for services provided to the Company.

 

In December 2018, the full outstanding principal
balance of a bridge note of $175,000 and unpaid accrued interest balance of $144,410 was converted to 290,220 shares of the Company’s
common stock at $1.10 per share.

 

In October 2018, the full outstanding principal
balance of a bridge note of $200,000 and unpaid accrued interest balance of $165,040 was converted to 331,681 shares of the Company’s
common stock at $1.10 per share.

  

Certain common shareholders have the right
to exchange their common shares for shares of preferred stock or convertible debt if the Company is unable to achieve the capital
raise event as defined in the Merger Agreement by September 30, 2020 (see Note 13). Shares would consist of:

 

		·	Series
                                         A Convertible Preferred Stock – 6,276,432

		·	Series
                                         B Convertible Preferred Stock – 7,653,981

		·	Convertible
                                         Debt – 10,560,090

     

As
of December 31, 2019, the convertible debt was still classified as debt on the balance sheet.

  

Series
A and B Convertible Preferred Stock

As part of the merger consummated on March
31, 2020, all series A and B convertible preferred stock were converted to common stock. If the Company is unable to achieve the
capital raise event as defined in the Merger Agreement by September 30, 2020, these shareholders can rescind their common shares
back to preferred shares. Below are the new rights to these shareholders if they decide to rescind:

 

Series
A Convertible Preferred Stock:

Rank. The Series A Preferred Stock shall rank, with respect
to dividend rights and to rights upon any voluntary or involuntary liquidation, dissolution or winding up of the Company (each,
a “Liquidation Event”), (a) senior in preference and priority to the common stock of the Company (the “Common
Stock”) and any other class or series of equity security established and designated by the Board of Directors the terms of
which do not expressly provide that it ranks senior in preference or priority to or on parity with the Series A Preferred Stock
with respect to dividend rights and rights upon a Liquidation Event (collectively, “Junior Securities”), (b) on parity,
without preference or priority, with each other class or series of equity security established and designated by the Board of Directors
the terms of which expressly provide that it ranks on parity, without preference or priority to, the Series A Preferred Stock with
respect to dividend rights and rights upon a Liquidation Event (collectively, “Parity Securities”), and (c) junior
in preference and priority to each other class or series of equity security established and designated by the Board of Directors
the terms of which expressly provide that it ranks senior in preference or priority to the Series A Preferred Stock with respect
to dividend rights and rights upon a Liquidation Event (collectively, “Senior Securities”).

 

Dividends.
Holders of shares of the Series A Preferred Stock are entitled to receive, when, as and if declared by the Board, out of funds
legally available for the payment of dividends, cumulative cash dividends at an annual rate of eight percent (8%) of the Original
Issue Price per share (equal to $.08 per share per annum). Dividends shall accrue on each share of Series A Preferred Stock from
the date of issuance thereof, whether paid or not, and shall be cumulative and compounded annually.

 

Liquidation
Preference. In the event of any Liquidation Event, the holders of shares of Series A Preferred Stock then outstanding shall be
entitled to be paid out of the assets of the Company available for distribution to its stockholders before any payment shall be
made to the holders of any Junior Securities by reason of their ownership thereof, an amount per share equal to one hundred fifty
percent (150%) of the Series A Original Issue Price (the “Liquidation Preference”), plus the amount of accrued and
unpaid dividends thereon from the Original Issue Date through the date of liquidation. If upon any such Liquidation Event the
assets of the Company available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series
A Preferred Stock the full amount to which they shall be entitled under this, the holders of shares of Series A Preferred Stock
and Parity Securities shall share ratably in any distribution of the assets available for distribution in proportion to the respective
amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on
or with respect to such shares were paid in full.

 

Conversion.
The holders of Series A Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

 

Optional
Conversion. Each share of Series A Preferred Stock shall be convertible, at the option of the holder thereof, at any time and
from time to time, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Series
A Original Issue Price by the Conversion Price (as defined below) in effect at the time of conversion. The Conversion Price at
which shares of Common Stock shall be deliverable upon conversion of Series A Preferred Stock without the payment of additional
consideration by the holder thereof (the “Conversion Price”) shall initially be $1.28 per share. Such initial Conversion
Price, and the rate at which shares of Series A Preferred Stock may be converted into shares of Common Stock, shall be subject
to adjustment as provided below. All accrued and unpaid dividends may be converted by each holder of Series A Preferred Stock
into Common Stock by first determining the number of shares of Series A Preferred Stock that could be purchased based on the Series
A Original Issue Price then in effect and then determining the number of shares of Common Stock such additional shares of Series
A Preferred Stock are convertible into. By way of illustration only, if the accrued and unpaid dividends are equal to $100,000,
then based on the Series A Original Issue Price of $1.00 and a Conversion Price of $0.85, the holders of Series A Preferred Stock
would receive an additional 85,000 shares of Common Stock.

 

Automatic
Conversion. Upon the consummation of an underwritten public offering of the Common Stock of the Company (“IPO”) ,
each share of Series A Preferred Stock shall automatically be converted into such number of fully paid and non-assessable shares
of Common Stock at a Conversion Price equal to the lesser of (i) the Conversion Price in effect immediately prior to the consummation
of the IPO or (ii) fifty percent (50%) of the public offering price of the Common Stock in the IPO. All accrued and unpaid dividends
may be converted by each holder of Series A Preferred Stock into Common Stock by first determining the number of shares of Series
A Preferred Stock that could be purchased based on the Series A Original Issue Price then in effect and then determining the number
of shares of Common Stock such additional shares of Series A Preferred Stock are convertible into. By way of illustration only,
if the accrued and unpaid dividends are equal to $100,000, then based on the Series A Original Issue Price of $1.00 and a Conversion
Price of $0.85, the holders of Series A Preferred Stock would receive an additional 85,000 shares of Common Stock.

 

Series
B Convertible Preferred Stock:

Rank.
The Series B Preferred Stock shall rank, with respect to dividend rights and to rights upon any voluntary or involuntary liquidation,
dissolution or winding up of the Company (each, a “Liquidation Event”), (a) senior in preference and priority to the
common stock of the Company (the “Common Stock”) and any other class or series of equity security established
and designated by the Board of Directors the terms of which do not expressly provide that it ranks senior in preference or priority
to or on parity with the Series B Preferred Stock with respect to dividend rights and rights upon a Liquidation Event (collectively,
“Junior Securities”), (b) on parity, without preference or priority, with the Series A Preferred Stock and with each
other class or series of equity security established and designated by the Board of Directors the terms of which expressly provide
that it ranks on parity, without preference or priority to, the Series B Preferred Stock with respect to dividend rights and rights
upon a Liquidation Event (collectively, “Parity Securities”), and (c) junior in preference and priority to each other
class or series of equity security established and designated by the Board of Directors the terms of which expressly provide that
it ranks senior in preference or priority to the Series B Preferred Stock with respect to dividend rights and rights upon a Liquidation
Event (collectively, “Senior Securities”).

 

Dividends.
The holders of the Series B Preferred Stock shall be entitled to receive cash dividends, when, as and if declared by the Board,
out of any assets legally available therefor, prior and in preference to any declaration or payment of any dividend on any other
class of Preferred Stock, except for the Series A Preferred Stock which shall be paid at the same time as the Series B Preferred
Stock is paid, and Common Stock of the Corporation at an annual rate of nine percent (9%) of the Original Issue Price per share
(equal to $.09 per share per annum) payable out of legally available funds. Dividends shall accrue on each share of Series B Preferred
Stock from the date of issuance thereof, whether paid or not, and shall be cumulative and compounded annually. Such dividends
shall be payable on the first day of each January, April, July and October commencing with respect to each share of Series B Preferred
Stock, on the first of such dates to occur after the issuance of such share (each such date a “Dividend Payment Date”)
to the holders of record at the close of business on the fifteenth day of each December, March, June and September, respectively,
subject to declaration of such dividends by the Board. All dividends paid with respect to shares of Series B Preferred Stock shall
be paid pro rata to the holders entitled thereto. Dividends, if paid, must be paid, on all outstanding shares of Series B Preferred
Stock contemporaneously. If any dividend shall not be paid on a Dividend Payment Date, for any reason, the right of the holders
to receive such dividend shall not lapse or terminate but each such dividend shall accrue and be paid to such holders, subject
to the conversion provisions below. No dividend shall be paid to the holders of any shares of Common Stock until all dividends,
including accrued dividends, then owing to the holders of Series B Preferred Stock, shall have been paid in full.

 

Liquidation
Preference. In the event of any Liquidation Event, the holders of shares of Series B Preferred Stock then outstanding shall be
entitled to be paid out of the assets of the Company available for distribution to its stockholders before any payment shall be
made to the holders of any Junior Securities by reason of their ownership thereof, an amount per share equal to one hundred fifty
percent (150%) of the Series B Original Issue Price (the “Liquidation Preference”), plus the amount of accrued and
unpaid dividends thereon from the Original Issue Date through the date of liquidation. If upon any such Liquidation Event the
assets of the Company available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series
B Preferred Stock the full amount to which they shall be entitled under this Section , the holders of shares of Series B Preferred
Stock and Parity Securities shall share ratably in any distribution of the assets available for distribution in proportion to
the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts
payable on or with respect to such shares were paid in full.

 

Conversion.
The holders of Series B Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

 

Optional
Conversion. Each share of Series B Preferred Stock shall be convertible, at the option of the holder thereof, at any time and
from time to time, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Series
B Original Issue Price by the Conversion Price (as defined below) in effect at the time of conversion. The Conversion Price at
which shares of Common Stock shall be deliverable upon conversion of Series B Preferred Stock without the payment of additional
consideration by the holder thereof (the “Conversion Price”) shall initially be $1.28 per share. Such initial Conversion
Price, and the rate at which shares of Series B Preferred Stock may be converted into shares of Common Stock, shall be subject
to adjustment as provided below. All accrued and unpaid dividends may be converted by each holder of Series B Preferred Stock
into Common Stock by first determining the number of shares of Series B Preferred Stock that could be purchased based on the Series
B Original Issue Price then in effect and then determining the number of shares of Common Stock such additional shares of Series
B Preferred Stock are convertible into. By way of illustration only, if the accrued and unpaid dividends are equal to $100,000,
then based on the Series B Original Issue Price of $1.50 and a Conversion Price of $1.28, the holders of Series B Preferred Stock
would receive an additional 78,125 shares of Common Stock.

 

Automatic
Conversion. Upon the consummation of an underwritten public offering of the Common Stock of the Company (“IPO”), each
share of Series B Preferred Stock shall automatically be converted into such number of fully paid and non-assessable shares of
Common Stock at a Conversion Price equal to the lesser of (i) the Conversion Price in effect immediately prior to the consummation
of the IPO or (ii) fifty percent (50%) of the public offering price of the Common Stock in the IPO. All accrued and unpaid dividends
may be converted by each holder of Series B Preferred Stock into Common Stock by first determining the number of shares of Series
B Preferred Stock that could be purchased based on the Series B Original Issue Price then in effect and then determining the number
of shares of Common Stock such additional shares of Series B Preferred Stock are convertible into. By way of illustration only,
if the accrued and unpaid dividends are equal to $100,000, then based on the Series B Original Issue Price of $1.50 and a Conversion
Price of $1.28, the holders of Series B Preferred Stock would receive an additional 78,125 shares of Common Stock.

  

Undesignated Preferred Stock

The Company has the ability to authorize
Series A and Series B Convertible Preferred Stock.

 

Treasury Stock

Since its inception, we have repurchased shares
from our shareholders. To date, we have repurchased 1,226,630 shares, of which 817,753 have been retired.

 

In connection with a 2018 consulting agreement,
we are committed to issue 408,877 shares held in treasury upon the occurrence of certain events or milestones. We issued, out
of treasury, 136,292 shares in July 2018 and 136,292 shares in July 2019.

 

Warrant Issuance-Common Stock

As part of the sale and issuance of 3,913,414
shares of our Series B Convertible Preferred Stock of SBG, we issued warrants to purchase 2,666,837 shares of our common stock
at a price of $1.10 per share. The warrants have a 5-year term. At December 31, 2019, there are 2,593,486 warrants outstanding
with a weighted average remaining life of 0.9 years.

 

     F-61

     

    

 

Splash
Beverage Group, Inc.

Notes
to the Consolidated Financial Statements

 

Note
8 – Share-Based Payments

 

Warrant Issuance-Loan Agreements

In 2014, the Company issued seven (7)
warrants for the purchase of 1,362,922 shares of the Company’s common stock. The warrants were issued with various loan
agreements as described above in Note 4. Two warrants for a total of 136,292 shares of common stock were issued with exercise
prices of $0.73 per share and five warrants for a total of 1,226,630 shares of common stock were issued with an exercise price
of $0.92 per share. The Company estimated the fair value of the warrants totaling $161,626 based on its estimate of the fair value
of the Company’s common stock at the issuance date, an average risk-free interest rate of 1.69%, the estimated life of half
of the term of the warrant, a zero dividend yield and, a volatility rate of 50%, which was recorded as a discount to the notes
and amortized over the notes’ lives under the effective interest rate method. The fair value of the warrants were expensed
over the life of the loans which was 12 months. These warrants have expired as of December 31, 2018.

 

Warrant
Issuance-GMA Consulting Services

During 2018, we
issued warrants to purchase 1,362,922 shares of our common stock at $0.007 per share as part of our consulting agreement with
GMA (see Note 4), At December 31, 2019, the weighted average life of the outstanding warrants is 3.75 years.

 

The
warrants entitle the holder to purchase one share per warrant of the Company’s common stock at a price of $0.007 per share
during the five-year period commencing on October 2, 2018, or, if greater, the number of common shares with a market value equivalent
to two percent of the enterprise value of the Company at an exercise price of $0.006 per share.

 

Stock
Plan

We
have adopted the 2012 Stock Incentive Plan (the “Plan”), which provides for the grant of common stock and stock options
to employees. We have reserved 4,088,765 shares for issuance under the Plan. The option exercise price generally may not be less
than the underlying stock’s fair market value at the date of the grant and generally have a term of ten years. On December
31, 2018, the sole option holder at the time, our CEO, exercised his options to purchase 2,657,698 shares of common stock at a
purchase price of $0.12 per share, totaling $312,000, which total purchase price was paid by the cancelation of the equivalent
amount of debt owed by us to the CEO. On December 7, 2019, our Board of Directors granted 1,124,410 options to certain employees
and consultants. None of these options were exercised at December 31, 2019. There are 1,124,410 options issued and outstanding
under the Plan at December 31, 2019. As of December 31, 2019, the total number of options available for grant is 306,657.

 

     F-62

     

    

 

Splash
Beverage Group, Inc.

Notes
to the Consolidated Financial Statements

 

Note
8 – Share-Based Payments, continued

 

Stock
Plan, continued

We
measure employee stock-based awards at the grant-date fair value and recognizes employee 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, the expected life of the option,
and expected stock price volatility and exercise price. We used the Black-Scholes option pricing model to value its stock option
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 was 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 and employment duration for its stock options grants. 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 options granted. The risk-free interest rate is
based on U.S. Treasury notes with a term approximating the expected life of the option. The estimation of the number of stock
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.

 

We
recognized stock-based compensation expense of $265,589 and $0 for the years ended December 31, 2019 and 2018, respectively. There
was no unrecognized compensation cost related to stock option awards at December 31, 2019.

 

A
summary of information related to stock options for the years ended December 31, 2019 and 2018 is as follows:

 

	 	 	December
    31, 2019	 	 	December
    31, 2018	 
	 	 	 	 	 	Weighted Average	 	 	 	 	 	Weighted Average	 
	 	 	Options	 	 	Exercise
    Price	 	 	Options	 	 	Exercise
    Price	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Outstanding - beginning of year	 	 	-	 	 	$	-	 	 	 	2,657,698	 	 	$	0.12	 
	Granted	 	 	1,124,410	 	 	$	0.73	 	 	 	.	 	 	 	 	 
	Exercised	 	 	-	 	 	$	-	 	 	 	(2,657,698	)	 	$	(0.12	)
	Cancelled/forfeited	 	 	-	 	 	$	-	 	 	 	-	 	 	 	 	 
	Outstanding - end of year	 	 	1,124,410	 	 	$	0.73	 	 	 	-	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Exercisable at end of year	 	 	1,124,410	 	 	$	0.73	 	 	 	-	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Weighted average grant date
    fair value of options during year	 	 	N/A	 	 	 	 	 	 	 	N/A	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Weighted average duration to
    expiration of outstanding options at year-end	 	 	5.0	 	 	 	 	 	 	 	N/A	 	 	 	 	 

 

     F-63

     

    

 

Splash
Beverage Group, Inc.

Notes
to the Consolidated Financial Statements

 

Note
9 – Related Parties

 

During
the normal course of business, we incurred expenses related to services provided by our CEO or Company expenses paid by our CEO,
resulting in related party payables, net of $429,432 and $302,934 as of December 31, 2019 and 2018, respectively. The related
party payable to the CEO bears no interest payable and is due on demand.

 

During 2018, $312,000 of the related party
was paid in kind as the CEO exercised 2,657,698 options to acquire common stock at $0.12 per share against the payable.

 

There
are related party notes payable of $1,505,100 and $1,375,100 outstanding as of December 31, 2019 and 2018, respectively, as discussed
in Note 4.

 

Note
10 – Investment in Salt Tequila USA, LLC

 

On
December 9, 2013, we entered into a marketing and distribution agreement with SALT Tequila USA, LLC (“SALT”) in Mexico
for the manufacturing of our product line. The agreement was for a one-year term with an additional two-year renewal. On December
28, 2015, the agreement was extended through 2020. In the December 9, 2013 agreement, we received a 5% ownership interest in SALT,
12 months after the date of the agreement we received an additional 5% ownership interest in SALT, and 24 months after the date
of the agreement we received an additional 5% interest, resulting in a total interest of 15% in SALT. We have not recorded the
cost of the investment or our share of its results of operations as the amounts are considered immaterial.

 

SALT also has sold product to an unrelated
international alcohol distributor, American Spirits Exchange, for preliminary market testing in 9 of 16 states that they distribute
to, that are government-controlled alcohol resellers. In 2018 and 2019 we had no sales of SALT Tequila. On December 31, 2018,
we created a Mexican subsidiary, Splash MEX SA DE CV (“Splash Mex”) for the exporting of SALT Tequila from Mexico
to the USA, South and Central Americas. Splash Mex will also act as the manufacturing and distribution agent of TapouT in Central
and South Americas. Applications for the appropriate licenses required for import and wholesale of alcohol in the USA have been
completed for at the Federal and State levels. These licenses will permit direct alcohol sales to distributors and wholesalers
thereby limiting the use of agents for importing SALT Tequila to the USA for distribution.

 

Note
11 – Operating Lease Obligations

 

Effective
July 2018, we entered into a lease agreement for the right to use and occupy office space. The lease term commenced July 1, 2018
and is scheduled to expire after 36 months, on June 30, 2021. Total rent expense for the ten months, beginning in March,
in 2018 was $32,855.

 

Prior to the current lease, we entered into
a lease agreement in 2014 for the right to use and occupy office space. The lease term commenced November 1, 2014 and was scheduled
to expire after 62 months, on December 31, 2019. The lease was terminated in February 2018. Total rent expense for the two months
in 2018 was $19,641.

 

Effective
November 2019, we entered into a new lease agreement for our NY affiliate. The lease is for six months and will expire on April
30, 2020. This lease was not subjected to the new lease standard, Topic 842.

 

     F-64

     

    

 

Splash
Beverage Group, Inc.

Notes
to the Consolidated Financial Statements

 

Note
11 – Operating Lease Obligations, continued

 

Effective
November 2019, we entered into a new lease with Interport Logistics, LLC. The lease term commenced on November 11, 2019 and is
scheduled to expire on November 11, 2020. This lease was subjected to the new lease standard, Topic 842.

 

Effective
May 2019, we entered into a new lease in Mexico. The lease commenced May 1, 2019 and is scheduled to expire after 24 months, on
April 1, 2021. This lease was subjected to the new lease standard, Topic 842.

 

The
following table presents a reconciliation of the undiscounted future minimum lease payments, under the leases for our office and
warehouses to the amounts reported as financial lease liabilities on the consolidated balance sheet at December 31, 2019:

 

	Undiscounted Future Minimum Lease Payments	 	Operating
    Lease	 
	 	 	 	 
	2020	 	$	87,734	 
	2021	 	 	59,291	 
	Thereafter	 	 	25,911	 
	Total	 	 	172,936	 
	Amount representing imputed interest	 	 	(9,196	)
	Total operating lease liability	 	 	163,740	 
	Current portion of operating lease liability	 	 	(81,502	)
	Operating lease liability, non-current	 	$	82,238	 

   

The
table below presents information for lease costs related to our operating leases at December 31, 2019:

 

	Operating lease cost:	 	 	 
	Amortization of leased assets	 	$	52,692	 
	Interest of lease liabilities	 	 	5,716	 
	Total operating lease cost	 	$	58,408	 

 

The
table below presents lease-related terms and discount rates at December 31, 2019:

 

	Remaining term on leases	 	 	16 to 34 months	 
	Incremented borrowing rate	 	 	5.0%	 

  

     F-65

     

    

 

Splash
Beverage Group, Inc.

Notes
to the Consolidated Financial Statements

 

Note
12 - Contingencies

 

We
are 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.

 

Litigation

On
April 24, 2017, a note holder filed a complaint against the Company for a promissory note in default. The note holder is requesting
summary judgment in the amount of $246,632.

 

Note
13 – Subsequent Events

 

TapouT Licensing Agreement

Effective January 1, 2020, we have amended
our license agreement with TapouT as previously disclosed in Note 5. The agreement has been extended through December 31, 2022.
Under the terms of the amendment, we are required to make guaranteed minimum royalty monthly payments of $45,000 through December
31, 2022. We also are required to meet a minimum net sales threshold of $9,000,000 for 2020. There can be no assurance that the
net sales threshold will be achieved, or that further amendments to the agreement will be executed for it to remain effective
in 2021 and later periods.

 

SALT Tequila Purchase Agreement 

On March 26, 2020, we entered into a new
amended stock sale and purchase agreement. The agreement is for $1,000,000 to be paid in 4 tranches of $250,000 and entitles us
to additional equity interest in Salt Tequila USA, LLC as follows:

 

	 	●	Tranche 1 – 7.5%

	 	●	Tranche 2 – 5.0%

	 	●	Tranche 3 – 5.0%

	 	●	Tranche 4 – 5.0%

 

Once all tranches are paid-out we will
have a total equity stake of 37.5% of Salt Tequila USA, LLC.

 

Merger with Canfield Medical Supply,
Inc.

As previously described in Note 1, Splash
entered into a Merger Agreement with CMS. Upon completion of the merger, the Splash shareholders collectively own, as a group,
on a fully diluted basis approximately 85% of the combined company.

 

The Merger Agreement was consummated on
March 31, 2020. As part of the merger, pursuant to a Promissory Note Conversion Agreement, all outstanding debt of Splash, except
for $450,000 in principal, was converted in common shares of the combined entity. Under the Promissory Note Conversion Agreement,
if the Company shall fail to raise $9,000,000 of additional capital no later than six months from the date of the Merger, then
the holder may seek to rescind the Promissory Note Conversion Agreement, return the Note Conversion Shares and receive a replacement
promissory note from the Company.

 

In addition, in connection with the Merger,
pursuant to Preferred Stock Conversion Agreements, all Series A Convertible Preferred Stock and Series B Convertible Preferred
Stock, and accreted dividends of Splash were converted into common shares of the combined entity, and have been reflected as outstanding
for all periods presented. Under the Preferred Stock Conversion Agreement, if the Company shall fail to raise $9,000,000 of additional
capital no later than six months from the date of the Merger, then the holder may seek to rescind the Preferred Stock Conversion
Agreement, return the Preferred Stock Conversion Shares and receive replacement shares of preferred stock from the Company.

 

Alcohol License

On February 4, 2020 we received a Florida
Alcohol License. This license gives us the ability to import and sell liquor within the United States.

 

Warrant Expiration

Subsequent to December 31, 2019, warrants
to purchase 754,741 shares of our common stock have expired.

 

Mezzanine Equity

As part of the merger, dated March 31,
2020, we converted the majority of our debt into equity. As stated in the debt conversion agreements, each debt holder can convert
their shares back to debt if we are not able to adequately raise $9,000,000 additional capital within six months of the date of
the merger. As a result, these shares have been classified as mezzanine equity in the consolidated balance sheet on March 31, 2020.

 

Q1 2020 Notes Received

During the first quarter of 2020, we received
$1.5 million from one of our shareholders to be used to finance the operations of the Company. As part of the merger, the entire
$1.5 million was converted into mezzanine equity.

  

     F-66

     

    

 

 

 

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 September 30, 2020

 

☐
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. 000-55114

 

SPLASH
BEVERAGE GROUP, INC.

(Exact
name of registrant as specified in its charter)

 

	Colorado	 	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 33316

(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
	N/A	 	N/A	 	N/A

 

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 November 13, 2020, there were 73,197,290
shares of Common Stock issued and outstanding.

 

 

 

     

     

    

 

SPLASH
BEVERAGE GROUP, INC.

FORM
10-Q

September
30, 2020 

 

TABLE
OF CONTENTS

 

	 	Page
	PART
    I: FINANCIAL INFORMATION	 
	ITEM
    1:	FINANCIAL
    STATEMENTS 	1
	 	Condensed Consolidated
    Balance Sheets 	1
	 	Condensed Consolidated
    Statements of Operations	2
	 	Condensed Consolidated
    Statement of Deficiency in Shareholders’ Equity 	3
	 	Condensed Consolidated
    Statements of Cash Flows 	4
	 	Notes to the Condensed
    Consolidated Financial Statements	5
	ITEM 2:	MANAGEMENT’S
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	22
	ITEM 3:	QUANTITATIVE AND
    QUALITATIVE DISCLOSURES ABOUT MARKET RISK	24
	ITEM 4:	CONTROLS AND PROCEDURES	24
	PART
    II: OTHER INFORMATION	
	ITEM 1	LEGAL PROCEEDINGS	25
	ITEM 1A:	RISK FACTORS	25
	ITEM 2:	UNREGISTERED SALES
    OF EQUITY SECURITIES AND USE OF PROCEEDS	26
	ITEM 3:	DEFAULTS UPON SENIOR
    SECURITIES	26
	ITEM 4:	MINE SAFETY DISCLOSURES	26
	ITEM 5:	OTHER INFORMATION	26
	ITEM 6:	EXHIBITS	27
	SIGNATURES	28

 

    i

     

    

 

PART
I – FINANCIAL INFORMATION

 

ITEM
1. FINANCIAL STATEMENTS 

 

Splash
Beverage Group, Inc.

[f/k/a
Canfield Medical Supply, Inc.]

Condensed
Consolidated Balance Sheets

September
30, 2020 and December 31, 2019

(Unaudited)

 

	 	 	September 30, 
 2020	 	 	December 31, 
 2019	 
	Assets	 	 	 	 	 	 	 	 
	Current assets:	 	 	 	 	 	 	 	 
	Cash	 	$	725,811	 	 	$	42,639	 
	Funds in Escrow	 	 	1,000,000	 	 	 	-	 
	Accounts Receivable, net	 	 	547,498	 	 	 	11,430	 
	Prepaid Expenses	 	 	219,575	 	 	 	5,449	 
	Inventory	 	 	627,386	 	 	 	304,012	 
	Other receivables	 	 	18,887	 	 	 	7,132	 
	Total current assets	 	 	3,139,157	 	 	 	370,662	 
	 	 	 	 	 	 	 	 	 
	Non-current assets:	 	 	 	 	 	 	 	 
	Deposit	 	$	39,089	 	 	$	34,915	 
	Goodwill	 	 	9,448,852	 	 	 	-	 
	Investment in Salt Tequila USA, LLC	 	 	250,000	 	 	 	-	 
	Right of use asset, net	 	 	100,667	 	 	 	162,008	 
	Property and equipment, net	 	 	59,172	 	 	 	37,729	 
	Total non-current assets	 	 	9,897,780	 	 	 	234,652	 
	 	 	 	 	 	 	 	 	 
	Total assets	 	$	13,036,937	 	 	$	605,314	 
	 	 	 	 	 	 	 	 	 
	Liabilities and Deficiency in Stockholders’ Equity	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Liabilities:	 	 	 	 	 	 	 	 
	Current liabilities	 	 	 	 	 	 	 	 
	Accounts payable and accrued expenses	 	$	1,080,953	 	 	$	703,885	 
	Right of use liability - current	 	 	70,297	 	 	 	81,502	 
	Due to related parties	 	 	469,904	 	 	 	429,432	 
	Bridge loan payable, net	 	 	-	 	 	 	2,200,000	 
	Related party notes payable	 	 	-	 	 	 	1,505,100	 
	Convertible Loan Payable	 	 	100,000	 	 	 	2,202,664	 
	Notes payable, current portion	 	 	703,565	 	 	 	875,000	 
	Royalty payable	 	 	-	 	 	 	39,000	 
	Revenue financing arrangements	 	 	-	 	 	 	45,467	 
	Shareholder advances	 	 	1,103,773	 	 	 	46,250	 
	Accrued interest payable	 	 	421,952	 	 	 	1,604,498	 
	Accrued interest payable - related parties	 	 	-	 	 	 	546,362	 
	Total current liabilities	 	 	3,950,444	 	 	 	10,279,160	 
	 	 	 	 	 	 	 	 	 
	Long-term Liabilities:	 	 	 	 	 	 	 	 
	Right of use liability - noncurrent	 	 	32,940	 	 	 	82,238	 
	Total long-term liabilities	 	 	32,940	 	 	 	82,238	 
	 	 	 	 	 	 	 	 	 
	Total liabilities	 	 	3,950,596	 	 	 	10,361,398	 
	 	 	 	 	 	 	 	 	 
	Common stock, (mezzanine shares)
    12,605,283 shares, contingently convertible to notes payable at September 30, 2020	 	 	9,248,720	 	 	 	-	 
	 	 	 	 	 	 	 	 	 
	Deficiency in stockholders’ equity:	 	 	 	 	 	 	 	 
	Common Stock, $0.001 par, 150,000,000 shares authorized, 60,574,873 and 44,021,382 shares issued 60,574,873 and 43,885,090 outstanding, at September 30, 2020 and December 31, 2019, respectively	 	 	60,575	 	 	 	44,021	 
	Additional paid in capital	 	 	38,763,100	 	 	 	22,095,403	 
	Treasury Stock, $0.001 par, 100,000 shares at cost	 	 	-	 	 	 	(50,000	)
	Accumulated deficit	 	 	(39,018,841	)	 	 	(31,845,508	)
	Total deficiency in stockholders’ equity	 	 	(195,166	)	 	 	(9,756,084	)
	 	 	 	 	 	 	 	 	 
	Total liabilities, mezzanine shares and deficiency in stockholders’ equity	 	$	13,036,937	 	 	$	605,314	 

  

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

 

    1

     

    

 

Splash
Beverage Group, Inc.

[f/k/a
Canfield Medical Supply, Inc.]

Condensed
Consolidated Statements of Operations

For
the Three- and Nine- Months Ended September 30, 2020 and 2019

(Unaudited)

 

	 	 	Three months 
 ended 
 September 30, 
 2020	 	 	Three months 
 ended 
 September 30, 
 2019	 	 	Nine months 
 ended 
 September 30, 
 2020	 	 	Nine months 
 ended 
 September 30, 
 2019	 
	Net revenues	 	$	1,009,615	 	 	$	-	 	 	$	1,733,926	 	 	$	47,086	 
	Cost of goods sold	 	 	(570,979	)	 	 	(13,947	)	 	 	(965,966	)	 	 	(88,365	)
	Gross margin	 	 	438,636	 	 	 	(13,947	)	 	 	767,960	 	 	 	(41,279	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Operating expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Contracted services	 	 	1,954,165	 	 	 	450,753	 	 	 	2,377,843	 	 	 	881,523	 
	Salary and wages	 	 	442,441	 	 	 	171,357	 	 	 	1,049,130	 	 	 	583,619	 
	Other general and administrative	 	 	298,277	 	 	 	205,300	 	 	 	1,487,948	 	 	 	507,143	 
	Sales and marketing	 	 	38,551	 	 	 	20,247	 	 	 	85,793	 	 	 	52,899	 
	Total operating expenses	 	 	2,733,434	 	 	 	847,657	 	 	 	5,000,714	 	 	 	2,025,184	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Loss from operations	 	 	(2,294,798	)	 	 	(861,604	)	 	 	(4,232,754	)	 	 	(2,066,463	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Other income/(expense):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Other Income	 	 	16,351	 	 	 	9,587	 	 	 	16,351	 	 	 	9,587	 
	Interest income	 	 	16,354	 	 	 	-	 	 	 	32,710	 	 	 	-	 
	Interest expense	 	 	(23,110	)	 	 	(215,229	)	 	 	(1,958,601	)	 	 	(635,753	)
	Gain from debt extinguishment	 	 	1,521	 	 	 	-	 	 	 	36,483	 	 	 	-	 
	Total other income/(expense)	 	 	11,116	 	 	 	(205,642	)	 	 	(1,873,057	)	 	 	(626,166	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net loss	 	$	(2,283,682	)	 	$	(1,067,246	)	 	$	(6,105,811	)	 	$	(2,692,629	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net loss per share (basic diluted)	 	$	(0.04	)	 	$	(0.03	)	 	$	(0.11	)	 	$	(0.07	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Weighted average number of common shares outstanding	 	 	58,397,694	 	 	 	40,570,619	 	 	 	53,108,031	 	 	 	41,228,247	 

 

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

 

    2

     

    

 

Splash
Beverage Group, Inc.

[f/k/a
Canfield Medical Supply, Inc.]

Condensed
Consolidated Statement of Deficiency in Stockholders’ Equity

For
the Nine months ended September 30, 2020 and 2019

(Unaudited)

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Total	 
	 	 	Common Stock	 	 	Treasury Stock	 	 	Additional Paid-In	 	 	Accumulated	 	 	Stockholders’ Equity	 
	 	 	Shares	 	 	Amount	 	 	Shares	 	 	Amount	 	 	Capital	 	 	Deficit	 	 	(Deficit)	 
	Balances at December 31, 2018	 	 	40,165,002	 	 	 	40,165	 	 	 	272,585	 	 	$	(100,000	)	 	$	18,938,480	 	 	$	(26,709,776	)	 	$	(7,831,132	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Issuance of Common stock for cash	 	 	27,258	 	 	 	27	 	 	 	-	 	 	 	-	 	 	 	19,973	 	 	 	-	 	 	$	20,000	 
	Issuance of Common stock for services	 	 	1,363	 	 	 	1	 	 	 	-	 	 	 	-	 	 	 	999	 	 	 	-	 	 	 	1,000	 
	Net loss	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(703,624	)	 	 	(703,624	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balances at March 31, 2019	 	 	40,193,623	 	 	 	40,193	 	 	 	272,585	 	 	$	(100,000	)	 	$	18,959,452	 	 	$	(27,413,400	)	 	$	(8,513,755	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Issuance of Common stock for cash	 	 	483,837	 	 	 	484	 	 	 	-	 	 	 	-	 	 	 	354,516	 	 	 	-	 	 	$	355,000	 
	Net loss	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(921,520	)	 	 	(921,520	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balances at June 30, 2019	 	 	40,677,460	 	 	 	40,677	 	 	 	272,585	 	 	$	(100,000	)	 	$	19,313,968	 	 	$	(28,334,920	)	 	$	(9,080,275	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Issuance of Common stock for cash	 	 	715,534	 	 	 	716	 	 	 	-	 	 	 	-	 	 	 	524,284	 	 	 	 	 	 	$	525,000	 
	Issuance of Common stock for services	 	 	190,809	 	 	 	191	 	 	 	-	 	 	 	-	 	 	 	139,809	 	 	 	 	 	 	 	140,000	 
	Issuance of Common stock from treasury	 	 	-	 	 	 	-	 	 	 	(136,292	)	 	 	50,000	 	 	 	49,900	 	 	 	 	 	 	 	99,900	 
	Net loss	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(973,546	)	 	 	(973,546	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balances at September 30, 2019	 	 	41,583,803	 	 	 	41,584	 	 	 	136,293	 	 	$	(50,000	)	 	$	20,027,962	 	 	$	(29,308,466	)	 	$	(9,288,921	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Total	 
	 	 	Common Stock	 	 	Treasury Stock	 	 	Additional Paid-In	 	 	Accumulated	 	 	Stockholders’ Equity	 
	 	 	Shares	 	 	Amount	 	 	Shares	 	 	Amount	 	 	Capital	 	 	Deficit	 	 	(Deficit)	 
	Balances at December 31, 2019	 	 	44,021,389	 	 	 	44,021	 	 	 	136,293	 	 	$	(50,000	)	 	$	22,095,403	 	 	$	(31,845,506	)	 	$	(9,756,083	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Issuance of common stock for convertible debt	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	145,579	 	 	 	-	 	 	 	145,579	 
	Incremental beneficial conversion for preferred A	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	240,770	 	 	 	(240,770	)	 	 	-	 
	Issuance of warrants on convertible instruments	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	2,486,706	 	 	 	(828,903	)	 	 	1,657,803	 
	Issuance of common stock for services	 	 	817,753	 	 	 	818	 	 	 	(136,293	)	 	 	50,000	 	 	 	549,182	 	 	 	-	 	 	 	600,000	 
	Issuance of common stock for acquisition	 	 	11,913,200	 	 	 	11,913	 	 	 	-	 	 	 	-	 	 	 	9,161,251	 	 	 	-	 	 	 	9,173,164	 
	Net loss	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(3,446,630	)	 	 	(3,446,630	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balances at March 31, 2020	 	 	56,752,342	 	 	 	56,752	 	 	 	-	 	 	$	-	 	 	$	34,678,891	 	 	$	(36,361,809	)	 	$	(1,626,167	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Issuance of warrants	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	77,434	 	 	 	-	 	 	 	77,434	 
	Issuance of common stock for cash	 	 	249,912	 	 	 	250	 	 	 	-	 	 	 	-	 	 	 	142,316	 	 	 	-	 	 	 	142,566	 
	Net loss	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(373,350	)	 	 	(373,350	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balances at June 30, 2020	 	 	57,002,254	 	 	 	57,002	 	 	 	-	 	 	$	-	 	 	$	34,898,641	 	 	$	(36,735,159	)	 	$	(1,779,517	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Issuance of warrants	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	438,431	 	 	 	-	 	 	 	1,236,254	 
	Issuance of options	 	 	180,936	 	 	 	181	 	 	 	-	 	 	 	-	 	 	 	(181	)	 	 	-	 	 	 	0	 
	Issuance of common stock for services	 	 	691,945	 	 	 	692	 	 	 	-	 	 	 	-	 	 	 	1,728,588	 	 	 	-	 	 	 	1,729,280	 
	Issuance of common stock for cash	 	 	2,699,738	 	 	 	2,700	 	 	 	-	 	 	 	-	 	 	 	1,697,621	 	 	 	-	 	 	 	902,498	 
	Net loss	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(2,283,682	)	 	 	(2,283,682	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balances at September 30, 2020	 	 	60,574,873	 	 	 	60,575	 	 	 	-	 	 	$	-	 	 	$	38,763,100	 	 	$	(39,018,841	)	 	$	(195,167	)

 

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

 

    3

     

    

 

Splash
Beverage Group, Inc.

[f/k/a
Canfield Medical Supply, Inc.]

Condensed
Consolidated Statement Cash Flows 

For
the Nine Months Ended September 30, 2020 and 2019

(Unaudited)

 

	 	 	Nine months ended September 30,

2020	 	 	Nine months ended September 30,

2019	 
	Net loss	 	$	(6,105,811	)	 	$	(2,692,629	)
	Adjustments to reconcile net loss to net cash used in operating activities:	 	 	 	 	 	 	 	 
	Depreciation and amortization	 	 	26,339	 	 	 	7,088	 
	Amortization of ROU Asset	 	 	61,341	 	 	 	-	 
	Gain from debt extinguishment	 	 	(36,483	)	 	 	-	 
	Non-cash interest expense	 	 	590,283	 	 	 	-	 
	Share-based compensation	 	 	2,329,280	 	 	 	532,276-	 
	Changes in working capital items:	 	 	 	 	 	 	 	 
	Accounts receivable	 	 	(243,369	)	 	 	(11,510	)
	Inventory	 	 	(269,172	)	 	 	(79,969	)
	Prepaid expenses and other current assets	 	 	(206,994	)	 	 	(21,523	)
	Deposits	 	 	(4,174	)	 	 	(1,013	)
	Accounts payable and accrued expenses	 	 	(474,940	)	 	 	(224,709	)
	Royalty payable	 	 	(39,000	)	 	 	(21,062	)
	Accrued interest payable	 	 	61,530	 	 	 	603,326	 
	Net cash used in operating activities	 	 	(4,311,170	)	 	 	(1,909,725	)
	 	 	 	 	 	 	 	 	 
	Cash Flows from Investing Activities:	 	 	 	 	 	 	 	 
	Capital expenditures	 	 	(9,693	)	 	 	(9,942	)
	Investment in Salt Tequila USA, LLC	 	 	(150,000	)	 	 	-	 
	Net cash acquired in merger	 	 	72,442	 	 	 	-	 
	Net cash used in investing activities	 	 	(87,251	)	 	 	(9,942	)
	 	 	 	 	 	 	 	 	 
	Cash Flows from Financing Activities:	 	 	 	 	 	 	 	 
	Proceeds from issuance of Common stock	 	 	3,574,002	 	 	 	900,000	 
	Funds placed in Escrow	 	 	(1,000,000	)	 	 	 	 
	Repayment of shareholder advance	 	 	 	 	 	 	-	 
	Cash advance from shareholder	 	 	1,097,995	 	 	 	-	 
	Proceeds from issuance of debt	 	 	1,470,099	 	 	 	130,000	 
	Principal repayment of debt	 	 	 	 	 	 	(18,009	)
	Reduction of ROU Liability	 	 	(60,502	)	 	 	-	 
	Net cash provided by financing activities	 	 	5,081,594	 	 	 	1,011,991	 
	 	 	 	 	 	 	 	 	 
	Net Change in Cash	 	 	683,172	 	 	 	(907,676	)
	Cash, beginning of year	 	 	42,639	 	 	 	938,040	 
	 	 	 	 	 	 	 	 	 
	Cash, end of period	 	$	725,811	 	 	$	30,364	 
	 	 	 	 	 	 	 	 	 
	Supplemental Disclosure of Cash Flow Information:	 	 	 	 	 	 	 	 
	Cash paid for Interest	 	$	-	 	 	$	-	 
	 	 	 	 	 	 	 	 	 
	Supplemental Disclosure of Non-Cash Investing and Financing Activities	 	 	 	 	 	 	 	 
	Notes payable and accrued interest converted to common stock (12,605,283 shares)	 	$	9,248,720	 	 	$	-	 
	Liability issued for investment in SALT Tequila USA, LLC	 	$	100,000	 	 	$	-	 

   

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

 

    4

     

    

 

Splash
Beverage Group, Inc.

[f/k/a
Canfield Medical Supply, Inc.]

Notes
to the Condensed Consolidated Financial Statements

 

Note
1 – Business Organization and Nature of Operations

  

Splash
Beverage Group (“SBG”), f/k/a Canfield Medical Supply, Inc. (the “CMS”), was incorporated in the State
of Ohio on September 3, 1992, and changed domicile to Colorado on April 18, 2012. CMS is in the business of home health services,
primarily the selling of durable medical equipment and medical supplies to the public, nursing homes, hospitals and other end
users.

 

On
December 31, 2019, CMS entered into an Agreement and Plan of Merger (the “Merger Agreement”) with SBG Acquisition
Inc. (“Merger Sub”), a Nevada Corporation wholly-owned by CMS, and Splash Beverage Group, Inc. a Nevada corporation
(“Splash”) pursuant to which Merger Sub merged with and into Splash (the “Merger”) with Splash as the
surviving company and a wholly-owned subsidiary of CMS. The Merger was consummated on March 31, 2020.

 

As
the owners and management of Splash have voting and operating control of CMS following the Merger, the Merger transaction was
accounted for as a reverse acquisition (that is with Splash as the acquiring entity), followed by a recapitalization.

 

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

 

Splash specializes in the manufacturing,
distribution, and sales & marketing of various beverages across multiple channels. Splash operates in both the non-alcoholic
and alcoholic beverage segments. Additionally, Splash operates its own vertically integrated B-to-B and B-to-C E-commerce distribution
platform called Qplash, further expanding its distribution abilities and visibility.

 

On July 2, 2020, CMS received a Certificate
of Good Standing from the State of Colorado. This certificate allowed us to change our name from Canfield Medical Supply, Inc.
to Splash Beverage Group, Inc. a Colorado company. On July 31, 2020, we received approval from FINRA to change the Company’s
name from Canfield Medical Supply, Inc. to Splash Beverage Group, Inc. Our new ticker symbol is SBEV.

 

Note
2 – Summary of Significant Accounting Policies 

 

Basis
of Presentation and Consolidation

These
condensed consolidated financial statements include the accounts of Splash Beverage Group and its wholly owned subsidiaries, Holdings
and Splash Mex, in addition to the accounts of the CMS from March 31, 2020, the merger consummation date. All intercompany balances
have been eliminated in consolidation. 

 

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

 

The accompanying condensed consolidated
financial statements have been prepared by us without audit. In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the
nine months ended September 30, 2020 and 2019 have been made.

 

Certain information and footnote disclosures
normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. It is suggested that
these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto
included in our December 31, 2019 audited financial statements. The results of operations for the period ended September 30, 2020
are not necessarily indicative of the operating results for the full year.

 

Use of Estimates

The preparation of the condensed 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

We
consider all highly liquid securities with an original maturity of three months or less to be cash equivalents. We had no cash
equivalents at September 30, 2020 or December 31, 2019.

 

Our
cash in bank deposit accounts, at times, may exceed federally insured limits of $250,000. At September 30, 2020 we had  bank
accounts over the federally insured limits. Our bank deposit accounts in Mexico are uninsured.

 

    5

     

    

 

Splash
Beverage Group, Inc.

[f/k/a
Canfield Medical Supply, 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 collectible amounts and are periodically evaluated for collectability based on past
credit history with clients and other factors. We establish 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 September 30, 2020 and December
31, 2019, our accounts receivable amounts are reflected net of allowances of $547,498 and $11,430, 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 September 30, 2020 and December 31, 2019 consisted of finished goods held for distribution. The cost elements of inventory
consist of purchase of products, transportation, and warehousing. We 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. We manage inventory levels and purchase commitments in an effort to maximize
utilization of inventory on hand and under commitments.

 

Property
and Equipment

We
record 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 3-10 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 $7,530 and
$2,377 for the three months ended September 30, 2020 and September 30, 2019, respectively. Depreciation expense totaled $26,339
and $7,088 for the nine months ended September 30, 2020 and September 30, 2019, respectively. Property and equipment as of September
30, 2020 and December 31, 2019 consisted of the following:

 

	 	 	September 30,

2020	 	 	December 31,

2019	 
	Property and equipment, at cost	 	 	208,440	 	 	 	88,758	 
	Accumulated depreciation	 	 	(149,268	)	 	 	(51,029	)
	Property and equipment, net	 	 	59,172	 	 	 	37,729	 

  

Licensing Agreements

The initial amount of the TapouT agreement
as entered into by one of the founders prior to the Company’s assumption in 2013 was $4,000,000 to be paid over several years
pursuant to a guaranteed minimum royalty agreement. Royalty costs incurred under the agreements, guaranteed minimum royalty amounts,
are expensed as incurred.

 

We
have not made any payments to Salt Tequila USA, LLC under the licensing agreement due to the immaterial level of our sales to
date from the brand.

 

    6

     

    

 

Splash
Beverage Group, Inc.

[f/k/a
Canfield Medical Supply, 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 September 30, 2020 and December 31, 2019, consistent
with recent negotiations of notes payable and due to the short duration of maturities.

 

Convertible
Instruments

U.S.
GAAP requires the bifurcation of certain conversion rights contained in convertible indebtedness and account for them as free
standing derivative financial instruments according to certain criteria. This criteria include circumstances in which (a) the
economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics
and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host
contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in
fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative
instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be
conventional as that term is described under applicable U.S. GAAP.

 

When
bifurcation is required, the embedded conversion options are bifurcated from the convertible note, resulting in the recognition
of discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences
between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion
price embedded in the note.  Debt discounts under these arrangements are amortized over the term of the related debt to their
stated date of redemption.

 

With
respect to convertible preferred stock, we record a dividend for the intrinsic value of conversion options embedded in preferred
securities based upon the differences between the fair value of the underlying common stock at the commitment date of the transaction
and the effective conversion price embedded in the preferred shares.

 

    7

     

    

 

Splash
Beverage Group, Inc.

[f/k/a
Canfield Medical Supply, Inc.]

Notes
to the Condensed Consolidated Financial Statements

 

Note
2 – Summary of Significant Accounting Policies, continued

 

Revenue
Recognition

We
recognize 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 we expect to receive in exchange for the transfer of
goods or services to customers.

 

We
recognize revenue when our performance obligations under the terms of a contract with the customer are satisfied. Product sales
occur once control of our products is transferred upon delivery to the customer. Revenue is measured as the amount of consideration
that we expect to receive in exchange for transferring goods and is presented net of provisions for customer returns and allowances.
The amount of consideration we receive and revenue we recognize varies with changes in customer incentives we offer to our customers
and their customers. Sales taxes and other similar taxes are excluded from revenue.

 

Distribution
expenses to transport our products, where applicable, and warehousing expense after manufacture are accounted for within operating
expenses.

 

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.

 

Stock-Based
Compensation

We
account 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 option vesting period.  We use the Black-Scholes
option pricing model to determine the fair value of stock options.  We early adopted ASU 2018-07, “Improvements
to Nonemployee Share-Based Payment Accounting”, which aligns accounting treatment for such awards to non-employees with
the existing guidance on employee share-based compensation in ASC 718.

 

Income
Taxes

We
use 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.  We
record a valuation allowance when it is not 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.

 

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
September 30, 2020 and December 31, 2019.

 

Net
loss per share 

The
net loss per share is computed by dividing the net loss by the weighted average number of shares of common 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.

 

	 	 	Three-months 

ending	 	 	Three-months 

ending	 	 	Nine-months 

ending	 	 	Nine-months 

ending	 
		 	September 30, 

2020
	 	 	September 30, 

2019	 	 	September 30, 

2020	 	 	September 30, 

2019	 
	Numerator	 	 	 	 	 	 	 	 	 	 	 	 
	Net loss applicable to common shareholders	 	$	(2,283,683	)	 	$	(1,067,246	)	 	$	(6,105,812	)	 	$	(2,692,629	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Denominator	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Weighted average number of common shares outstanding	 	 	58,397,694	 	 	 	40,570,619	 	 	 	53,108,031	 	 	 	41,228,247	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net loss per share (basic diluted)	 	$	(0.04	)	 	$	(0.03	)	 	$	(0.11	)	 	$	(0.07	)

 

    8

     

    

 

Splash
Beverage Group, Inc.

[f/k/a
Canfield Medical Supply, Inc.]

Notes
to the Condensed Consolidated Financial Statements

 

Note
2 – Summary of Significant Accounting Policies, continued

 

Weighted
average number of shares outstanding excludes anti-dilutive common stock equivalents, including warrants to purchase 3 million
shares of common stock for nominal consideration.

 

Advertising

We
conduct advertising for the promotion of our products. In accordance with ASC 720-35, advertising costs are charged to operations
when incurred.

 

Related
Parties

We
are indebted to certain members of our Board of Directors at September 30, 2020 and December 31, 2019. Transactions between us
and the Board members are summarized in Notes 4 and 8.

 

Goodwill

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.

 

Long-lived assets

The Company evaluates long-lived assets
for impairment on an annual basis, when relocating or closing a facility, or 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.

  

Recent
Accounting Pronouncements

In
February 2016, the FASB issued ASU 2016-02, “Leases” (Topic 842). This ASU requires a lessee to recognize a
right-of-use asset and a lease liability for most leases in its balance sheet.

 

We
adopted the standard on January 1, 2019, using the modified retrospective method. The adoption of this standard resulted in recognition
of a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, for all leases with
a term greater than 12 months. When available, we would use the rate implicit in the lease to discount lease payments to present
value. However, our leases generally do not provide a readily determinable implicit rate. Therefore, our management estimates
the incremental borrowing rate to discount lease payments based on the information at the lease commencement. The accounting for
finance leases is substantially unchanged. Given the nature of our operation, the adoption of Topic 842 did not have a material
impact on our balance sheet, statement of income, or liquidity. Refer to Note 10 – Operating Lease Obligations for information
regarding our adoption of Topic 842 and the Company’s undiscounted future lease payments and the timing of those payments.

 

Management
does not believe that any other recently issued, but not yet effective, accounting standards could have a material effect on the
accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under
the circumstances.

 

Note
3 – Going Concern

 

The accompanying condensed consolidated
financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business.  Our business operations have not yet generated significant revenues, and
we have sustained net losses of approximately $6.1 million during the nine months ended September 30, 2020 and have an accumulated
deficit of approximately $39.0 million at September 30, 2020. In addition, we have current liabilities in excess of current assets
of approximately $0.8 million at September 30, 2020. Further, we are in default on approximately $0.9 million of indebtedness,
including accrued interest.

 

Our
ability to continue as a going concern in the foreseeable future is dependent upon our ability to generate revenues and obtain
sufficient long-term financing to meet current and future obligations and deploy such to produce profitable operating results.
Management has evaluated these conditions and plans to raise capital as needed and to generate revenues to satisfy our capital
needs. No assurance can be given that we will be successful in these efforts.

 

These factors, among others, raise substantial
doubt about our ability to continue as a going concern for a reasonable period of time. These condensed consolidated financial
statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts
and classification of liabilities that might be necessary should we be unable to continue as a going concern.

 

    9

     

    

 

Splash
Beverage Group, Inc.

[f/k/a
Canfield Medical Supply, Inc.]

Notes
to the Condensed Consolidated Financial Statements

 

Note
4 – 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	 	 	September 30,
 2020	 	 	December 31,
 2019	 
	Notes Payable	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	In October 2013, we entered into a short-term loan agreement with an entity in the amount of $25,000. The note matured and in March 2020 the full outstanding principal balance of $25,000 and unpaid accrued interest of $11,345 was converted into 234,767 shares of common stock according to the Merger Agreement.	 	 	7	%	 	$	-	 	 	$	25,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	In February 2014, we entered into a 12-month term loan agreement with an individual in the amount of $200,000. The note included warrants for 66,146 shares of common stock at $0.73 per share.  The warrants expired on February 28, 2017 and none were exercised at that date. The note matured and remains in default.	 	 	15	%	 	 	150,000	 	 	 	150,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	In March 2014, we entered into a 12-month term loan agreement with an individual in the amount of $500,000.  The note included warrants for 681,461 shares of common stock at $0.92 per share. The warrants expired on February 28, 2017 and none were exercised at that date.  The note matured and in March 2020 the full outstanding principal balance of $500,000 and unpaid accrued interest of $373,065 was converted into 1,124,802 shares of common stock according to the Merger Agreement.	 	 	15	%	 	 	-	 	 	 	500,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	In March 2014, we entered into a short-term loan agreement with an entity in the amount of $200,000. The note included warrants for 272,584 shares of common stock at $0.94 per share. The warrants expired on February 28, 2017 and none were exercised at that date. The loans matured and remains in default.	 	 	8	%	 	 	200,000	 	 	 	200,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	In May 2020, we entered into a two year loan with an entity under the Paycheck Protection Program established by the CARES Act in the amount of $159,033. The note requires monthly payments of principal and interest starting in December 2020 and maturing in May 2020. We expect $74,000 of the loan amount to be forgiven in accordance with the CARES Act.	 	 	1	%	 	 	159,033	 	 	 	-	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	In June 2020, we entered into a six-month loan with an individual in the amount of $100,000. The loan matures in December 2020 with principal and interest due at maturity.	 	 	12	%	 	 	100,000	 	 	 	-	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	In August 2020, we entered into a nine-month loan with a company in the amount of $112,000. The loan requires 9 amortized payments of principal and interest in the amount of $12,246.66 with the first payment due September 2020.	 	 	4.8	%	 	 	99,753	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	$	703,565	 	 	$	875,000	 

 

Interest expense on notes payable was $13,377
and $28,813 for the three months ended September 30, 2020 and 2019, respectively. Interest expense on notes payable was $73,236
and $86,439 for the nine months ended September 30, 2020 and 2019, respectively. Accrued interest was $258,738 and $581,693 at
September 30, 2020 and December 31, 2019.

 

Concurrently with the consummation of the
Merger, notes payable of $525,000 and accrued interest were converted to shares of Splash common stock, which were exchanged for
Splash Beverage Group, Inc. [Formerly known as Canfield Medical Supply, Inc.] shares. Pursuant to the terms of the conversion agreements,
these investors have the right to rescind the common shares received and receive replacement notes payable if we fail to raise
$9 million in a secondary initial public offering by September 30, 2020 (subsequently extended to April 30, 2021). As a result,
these shares are classified as mezzanine equity in our condensed consolidated balance sheet.

 

    10

     

    

 

Splash
Beverage Group, Inc.

[f/k/a
Canfield Medical Supply, Inc.]

Notes
to the Condensed Consolidated Financial Statements

 

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

 

	 	 	Interest

Rate	 	 	September 30,

2020	 	 	December 31,

2019	 
	Related Parties Notes Payable	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	During 2012, we entered into two 6-month term loan agreements with an entity, totaling $150,000. The notes included warrants for 68,146 shares of common stock at $0.73 per share which expired unexercised in 2017. The note matured and in March 2020 the full outstanding principal balance of $41,500 and unpaid accrued interest of $31,515 was converted into 98,726 shares of common stock according to the Merger Agreement.	 	 	7	%	 	$	        -	 	 	$	41,500	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	In March 2014, we entered into a $50,000 12-month term loan agreement. The note included warrants for 136,292 shares of common stock at $0.92 per share. The warrants expired unexercised on February 28, 2017.  The note matured and in March 2020 the full outstanding principal balance of $50,000 and unpaid accrued interest of $24,145 was converted into 99,252 shares of common stock according to the Merger Agreement.	 	 	8	%	 	 	-	 	 	 	50,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	During 2015, we entered into a 12-month term loan agreement with an individual in the amount $250,000.  The note matured and in March 2020 the full outstanding principal balance of $250,000 and unpaid accrued interest of $101,850 was converted into 98,726 shares of common stock according to the Merger Agreement.	 	 	8	%	 	 	-	 	 	 	250,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	In February 2012, we entered into a loan agreement with an officer of the Company in the amount of $100. On September 25, 2018 an additional $10,500 loan agreement was entered into. The note matured and in March 2020 the full outstanding principal balance of $10,600 and unpaid accrued interest of $1,189 was converted into 15,734 shares of common stock according to the Merger Agreement.	 	 	7	%	 	 	-	 	 	 	10,600	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	During 2013, 2014, 2015, and 2016, we entered into several 12-month term loan agreements with an officer of the Company in the amounts of $57,000, $225,000, $105,000, and $9,000, respectively. The note matured and in March 2020 the full outstanding principal balance of $396,000 and unpaid accrued interest of $146,828 was converted into 727,344 shares of common stock according to the Merger Agreement.	 	 	7	%	 	 	-	 	 	 	396,000	 

 

Continued
on next page

 

    11

     

    

 

Splash
Beverage Group, Inc.

[f/k/a
Canfield Medical Supply, Inc.]

Notes
to the Condensed Consolidated Financial Statements

 

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

 

	 	 	Interest
 Rate	 	 	September 30,

2020	 	 	December 31,
 2019	 
	Related Parties Notes Payable, continued	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	During 2012, 2013, 2014, and 2016, we entered into 6-month term loan agreements with an officer of the Company in the amounts of $155,000, $210,000, $150,000 and $40,000, all respectively. The notes included warrants for issuances of 204,438 shares of common stock at $.092 per share. The warrants expired unexercised on March 1, 2017. The note matured and in March 2020 the full outstanding principal balance of $495,000 and unpaid accrued interest of $213,010 was converted into 942,504 shares of common stock according to the Merger Agreement.	 	 	7	%	 	 	-	 	 	 	495,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	During 2013, 2014 and 2017, we entered into 12-month term loan agreements with an officer of the Company in the amounts of $60,000, $50,000 and $10,000. The note matured and in March 2020 the full outstanding principal balance of $120,000 and unpaid accrued interest of $50,305 was converted into 228,328 shares of common stock according to the Merger Agreement.	 	 	7	%	 	 	-	 	 	 	120,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	During 2018, we entered into a long term note payable with an entity owned by an officer for $12,000 to be payable on July 10, 2020. The note matured and in March 2020 the full outstanding principal balance of $12,000 and unpaid accrued interest of $1,050 was converted into 17,407 shares of common stock according to the Merger Agreement.	 	 	12	%	 	 	-	 	 	 	12,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	During 2019, we entered into a term note payable with an entity owned by an officer for $130,000 to be paid on August 8, 2019. The note matured and in March 2020 the full outstanding principal balance of $130,000 and unpaid accrued interest of $9,078 was converted into 182,525 shares of common stock according to the Merger Agreement.	 	 	12	%	 	 	-	 	 	 	130,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	$	        -	 	 	$	1,505,100	 

 

Interest expense on related party notes
payable was $0 and $24,714 for the three months ended September 30, 2020 and 2019, respectively. Interest expense on related party
notes payable was $37,967 and $74,342 for the nine months ended September 30, 2020 and 2019, respectively. Accrued interest was
$0 and $546,362 as of September 30, 2020 and December 31, 2019. 

  

Concurrently with the consummation of the
Merger, notes payable of $1,505,100 and accrued interest were converted to shares of Splash common stock, which were exchanged
for Splash Beverage Group, Inc. [Formerly known as Canfield Medical Supply, Inc.] shares. Pursuant to the terms of the conversion
agreements, these investors have the right to rescind the common shares received and receive replacement notes payable if we fail
to raise $9 million in a secondary initial public offering by September 30, 2020 (subsequently extended to April 30, 2021). As
a result, these shares are classified as mezzanine equity in our condensed consolidated balance sheet.

 

    12

     

    

 

Splash
Beverage Group, Inc.

[f/k/a
Canfield Medical Supply, Inc.]

Notes
to the Condensed Consolidated Financial Statements

 

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

 

	 	 	Interest 
 Rate	 	 	September 30, 
 2020	 	 	December 31, 
 2019	 
	Convertible Bridge Loans Payable	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	In May 2015, we entered into a 3-month term loan agreement with
an individual in the amount of $100,000. The annual interest rate for this bridge loan was 32% for the first 90 days, and 4% thereafter,
compounded monthly. The loan remains in default.
	 	 	See left	 	 	$	100,000	 	 	$	100,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	In October 2015, we entered into a 3-month term loan agreement with two individuals in the amount of $25,000. On December 26, 2018, the outstanding principal and accrued interest of $14,388 was consolidated into a new $39,388 term loan due August 26, 2020. In March 2020 the full outstanding principal balance of $39,388 and unpaid accrued interest of $5,973 was converted into 59,694 shares of common stock according to the Merger Agreement.	 	 	12	%	 	 	-	 	 	 	39,388	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	In June 2015, we entered into a 3-month term loan with two individuals in the amount of $100,000. On December 26, 2018, the outstanding principal amount of $100,000 and accrued interest of $64,307 was consolidated into a new $164,307 term loan due August 26, 2020. In March 2020 the full outstanding principal balance of $164,307 and unpaid accrued interest of $24,916 was converted into 249,013 shares of common stock according to the Merger Agreement.	 	 	12	%	 	 	-	 	 	 	164,307	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	During 2016, 2017 and 2018, we entered into multiple loan agreements with an entity in varying amounts. On December 26, 2018, the outstanding principal of $235,500 and accrued interest of $155,861 was consolidated into a new $391,361 term due August 26, 2020. In March 2020 the full outstanding principal balance of $391,361 and unpaid accrued interest of $43,823 was converted into 435,184 shares of common stock according to the Merger Agreement.	 	 	12	%	 	 	-	 	 	 	391,361	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	During 2016, we entered into 3-month term loan agreements with an individual totaling $20,000. The loan was extended to August 14, 2020. In March 2020 the full outstanding principal balance of $20,000 and unpaid accrued interest of $10,096 was converted into 41,336 shares of common stock according to the Merger Agreement.	 	 	9	%	 	 	-	 	 	 	20,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	During 2014 through 2018, we entered into convertible promissory note agreements with various terms ranging from 90 days to 18 months at 18% interest with an entity which were consolidated into one loan at 12% in 2018 totaling $795,137 with a due date of August 26, 2020. In March 2020 the full outstanding principal balance of $795,137 and unpaid accrued interest of $89,037 was converted into 884,174 shares of common stock according to the Merger Agreement.	 	 	12	%	 	 	-	 	 	 	795,137	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	During 2015 and 2016, we entered into a series of 3-month term convertible promissory note agreements at 18% interest with an entity which were consolidated into one loan at 12% in 2018 totaling $692,471 with a due date of August 26, 2020. In March 2020 the full outstanding principal balance of $692,471 and unpaid accrued interest of $77,541 was converted into 770,012 shares of common stock according to the Merger Agreement.	 	 	12	%	 	 	-	 	 	 	692,471	 
	 	 	 	 	 	 	$	100,000	 	 	$	2,202,664	 

 

During 2018, we issued convertible bridge
loans payable which are convertible, at the holders’ option, into shares of our common stock.

 

During 2018 multiple convertible bridge
loans payable to five counterparties, and related unpaid interest were consolidated into five new convertible bridge loans payable
totaling $2,082,665. The notes are of varying amounts and are due in August 2020, at an interest rate of 12%. We analyzed the notes
and concluded the conversion terms did not constitute beneficial conversion features. The principal amount and any accrued and
unpaid interest are convertible at the conversion price of a potential future offering of the Company.

 

    13

     

    

 

Splash
Beverage Group, Inc.

[f/k/a
Canfield Medical Supply, Inc.]

Notes
to the Condensed Consolidated Financial Statements

 

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

 

Interest expense on the convertible bridge
loans payable was $8,000 and $70,480 for the three months ended September 30, 2020 and 2019, respectively. Interest expense on
the convertible bridge loans payable was $109,785 and $140,960 for the nine months ended September 30, 2020 and 2019, respectively.
Accrued interest was $163,215 and $439,344 as of September 30, 2020 and December 31, 2019.

 

On
April 24, 2017, a note holder filed a complaint against the Company for a promissory note in default. The note holder is requesting
summary judgment in the amount of $263,215. 

   

Concurrently with the consummation of the
Merger, notes payable of $2,102,664 and accrued interest were converted to shares of Splash common stock, which were exchanged
for Splash Beverage Group, Inc. [Formerly known as Canfield Medical Supply, Inc.] shares. Pursuant to the terms of the conversion
agreements, these investors have the right to rescind the common shares received and receive replacement notes payable if we fail
to raise $9 million in a secondary initial public offering by September 30, 2020 (subsequently extended to April 30, 2021). As
a result, these shares are classified as mezzanine equity in our condensed consolidated balance sheet.

 

	 	 	Interest 
 Rate	 	 	September 30, 
 2020	 	 	December 31, 
 2019	 
	Revenue Financing Arrangements	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	During August 2015, we entered into a 3-month term loan agreement
with an entity in the amount of $50,000, with required daily payments of $999. we entered into two additional 3-month loan agreements
with the entity in 2016 in the amounts of $60,000 and $57,000, with required daily payments of $928 and $713, respectively.   The
term loans matured and remains in default.	 	 	10	%	 	 	28,032	 	 	 	28,032	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	During November 2016, we entered into a short-term loan agreement with an entity in the amount of $55,000 with required daily payments of $1,299. The note was in default as of December 31, 2018. In 2019, we entered into a settlement agreement with monthly installment payments of $6,000.  The loan is scheduled to be fully repaid in 2020.	 	 	12	%	 	 	17,435	 	 	 	17,435	 
	 	 	 	 	 	 	$	45,464	 	 	$	45,464	 

 

Interest expense on the revenue financing
arrangements was $25,067 and $1,723 for the nine months ended September 30, 2020 and 2019, respectively. Accrued interest was $0
and $32,154 at September 30, 2020 and December 31, 2019.

 

Bridge
Loan Payable

 

We
issued an additional bridge loan in October 2018 for $2 million with a one-year maturity to GMA Bridge Fund LLC (“GMA”).
This bridge loan contains a 10% administration fee of which the full $200,000 was accrued at December 31, 2019 and included in
bridge loan payable, net. We incurred $271,670 of loan costs, which was fully amortized at December 31, 2019. Interest on the
bridge loan was 0.5% monthly for the first six months and 0.75% monthly for the next six months. At the same time the debt was
issued, we entered into a separate agreement in which GMA provided consulting services for one year (“Consulting Agreement”).
We compensated GMA for the Consulting Agreement services by issuance of a warrant with a 5-year term to acquire 1,362,922 shares
of our common stock at an exercise price of $0.01 per share. The warrant vested immediately. The value of the warrant, based on
a Black-Scholes option pricing model, was $991,423 and was expensed in full in 2018. Interest expense on the bridge loan for the
nine months ended September 30, 2020 was $0 and accrued interest at September 30, 2020 was $0.

 

As
part of GMA’s conversion agreement, we replaced the original warrants to purchase 1 million shares and granted additional
warrants. To purchase 1 million shares. The value of the warrants based on a Black-Scholes option pricing model, was $1,657,805,
and was expensed. 

 

Concurrently with the consummation of the
Merger, the $2,500,000 note payable of was converted to shares of Splash common stock, which were exchanged for Splash Beverage
Group, Inc. [Formerly known as Canfield Medical Supply, Inc.] shares. Pursuant to the terms of the conversion agreements, GMA has
the right to rescind the common shares received and receive replacement notes payable if we fail to raise $9 million in a secondary
initial public offering by September 30, 2020 (subsequently extended to April 30, 2021). As a result, these shares are classified
as mezzanine equity in our condensed consolidated balance sheet.

 

    14

     

    

 

Splash
Beverage Group, Inc.

[f/k/a
Canfield Medical Supply, Inc.]

Notes
to the Condensed Consolidated Financial Statements

 

Note
5 – Licensing Agreement and Royalty Payable

 

We
have a licensing agreement with ABG TapouT, LLC (“TapouT”), providing us with licensing rights to the brand “TapouT”
on energy drinks, energy shots, water, teas and sports drinks for beverages sold in the United States of America, its territories,
possessions, U.S. military bases and Mexico. Under the terms of the agreement, we are required to pay a 6% royalty on net sales,
as defined. In 2020 and 2019, we are required to make monthly payments of $45,000 and $39,000, respectively.

 

There were no unpaid royalties at September
30, 2020. Guaranteed minimum royalty payments totaled $135,000 and $117,000 for the three months ended September 30, 2020 and 2019,
which is included in general and administrative expenses. Guaranteed minimum royalty payments totaled $405,000 and $351,000 for
the nine months ended September 30, 2020 and 2019, which is included in general and administrative expenses.

 

Note 6 – Deficiency in Stockholders’
Equity 

 

Series A and B Convertible Preferred
Stock

As part of the merger consummated on March
31, 2020, all series A and B convertible preferred stock were converted to common stock. If the Company is unable to achieve the
capital raise event as defined in the Merger Agreement by September 30, 2020 (subsequently extended to April 30, 2021), these shareholders
can rescind their common shares back to preferred shares. Below are the new rights to these shareholders if they decide to rescind:

 

Series
A Convertible Preferred Stock:

Rank.
The Series A Preferred Stock shall rank, with respect to dividend rights and to rights upon any voluntary or involuntary liquidation,
dissolution or winding up of the Company (each, a “Liquidation Event”), (a) senior in preference and priority to the
common stock of the Company (the “Common Stock”) and any other class or series of equity security established and
designated by the Board of Directors the terms of which do not expressly provide that it ranks senior in preference or priority
to or on parity with the Series A Preferred Stock with respect to dividend rights and rights upon a Liquidation Event (collectively,
“Junior Securities”), (b) on parity, without preference or priority, with each other class or series of equity security
established and designated by the Board of Directors the terms of which expressly provide that it ranks on parity, without preference
or priority to, the Series A Preferred Stock with respect to dividend rights and rights upon a Liquidation Event (collectively,
“Parity Securities”), and (c) junior in preference and priority to each other class or series of equity security established
and designated by the Board of Directors the terms of which expressly provide that it ranks senior in preference or priority to
the Series A Preferred Stock with respect to dividend rights and rights upon a Liquidation Event (collectively, “Senior
Securities”).

 

Dividends.
Holders of shares of the Series A Preferred Stock are entitled to receive, when, as and if declared by the Board, out of funds
legally available for the payment of dividends, cumulative cash dividends at an annual rate of eight percent (8%) of the Original
Issue Price per share (equal to $.08 per share per annum). Dividends shall accrue on each share of Series A Preferred Stock from
the date of issuance thereof, whether paid or not, and shall be cumulative and compounded annually.

 

Liquidation
Preference. In the event of any Liquidation Event, the holders of shares of Series A Preferred Stock then outstanding shall be
entitled to be paid out of the assets of the Company available for distribution to its stockholders before any payment shall be
made to the holders of any Junior Securities by reason of their ownership thereof, an amount per share equal to one hundred fifty
percent (150%) of the Series A Original Issue Price (the “Liquidation Preference”), plus the amount of accrued and
unpaid dividends thereon from the Original Issue Date through the date of liquidation. If upon any such Liquidation Event the
assets of the Company available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series
A Preferred Stock the full amount to which they shall be entitled under this, the holders of shares of Series A Preferred Stock
and Parity Securities shall share ratably in any distribution of the assets available for distribution in proportion to the respective
amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on
or with respect to such shares were paid in full.

 

Conversion.
The holders of Series A Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

 

Optional
Conversion. Each share of Series A Preferred Stock shall be convertible, at the option of the holder thereof, at any time and
from time to time, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Series
A Original Issue Price by the Conversion Price (as defined below) in effect at the time of conversion. The Conversion Price at
which shares of Common Stock shall be deliverable upon conversion of Series A Preferred Stock without the payment of additional
consideration by the holder thereof (the “Conversion Price”) shall initially be $1.28 per share. Such initial Conversion
Price, and the rate at which shares of Series A Preferred Stock may be converted into shares of Common Stock, shall be subject
to adjustment as provided below. All accrued and unpaid dividends may be converted by each holder of Series A Preferred Stock
into Common Stock by first determining the number of shares of Series A Preferred Stock that could be purchased based on the Series
A Original Issue Price then in effect and then determining the number of shares of Common Stock such additional shares of Series
A Preferred Stock are convertible into. By way of illustration only, if the accrued and unpaid dividends are equal to $100,000,
then based on the Series A Original Issue Price of $1.00 and a Conversion Price of $0.85, the holders of Series A Preferred Stock
would receive an additional 85,000 shares of Common Stock.

 

Automatic
Conversion. Upon the consummation of an underwritten public offering of the Common Stock of the Company (“IPO”) ,
each share of Series A Preferred Stock shall automatically be converted into such number of fully paid and non-assessable shares
of Common Stock at a Conversion Price equal to the lesser of (i) the Conversion Price in effect immediately prior to the consummation
of the IPO or (ii) fifty percent (50%) of the public offering price of the Common Stock in the IPO. All accrued and unpaid dividends
may be converted by each holder of Series A Preferred Stock into Common Stock by first determining the number of shares of Series
A Preferred Stock that could be purchased based on the Series A Original Issue Price then in effect and then determining the number
of shares of Common Stock such additional shares of Series A Preferred Stock are convertible into. By way of illustration only,
if the accrued and unpaid dividends are equal to $100,000, then based on the Series A Original Issue Price of $1.00 and a Conversion
Price of $0.85, the holders of Series A Preferred Stock would receive an additional 85,000 shares of Common Stock.

 

    15

     

    

 

Splash
Beverage Group, Inc.

[f/k/a
Canfield Medical Supply, Inc.]

Notes
to the Condensed Consolidated Financial Statements

 

Note
6 – Deficiency in Stockholders’ Equity, continued

 

Series
B Convertible Preferred Stock:

Rank.
The Series B Preferred Stock shall rank, with respect to dividend rights and to rights upon any voluntary or involuntary liquidation,
dissolution or winding up of the Company (each, a “Liquidation Event”), (a) senior in preference and priority to the
common stock of the Company (the “Common Stock”) and any other class or series of equity security established and
designated by the Board of Directors the terms of which do not expressly provide that it ranks senior in preference or priority
to or on parity with the Series B Preferred Stock with respect to dividend rights and rights upon a Liquidation Event (collectively,
“Junior Securities”), (b) on parity, without preference or priority, with the Series A Preferred Stock and with each
other class or series of equity security established and designated by the Board of Directors the terms of which expressly provide
that it ranks on parity, without preference or priority to, the Series B Preferred Stock with respect to dividend rights and rights
upon a Liquidation Event (collectively, “Parity Securities”), and (c) junior in preference and priority to each other
class or series of equity security established and designated by the Board of Directors the terms of which expressly provide that
it ranks senior in preference or priority to the Series B Preferred Stock with respect to dividend rights and rights upon a Liquidation
Event (collectively, “Senior Securities”).

 

Dividends.
The holders of the Series B Preferred Stock shall be entitled to receive cash dividends, when, as and if declared by the Board,
out of any assets legally available therefor, prior and in preference to any declaration or payment of any dividend on any other
class of Preferred Stock, except for the Series A Preferred Stock which shall be paid at the same time as the Series B Preferred
Stock is paid, and Common Stock of the Corporation at an annual rate of nine percent (9%) of the Original Issue Price per share
(equal to $.09 per share per annum) payable out of legally available funds. Dividends shall accrue on each share of Series B Preferred
Stock from the date of issuance thereof, whether paid or not, and shall be cumulative and compounded annually. Such dividends
shall be payable on the first day of each January, April, July and October commencing with respect to each share of Series B Preferred
Stock, on the first of such dates to occur after the issuance of such share (each such date a “Dividend Payment Date”)
to the holders of record at the close of business on the fifteenth day of each December, March, June and September, respectively,
subject to declaration of such dividends by the Board. All dividends paid with respect to shares of Series B Preferred Stock shall
be paid pro rata to the holders entitled thereto. Dividends, if paid, must be paid, on all outstanding shares of Series B Preferred
Stock contemporaneously. If any dividend shall not be paid on a Dividend Payment Date, for any reason, the right of the holders
to receive such dividend shall not lapse or terminate but each such dividend shall accrue and be paid to such holders, subject
to the conversion provisions below. No dividend shall be paid to the holders of any shares of Common Stock until all dividends,
including accrued dividends, then owing to the holders of Series B Preferred Stock, shall have been paid in full.

 

Liquidation
Preference. In the event of any Liquidation Event, the holders of shares of Series B Preferred Stock then outstanding shall be
entitled to be paid out of the assets of the Company available for distribution to its stockholders before any payment shall be
made to the holders of any Junior Securities by reason of their ownership thereof, an amount per share equal to one hundred fifty
percent (150%) of the Series B Original Issue Price (the “Liquidation Preference”), plus the amount of accrued and
unpaid dividends thereon from the Original Issue Date through the date of liquidation. If upon any such Liquidation Event the
assets of the Company available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series
B Preferred Stock the full amount to which they shall be entitled under this Section , the holders of shares of Series B Preferred
Stock and Parity Securities shall share ratably in any distribution of the assets available for distribution in proportion to
the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts
payable on or with respect to such shares were paid in full.

 

Conversion.
The holders of Series B Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

 

Optional
Conversion. Each share of Series B Preferred Stock shall be convertible, at the option of the holder thereof, at any time and
from time to time, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Series
B Original Issue Price by the Conversion Price (as defined below) in effect at the time of conversion. The Conversion Price at
which shares of Common Stock shall be deliverable upon conversion of Series B Preferred Stock without the payment of additional
consideration by the holder thereof (the “Conversion Price”) shall initially be $1.28 per share. Such initial Conversion
Price, and the rate at which shares of Series B Preferred Stock may be converted into shares of Common Stock, shall be subject
to adjustment as provided below. All accrued and unpaid dividends may be converted by each holder of Series B Preferred Stock
into Common Stock by first determining the number of shares of Series B Preferred Stock that could be purchased based on the Series
B Original Issue Price then in effect and then determining the number of shares of Common Stock such additional shares of Series
B Preferred Stock are convertible into. By way of illustration only, if the accrued and unpaid dividends are equal to $100,000,
then based on the Series B Original Issue Price of $1.50 and a Conversion Price of $1.28, the holders of Series B Preferred Stock
would receive an additional 78,125 shares of Common Stock.

 

Automatic
Conversion. Upon the consummation of an underwritten public offering of the Common Stock of the Company (“IPO”), each
share of Series B Preferred Stock shall automatically be converted into such number of fully paid and non-assessable shares of
Common Stock at a Conversion Price equal to the lesser of (i) the Conversion Price in effect immediately prior to the consummation
of the IPO or (ii) fifty percent (50%) of the public offering price of the Common Stock in the IPO. All accrued and unpaid dividends
may be converted by each holder of Series B Preferred Stock into Common Stock by first determining the number of shares of Series
B Preferred Stock that could be purchased based on the Series B Original Issue Price then in effect and then determining the number
of shares of Common Stock such additional shares of Series B Preferred Stock are convertible into. By way of illustration only,
if the accrued and unpaid dividends are equal to $100,000, then based on the Series B Original Issue Price of $1.50 and a Conversion
Price of $1.28, the holders of Series B Preferred Stock would receive an additional 78,125 shares of Common Stock.

 

    16

     

    

 

Splash
Beverage Group, Inc.

[f/k/a
Canfield Medical Supply, Inc.]

Notes
to the Condensed Consolidated Financial Statements

 

Common
Stock

In 2019, we issued 1,846,078 shares of
our common stock in exchange for services provided to us. The shares were valued at $0.73 per share. We recognized share-based
compensation expense of $1,354,500, which is classified within the contracted services line on the Statement of Operations. 

 

In Q3 2020, we entered into multiple subscription
agreements for $3,429,601 in exchange for 3,391,683 of our common stock.

 

In Q3 2020, we issued 490,652 shares to
an existing shareholder under a 3-year consulting agreement dated December 2019. The shareholder fulfilled his deliverables in
full and the board approved issuing the shares early.

 

Private Placement Memorandum (PPM)

Our Board of Directors has determined that
it is in the best interests of the Corporation and its stockholders to obtain working capital by conducting a private placement
offering of 2,790,909 shares of the common stock of the Company, no par value per share at a purchase price of $1.10 per share
for aggregate gross proceeds of $3,070,000. As part of the PPM, each common share holds one-half warrant. We will issue all shares
for subscription agreements executed after September 30, 2020, in Q4 2020.

 

Treasury
Stock

Since
its inception, we have repurchased shares from our shareholders. To date, we have repurchased 1,226,630 shares, of which 817,753
have been retired.

 

In
connection with a 2018 consulting agreement, we were committed to issue the 408,877 shares held in treasury upon the occurrence
of certain events or milestones. We issued 136,292 shares in July 2018, 136,292 shares in July 2019 and 136,292 shares on March
31, 2020.

 

Warrant
Issuance-Common Stock 

As
part of the sale and issuance of 4,088,765 shares of our Series A Convertible Preferred Stock, we issued 4,088,765 warrants to
purchase shares of our common stock at a price of $0.73 per share. The warrants had a five-year term and expired during 2019.

 

As
an incentive to convert their Series A preferred stock we issued 1,000,000 new warrants to purchase shares of SBG common stock
at $0.18 per share. Concurrently with the consummation of the Merger, these warrants were exchanged for 1,362,922 of Splash Beverage
Group, Inc. [Formerly known as Canfield Medical Supply, Inc.] shares. These warrants have a 3-year term.

 

Warrant
Issuance-Common Stock 

As
part of the sale and issuance of 5,333,675 shares of our Series B Convertible Preferred Stock, we issued 2,666,839 warrants to
purchase shares our common stock at a price of $1.10 per share. The warrants have a 5-year term. At September 30, 2020, there
are 935,386 warrants outstanding.

 

As
part of the sale of 300,000 shares of common stock, we issued 975,000 warrants to purchase shares of our common stock at a price
of $0.25 per share. These warrants have a 3-year term. In Q3 2020, the holder exercised all of his warrants and received 975,000
shares of the Company’s common stock.

 

    17

     

    

 

Splash
Beverage Group, Inc.

[f/k/a
Canfield Medical Supply, Inc.]

Notes
to the Condensed Consolidated Financial Statements

 

Note
7 – Share-Based Payments

 

Warrant
Issuance-GMA Consulting Services

We
issued 1,362,922 warrants to purchase shares of our common stock at $0.007 per share as part of our consulting agreement with
GMA, at December 31, 2019, the weighted average life of the outstanding warrants is 3.75 years.

 

The
warrants entitle the holder to purchase one share per warrant of the Company’s common stock at a price of $0.01 per share
during the five-year period commencing on October 2, 2018, or, if greater, the number of common shares with a market value equivalent
to two percent of the enterprise value of the Company at an exercise price of $0.008 per share.

 

As
an incentive for GMA to convert their debt and accrued interest into shares of common stock, we retired the original 1,362,922
warrants and issued 2,725,844 pre-merger new warrants to purchase shares of our common stock at $0.18 per share. These warrants
have a 3-year term.

 

Stock
Plan

We
have adopted the 2012 Stock Incentive Plan for SBG (the “Plan”), which provides for the grant of common stock and
stock options to employees. We have reserved 4,088,765 shares for issuance under the Plan. The option exercise price generally
may not be less than the underlying stock’s fair market value at the date of the grant and generally have a term of ten
years. On December 31, 2018, the sole option holder at the time, our CEO, exercised his options to purchase 2,657,698 shares of
common stock at a purchase price of $0.12 per share, totaling $312,000, which total purchase price was paid by the cancelation
of the equivalent amount of debt owed by us to the CEO. On December 7, 2019, our Board of Directors granted 1,124,410 options
to certain employees and consultants. None of these options were exercised at September 30, 2020. There are 1,124,410 options
issued and outstanding under the Plan at September 30, 2020. As of September 30, 2020, the total number of options available for
grant is 306,657.

 

We
measure employee stock-based awards at the grant-date fair value and recognizes employee 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, the expected life of the option,
and expected stock price volatility and exercise price. We used the Black-Scholes option pricing model to value its stock option
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 was 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 and employment duration for its stock options grants. 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 options granted. The risk-free interest rate is
based on U.S. Treasury notes with a term approximating the expected life of the option. The estimation of the number of stock
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.

 

We
recognized stock-based compensation expense of $265,589 for the year ended December 31, 2019. There was no unrecognized compensation
cost related to stock option awards at September 30, 2020.

 

Concurrently
with the consummation of the Merger, options to purchase 825,000 SBG shares were converted to options to purchase 1,124,410 Splash
Beverage Group, Inc. [Formerly known as Canfield Medical Supply, Inc.] shares. 

 

	 	 	 	 	 	Weighted Average	 
	 	 	Options	 	 	Exercise Price	 
	 	 	 	 	 	 	 
	Outstanding - beginning of year	 	 	1,124,410	 	 	$	0.77	 
	Granted	 	 	-	 	 	 	 	 
	Exercised	 	 	-	 	 	$	-	 
	Cancelled/forfeited	 	 	-	 	 	$	-	 
	Outstanding - September 30, 2020	 	 	1,124,410	 	 	$	0.77	 
	 	 	 	 	 	 	 	 	 
	Exercisable at September, 30 2020	 	 	1,124,410	 	 	$	0.77	 
	 	 	 	 	 	 	 	 	 
	Weighted average grant date fair value of options during year	 	 	 N/A 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Weighted average duration to expiration of outstanding
    options at September 30, 2020	 	 	4.3	 	 	 	 	 

  

In August 2020, we adopted a new
incentive plan. The 2020 Long-Term Incentive Compensation Plan (the “Plan”) is established by Splash Beverage
Group, Inc., a Colorado corporation (the “Company”), to create incentives which are designed to motivate
Participants to put forth maximum effort toward the success and growth of the Company and to enable the Company to attract
and retain experienced individuals who by their position, ability and diligence are able to make important contributions to
the Company’s success. Toward these objectives, the Plan provides for the grant of Options, Restricted Stock Awards,
Stock Appreciation Rights (“SARs”), Performance Units and Performance Bonuses to Eligible Employees and the grant
of Nonqualified Stock Options, Restricted Stock Awards, SARs and Performance Units to Consultants and Eligible Directors,
subject to the conditions set forth in the Plan. At September 30, 2020, no awards have been granted by the board of
directors.

 

    18

     

    

 

Splash
Beverage Group, Inc.

[f/k/a
Canfield Medical Supply, Inc.]

Notes
to the Condensed Consolidated Financial Statements

 

Note
8 – Related Parties

 

During the normal course of business, we
incurred expenses related to services provided by our CEO or Company expenses paid by our CEO, resulting in related party payables,
net of $469,904 as of September 30, 2020. The related party payable to the CEO bears no interest payable and is due on demand.
We also assumed a $50,000 note for the President of WesBev who is the majority shareholder of Splash Beverage Group, Inc. [Formerly
known as Canfield Medical Supply, Inc.].

 

There
are related party notes payable of $0 outstanding as of September 30, 2020 as discussed in Note 4.

 

Note
9 – Investment in Salt Tequila USA, LLC

 

On
December 9, 2013, we entered into a marketing and distribution agreement with SALT Tequila USA, LLC (“SALT”) in Mexico
for the manufacturing of our product line. The agreement was for a one-year term with an additional two-year renewal. On December
28, 2015, the agreement was extended through 2020. In the December 9, 2013 agreement, we received a 5% ownership interest in SALT,
12 months after the date of the agreement we received an additional 5% ownership interest in SALT, and 24 months after the date
of the agreement we received an additional 5% interest, resulting in a total interest of 15% in SALT. We have not recorded the
cost of the investment or our share of its results of operations as the amounts are considered immaterial. 

 

SALT also has product at a unrelated international
alcohol distributor, American Spirits Exchange, for preliminary market testing in 9 of 16 states that they distribute to, that
are government-controlled alcohol resellers. In 2019 we had no sales for SALT Tequila. On December 31, 2018, we created a Mexican
subsidiary, Splash MEX SA DE CV (“Splash Mex”) for the exporting of SALT Tequila from Mexico to the USA, South and
Central Americas. Splash Mex will also act as the manufacturing and distribution agent of TapouT in Central and South Americas.
Applications for the appropriate licenses required for import and wholesale of alcohol in the USA have been completed for at the
Federal and State levels. These licenses will permit direct alcohol sales to distributors and wholesalers thereby limiting the
use of agents for importing SALT Tequila to the USA for distribution.

 

On
March 26, 2020, we entered into a new amended stock sale and purchase agreement. The agreement is for $1,000,000 to be paid in
4 tranches of $250,000 and entitles us to additional equity interest in Salt Tequila USA, LLC as follows:

 

	 	●	Tranche 1 –
    7.5%

 

	 	●	Tranche 2 –
    5.0%

 

	 	●	Tranche 3 –
    5.0%

 

	 	●	Tranche 4 –
    5.0%

 

Once
all tranches are paid-out we will have a total equity stake of 37.5% of Salt Tequila USA, LLC.

 

    19

     

    

 

Splash
Beverage Group, Inc.

[f/k/a
Canfield Medical Supply, Inc.]

Notes
to the Condensed Consolidated Financial Statements

 

Note
10 – Operating Lease Obligations

 

Effective
July 2018, we entered into a lease agreement for the right to use and occupy office space. The lease term commenced July 1, 2018
and is scheduled to expire after 36 months, on June 30, 2021.

 

Prior
to the current lease, we entered into a lease agreement in 2014 for the right to use and occupy office space. The lease term commenced
November 1, 2014 and was scheduled to expire after 62 months, on March 31, 2020. The lease was terminated in February 2018.

 

Effective November 2019, we entered into
a new lease agreement for our NY affiliate. The lease was for six months and had expired on April 30, 2020. This lease was not
subjected to the new lease standard, Topic 842.

 

Effective
November 2019, we entered into a new lease with Interport Logistics, LLC. The lease term commenced on November 11, 2019 and is
scheduled to expire on November 11, 2020.

 

Effective
May 2019, we entered into a new lease in Mexico. The lease commenced May 1, 2019 and is scheduled to expire after 24 months, on
April 1, 2021.

 

The
following table presents the discounted present value of minimum lease payments for our office and warehouses to the amounts reported
as financial lease liabilities on the condensed consolidated balance sheet at September 30, 2020:

 

	Undiscounted Future Minimum Lease Payments	 	Operating Lease	 
	 	 	 	 
	2020	 	$	22,172	 
	2021	 	 	59,291	 
	Thereafter	 	 	25,910	 
	Total	 	 	107,372	 
	Amount representing imputed interest	 	 	(4,136	)
	Total operating lease liability	 	 	103,237	 
	Current portion of operating lease liability	 	 	70,297	 
	Operating lease liability, non-current	 	$	32,940	 

  

The
table below presents information for lease costs related to our operating leases at September 30, 2020:

 

	Operating lease cost:	 	 	 
	Amortization of leased assets	 	$	114,032	 
	Interest of lease liabilities	 	 	10,776	 
	Total operating lease cost	 	$	124,808	 

  

The
table below presents lease-related terms and discount rates at September 30, 2020:

 

	Remaining
    term on leases	 	9
    to 25 months
	Incremented
    borrowing rate	 	 	5.0	%

 

Note
11 – Line of Credit 

 

At September 30, 2020 SBG owed $68,000 to a financial institution
under a revolving line of credit.. The line of credit is secured by the assets of SBG is due on demand, and bears interest at variable
rates approximately 6.1% at September 30, 2020. Interest expense under the note was approximately $300 during the three months
ended September 30, 2020. Interest expense under the note was approximately $2,300 during the nine months ended September 30, 2020.

 

Note
12 – PPP Loan

 

On
January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain
of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community
as the virus spreads globally beyond the point of origin. On March 20, 2020, the WHO classified the COVID-19 outbreak as a pandemic,
based on the rapid increase in exposure globally.

 

In
response to the COVID-19 outbreak in the United States, the CARES Act (the “Act”) was passed by Congress and signed
into law on March 27, 2020. In connection with the CARES Act, the Company and its subsidiary applied for and received loans with
an original aggregate principal balance of approximately $158,000. These loans and interest will be forgiven as long as the funds
are used for qualifying expenditures as outlined in the Act. The loans bear interest at 1%, with an 18 month term, and has a 6-month
initial payment deferral.

 

    20

     

    

 

Splash
Beverage Group, Inc.

[f/k/a
Canfield Medical Supply, Inc.]

Notes
to the Condensed Consolidated Financial Statements

 

Note
13 – Business Combinations

 

As
stated in Note 1, we consummated the merger of SBG on March 31, 2020 which was accounted for as a reverse merger.

 

The
value of our merger was approximately $9.2 million based on the valuation of the SBG equity on the date of consummation.

 

The
following summarizes our allocation of the purchase price for the acquisition:

 

	Cash and cash equivalents	 	$	72,442	 
	Accounts receivable	 	$	311,586	 
	Inventory	 	$	21,415	 
	Property and equipment	 	$	38,110	 
	Goodwill	 	$	9,448,832	 
	Accounts payable, accrued expenses and other liabilities	 	$	719,221	 
	Purchase price	 	$	9,173,164	 

 

Note
14 – Segment Reporting

 

The
Company evaluates segment reporting in accordance with the FASB Accounting Standards Codification Topic 280, Segment Reporting,
each reporting period, including evaluating the reporting package reviewed by the Chief Executive Officer and Chief Financial
Officer.

 

	 	 	Three-Months Ending	 	 	Nine-Months Ending	 
	Revenue	 	September 30,
 2020	 	 	September 30,

2019	 	 	September 30,

2020	 	 	September 30,

2019	 
	Splash Beverage Group	 	 	91,778	 	 	 	    -	 	 	 	213,174	 	 	 	14,445	 
	B2C Business	 	 	601,196	 	 	 	-	 	 	 	1,004,536	 	 	 	32,641	 
	Medical Devices	 	 	316,641	 	 	 	-	 	 	 	516,217	 	 	 	-	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total Revenues	 	 	1,009,615	 	 	 	-	 	 	 	1,733,926	 	 	 	47,086	 

 

	Total assets	 	Sep-20	 	 	Dec-19	 
	Splash Beverage Group	 	 	2,725,853	 	 	 	446,288	 
	B2C Business	 	 	435,933	 	 	 	159,026	 
	Medical Devices	 	 	9,875,151	 	 	 	-	 
	 	 	 	 	 	 	 	 	 
	Total Assets	 	 	13,036,937	 	 	 	605,314	 

    

Note
15 – Commitment and Contingencies

 

We
are 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 we do 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.

 

Capital
Raise

In connection with the merger we are committed
to our previous preferred stock and debt holders to raise $9 million in a secondary IPO, private placement and debt as defined
in the agreements. There cannot be any assurance that we will raise this capital as required.

 

Stock Price Guarantee

We have a commitment to issue additional
shares associated with specific stock price guarantee granted to an investor. See Note 4.

 

Note 16 – Subsequent Events 

 

Subscription Agreements

In
Q4 2020, we entered into multiple subscription agreements
for $1,895,000 in exchange for 1,722,727 of our common stock at $1.10 per share as well as warrants to purchase 861,361 shares
of our common stock at $1.10 per share.

 

2020 Incentive Plan

In October 2020, our board approved the
granting of both shares and warrants to purchase shares to existing employees as well as consultants.

 

International Distribution Agreement

The Company entered into a distribution
agreement with China-based American Software Capital (“ASC”), resulting in securing distribution and Manufacturing
capabilities in Greater China for its TapouT Performance brand and distribution for its SALT Naturally Flavored Tequila brand.

 

    21

     

    

 

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. We disclaim any
obligation to publicly update these statements or disclose any difference between actual results and those reflected in these
statements.

 

Unless
the context otherwise requires, references in this Form 10-Q to “we,” “us,” “our,” or the
“Company” refer to Splash Beverage Group, Inc.

 

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 (“SBG”), f/k/a Canfield Medical Supply, Inc. (the “CMS”), was incorporated in the State
of Ohio on September 3, 1992, and changed domicile to Colorado on April 18, 2012. CMS is in the business of home health services,
primarily the selling of durable medical equipment and medical supplies to the public, nursing homes, hospitals and other end
users.

 

On
December 31, 2019, CMS entered into an Agreement and Plan of Merger (the “Merger Agreement”) with SBG Acquisition
Inc. (“Merger Sub”), a Nevada Corporation wholly-owned by CMS, and Splash Beverage Group, Inc. a Nevada corporation
(“Splash”) pursuant to which Merger Sub merged with and into Splash (the “Merger”) with Splash as the
surviving company and a wholly-owned subsidiary of CMS. The Merger was consummated on March 31, 2020.

 

As
the owners and management of Splash have voting and operating control of CMS following the Merger, the Merger transaction was
accounted for as a reverse acquisition (that is with Splash as the acquiring entity), followed by a recapitalization.

 

Splash
specializes in the manufacturing, distribution, and sales & marketing of various beverages across multiple channels. Splash
operates in both the non-alcoholic and alcoholic beverage segments. Additionally, Splash operates its own vertically integrated
B-to-B and B-to-C e-commerce distribution platform called Qplash, further expanding its distribution abilities and visibility.

 

In
July 2020, we filed a Certificate of Amendment of Articles of Incorporation to change our name to Splash Beverage Group Inc. On
July 31, 2020, we received approval from FINRA regarding our name change. 

 

    22

     

    

 

Results
of Operations for the Three Months Ended September 30, 2020 compared to Three Months Ended September 30, 2019.

 

Revenue 

 

Revenues for the three months ended September
30, 2020 were $1,009,615 compared to revenues of $0 for the three months ended September 30, 2019. The $1,009,615 increase in sales
was due to Salt Tequila ($91,782), Qplash –our vertically integrated B2B and B2C e-commerce distribution platform which sells
their products on Amazon and Shopify ($704,388) and Canfield’s medical device business ($290,638). Cost of goods sold for
the three months ended September 30, 2020 were $570,979 compared to cost of goods sold for the three months ended September 30,
2019 of $13,947. The $557,032 increase in cost of goods sold for the three-month period ended September 30, 2020 was primarily
due to our increased sales, and as our sales increased, our cost of sales for those sales correspondingly increased.

 

Operating
Expenses

 

Operating
expenses for the three months ended September 30, 2020 were $2,733,434 compared to $847,657 for the three months ended September
30, 2019. The $1,885,777 increase in our operating expenses was primarily a result of recording $1,236,254 in consulting fees
relating to the issuance of warrants and $730,085 in other consulting related expenses. The net loss for the three months ended
September 30, 2020 was $2,283,682 as compared to a net loss of $1,067,246 for the three months ended September 30, 2019. The increase
in net loss is due to our increase in operating expenses slightly offset by our increase in revenues.

 

Other
Income/(Expense)

 

Other
income/(expense) for the three months ended September 30, 2020 were $11,116 compared to ($205,642) for the three months ended
September 30, 2019. The $216,758 decrease in our interest expenses was primarily a result converting the majority of our debt
into common stock in Q1 2020 as part of our merger.

 

Results
of Operations for the Nine Months Ended September 30, 2020 compared to Nine Months Ended September 30, 2019.

 

Revenue 

 

Revenues for the nine months ended September
30, 2020 were $ $1,733,926 compared to revenues of $47,086 for the nine months ended September 30, 2019. The $1,686,840 increase
in sales was due to Salt Tequila $213,933, Qplash – our vertically integrated B2B and B2C e-commerce distribution platform
which sells their products on Amazon and Shopify $1,004,536 and Canfield’s medical device business $490,217. Cost of goods
sold for the nine months ended September 30, 2020 were $965,966 compared to cost of goods sold for the nine months ended September
30, 2019 of $88,365. The $877,638 increase in cost of goods sold for the nine-month period ended September 30, 2020 was primarily
due to our increased sales, and as our sales increased, our cost of sales for those sales correspondingly increased.

 

Operating Expenses

 

Operating expenses for the nine months
ended September 30, 2020 were $5,000,715 compared to $ 2,025,184 for the nine months ended September 30, 2019. The $2,975,530
increase in our operating expenses was primarily a result of recording $500,000 in consulting fees for one of our investors, $465,511
in increased salaries, and $1,966,339 in consulting fees of which $1,236,254 was for the issuance of warrants. The net loss for
the nine months ended September 30, 2020 was $6,105,812 as compared to a net loss of $ $2,692,629 for the nine months ended September
30, 2019. The increase in net loss is due to our increase in operating expenses slightly offset by our increase in revenues.

 

Other
Income/(Expense)

 

Other
income/(expense) for the nine months ended September 30, 2020 were $1,873,057 compared to $626,166 for the nine months ended September
30, 2019. The $1,246,891 increase in our interest expenses was primarily a result of recording a finance charge of $1,236,254
associated with warrants issued to one of our note holders.

 

LIQUIDITY
AND CAPITAL RESOURCES

 

Liquidity
is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise
operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts
receivable and accounts payable and capital expenditures.

 

As of September 30, 2020, we had total
cash and cash equivalents of $ $725,811, as compared with $42,639 at December 31, 2019. The increase was primarily due to issuances
of notes payable and subscription agreements offset by expenses relating to the operating the business.

 

Net cash used for operating activities
during the nine months ended September 30, 2020 was $ 4,311,170 as compared to the net cash used by operating activities for the
nine months ended September 30, 2019 of $1,909,725. The primary reasons for the change in net cash used was due to losses sustained
and increases for stock-based compensation, offset by other non-cash expenses.

 

Net cash used for investing activities
during the nine months ended September 30, 2020 was $87,251 as compared to the net cash used by investing activities for the nine
months ended September 30, 2019 of $9,942. The net cash used in the first nine months of 2020 was primarily due to the $150,000
payment made to SALT Tequila USA, offset by $72,422 of cash obtained in the acquisition of Canfield Medical Supply, Inc.

 

Net cash provided by financing activities
during the nine months ended September 30, 2020 was $5,081,594 compared to $1,011,991 provided from financing activities for the
nine months ended September 30, 2019. During the nine months ended September 30, 2020, we received $6,191,406 from investors and
related parties, of which $1,000,000 of funds are held in escrow.

 

    23

     

    

 

CONTRACTUAL
OBLIGATIONS

 

Minimum
Royalty Payments:

 

As
stated in Note 5, we have a licensing agreement with ABG TapouT, LLC (“TapouT”). Under the licensing agreement, we
have minimum royalty payments to TapouT for the next three years.

 

	 	●	2020$540,000

 

	 	●	2021$594,000

 

	 	●	2022$653,400

 

Inventory
Purchase Commitments:

 

None.

 

Off-Balance
Sheet Arrangements

 

We
do not have any off-balance sheet arrangements (as that term is defined in Item 303 of Regulation S-K) that are reasonably likely
to have a current or future material effect on our financial condition, revenue or expenses, results of operations, liquidity,
capital expenditures or capital resources.

 

ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not
required for Smaller Reporting Companies.

 

ITEM
4. CONTROLS AND PROCEDURES

 

(a)
Evaluation of Disclosure Controls and Procedures

 

We
maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our reports filed
under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed,+ summarized, and reported within
the required time periods, and that such information is accumulated and communicated to our management, including our Chairman,
Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding disclosure. Under
the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer,
we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of
the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer has concluded that these disclosure
controls and procedures are ineffective due to the size of the organization. We are addressing our needs to enhance our effectiveness.
There have been no changes to our disclosure controls and procedures during the three months ended September 30, 2020. There
has been no change in our internal control over financial reporting during the three months ended September 30, 2020 that has
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Since the most
recent evaluation date, there have been no significant changes in our internal control structure, policies, and procedures or
in other areas that could significantly affect our internal control over financial reporting.

 

(b)
Changes in Internal Controls

 

There
were no significant changes in the Company's internal controls over financial reporting or in other factors that could significantly
affect these internal controls subsequent to the date of their most recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.

 

    24

     

    

 

PART
II – OTHER INFORMATION

 

ITEM
1. LEGAL PROCEEDINGS.

 

None.

 

ITEM
1A. RISK FACTORS

 

The
COVID-19 pandemic has had, and we expect will continue to have, certain negative impacts on our business and operations, and such
impacts may have a material adverse effect on our business and results of operations.

 

The
current COVID-19 pandemic has presented a substantial public health and economic challenge around the world and is affecting our
employees, communities and business operations, as well as the global economy and financial markets. The human and economic consequences
of the COVID-19 pandemic as well as the measures being taken by governments, businesses (including the Company and our suppliers,
bottlers/distributors, co-packers and other service providers) and the public at large to limit the COVID-19 pandemic, have and
will, directly and indirectly impact our business and results of operations, including, without limitation, the following:

 

	 	●	Deteriorating
    economic conditions and financial uncertainties in many of our major markets due to the COVID-19 pandemic, such as increased
    and prolonged unemployment, decreases in per capita income and the level of disposable income, declines in consumer confidence,
    or economic slowdowns or recessions, could affect consumer purchasing power and consumers’ ability to purchase our products,
    thereby reducing demand for our products. In addition, public concern among consumers regarding the risk of contracting COVID-19
    may also reduce demand for our products.
	 	 	 
	 	●	The closure of on-premise
    retailers and other establishments that sell our products as a result of the COVID-19 pandemic may also adversely impact our
    sales and results of operations.
	 	 	 
	 	●	Our advertising,
    marketing, promotional, sponsorship and endorsement activities have been, and will continue to be, disrupted by reduced opportunities
    for such activities due to measures taken to limit the spread of the COVID-19 pandemic and the cancellations of sporting events,
    concerts and other events may result in decreased demand for our products.  Our product sampling programs, which are
    part of our strategy to develop brand awareness, have been, and will continue to be, disrupted by the COVID-19 pandemic. If
    we are unable to successfully adapt to the changing landscape of advertising, marketing, promotional, sponsorship and endorsement
    opportunities created by the COVID-19 pandemic, our sales, volume growth and overall financial results could be negatively
    affected.
	 	 	 
	 	●	Our innovation activities,
    including our ability to introduce new products in certain markets, have been delayed and/or adversely impacted by the COVID-19
    pandemic. If such innovation activities are disrupted and we continue to delay the launch of new products and/or we are unable
    to secure sufficient distribution levels for such new products, our business and results of operations could be adversely
    affected.
	 	 	 
	 	●	Some of our suppliers,
    bottlers/distributors and co-packers may experience plant closures, production slowdowns and disruptions in operations as
    a result of the impact of the COVID-19 pandemic. This could result in a disruption to our operations.
	 	 	 
	 	●	We may experience
    delays in the sourcing of certain raw materials as a result of shipping delays due to, among other things, additional safety
    requirements imposed by port authorities, closures of or congestion at ports, reduced availability of commercial transportation,
    border restrictions and capacity constraints.
	 	 	 
	 	●	As a result of the
    COVID-19 pandemic, including related governmental measures, restrictions, directives and guidance, we have required most of
    our office-based employees to work remotely. We may experience reductions in productivity and disruptions to our business
    routines while our remote work policy remains in place. If our employees working remotely do not maintain appropriate measures
    to mitigate potential risks to our technology and operations from information technology-related disruptions, we may face
    cybersecurity threats. Employees of our third-party service providers who are working remotely, with whom we may share data,
    are subject to similar cybersecurity risks. 
	 	 	 
	 	●	Governmental authorities
    at the U.S. federal, state and/or municipal level and in certain foreign jurisdictions may increase or impose new income taxes,
    indirect taxes or other taxes or revise interpretations of existing tax rules and regulations as a means of financing the
    costs of stimulus or may take other measures to protect populations and economies from the impact of the COVID-19 pandemic.
    Increases in direct and indirect tax rates could affect our net income, and increases in consumer taxes could affect our products’
    affordability and reduce our sales.

 

    25

     

    

 

	 	●	We may be required
    to record significant impairment charges with respect to goodwill or intangible assets whose fair values may be negatively
    affected by the effects of the COVID-19 pandemic.
	 	 	 
	 	●	The financial impact
    of the COVID-19 pandemic may cause one or more of the financial institutions we do business with to fail or default in their
    obligations to us or to become insolvent or file for bankruptcy, which could cause us to incur significant losses and negatively
    impact our results of operations and financial condition.
	 	 	 
	 	●	Actions we have
    taken or may take, or decisions we have made or may make, as a consequence of the COVID-19 pandemic may result in negative
    publicity and the Company becoming a party to litigation claims and/or legal proceedings, which could consume significant
    financial and managerial resources, result in decreased demand for our products and injury to our reputation.
	 	 	 
	 	●	The resumption of
    normal business operations after the disruptions caused by the COVID-19 pandemic may be delayed or constrained by its lingering
    effects on our suppliers, bottlers/distributors, co-packers, contractors, business partners and other service providers.

 

Any
of the negative impacts of the COVID-19 pandemic, including those described above, alone or in combination with others, may have
a material adverse effect on our business, reputation, operating results and/or financial condition. The full extent to which
the COVID-19 pandemic will negatively affect our business, reputation, operating results and/or financial condition will depend
on future developments that are highly uncertain and cannot be predicted, including the scope and duration of the COVID-19 pandemic
and actions taken by governmental authorities and other third parties in response to the COVID-19 pandemic.  

 

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

 

See
notes 6 and 16.

 

ITEM
3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM
4. MINE SAFETY DISCLOSURES

 

No
disclosure required.

 

ITEM
5. OTHER INFORMATION

 

None.

 

    26

     

    

 

ITEM
6. EXHIBITS

 

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

 

	Exhibits	 	Description
	31.1	 	Certification of
    CEO and Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) - Filed herewith electronically
	31.2	 	Certification of
    CFO and Principal Financial and Accounting Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) - Filed herewith electronically
	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 

 

    27

     

    

 

 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 BEVERAGE GROUP, INC.
	 	 	 
	Date:  November 13, 2020 	By:	/s/
    Robert Nistico
	 	 	Robert Nistico, Chairman and CEO
	 	 	 
	Date:  November 13, 2020	By:	/s/
    Dean Huge
	 	 	Dean Huge, CFO

 

    28

     

    

 

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:  November 13, 2020

 

/s/ Robert Nistico

 

Robert Nistico

Chief Executive Officer

 

 

    29

     

    

 

Exhibit 31.2

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER

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

 

I, Dean Huge, 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: November 13, 2020

 

/s/ Dean Huge

 

 

Dean Huge

Chief Financial Officer

 

 

    30

     

    

 

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 Colorado (the “Company”), for the
quarter ended September 30, 2020, 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:  November 13, 2020	/s/ Robert Nistico
	 	
        Robert Nistico

        Chief 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.

 

A signed original of this written statement
required by Section 906 has been provided to Splash Beverage Group, Inc. and will be retained by Splash Beverage Group, Inc. and
furnished to the Securities and Exchange Commission or its staff upon request.

 

    31

     

    

 

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 Colorado (the “Company”), for the
quarter ended September 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”),
Dean Huge, 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:  November 13, 2020	/s/ Dean Huge
	 	
        Dean Huge 

        Chief 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.

 

A signed original of this written statement
required by Section 906 has been provided to Splash Beverage Group, Inc. and will be retained by Splash Beverage Group, Inc. and
furnished to the Securities and Exchange Commission or its staff upon request.

 

    32

     

    

 

SCHEDULE
3.1(l)

TITLE
TO PROPERTY AND ASSETS

 

		1.	The
                                         Merits Lien.

 

		2.	The
                                         Navitas Lien.

 

 

    33

     

    

 

SCHEDULE
3.1(n) COLLATERAL

 

		1.	The
                                         Merits Lien.

 

		2.	The
                                         Navitas Lien.

 

		3.	In
                                         exchange for paying off the Key Bank Line of Credit, the Splash Beverage Group Inc. (the
                                         “Company”) received a secured promissory note in the amount of $68,000 from
                                         Canfield Medical Supply and Services LLC a subsidiary of the Company. In connection with
                                         the execution of the Promissory Note Michael West executed a personal guarantee in favor
                                         of the Company and Canfield Medical Supply and Services LLC executed a Security Agreement
                                         with the Company pursuant to which Canfield Medical Supply and Services LLC gave the
                                         Company a security interest in its assets and Company intends to file a UCC
                                         to evidence the security interest.

 

 

    34

     

    

 

SCHEDULE
4.1 CLOSING USE OF PROCEEDS

 

	Payee	Amount	Wire
    Instructions
	KeyBank
    National Association	$68,236.64	 

        

	Lender	$10,000	Withheld
                                         by Lender and applied towards Company’s Share of Transaction Costs. The remaining
                                         $5,000 balance of Company’s Share of Transaction Costs was deposited by Company
                                         with

        Lender
        in connection with executing the term sheet.

	Copa
    di Vino	$1,500,000	Beneficiary:TGE,
                                         LLC

        Bank:US
        Bank

        Address:401
        Washington St. Dalles, Oregon, 97058

        Account:
        ***

        ABA
Routing Number: ***

	TOTAL	$1,578,236.64	 

 

    35

     

    

 

 

 

SCHEDULE
5.11 COMPANY BANK ACCOUNT

 

Not
applicable.

 

 

    36

     

    

 

SCHEDULE
7.7

INDEBTEDNESS
NOT SUBJECT TO CROSS DEFAULT

 

		1.	In
                                         February 2014, we entered into a 12-month term loan agreement with an individual in the
                                         amount of $200,000. The note included warrants for 66,146 shares of common stock at $0.73
                                         per share. The warrants expired on February 28, 2017 and none were exercised at that
                                         date. The note matured and remains unpaid.

 

		2.	In
                                         March 2014, we entered into a short-term loan agreement with an entity in the amount
                                         of

$200,000.
The note included warrants for 272,584 shares of common stock at $0.94 per share. The warrants expired on February 28, 2017 and
none were exercised at that date. The loans matured and remain unpaid.

 

		3.	In
                                         May 2015, we entered into a 3-month term loan agreement with an individual in the amount
                                         of

$100,000.
The annual interest rate for this bridge loan was 32% for the first 90 days, and 4% thereafter, compounded monthly.

 

 

    37

     

    

 

SCHEDULE
11.1 APPLICABLE REVENUE PERCENTAGE

(a)

 

Between
the Effective Date and December 31, 2022 (inclusive) the Applicable Revenue Percentage will be 3.75% of Revenue for all payments
due during any month within such period.

 

Between
January 1, 2023 and the Maturity Date (inclusive) the Applicable Revenue Percentage will be 4.00% of Revenue for all payments
due during any month within such period.

 

(b)

 

If
the Revenue or Reported Revenue is not equal to at least 80% of Projected Revenue (the “ARP Threshold”) for
any Revenue Test Period, the Applicable Revenue Percentage for all subsequent monthly payments (beginning with the payment due
the following January 15) will, automatically and without notice from Lender, increase by 0.50%.

 

For
clarity, the terms “Revenue” and “Reported Revenue” have separate meanings (even though it is expected
that these amounts will be the same). The determination of whether the ARP Threshold has been met for the corresponding Revenue
Test Period will be made initially based off of Reported Revenue (as reported in the Monthly Questionnaires delivered by
Company to Lender pursuant to Section 5.19). If the Company Entities fail to meet the ARP
Threshold based off of Reported Revenue, then the adjustment to the Applicable Revenue Percentage made pursuant to part
(b) of this Schedule 11.1 will be effective immediately beginning with the payment due on January 15 of the year immediately
following the applicable Revenue Test Period. If it appears initially that the Company Entities met the ARP Threshold for the
corresponding Revenue Test Period based off of Reported Revenue, but it is later discovered that the Company Entities failed to
meet the ARP Threshold based off of actual Revenue (as reported in the Financial Statements), then the adjustment to the Applicable
Revenue Percentage made pursuant to part (a) of this Schedule 11.1 will be effective retroactively beginning with the payment
due on January 15 of the year immediately following the applicable Revenue Test Period.

		(a)	

 

If
the Company Entities fail to meet the ARP Threshold for two or more consecutive Revenue Test Periods, the adjustments made pursuant
to part (b) of this Schedule 11.1 will be cumulative. If, after failing to meet the ARP Threshold for one or more previous
Revenue Test Periods, the Company Entities meet the ARP Threshold for a subsequent Revenue Test Period, any previous adjustments
made pursuant to part (b) of this Schedule 11.1 will no longer be applied cumulatively and the Applicable Revenue Percentage
will revert back to the standard Applicable Revenue Percentage as determined in accordance with part (a) of this Schedule 11.1.
Except as provided in the previous paragraph, all adjustments to the Applicable Revenue Percentage made pursuant to this Schedule
11.1 will be applied prospectively and will not result in a retroactive adjustment to any prior monthly payment.

 

    38

     

    

 

 

SCHEDULE
11.2 COLLATERAL

 

All
present and hereafter acquired property of Company wherever located and however described and whether or not constituting a fixture
(including, without limitation, any and all present and future property), together, in each case, with all proceeds thereof, including
without limitation all goods (including inventory, equipment and any accessions thereto), instruments (including promissory notes),
documents, accounts (including health-care-insurance receivables and credit card receivables), chattel paper (whether tangible
or electronic), deposit accounts, letter-of-credit rights (whether or not the letter of credit is evidenced by a writing), commercial
tort claims, securities and all other investment property, supporting obligations, any other contract rights or rights to the
payment of money, insurance claims and proceeds, money, patents, patent applications, trademarks, trademark applications, copyrights,
copyright applications, trade names, other names, software, and all general intangibles (including all payment intangibles); together
with all goodwill related to the foregoing property and all rights, liens, security interests and other interests which Company
may at any time have by law or agreement against any account debtor, issuer or obligor obligated to make any such payment or against
any of the property of such account debtor, issuer, or obligor, and all other supporting obligations relating to the foregoing,
whether now existing or hereafter arising, whether now owned or hereafter acquired; and all products and proceeds of the foregoing
property, including without limitation all accounts, instruments, chattel paper, investment property, letter-of-credit rights,
letters-of-credit, other rights to payment, documents, deposit accounts, money, insurance proceeds and general intangibles related
to the foregoing property, and all refunds of insurance premiums due or to become due under all insurance policies covering the
foregoing property, all whether now owned or hereafter acquired, and wherever located, together with proceeds of all of the foregoing.

 

[ALL
REGISTERED INTELLECTUAL PROPERTY SHOULD BE SPECIFICALLY IDENTIFIED BELOW. FAILURE TO SO LIST REGISTERED INTELLECTUAL PROPERTY
DOES NOT EXCLUDE IT FROM COLLATERAL.]

 

 

    39

     

    

 

SCHEDULE
11.3 MINIMUM INTEREST

 

(a)

 

The
“Minimum Interest” means the amount shown below in the column headed Minimum Interest opposite the applicable
period during which the Payoff Date occurs:

 

	Period
                                         During Which the Payoff

        Date
        Occurs
	Minimum
    Interest
	On
    or before 6 months after the Effective Date	0.50
    times the Amount Advanced
	After
                                         6 months and on or before 12

        months
        after the Effective Date
	0.65
    times the Amount Advanced
	After
    12 months and on or before 18 months after the Effective Date	0.75
    times the Amount Advanced
	After
    18 months and on or before 24 months after the Effective Date	0.90
    times the Amount Advanced
	After
    24 months after the Effective Date	1.00
    times the Amount Advanced

 

For
the avoidance of doubt, any increases to the Minimum Interest made pursuant to Section 8.2 of the Agreement will be cumulative
and will apply throughout the remainder of the term of the Agreement for each period set forth in the table above.

 

(b)

 

If
the Revenue or Reported Revenue is not equal to at least 75% of Projected Revenue (the “MI Threshold”) for
any Revenue Test Period, then the Minimum Interest multiple will increase, automatically and without notice from Lender, by 0.10
throughout the remainder of the term of the Agreement for each period set forth in the table in part (a) of this Schedule 11.3.
For each incremental 10% that the Projected Revenue is lower than the MI Threshold, the Minimum Interest multiple will increase,
automatically and without notice from Lender, by an additional 0.05 throughout the remainder of the term of the Agreement for
each period set forth in the table in part (a) of this Schedule 11.3.

 

If
the Company Entities fail to meet the MI Threshold for two or more Revenue Test Periods, the adjustments made pursuant to part
(b) of this Schedule 11.3 will be cumulative. There is no limit to the number of adjustments that may be made pursuant
to part (b) of this Schedule 11.3.

 

 

    40

     

    

 

SCHEDULE
11.4 PERMITTED INDEBTEDNESS

 

“Permitted
Indebtedness” is:

 

(a)               
Company’s and the Company Entities’
Indebtedness to Lender under this Agreement and the other Transaction Documents;

 

		(b)	unsecured
                                         Indebtedness to trade creditors incurred in the ordinary course of business;

 

(c)               
Indebtedness incurred as a result of endorsing
negotiable instruments received in the ordinary course of any Company Entity’s business;

 

		(d)	Indebtedness
                                         secured by the Merits Lien; and

 

(e)               
Indebtedness secured by the Navitas Lien.

 

 

    41

     

    

 

SCHEDULE
11.5 PERMITTED LIENS

 

“Permitted
Liens” are:

 

(a)               
the Merits Lien;

 

		(b)	the
                                         Navitas Lien;

 

(c)               
Liens for taxes, fees, assessments or other government
charges or levies, either not delinquent or being contested in good faith and for which the applicable Company Entity maintains
adequate reserves on its books, provided that no notice of any such Lien has been filed or recorded under the Internal Revenue
Code of 1986, as amended , and the Treasury Regulations adopted thereunder;

 

(d)               
statutory Liens securing claims or demands of
materialmen, mechanics, carriers, warehousemen, landlords and other Persons imposed without action of such parties, provided they
have no priority over any of Lender’s Lien and the aggregate amount of such Liens does not exceed $10,000 at any one time;

 

(e)               
leases or subleases of real property granted
in the ordinary course of business, if the leases, subleases, licenses and sublicenses do
not prohibit granting Lender a security interest; and

 

(f)                
banker’s liens, rights of setoff and Liens
in favor of financial institutions incurred made in the ordinary course of business arising in connection with a Company Entity’s
deposit accounts or securities accounts held at such institutions to secure solely payment of fees and similar costs and expenses;

 

(g)               
Liens to secure payment of workers’ compensation,
employment insurance, old-age pensions, social security and other like obligations incurred in the ordinary course of business
(other than Liens imposed by ERISA);

 

(h)               
Liens arising from judgments, decrees or attachments
in circumstances not constituting an Event of Default under Section 7.4;

 

(i)                 
easements, reservations, rights-of-way, restrictions,
minor defects or irregularities in title and similar charges or encumbrances affecting real property not constituting a Material
Adverse Effect;

 

(j)                 
non-exclusive licenses of intellectual property
granted to third parties in the ordinary course of business; and

 

(k)               
non-exclusive licenses of intellectual property
granted to third parties in the ordinary course of business in connection with joint ventures and
corporate collaborations.

 

    42Exhibit 10.2

 

ASSET PURCHASE AGREEMENT 

 

By and among 

 

COPA di VINO WINE GROUP, INC.,

 

SPLASH BEVERAGE GROUP, INC., 

a Nevada Corporation,

 

SPLASH BEVERAGE GROUP, INC., 

a Colorado Corporation,

 

and

 

COPA di VINO CORPORATION

 

dated as of 

December 24, 2020

 

     

     

    

 

ASSET PURCHASE AGREEMENT

 

This Asset Purchase Agreement (this “Agreement”),
dated as of December 24, 2020, is entered into by and among Copa di Vino Corporation, an Oregon corporation (“Seller”),
Copa di Vino Wine Group, Inc., a Nevada corporation (“Buyer”), Splash Beverage Group, Inc., a Nevada corporation
(“Splash Nevada”), and Splash Beverage Group, Inc., a Colorado corporation (“Parent”). Buyer,
Splash Nevada and Parent are hereafter referred to as the “Buyer Parties.”

 

RECITALS

 

WHEREAS, Seller wishes
to sell and assign to Buyer, and Buyer wishes to purchase and assume from Seller, the rights of Seller to the Purchased Assets
(as defined herein), subject to the terms and conditions set forth herein;

 

WHEREAS, the Buyer is
a wholly-owned subsidiary of Splash Nevada and Splash Nevada and Parent have agreed to make payment for the Purchased Assets on
behalf of the Buyer;

 

WHEREAS, Splash Nevada
is a wholly-owned subsidiary of Parent, the common stock of which is quoted on the OTCQB market;

 

WHEREAS, in connection
with Buyer’s purchase of the Purchased Assets, the Parent has agreed to make certain representations in connection with
the issuance of certain equity consideration issuable hereunder.

 

NOW, THEREFORE, in consideration
of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I

Purchase and Sale

 

Section
1.01Purchase and Sale of Assets. Subject to the
terms and conditions set forth herein, Seller shall sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase
from Seller, all of Seller’s right, title and interest in the assets set forth on Section 1.01 of the disclosure schedules (“Disclosure
Schedules”) attached hereto (the “Purchased Assets”), free and clear of any mortgage, pledge, lien,
charge, security interest, claim or other encumbrance (“Encumbrance"). The transactions contemplated by this
Agreement are hereafter referred to as the “Transaction.”

 

Section
1.02Assumption of Liabilities. Subject to the
terms and conditions set forth herein, Buyer, Splash Nevada and Parent shall jointly and severally assume and agree to timely
pay, perform and discharge certain trade payables and accrued expenses as set forth on Section 1.02 of the Disclosure Schedules,
but only to the extent that such liabilities and obligations do not relate to any breach, default or violation by Seller on or
prior to the Closing (collectively, the "Assumed Liabilities"). In any event, except as otherwise provided on
Section 1.02 of the Disclosure Schedules, not later than six months following Closing, the Buyer Parties shall pay, perform and
discharge each Assumed Liability or obtain a written release discharging Seller from all obligations related to such Assumed Liability.
Other than the Assumed Liabilities, each of Buyer, Splash Nevada and Parent shall not assume any liabilities or obligations of
Seller of any kind, whether known or unknown, contingent, matured or otherwise, whether currently existing or hereinafter created
(collectively, the “Excluded Liabilities”).

 

    1

     

    

 

Section 1.03Purchase
Price. Subject to the conditions in this Section
1.03, the aggregate purchase price (the “Purchase Price”) for the Purchased Assets shall be $5,980,000, payable
in the combination of cash, debt and equity in the Parent as described herein. The Purchase Price shall consist of the following
(i) $2,000,000.00 of cash (the “Purchase Cash”); (ii) $2,000,000 convertible promissory note to Seller payable
jointly and severally by Buyer, Splash Nevada, and Parent with a 2% APR, substantially in the form of Exhibit 1.03 (the “Purchase
Promissory Note”), and (iii) the Parent Shares as set forth below.

 

No later than sixty (60)
days after one of the Revenue Hurdles has been reached and the Introductions have been completed (or the obligation to make the
Introductions has terminated), the Parent shall issue to Seller one of the following amounts of Parent Shares, depending on which
Revenue Hurdle the Buyer actually realizes: (a) if the monthly combined net revenue as determined under generally accepted accounting
principles generated by the Buyer and its subsidiaries for each of two consecutive months during the twelve (12) month period
following the Closing of this Transaction equates to or exceeds $455,194.00 (the “First Revenue Hurdle”), then
Parent shall issue the number of its shares of common stock (the “Parent Shares”) equal to $1,980,000 divided
by the Average Trading Price; or (b) if the First Revenue Hurdle was not achieved, but the monthly combined net revenue generated
by the Buyer and its subsidiaries for each of two consecutive months during the eighteen (18) month period following the Closing
of this Transaction equates to or exceeds $455,194.00 (the “Second Revenue Hurdle”), then Parent shall issue
the number of Parent Shares equal to $1,000,000 divided by the Average Trading Price. The “Average Trading Price”
means the volume weighted average price (“VWAP”) for thirty (30) consecutive trading days of the Common
Stock as quoted on a stock exchange or over-the-counter market and reported by Bloomberg LLP, immediately before the date of issuance
of such Parent Shares. Except as otherwise provided below, the Parent shall have no obligation to issue any Parent Shares to the
Seller unless the Buyer has satisfied one of the Revenue Hurdles and James Martin, the President of the Seller has introduced
Splash Nevada to all of Seller’s Anheuser Busch distributors and has advocated for and used his best efforts to cause all
of such Anheuser Busch distributors to distribute and sell the Tapout Performance Drink product line (such efforts are hereafter
referred to as the “Introductions”). If Splash Nevada or Buyer waives the requirement of James Martin’s
Introductions in writing, Seller’s obligations under the Introductions will be deemed fulfilled. Splash Nevada or Buyer
shall timely pay the reasonable costs and expenses associated with making the Introductions and shall provide all other support
reasonably needed to make the Introductions. If Splash Nevada and Buyer fail to pay such costs and expenses or provide such support,
James Martin’s obligation to make the Introductions shall terminate and the Parent shall be obligated to issue the Parent
Shares if Buyer has satisfied one of the Revenue Hurdles notwithstanding the fact that part or all of the Introductions have not
been made.

 

The Purchase Cash, Purchase
Promissory Note, and Parent Shares collectively constitute the Purchase Price. The Buyer Parties shall pay or cause the payment
of the Purchase Cash to Seller at the Closing (as defined herein), by wire transfer of immediately available funds in accordance
with the wire transfer instructions set forth in Section 1.03 of the Disclosure Schedules and Parent, Splash Nevada and Buyer
shall deliver the Purchase Promissory Note to the Seller at Closing.

 

    2

     

    

 

Section 1.04Piggy-Back
Registration Rights. If at any time while the principal amount
on the Purchase Promissory Note is outstanding, Parent determines to prepare and file with the securities and exchange commission
(the “SEC”) a registration statement (the “Registration Statement”) relating to an offering for its own
account or the account of others under the Securities Act of any of its equity securities, including a shelf registration statement,
other than a registration statement on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents
relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities
issuable in connection with stock option or other employee benefit plans, then the Company shall send to Seller a written notice
of such determination and, if within thirty days after the date of such notice, Seller shall so request in writing, Parent shall
include in such Registration Statement all or any part of such Registrable Securities Seller requests to be registered, unless
the underwriters named on the Registration Statement object to the inclusion of the Registrable Securities in such Registration
Statement or the inclusion of the Registrable Securities significantly prolongs the period of time required to clear the Registration
Statement with the SEC or triggers multiple rounds of SEC comments before clearing the Registration Statement with the SEC.

 

The term “Registrable
Securities” means (i) all shares of Common Stock underlying the Purchase Promissory Note, including, without limitation,
any shares of Common Stock issued or issuable in respect of conversions under the Purchase Promissory Note, and (ii) any securities
issued or issuable in connection with any stock split or similar event with respect to the foregoing.

 

The term “Registration
Statement” means the registration statements required to be filed hereunder and any additional registration statements contemplated
by Section 1.04, including (in each case) the prospectus, amendments and supplements to such registration statement, including
pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated
by reference in such registration statement.

 

Section
1.05Training. Upon Closing of this Transaction, for
value received under Section 1.03, Seller or Seller’s designee shall train Buyer and its staff on site regarding the operations
of the winery business at no additional cost to the Buyer until (i) Buyer is granted approval of a winery license and/or a 90-day
operating permit by the Oregon Liquor Control Commission (“OLCC”) and (ii) Buyer receives a winery license or its
equivalent from each of all other State, Federal, and City regulatory agencies where Buyer intends to do business (the “Training
Period”). 

 

During
this Training Period, Seller shall at Buyer’s expense maintain all of its liquor licenses and permits in good standing,
including renewal of all of its liquor licenses, in order to facilitate a seamless transition of the business operation to the
Buyer. In addition, during the Training Period, Seller shall remain on site to conduct alcohol sales on behalf and for the benefit
of Buyer.

 

    3

     

    

 

The
Buyer has agreed to, no later than forty-five (45) days from the Closing Date, apply to the OLCC for the appropriate licenses
to conduct its business and Seller has agreed to cooperate with Buyer in all matters concerning such license applications. However,
both the Buyer and Seller acknowledge and understand that Seller’s cooperation and training efforts set forth herein does
not constitute Seller’s guaranty and/or promise that Buyer will ultimately be granted a liquor license.

 

ARTICLE II

Closing

 

Section
2.01Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place on December 24, 2020 or on such later date as
mutually agreed upon by the parties hereto (the "Closing Date") at the offices of Sichenzia Ross Ference LLP,
1185 Avenue of the Americas, 37th Floor, New York, New York 10036. The consummation of the transactions contemplated
by this Agreement shall be deemed to occur at 5:01 p.m. on the Closing Date.

 

Section
2.02Closing Deliverables. 

 

(a)       At
the Closing, Seller shall deliver to Buyer the following:

 

(i)       a
bill of sale in form and substance satisfactory to Buyer (the "Bill of Sale") and duly executed by Seller, transferring
the Purchased Assets to Buyer;

 

(ii)       an
assignment and assumption agreement in form and substance satisfactory to Buyer (the "Assignment and Assumption Agreement")
and duly executed by Seller, effecting the assignment to and assumption by Buyer of the Purchased Assets and the Assumed Liabilities;

 

(iii)       an
assignment and assumption agreement in form and substance satisfactory to Buyer (the “Drinx Assignment and Assumption
Agreement”) and duly executed by Drinx Tec Inc. (“Drinx”), an Oregon corporation, Seller and Buyer, effecting
the transfer and assignment of the distribution agreement related to the right to distribute the Pulpoloco branded products in
the United States from Drinx to Seller and subsequently from Seller to Buyer;

 

(iv)       assignments
in form and substance satisfactory to Buyer (the "Intellectual Property Assignments") and duly executed by Seller,
transferring all of Seller's right, title and interest in and to the trademark registrations and applications, patents and patent
applications, copyright registrations and applications, domain name registrations, trade secret and other proprietary information
included in the Purchased IP (as defined in Section 3.10) to Buyer;

 

(v)       a
sublease in form and substance satisfactory to Seller and Buyer subleasing to Buyer the real property used by Seller in the operation
of its business (the “Sublease”) duly executed by Seller;

 

    4

     

    

 

(vi)       copies
of all consents, approvals, waivers and authorizations referred to in Section 3.02 of the Disclosure Schedules, including the
consent or resolutions of the Seller’s shareholders owning the majority voting power (the “Majority Shareholders”)
and the consent or resolutions of the Seller’s board of directors approving this Transaction;

 

(vii)       a
certificate of the Secretary or Assistant Secretary (or equivalent officer) of Seller certifying as to (A) the resolutions of
the board of directors of Seller and its Majority Shareholders, duly adopted and in effect, which authorize the execution, delivery
and performance of this Agreement and the transactions contemplated hereby; and (B) the names and signatures of the officers of
Seller authorized to sign this Agreement and the documents to be delivered hereunder;

 

(viii)       retention
agreements in form and substance satisfactory to Buyer (the “Employee Retention Agreements”) duly executed
by each of the named employees (the “Retained Employees”) set forth in Section 2.02 of the Disclosure Schedules;

 

(ix)       such
other customary instruments of transfer, assumption, filings or documents, in form and substance reasonably satisfactory to Buyer,
as may be required to give effect to this Agreement; and

 

(b)       At
the Closing, Buyer shall deliver to Seller the following:

 

(i)       the
Purchase Cash by wire transfer of immediately available funds to an account designated in writing by Seller to Buyer;

 

(ii)       the
Purchase Promissory Note duly executed by Buyer, Splash Nevada and Parent to Seller;

 

(iii)       the
Sublease duly executed by Parent, Splash Nevada, and Buyer;

 

(iv)       The
Employee Retention Agreements, each duly executed by Buyer or Splash Nevada;

 

(v)       the
Assignment and Assumption Agreement duly executed by Buyer, Splash Nevada and Parent;

 

(vi)       a
certificate of the Secretary or Assistant Secretary (or equivalent officer) of Buyer certifying as to (A) the resolutions of the
board of directors of Buyer, duly adopted and in effect, which authorize the execution, delivery and performance of this Agreement
and the transactions contemplated hereby; and (B) the names and signatures of the officers of Buyer authorized to sign this Agreement
and the documents to be delivered hereunder; and

 

(vii)       such
other customary instruments of assumption, filings or documents, in form and substance reasonably satisfactory to Seller, as may
be required to give effect to this Agreement.

 

    5

     

    

 

For purposes of
this Agreement, the term “Transaction Documents” shall mean, collectively, this Agreement, the Bill of Sale,
the Assignment and Assumption Agreement, Drinx Assignment and Assumption Agreement, the Intellectual Property Assignments, the
Purchase Promissory Note, the Sublease, and the other agreements, instruments and documents required to be delivered at the Closing.
Any breach by Seller of any Transaction Document shall constitute a breach by Seller of all the Transaction Documents. Any breach
by a Buyer Party of the terms of any Transaction Document shall constitute a breach by each of the Buyer Parties of all the Transaction
Documents.

 

Section 2.03Accounting
Treatment Regarding Closing Date. For accounting purposes only,
the Closing Date of this Transaction shall be deemed to be December 1, 2020.

 

ARTICLE III

Representations and warranties of seller

 

Seller represents and
warrants to each of Buyer Parties except as set forth in the Disclosure Schedules attached hereto, which exceptions shall be deemed
to be part of the representations and warranties made hereunder that the statements contained in this ARTICLE III are true and
correct as of the date of the Closing of the Transactions. For purposes of this ARTICLE III

 

"Seller's knowledge,"
"knowledge of Seller" and any similar phrases shall mean the actual knowledge of any officer of Seller, after
due inquiry.

 

“Material Adverse
Effect” shall mean any event, occurrence, fact, condition or change that is materially adverse to (a) the business,
results of operations, financial condition or assets of the Business, taken as a whole, or (b) the ability of Seller to consummate
the transactions contemplated hereby; provided, however, that "Material Adverse Effect" shall not include any
event, occurrence, fact, condition or change, directly or indirectly, arising out of or attributable to: (i) general economic
or political conditions; (ii) conditions generally affecting the industries in which the Business operates; (iii) any changes
in financial, banking or securities markets in general, including any disruption thereof and any decline in the price of any security
or any market index or any change in prevailing interest rates; (iv) acts of war (whether or not declared), armed hostilities
or terrorism, or the escalation or worsening thereof; (v) any action required or permitted by this Agreement or any action taken
(or omitted to be taken) with the written consent of or at the written request of Buyer; (vi) any matter of which Buyer is aware
on the date hereof; (vii) any changes in applicable Laws or accounting rules (including GAAP); (viii) the announcement, pendency
or completion of the transactions contemplated by this Agreement, including losses or threatened losses of employees, customers,
suppliers, distributors or others having relationships with the Seller and the Business; (ix) any natural or man-made disaster
or acts of God; or (x) any failure by the Business to meet any internal or published projections, forecasts or revenue or earnings
predictions (provided that the underlying causes of such failures (subject to the other provisions of this definition) shall not
be excluded).

 

Section
3.01Organization and Authority of Seller; Enforceability. Seller
is a corporation duly organized, validly existing and in good standing under the laws of the state of Oregon and has all necessary
corporate power and authority to own, operate or lease the properties and assets now owned, operated or leased by it. Seller is
duly licensed or qualified to do business and is in good standing in each jurisdiction in which the ownership of the Purchased
Assets makes such licensing or qualification necessary, except where the failure to be so licensed, qualified, or in good standing
would not have a Material Adverse Effect. Seller has full corporate power and authority to enter into this Agreement and the documents
to be delivered hereunder, to carry out its obligations hereunder and to consummate the transactions contemplated hereby. The
execution, delivery and performance by Seller of this Agreement and the documents to be delivered hereunder and the consummation
of the transactions contemplated hereby have been duly authorized by all requisite corporate action on the part of Seller. This
Agreement and the documents to be delivered hereunder have been duly executed and delivered by Seller, and (assuming due authorization,
execution and delivery by Buyer) this Agreement and the documents to be delivered hereunder constitute legal, valid and binding
obligations of Seller, enforceable against Seller in accordance with their respective terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or other laws of general application relating to or
affecting the enforcement of creditors’ rights generally, or (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies.

 

    6

     

    

 

Section 3.02No
Conflicts; Consents. The execution, delivery
and performance by Seller of this Agreement and the documents to be delivered hereunder, and the consummation of the transactions
contemplated hereby, do not and will not: (a) violate or conflict with the certificate of incorporation, by-laws or other organizational
documents of Seller; (b) violate or conflict with any judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Seller or the Purchased Assets; (c) conflict with, or result in (with or without notice or lapse of time or both) any violation
of, or default under, or give rise to a right of termination, acceleration or modification of any obligation or loss of any benefit
under any contract or other instrument to which Seller is a party or to which any of the Purchased Assets are subject; except
in the cases of clauses (b) and (c), where the violation, breach, conflict, default, acceleration or failure to give notice would
not have a Material Adverse Effect; or (d) result in the creation or imposition of any Encumbrance that will not be paid in full
on or prior to the Closing on the Purchased Assets. No consent, approval, waiver or authorization is required to be obtained by
Seller from any person or entity (including any governmental authority) in connection with the execution, delivery and performance
by Seller of this Agreement and the consummation of the transactions contemplated hereby.

 

Section 3.03Financial
Statements. Copies of financial statements consisting of the
balance sheet of the Seller in each of the years December 31, 2019 and 2018 and the related statements of income and retained
earnings and stockholders' equity for the years then ended (the "Prior Financial Statements"), and unaudited
financial statements consisting of the balance sheet of the Seller as of November 30, 2020 and the related statements of income
and retained earnings, stockholders' equity and cash flow for the eleven-month period then ended (the "Interim Financial
Statements" and together with the Prior Financial Statements, the "Financial Statements") have been
made available to Buyer. The Financial Statements have been prepared in accordance with accounting principles that the Seller
believes are reasonable for a company of its size and financial condition. Seller represents that the Financial Statements fairly
present in all material respects the financial condition of the Business as of the respective dates they were prepared and the
results of the operations of the Business for the periods indicated. The balance sheets as of December 31, 2019 and 2018 are individually
referred to herein as a "Prior Balance Sheet" and the date thereof as the "Prior Balance Sheet Date"
and the balance sheet as of November 30, 2020 is referred to herein as the "Interim Balance Sheet" and the date
thereof as the "Interim Balance Sheet Date". Seller represents that it will cooperate with the Buyer Parties
and the selected auditing firm to prepare the reviewed financial statements for the nine-month period ended September 30, 2020
(the “Reviewed Nine-Month Financial Statements”) and understands that the Parent needs to include the Reviewed
Nine-Month Financial Statements in its current report to be filed with the United States Securities and Exchange Commission (the
“SEC”). 

 

    7

     

    

 

Section
3.04Absence of Certain Changes, Events and Conditions. Except
as expressly contemplated by this Agreement, from the Interim Balance Sheet Date until the date of this Agreement, Seller has
operated the Business in the ordinary course of business in all material respects and there has not been, with respect to the
Business, and other than in the ordinary course of business any:

 

(a)       event,
occurrence or development that has had a Material Adverse Effect;

 

(b)       incurrence
of any indebtedness for borrowed money in connection with the Business in an aggregate amount exceeding $25,000, except unsecured
current obligations and liabilities incurred in the ordinary course of business;

 

(c)       sale
or other disposition of any of the Purchased Assets shown or reflected in the Interim Balance Sheet;

 

(d)       cancellation
of any debts or claims or amendment, termination or waiver of any rights constituting Purchased Assets, except in the ordinary
course of business;

 

(e)       imposition
of any Encumbrance upon any of the Purchased Assets;

 

(f)       increase
in the compensation of any employees, other than as provided for in any written agreements or in the ordinary course of business;

 

(g)       adoption,
termination, amendment or modification of any employee benefit plan;

 

(h)       adoption
of any plan of merger, consolidation, reorganization, liquidation or dissolution or filing of a petition in bankruptcy under any
provisions of federal or state bankruptcy law or consent to the filing of any bankruptcy petition against it under any similar
law; or

 

(i)       any
agreement to do any of the foregoing, or any action or omission that would result in any of the foregoing.

 

    8

     

    

 

Section
3.05Material Contracts. 

 

(a)       Section
3.05 (a) of the Disclosure Schedules lists each of the following Contracts (x) by which any of the Purchased Assets are bound
or affected or (y) to which Seller is a party or by which it is bound in connection with the Purchased Assets (collectively, the
"Material Contracts"):

 

(i)       all
contracts requiring performance by any party more than one year from the date hereof, which, in each case, cannot be cancelled
without penalty or without more than 180 days’ notice;

 

(ii)       all
contracts that relate to the sale of any of the Purchased Assets;

 

(iii)       
all contracts that relate to the acquisition of any business, a material amount of stock or assets of any other person or any
real property (whether by merger, sale of stock, sale of assets or otherwise), in each case involving amounts in excess of $25,000;

 

(iv)       all
contracts relating to indebtedness (including, without limitation, guarantees), in each case having an outstanding principal amount
in excess of $25,000;

 

(v)       all
contracts between or among the Seller on the one hand and any affiliate of Seller on the other hand; and

 

(vi)       all
collective bargaining agreements or contracts with any labor organization, union or association.

 

(b)       Seller
is not in breach of, or default under, any Material Contract, except for such breaches or defaults that would not have a Material
Adverse Effect.

 

Section
3.06Assigned Contracts. Section 3.06 of the Disclosure
Schedules lists each contract included in the Purchased Assets that is being assigned to and assumed by Buyer (the "Assigned
Contracts"). Each Assigned Contract is valid and binding on Seller in accordance with its terms and is in full force
and effect. Neither Seller nor any other party thereto is in material breach of or default under (or is alleged to be in breach
of or default under), or has provided or received any notice of any intention to terminate, any Assigned Contract. No event or
circumstance has occurred that, with or without notice or lapse of time or both, would constitute an event of default under any
Assigned Contract or result in a termination thereof or would cause or permit the acceleration or other changes of any right or
obligation or the loss of benefit thereunder, unless each terminated agreement has less than $25,000 in value or all of the terminated
agreements have less than an aggregate of $50,000 in value. Complete and correct copies of each Assigned Contract have been made
available to Buyer. There are no disputes pending or, to Seller’s Knowledge, threatened under any Assigned Contract. Buyer
acknowledges that certain Contracts can’t be assigned without the approval or consent of the other party or parties to such
Material Contracts (the “Nontransferable Contracts”). Seller and Buyer agree to cooperate with and use their
best efforts to get the approval necessary to assign each Nontransferrable Contract, and upon obtaining such approval, Seller
will assign such Contract to Buyer. Seller will, to the extent legally allowed, facilitate at Buyer’s expense Buyer’s
ability to take those actions that Seller would be entitled to take and derive the benefit therefrom, pursuant to the terms of
any Nontransferable Contract until the earlier of that the Nontransferable Contract has been legally assigned to Buyer or such
Nontransferable Contract ceases being effective and enforceable.

 

    9

     

    

 

Section
3.07Title to Purchased Assets. Seller owns and
has good title to the Purchased Assets, free and clear of Encumbrances.

 

Section
3.08Condition of Assets. The Purchased Assets
are in good condition and are adequate for the uses to which they are being put, and none of such Purchased Assets is in need
of maintenance or repairs except for ordinary, routine maintenance and repairs that are not material in nature or cost.

 

Section
3.09Inventory. Except as provided on Section
3.09 of the Disclosure Schedules, all Inventory included in the Purchased Assets consist of a quality and quantity usable and
salable in the ordinary course of business.

 

Section
3.10Intellectual Property. 

 

(a)       "Intellectual
Property" means any and all of the following in any jurisdiction throughout the world: (i) trademarks and service marks,
including all applications and registrations and the goodwill connected with the use of and symbolized by the foregoing; (ii)
copyrights, including all applications, software and registrations related to the foregoing; (iii) trade secrets and confidential
know-how; (iv) patents and patent applications; (v) websites and internet domain name registrations; and (vi) other intellectual
property and related proprietary rights, exclusive and non-exclusive licensing rights, interests and protections (including all
rights to sue and recover and retain damages, costs and attorneys' fees for past, present and future infringement and any other
rights relating to any of the foregoing).

 

(b)       To
Seller’s Knowledge, Section 3.10 (b) of the Disclosure Schedules lists all the Intellectual Property included in the Purchased
Assets ("Purchased IP"). Seller owns or has adequate, valid and enforceable rights to use all the Purchased IP,
free and clear of all Encumbrances, except where the lack of such rights would not cause a Material Adverse Effect on the use
of the Purchased IP. Seller is not bound by any outstanding judgment, injunction, order or decree restricting the use of the Purchased
IP, or restricting the licensing thereof to any person or entity. With respect to the registered Intellectual Property listed
on Section 3.10 (b) of the Disclosure Schedules, (i) all such Intellectual Property is valid, subsisting and in full force and
effect; and (ii) Seller has paid all maintenance fees and made all filings required to maintain Seller's ownership thereof. For
all such registered Intellectual Property, Section 3.10 (b) of the Disclosure Schedules lists (A) the jurisdiction where the application
or registration is located; (B) the application or registration number; and (C) the application or registration date.

 

(c)       To
Seller’s Knowledge, Seller's prior and current use of the Purchased IP has not and does not infringe, violate, dilute or
misappropriate the Intellectual Property of any person or entity and there are no claims pending or threatened by any person or
entity with respect to the ownership, validity, enforceability, effectiveness or use of the Purchased IP. To Seller’s Knowledge,
no person or entity is infringing, misappropriating, diluting or otherwise violating any of the Purchased IP, and neither Seller
nor any affiliate of Seller has made or asserted any claim, demand or notice against any person or entity alleging any such infringement,
misappropriation, dilution or other violation.

 

    10

     

    

 

Section 3.11Permits.
Section 3.11 of the Disclosure Schedules
lists all of Seller’s permits, licenses, franchises, approvals, authorizations, registrations, certificates, variances and
similar rights obtained from governmental authorities (the "Governmental Permits"). The Governmental Permits
are valid and in full force and effect and all fees and charges with respect to such Governmental Permits as of the date hereof
have been paid in full, except for such failure of timely payments that would not have a Material Adverse Effect on the operations
of the Purchased Assets. With respect to the winery licenses and permits, the Seller
represents that it currently holds a valid winery license, a TTB winery permit, and other State licenses in those states listed
in Section 3.11 of the Disclosure Schedule. In addition, to Seller’s Knowledge, since the date its OLCC Winery license was
last reissued, Seller has made no alterations to the premises of its operations that would impair the validity of its OLCC Winery
license and Seller is materially compliant with all the United States Federal and State rules and regulations regarding all of
its winery licenses and permits. To Seller’s Knowledge, no event has occurred that, with or without notice or
lapse of time or both, would reasonably be expected to result in the revocation, suspension, lapse or limitation of any Governmental
Permit. Buyer acknowledges that most, if not all, of its Governmental Permits cannot be assigned or transferred without the approval
or consent of applicable governmental authorities (the “Nontransferable Permits”). Seller will, to the extent
legally allowed, facilitate at Buyer’s expense Buyer’s ability to take actions that Seller would be entitled to take
and derive the benefit therefrom, pursuant to the terms of any Nontransferable Permit until the earlier of the date the Nontransferable
Permit has been legally transferred to Buyer or Buyer has obtained its own permit for such activity.

 

Section
3.12Compliance With Laws. Seller has complied,
and is now complying, with all applicable federal, state and local laws and regulations applicable to ownership and use of the
Purchased Assets, except where the failure to be in compliance would not have a Material Adverse Effect.

 

Section 3.13Legal
Proceedings. Except as described in Section
3.13 of the Disclosure Schedules, there is no claim, action, suit, proceeding or governmental investigation ("Action")
of any nature pending or, to Seller's knowledge, threatened against or by Seller (a) relating to or affecting the Purchased Assets
or the Assumed Liabilities, which if determined adversely to Seller would result in a Material Adverse Effect; or (b) that challenges
or seeks to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement. To Seller’s Knowledge, no
event has occurred or circumstances exist that may give rise to, or serve as a basis for, any such Action.

 

Section
3.14Employment Matters. 

 

(a)       Seller
is not a party to, bound by, any collective bargaining or other agreement with a labor organization representing any of its employees.
There has not been, nor, to Seller's Knowledge, has there been any threat of, any strike, slowdown, work stoppage, lockout, concerted
refusal to work overtime or other similar labor activity or dispute affecting Seller or any of its employees.

 

    11

     

    

 

(b)       Seller
is in compliance with all applicable Laws pertaining to employment and employment practices to the extent they relate to its employees,
except to the extent non-compliance would not result in a Material Adverse Effect.

 

(c)       As
of the date hereof, each of the Retained Employees is still employed by Seller and has maintained a good standing and relationship
with Seller. 

 

Section
3.15Taxes. 

 

(a)       Except
as would not have a Material Adverse Effect, Seller has filed (taking into account any valid extensions) all material tax returns
required to be filed by Seller and has paid all taxes shown thereon as owing. To Seller’s Knowledge, Seller is not currently
the beneficiary of any extension of time within which to file any material tax return other than extensions of time to file tax
returns obtained in the ordinary course of business.

 

(b)       Seller
is not a "foreign person" as that term is used in Treasury Regulations Section 1.1445-2.

 

Section 3.16Brokers.
No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement
based upon any arrangements made by or on behalf of Seller.

 

Section
3.17Investment Representations.

 

(a)       Seller
is acquiring the Purchase Promissory Note and Parent Shares for its own account and not with a view to the distribution thereof
in contravention of the Securities Act.

 

(b)       In
proceeding with the transactions contemplated hereby, Seller is not relying upon any representation or warranty of Buyer, Splash
Nevada, or Parent, or any of its officers, directors, employees, agents or representatives thereof, except the representations
and warranties set forth herein and the statements contained in Parent’s filings with the SEC. Seller is satisfied that
it has received adequate information with respect to all matters which it considers material to its decision to make this investment.

 

(c)       Seller
has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of acquiring
Purchase Promissory Note and Parent Shares and understand the risks of, and other considerations relating to, its acquisition
of the Purchase Promissory Note and Parent Shares.

 

(d)       
Seller understands the substance of and acknowledges the legend that will be placed on the Purchase Promissory Note and any Parent
Shares, in substantially the following form:

 

THE
SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS
AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE SECURITIES
ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID
ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN RECOMMENDED, APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF
THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

 

    12

     

    

 

Section 3.18Full
Disclosure. To Seller’s Knowledge, no
representation or warranty by Seller in this Agreement and no statement contained in the Disclosure Schedules to this Agreement
or any certificate or other document furnished or to be furnished to Buyer pursuant to this Agreement contains any untrue statement
of a material fact, or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances
in which they are made, not misleading.

 

Section
3.19Regulatory Issues. Seller represents that as of
the date of Closing it has received no notice that it is the subject of any ongoing regulatory action or proceeding by any federal,
state or local governmental agency or self-regulatory organization, including but not limited to the SEC and the Financial Industry
Regulatory Authority (the “FINRA”). To Seller’s actual present knowledge, none of its shareholders are the subject
of any such ongoing regulatory action or proceeding. 

 

ARTICLE IV

Representations and warranties of buyer, SPLASH NEVADA and parent

 

Buyer, Splash Nevada and
Parent herein represent and warrant severally to Seller that the statements contained in this ARTICLE IV are true and correct
as of the date of Closing. For purposes of this ARTICLE IV, "Buyer's knowledge," "knowledge of Buyer" and
any similar phrases shall mean the actual or constructive knowledge of any director or officer of Buyer, after due inquiry.

 

Section
4.01Organization and Authority of Buyer; Enforceability. Buyer
is a corporation duly organized, validly existing and in good standing under the laws of the state of Nevada. Buyer has full corporate
power and authority to enter into this Agreement and the documents to be delivered hereunder, to carry out its obligations hereunder
and to consummate the transactions contemplated hereby. The execution, delivery and performance by Buyer of this Agreement and
the documents to be delivered hereunder and the consummation of the transactions contemplated hereby have been duly authorized
by all requisite corporate action on the part of Buyer. This Agreement and the documents to be delivered hereunder have been duly
executed and delivered by Buyer, and (assuming due authorization, execution and delivery by Seller) this Agreement and the documents
to be delivered hereunder constitute legal, valid and binding obligations of Buyer enforceable against Buyer in accordance with
their respective terms.

 

    13

     

    

 

Section
4.02No Conflicts; Consents. The execution, delivery
and performance by Buyer of this Agreement and the documents to be delivered hereunder, and the consummation of the transactions
contemplated hereby, do not and will not: (a) violate or conflict with the certificate of incorporation, by-laws or other organizational
documents of Buyer; or (b) violate or conflict with any judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Buyer. No consent, approval, waiver or authorization is required to be obtained by Buyer from any person or entity (including
any governmental authority) in connection with the execution, delivery and performance by Buyer of this Agreement and the consummation
of the transactions contemplated hereby.

 

Section
4.03Sufficiency of Funds. Parent has sufficient
cash on hand or other sources of immediately available funds to enable it to make a payment of the Purchase Price and consummate
the transactions contemplated by this Agreement.

 

Section 4.04Solvency.
Immediately after giving effect to the transactions
contemplated hereby, Parent shall be solvent and shall: (a) be able to pay its debts as they become due; (b) own property that
has a fair saleable value greater than the amounts required to pay its debts (including a reasonable estimate of the amount of
all contingent liabilities); and (c) have adequate capital to carry on its business. No transfer of property is being made and
no obligation is being incurred in connection with the transactions contemplated hereby with the intent to hinder, delay or defraud
either present or future creditors of Buyer, Parent or Seller. In connection with the transactions contemplated hereby, Parent
has not incurred, nor plans to incur, debts beyond its ability to pay as they become absolute and matured.

 

Section 4.05SEC
Filings. The Parent has timely filed with or furnished to, as
applicable, the SEC all registration statements, prospectuses, reports, schedules, forms, statements, and other documents (including
exhibits and all other information incorporated by reference) required to be filed or furnished by it with the SEC (the "SEC
Documents"), except where such failure to file would not have a Material Adverse Effect on the Parent Shares or the Purchase
Promissory Note. True, correct, and complete copies of all SEC Documents are publicly available in the Electronic Data Gathering,
Analysis, and Retrieval database of the SEC ("EDGAR"). As of their respective filing dates or, if amended or
superseded by a subsequent filing prior to the date hereof, as of the date of the last such amendment or superseding filing (and,
in the case of registration statements and proxy statements, on the dates of effectiveness and the dates of the relevant meetings,
respectively), each of the SEC Documents complied as to form in all material respects with the applicable requirements of the
Securities Act, the Exchange Act, and the Sarbanes-Oxley Act of 2002 (including the rules and regulations promulgated thereunder,
the "Sarbanes-Oxley Act"), and the rules and regulations of the SEC thereunder applicable to such SEC Documents.
None of the SEC Documents, including any financial statements, schedules, or exhibits included or incorporated by reference therein
at the time they were filed (or, if amended or superseded by a subsequent filing prior to the date hereof, as of the date of the
last such amendment or superseding filing), contained any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which
they were made, not misleading. To the Knowledge of the Buyer and of the Parent, none of the SEC Documents is the subject of ongoing
SEC review or outstanding SEC investigation and there are no outstanding or unresolved comments received from the SEC with respect
to any of the SEC Documents. None of the Parent’s Subsidiaries is required to file or furnish any forms, reports, or other
documents with the SEC.

 

    14

     

    

 

Section
4.06OTC Markets Compliance. Parent is
in compliance with all of the applicable corporate governance rules of the OTC Markets, except for any non-compliance that would
not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the trading of Parent’s
Common Stock.

 

Section
4.07Legal Proceedings. There is no Action of
any nature pending or, to Buyer's knowledge, threatened against or by Buyer that challenges or seeks to prevent, enjoin or otherwise
delay the transactions contemplated by this Agreement. No event has occurred or circumstances exist that may give rise to, or
serve as a basis for, any such Action.

 

Section
4.08Brokers. No broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Buyer.

 

ARTICLE V

Covenants

 

Section
5.01Public Announcements. Subject to applicable
federal or state law, Buyer, Splash Nevada or Parent shall make all the decisions regarding any and all public announcements regarding
this Agreement or the transactions contemplated hereby at its sole discretion.

 

Section
5.02Bulk Sales Laws. The parties hereby waive
compliance with the provisions of any bulk sales, bulk transfer or similar laws of any jurisdiction that may otherwise be applicable
with respect to the sale of any or all of the Purchased Assets to Buyer; it being understood that any Liabilities arising out
of the failure of Seller to comply with the requirements and provisions of any bulk sales, bulk transfer or similar laws of any
jurisdiction which would not otherwise constitute Assumed Liabilities shall be treated as Excluded Liabilities.

 

Section 5.03Transfer
Taxes. All transfer, documentary, sales, use,
stamp, registration, value added and other such taxes and fees (including any penalties and interest) incurred in connection with
this Agreement and the documents to be delivered hereunder shall be borne and paid equally by the Seller and Buyer. The party
which has the primary responsibility under applicable law for the payment of any particular transfer taxes, shall prepare the
relevant tax return and notify the other party in writing of the transfer taxes shown on such tax return. Such other party shall
pay the party that paid the transfer tax an amount equal to fifty percent (50%) of such transfer taxes by check or wire transfer
of immediately available funds no later than the date that is the later of (i) five (5) business days after the date of such notice
or (ii) two (2) business days prior to due date for such transfer taxes. The Seller and Buyer shall cooperate in the preparation,
execution and filing of all transfer tax returns and shall cooperate in seeking to secure any available exemptions from such transfer
taxes. Buyer may, in its sole discretion, withhold the first monthly payment under the Purchase Promissory Note to ensure the
enforcement of this Section 5.03 and, if so withheld, Buyer shall release such monthly payment to Seller when all of the transfer
taxes related to this Transaction are duly paid and equally shared by Seller and Buyer.

 

    15

     

    

 

Section
5.04Non-contestation. Following the Closing, Seller,
its stockholders, directors, officers and affiliates
shall not contest or bring an action against any of the Buyer Parties or their affiliates with respect to the use of any of Seller’s
tradenames or any other types of intellectual properties by Buyer Parties and their affiliates, at law or in equity. 

 

Section
5.05Further Assurances. Following the Closing,
each of the parties hereto shall execute and deliver such additional documents, instruments, conveyances and assurances and take
such further actions as may be reasonably required to carry out the provisions hereof and give effect to the transactions contemplated
by this Agreement and the documents to be delivered hereunder.

 

ARTICLE VI

Indemnification

 

Section
6.01Survival. Subject to the limitations and
other provisions of this Agreement, the representations and warranties contained herein shall survive the Closing and shall remain
in full force and effect until the date that is one (1) year from the Closing Date. None of the covenants or other agreements
contained in this Agreement shall survive the Closing Date other than those which by their terms contemplate performance after
the Closing Date, and each such surviving covenant and agreement shall survive the Closing for the period contemplated by its
terms. Notwithstanding the foregoing, any claims asserted in good faith with reasonable specificity (to the extent known at such
time) and in writing by notice from the non-breaching party to the breaching party prior to the expiration date of the applicable
survival period shall not thereafter be barred by the expiration of such survival period and such claims shall survive until finally
resolved.

 

Section
6.02Indemnification By Seller. Subject to the
other terms and conditions of this Article VI, Seller shall defend, indemnify and hold harmless Buyer, its affiliates and their
respective stockholders, directors, and officers from and against any and all claims, judgments, damages, liabilities, settlements,
losses, costs and expenses, including reasonable attorneys' fees and disbursements (collectively, “Losses”),
incurred or sustained by, or imposed upon, Buyer based upon, arising out of, with respect to or by reason of:

 

(a)       any
inaccuracy in or breach of any of the representations or warranties of Seller contained in this Agreement or any document to be
delivered hereunder;

 

(b)       any
breach or non-fulfillment of any covenant, agreement or obligation to be performed by Seller pursuant to this Agreement or any
document to be delivered hereunder; 

 

    16

     

    

 

(c)       any
liabilities (including the Excluded Liabilities but excluding the Assumed Liabilities) imposed by a third party, including any
federal, state and local governmental or semi-governmental agencies, against any of the Buyer Parties because the Transaction
is deemed an acquisition of all or substantially all of Seller’s assets and any or all of the Buyer Parties is or are deemed
the successor(s) of Seller under the applicable laws. Such liabilities described in this Section 6.02(c) shall include, without
limitation, any and all of unpaid tax liabilities of Seller;

 

(d)       any
current and future, potential and existing liabilities and obligations arising from any disputes among any of the Seller’s
shareholders and Seller; or

 

(e)       any
costs and expenses incurred by any Buyer Party associated with cooperating with any federal, state or local governmental agencies
regarding investigations or actions involving any current or former shareholders of Seller or Seller.

 

Section
6.03 Indemnification By Buyer. Subject to the
other terms and conditions of this ARTICLE VI, Buyer shall indemnify Seller against, and shall hold harmless Seller, its directors
and officers from and against, any and all Losses incurred or sustained by, or imposed upon, Seller based upon, arising out of,
with respect to or by reason of:

 

(a)       any
inaccuracy in or breach of any of the representations or warranties of Buyer contained in this Agreement;

 

(b)       any
Purchased Assets;

 

(c)       any
breach or non-fulfillment of any covenant, agreement or obligation to be performed by Buyer pursuant to this Agreement; or

 

(d)       any
Assumed Liability.

 

Section 6.04Certain
Limitations. The party making a claim under
this ARTICLE VI is referred to as the "Indemnified Party", and the party against whom such claims are asserted
under this ARTICLE VI is referred to as the "Indemnifying Party". The indemnification provided for in Section
6.02 and Section 6.03 (a) and (b) shall be subject to the following limitations:

 

(a)       No
Loss arising out of a party’s breach of a representation or warranty contained in this Agreement for which an Indemnifying
Party would otherwise be liable pursuant to Section 6.02 or Section 6.03(a) (a) and (b), as the case may be, shall give rise to
an indemnification obligation under this Agreement unless such Loss, after reduction by any insurance proceeds and any third party
indemnity, contribution or other similar payment received or reasonably expected to be received by the Indemnified Party in respect
of any such Loss, equals or exceeds the sum of $25,000. The aggregate amount of all Losses for which an Indemnifying Party shall
be liable pursuant to Section 6.02 or Section 6.03(a) (a) and (b), as the case may be, shall not exceed the sum of $750,000. 

 

(b)       Payments
by an Indemnifying Party pursuant to Section 6.02 or Section 6.03 in respect of any Loss shall be limited to the amount of any
liability or damage that remains after deducting therefrom any insurance proceeds and any third party indemnity, contribution
or other similar payment received or reasonably expected to be received by the Indemnified Party in respect of any such claim.
The Indemnified Party shall use its commercially reasonable efforts to recover under insurance policies or indemnity, contribution
or other similar agreements for any Losses prior to seeking indemnification under this Agreement.

 

    17

     

    

 

(c)       In
no event shall any Indemnifying Party be liable to any Indemnified Party for any punitive, incidental, consequential, speculative,
special or indirect damages, including loss of future revenue or income, loss of business reputation or opportunity relating to
the breach or alleged breach of this Agreement, or diminution of value or any damages based on any type of multiple.

 

(d)       Each
Indemnified Party shall take, and cause its Affiliates to take, all reasonable steps to mitigate any Loss upon becoming aware
of any event or circumstance that would be reasonably expected to, or does, give rise thereto, including incurring costs only
to the minimum extent necessary to remedy the breach that gives rise to such Loss.

 

Section 6.05Indemnification
Procedures. Whenever any claim shall arise
for indemnification hereunder, the party entitled to indemnification (the "Indemnified Party") shall promptly
provide written notice of such claim to the other party (the "Indemnifying Party") and the Indemnifying Party
shall make payments, within ten (10) business days from receiving the notice, to the Indemnified Party as provided in this Article
VI, unless there is a dispute as to the liabilities or amounts of the indemnity. In the event that the Indemnified Party and Indemnifying
Party do not agree on the liabilities or amounts of the indemnity under Section 6.02 or 6.03, such controversy or dispute shall
be settled by arbitration administered by the American Arbitration Association with one arbitrator (the “Arbitrator”)
jointly selected by the Indemnified Party and Indemnifying Party. Both the Indemnified Party and Indemnifying Party have agreed
to conduct such arbitration proceedings in Fort Lauderdale, Florida if they need to appear in person, or via virtual video conferences
if provided. The judgment on the award rendered by the Arbitrator may be entered in any court having jurisdiction thereof.

 

In the event a dispute related
to a claim by the Buyer Parties is not resolved within ninety (90) days following the Buyer Parties’ delivery of notice
of the claim, the Buyer Parties shall have the right following the end of such 90-day period to thereafter withhold payment otherwise
due under the Purchase Promissory Note in an amount up to, but not exceeding, the Buyer Parties’ reasonable estimate of
the amount of the claim that is in dispute. Upon the final determination of Seller’s indemnification obligation for such
claim pursuant to this Section 6.05, the Buyer Parties shall have the right to set off the amount of such finally determined claim
against the outstanding amount of the Purchase Promissory Note.

 

In connection with any claim
giving rise to indemnity hereunder resulting from or arising out of any Action by a person or entity who is not a party to this
Agreement, the Indemnifying Party, at its sole cost and expense and upon written notice to the Indemnified Party, may assume the
defense of any such Action with counsel reasonably satisfactory to the Indemnified Party. The Indemnified Party shall be entitled
to participate in the defense of any such Action, with its counsel and at its own cost and expense. If the Indemnifying Party
does not assume the defense of any such Action, the Indemnified Party may, but shall not be obligated to, defend against such
Action in such manner as it may deem appropriate, including, but not limited to, settling such Action, after giving notice of
it to the Indemnifying Party, on such terms as the Indemnified Party may deem appropriate and no action taken by the Indemnified
Party in accordance with such defense and settlement shall relieve the Indemnifying Party of its indemnification obligations herein
provided with respect to any damages resulting therefrom. The Indemnifying Party shall not settle any Action without the Indemnified
Party's prior written consent (which consent shall not be unreasonably withheld or delayed).

 

    18

     

    

 

Section
6.06Tax Treatment of Indemnification Payments. All
indemnification payments made by Seller under this Agreement shall be treated by the parties as an adjustment to the Purchase
Price for tax purposes, unless otherwise required by law.

 

Section
6.07Exclusive Remedies. Subject to Section 9.16,
the parties acknowledge and agree that their sole and exclusive remedy with respect to any and all claims (other than claims arising
from intentional fraud on the part of a party hereto in connection with the transactions contemplated by this Agreement) for any
breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject
matter of this Agreement, shall be pursuant to the indemnification provisions set forth in this ARTICLE VI. In furtherance of
the foregoing, each party hereby waives, to the fullest extent permitted under Law, any and all rights, claims and causes of action
for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the
subject matter of this Agreement it may have against the other parties hereto and their Affiliates and each of their respective
Representatives arising under or based upon any Law, except pursuant to the indemnification provisions set forth in this ARTICLE
VI. Nothing in this Section 6.07 shall limit any Person's right to seek and obtain any equitable relief to which any Person shall
be entitled pursuant to Section 9.16 or to seek any remedy on account of any intentional fraud by any party hereto.

 

ARTICLE VII

 

CONDITIONS
TO CLOSING

 

Section
7.01Conditions to Obligations of All Parties. The
obligations of each party to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at
or prior to the Closing, of each of the following conditions:

 

(a)       No
governmental authority shall have enacted, issued, promulgated, enforced or entered any governmental order which is in effect
and has the effect of making the transactions contemplated by this Agreement illegal, otherwise restraining or prohibiting consummation
of such transactions or causing any of the transactions contemplated hereunder to be rescinded following completion thereof.

 

(b)       Seller
shall have received all consents, authorizations, orders and approvals required from the governmental authorities (other than
those necessary to transfer the nontransferable Governmental Permits) and Buyer shall have received all consents, authorizations,
orders and approvals required from the governmental authorities (other than those necessary to transfer the nontransferable Governmental
Permits) that are necessary to consummate the transactions contemplated by this Agreement, in each case, in form and substance
reasonably satisfactory to Buyer and Seller, and no such consent, authorization, order and approval shall have been revoked.

 

    19

     

    

 

Section
7.02Conditions to Obligations of Buyer. The obligations
of Buyer to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or Buyer's waiver,
at or prior to the Closing, of each of the following conditions:

 

(a)       The
representations and warranties of Seller contained in ARTICLE III shall be true and correct in all respects as of the Closing
Date with the same effect as though made at and as of such date (except those representations and warranties that address matters
only as of a specified date, which shall be true and correct in all respects as of that specified date), except where the failure
of such representations and warranties to be true and correct would not have a material adverse effect.

 

(b)       Seller
shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this
Agreement and each of the other Transaction Documents to be performed or complied with by it prior to or on the Closing Date.

  

(c)       Seller
shall have delivered to Buyer duly executed counterparts to the Transaction Documents (other than this Agreement) and such other
documents and deliveries set forth in Section 2.02.

 

(d)       Buyer
shall have received a certificate, dated the Closing Date and signed by a duly authorized officer of Seller, that each of the
conditions set forth in Section 7.02 (a) and Section 7.02 (b) have been satisfied (the "Seller Closing Certificate").

 

(e)       Buyer
shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Seller certifying that
attached thereto are true and complete copies of all resolutions adopted by the board of directors of Seller and resolutions adopted
by the Majority Shareholders of Seller, authorizing the execution, delivery and performance of this Agreement and the other Transaction
Documents and the consummation of the transactions contemplated hereby and thereby, and that all such resolutions are in full
force and effect and are all the resolutions adopted in connection with the transactions contemplated hereby and thereby.

 

(f)       Buyer
shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Seller certifying the
names and signatures of the officers of Seller authorized to sign this Agreement, the Transaction Documents and the other documents
to be delivered hereunder and thereunder.

 

Section
7.03Conditions to Obligations of Seller. The
obligations of Seller to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or Seller's
waiver, at or prior to the Closing, of each of the following conditions:

 

(a)       The
representations and warranties of Buyer contained in ARTICLE IV shall be true and correct in all respects as of the Closing Date
with the same effect as though made at and as of such date (except those representations and warranties that address matters only
as of a specified date, which shall be true and correct in all respects as of that specified date), except where the failure of
such representations and warranties to be true and correct would not have a Material Adverse Effect on Buyer's ability to consummate
the transactions contemplated hereby.

 

    20

     

    

 

(b)       Buyer
shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this
Agreement and each of the other Transaction Documents to be performed or complied with by it prior to or on the Closing Date.

 

(c)       Buyer
shall have delivered to Seller the Purchase Price and the duly executed Purchase Promissory Note, duly executed counterparts to
the Transaction Documents (other than this Agreement) and such other documents and deliveries set forth in Section 2.02.

 

(d)       Seller
shall have received a certificate, dated the Closing Date and signed by a duly authorized officer of Buyer, that each of the conditions
set forth in Section 7.03 (a) and Section 7.03 (b) have been satisfied (the "Buyer Closing Certificate").

 

(e)       Seller
shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Buyer certifying that
attached thereto are true and complete copies of all resolutions adopted by the board of directors of Buyer authorizing the execution,
delivery and performance of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated
hereby and thereby, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection
with the transactions contemplated hereby and thereby.

 

(f)       Seller
shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Buyer certifying the names
and signatures of the officers of Buyer authorized to sign this Agreement, the Transaction Documents and the other documents to
be delivered hereunder and thereunder.

 

ARTICLE
VIII

Termination

 

Section
8.01Termination. This Agreement may be terminated
at any time prior to the Closing:

 

(a)       by
the mutual written consent of Seller and Buyer;

 

(b)       by
Buyer by written notice to Seller if:

 

(i)       Buyer
is not then in material breach of any provision of this Agreement and there has been a material breach, inaccuracy in or failure
to perform any representation, warranty, covenant or agreement made by Seller pursuant to this Agreement that would give rise
to the failure of any of the conditions specified in ARTICLE VII and such breach, inaccuracy or failure cannot be cured by Seller
by December 24, 2020 (the "Drop Dead Date"); or

 

    21

     

    

 

(ii)       any
of the conditions set forth in Section 7.01 or Section 7.02 shall not have been fulfilled by the Drop Dead Date, unless such failure
shall be due to the failure of Buyer to perform or comply with any of the covenants, agreements or conditions hereof to be performed
or complied with by it prior to the Closing;

 

(c)       by
Seller by written notice to Buyer if:

 

(i)       Seller
is not then in material breach of any provision of this Agreement and there has been a material breach, inaccuracy in or failure
to perform any representation, warranty, covenant or agreement made by Buyer pursuant to this Agreement that would give rise to
the failure of any of the conditions specified in ARTICLE VII and such breach, inaccuracy or failure cannot be cured by Buyer
by the Drop Dead Date; or

 

(ii)       any
of the conditions set forth in Section 7.01 or Section 7.03 shall not have been fulfilled by the Drop Dead Date, unless such failure
shall be due to the failure of Seller to perform or comply with any of the covenants, agreements or conditions hereof to be performed
or complied with by it prior to the Closing; or

 

(d)       by
Buyer or Seller in the event that:

 

(i)       there
shall be any law that makes consummation of the transactions contemplated by this Agreement illegal or otherwise prohibited; or

 

(ii)       any
governmental authority shall have issued a governmental order restraining or enjoining the transactions contemplated by this Agreement,
and such governmental order shall have become final and non-appealable.

 

Section
8.02Effect of Termination. In the event of the
termination of this Agreement in accordance with this Article, this Agreement shall forthwith become void and there shall be no
liability on the part of any party hereto except:

 

(a)       as
set forth in this ARTICLE VIII and ARTICLE IX hereof; and

 

(b)       that
nothing herein shall relieve any party hereto from liability for any intentional breach of any provision hereof or actual fraud.

 

ARTICLE IX

Miscellaneous

 

Section
9.01Expenses. All costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and
expenses.

 

    22

     

    

 

Section
9.02Notices. All notices, requests, consents,
claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when
delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized
overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission)
if sent during normal business hours of the recipient, and on the next business day if sent after normal business hours of the
recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid.
Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 9.02):

 

	If to Seller:	
        Copa di Vino Corporation 

        4010 Emerson Loop Rd. 

        The Dalles, OR 97058 

        E-mail: ***

        Attention: James Martin

	 	 
	with a copy to:	
        Harris Berne Christensen LLP 

        15350 SW Sequoia Parkway, Suite 250 

        Portland, OR 97224 

        E-mail: ***

        Attention: Milt Christensen

	 	 
	If to Buyer, Splash Nevada and Parent:	
        1314 E Las Olas BLVD, Suite 221 

        Fort Lauderdale, FL 33301 

        E-mail: ***

        Attention: Robert Nistico

	 	 
	with a copy to:	
        Sichenzia Ross Ference LLP 

        1185 Avenue of the Americas, 37th
        Floor 

        New York, New York 10036 

        E-mail: ***

        Attention: Darrin M. Ocasio 

         

Section
9.03Construction. The headings and captions
used in this Agreement are provided for convenience only and will not affect the meaning or interpretation of any provision of
this Agreement. All references in this Agreement to “Section” or “Sections” without additional identification
refer to the Section or Sections of this Agreement. All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Whenever the words “include” or “including” are used in this Agreement,
they will be deemed to be followed by the words “without limitation.”

 

    23

     

    

 

Section 9.04Severability.
If any term or provision of this Agreement
is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any
other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction.

 

Section
9.05Exhibits and Schedules. The exhibits
and schedules referenced in this Agreement are part of this Agreement as if fully set forth in this Agreement.

 

Section
9.06Entire Agreement. This Agreement and the
documents to be delivered hereunder constitute the sole and entire agreement of the parties to this Agreement with respect to
the subject matter contained herein, and supersede all prior and contemporaneous understandings and agreements, both written and
oral, with respect to such subject matter. In the event of any inconsistency between the statements in the body of this Agreement
and the documents to be delivered hereunder or the exhibits or Disclosure Schedules (other than an exception expressly set forth
as such in the Disclosure Schedules), the statements in the body of this Agreement will control.

 

Section
9.07Successors and Assigns. This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. No
party may assign its rights or obligations hereunder without the prior written consent of the other parties, which consent shall
not be unreasonably withheld or delayed. No assignment shall relieve the assigning party of any of its obligations hereunder.

 

Section 9.08No
Third-party Beneficiaries. Except as provided
in ARTICLE VI, this Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns
and nothing herein, express or implied, is intended to or shall confer upon any other person or entity any legal or equitable
right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

Section
9.09Time of Essence. Time is of the essence
with respect to all dates and time periods set forth or referred to in this Agreement.

 

Section
9.10Amendment and Modification. This Agreement
may only be amended, modified or supplemented by an agreement in writing signed by each party hereto.

 

Section
9.11Waiver. No waiver by any party of any of
the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver
by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by
such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure
to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed
as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

    24

     

    

 

Section
9.12Governing Law. This Agreement shall be governed
by and construed in accordance with the internal laws of the State of Florida without giving effect to any choice or conflict
of law provision or rule (whether of the State of Florida or any other jurisdiction).

 

Section
9.13Submission to Jurisdiction. Any action or
proceeding seeking to enforce any provision of this Agreement or based on any right arising out of this Agreement must be brought
against any of the parties in a Broward County Court of the State of Florida or, subject to applicable jurisdictional requirements,
in the United States District Court for the Southern District of Florida, and each of the parties consents to the jurisdiction
of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to such venue.

 

Section
9.14Attorney Fees. With respect to any
dispute relating to this Agreement, or in the event that a suit, action, arbitration, or other proceeding of any nature whatsoever
is instituted to interpret or enforce the provisions of this Agreement, including, without limitation, any proceeding under the
U.S. Bankruptcy Code and involving issues peculiar to federal bankruptcy law or any action, suit, arbitration, or other proceeding
seeking a declaration of rights or rescission, the prevailing party will be entitled to recover from the losing party its reasonable
attorney fees, paralegal fees, expert fees, and all other fees, costs, and expenses actually incurred and reasonably necessary
in connection therewith, as determined by the judge or arbitrator at trial, arbitration, or other proceeding, or on any appeal
or review, in addition to all other amounts provided by law.

 

Section
9.15Waiver of Jury Trial. Each party acknowledges
and agrees that any controversy which may arise under this Agreement is likely to involve complicated and difficult issues and,
therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal
action arising out of or relating to this Agreement or the transactions contemplated hereby.

 

Section
9.16Specific Performance. The parties agree that
irreparable damages would occur if any provision of this Agreement were not performed in accordance with the terms hereof and
that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy to which they
are entitled at law or in equity.

 

Section
9.17Counterparts. This Agreement may be executed
in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement.
A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have
the same legal effect as delivery of an original signed copy of this Agreement.

 

[signature page
follows]

 

    25

     

    

 

IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

  

	 	Copa
    di Vino Corporation 
	 	 
	 	By /s/ James Martin

        

        Name: James Martin 

        Title: CEO

	 	 

                                           Copa di Vino Wine
                                         Group, Inc. 

	 	 
	 	By /s/ Robert Nistico

        Name: Robert Nistico 

        Title: CEO

	 	 
	 	Splash Beverage Group,
Inc.,  

        a Nevada corporation

	 	 
	 	By /s/ Robert Nistico

        Name: Robert Nistico 

        Title: CEO 

         

	 	Splash Beverage Group,
Inc.,  

        a Colorado corporation

	 	 
	 	By /s/ Robert Nistico 

        Name: Robert Nistico 

        Title: CEO

 

Signature Page to Asset Purchase Agreement

 

    26

     

    

 

 

DISCLOSURE
SCHEDULE

 

to
the

 

ASSET
PURCHASE AGREEMENT

 

by
and among

 

COPA
di VINO WINE GROUP, INC. 

a
Nevada Corporation,

 

SPLASH
BEVERAGE GROUP, INC. 

a
Nevada Corporation,

 

SPLASH
BEVERAGE GROUP, INC. 

a
Colorado Corporation,

 

and

 

COPA
di VINO CORPORATION

an
Oregon Corporation

 

DATED
AS OF December 23rd, 2020

 

    

     

    

 

Disclosure
Schedule

 

This
disclosure schedule (the “Schedule”) has been prepared in connection with the Asset Purchase Agreement
dated as of December 23rd, 2020 (the “Agreement”), among Copa di Vino Corporation, an Oregon corporation (“Seller”),
Copa di Vino Wine Group, Inc., a Nevada corporation (“Buyer”), Splash Beverage Group, Inc., a Nevada corporation
(“Splash Nevada”), and Splash Beverage Group, Inc., a Colorado corporation (“Parent”). Capitalized
terms used in the Schedule and not otherwise defined in the Schedule shall have the meanings assigned to such terms in the Agreement.

 

The
inclusion of any item in any section of the Schedule shall not be deemed to constitute an admission or indication or otherwise
imply that any item so included is material for purposes of the Agreement. The inclusion of, or reference to, any item in any
section of the Schedule that is an exception to any representation and warranty does not constitute an admission or indication
that such item meets any or all of the criteria set forth in the Agreement for inclusion in such section of the Schedule. No disclosure
in the Schedule relating to any possible breach or violation of any agreement, law or regulation shall be construed as an admission
or indication that any such breach or violation exists or has actually occurred.

 

Any
item that is disclosed on a Schedule to Article 2 of the Agreement with sufficient specificity that it is apparent on its face
that such disclosure is also applicable to one or more Schedules to other sections of Article 2 of the Agreement shall also be
deemed disclosed for purposes of such other parts of such Schedule to which such disclosure is applicable.

 

Matters
reflected in the Schedule are not necessarily limited to matters required by the Agreement to be reflected in the Schedule. Any
such additional matters are set forth for informational purposes and do not necessarily include other matters of a similar nature.
In no event shall the listing of any such matters in the Schedule be deemed or interpreted to expand the scope of any representations
and warranties contained in the Purchase Agreement. The section headings contained herein are for reference purposes only and
do not broaden or otherwise affect any of the provisions of the Agreement.

 

All
attachments to the Schedule are hereby incorporated by reference into the Schedule section in which they are directly referenced.

 

The
Schedule was prepared by the Seller and is being delivered solely pursuant to the Seller’s obligations under the Agreement.
No other party shall be entitled to rely on the Schedule or its contents.

 

    1

     

    

 

Schedule
1.01

 

Purchased
Assets

 

All
of Seller’s right, title and interest in, to and under the following assets, properties and rights of Seller, to the extent
that such assets, properties and rights exist as of the Closing Date:

 

(a) all
accounts or notes receivable of the Seller listed on Exhibit 1.01(a);

 

(b) all
inventory, finished goods, raw materials, work in progress, packaging, supplies, parts and other inventories of the Seller other
than those items listed on attached Exhibit 1.01(b) (“Inventory”);

 

 (c) the Assigned Contracts listed on Schedule 3.06;

 

(d) the
Purchased IP listed on attached Schedule 3.10;

 

(e) the
furniture, fixtures, equipment, supplies and other tangible personal property of Seller listed on attached Exhibit 1.01(e) (the
“Tangible Personal Property”);

 

(f) all
prepaid expenses, credits, advance payments, security, deposits, charges, sums and fees other than those listed on attached Exhibit
1.01(f);

 

(g) all
of Seller’s rights under warranties, indemnities and all similar rights against third parties to the extent related to any
Purchased Assets;

 

(h) originals,
or where not available, copies, of all books and records, including books of account, ledgers and general, financial and accounting
records, machinery and equipment maintenance files, customer lists, customer purchasing histories, price lists, distribution lists,
supplier lists, production data, quality control records and procedures, customer complaints and inquiry files, research and development
files, records and data (including all correspondence with any governmental authority), sales material and records, strategic
plans, internal financial statements and marketing and promotional surveys, material and research, that relate to the Purchased
Assets; and

 

(i) all
goodwill associated with any of the assets described in the foregoing clauses.

 

Excluded
Assets: The following assets are not included in the Purchased Assets and are not being sold or transferred to Buyer:

 

-Sunshine
Mill building and brand

-Oregon
Mountain Vineyards brand

-The
assets that are a part of or used in the operation of the tasting room business

-Quenett
brand

 

    2

     

    

 

Exhibit
1.01(a)

 

ACCOUNTS RECEIVABLE
12/23/20 

 

	Customers	 	TOTAL	 
	American Premium Beverage	 	 	6,281.25	 
	Brown Distributing Company VA	 	 	8,970.00	 
	Burkhardt Sales & Service	 	 	10,131.00	 
	City Beverages	 	 	16,200.00	 
	Craft Beer Guild Distributing-SD	 	 	4,950.00	 
	Gold Coast Eagle	 	 	5,850.00	 
	Great Lakes Wine & Spirits	 	 	5,400.00	 
	Hensley Beverage	 	 	5,250.00	 
	Long Beverage, Inc.	 	 	5,025.00	 
	Nevada Beverage	 	 	5,986.50	 
	North Florida Sales	 	 	587.30	 
	Pennsylvania Liquor Control Board	 	 	58,832.30	 
	Pepin Dist	 	 	11,700.00	 
	Point Blank Distributing	 	 	460.00	 
	Sunshine Mill Tasting Room	 	 	1,184.96	 
	The House of LaRose	 	 	2,734.20	 
	Virginia Eagle Distributing	 	 	17,043.00	 
	WEB	 	 	140.38	 
	Wyoming Liquor Division	 	 	69.96	 

 

    3

     

    

 

Exhibit
1.01(b) Inventory

  

	Item	 	Item Description	 	On Hand	 
	
POP-201
	 	
Horizontal Suction Cup Rack
	 	 	6,290.00	 
	CapCopaCo.	 	Gold Copa Co. Plastic Cap	 	 	1,942,346.00	 
	Cap Black	 	Black Plastic Cap	 	 	2,217,601.00	 
	Blank Drop 19	 	Blank Drop 19	 	 	211,578.00	 
	POP-116	 	Wire Countertop (C3)	 	 	703.00	 
	POP-102 WMC	 	Winemaker’s Cut Cardboard Tasting Cellar Shipper, holds 48 (187ml) glasses and 24 (750ml) bottle...	 	 	460.00	 
	Foil	 	Foil lids	 	 	688,878.00	 
	CIP-802	 	Standup Paddleboard “Coastal Cruiser”	 	 	10.00	 
	SWG-321	 	Copa Cooler	 	 	131.00	 
	SWG-310	 	Copa Ice Bucket	 	 	4,972.00	 
	POP-202	 	Large Glorifier	 	 	118.00	 
	EVK-202	 	11ft. bow flag kit. (pole, stake & bag)	 	 	74.00	 
	ip-WZ	 	In Process - White Zinfandel	 	 	2,020.94	 
	Copa12-ME	 	12 - 187ml Merlot	 	 	708.00	 
	Copa12-CS	 	12 - 187ml Cabernet Sauvignon	 	 	636.00	 
	BAR-404	 	Portable Tasting Table	 	 	21.00	 
	ip-MO	 	In Process - Moscato	 	 	1,332.45	 
	ip-CS	 	In Process - Cabernet Sauvignon	 	 	1,009.25	 
	Chardonnay	 	Chardonnay Cardboard Boxes	 	 	15,045.00	 
	WMC1-750RB	 	1 - 750ml Bottle of Wine Makers Cut Red Blend	 	 	1,784.00	 
	FoilDom	 	Foil lids, Domestic	 	 	617,367.00	 
	WMC1-750WB	 	1 - 750ml Bottle of Wine Makers Cut White Blend	 	 	1,756.00	 
	FinishedCupPinotNoir	 	Printed Drop 19 Glass - Pinot Noir	 	 	14,149.00	 
	Cabernet	 	Cabernet Boxes	 	 	11,354.00	 
	 	 	 	 	 	 	 
	Item	 	Item Description	 	On Hand	 
	CIP-801
	 	Inflatable
                                         Kayak
	 	 	21.00	 
	Pinot Grigio	 	Pinot Grigio Cardboard Boxes	 	 	10,808.00	 
	Copa12-PG	 	12 - 187ml Pinot Grigio	 	 	342.00	 
	EVK-203	 	14 ft. bow flag (pole, stake, bag)	 	 	28.00	 
	FinishedCup WMC White	 	Printed
                                         Copa Feel Glass - WMC White Blend
	 	 	11,873.00	 
	ip-RI	 	In Process - Riesling	 	 	477.02	 

 

    4

     

    

 

	BAR-401	 	Deluxe Outdoor Bar	 	 	1.00	 
	POP-108	 	EcoTrac 10/12 oz Gravity Glide Part Five Lanes	 	 	206.00	 
	Moscato	 	Moscato Cardboard Box	 	 	5,377.00	 
	Merlot	 	Merlot Cardboard Boxes	 	 	6,408.00	 
	White Zinfandel	 	White Zinfandel Cardboard Boxes	 	 	6,178.00	 
	Master 48 Pack	 	48 Pack Master Shipper	 	 	2,908.00	 
	SWG-303	 	Pennant Flags (98in x 12in)	 	 	440.00	 
	Riesling	 	Riesling Cardboard Boxes	 	 	5,755.00	 
	EVK-201	 	Branded Copa Tent (10ft x 10ft) comes with carry bag and back panel.	 	 	3.00	 
	SWG-307	 	48 Inch Inflatable Cup	 	 	46.00	 
	Capsule	 	Capsule used for In house bottling	 	 	8,232.00	 
	POP-112	 	8 Tier Wire Circular, packed with labels and a header	 	 	14.00	 
	FinishedCupChard	 	Printed Drop 19 Glass - Chardonnay	 	 	6,092.00	 
	FinishedCupCabernet	 	Printed Drop 19 Glass - Cabernet Sauvignon	 	 	6,029.00	 
	Copa12-CH	 	12 - 187ml Chardonnay	 	 	164.00	 
	Sugar	 	Sugar	 	 	2,755.50	 
	Keg Tap	 	KeyKeg Starter Kit (Dispense head)	 	 	38.00	 
	Pinot Noir	 	Pinot Noir Cardboard Boxes	 	 	3,794.00	 
	 	 	 	 	 	 	 
	Item	 	Item Description	 	On Hand	 
	 Keg	 	Empty KeyKeg Slimline	 	 	77.00	 
	Copa12-WZ	 	12 - 187ml White Zinfandel	 	 	150.00	 
	ip-PG	 	In Process - Pinot Grigio	 	 	194.02	 
	POP-204	 	Copa 4 Pack Branded Carrier, 240/box	 	 	16.00	 
	CopaKeg-PG	 	5.15 Gallon Copa Di Vino Pinot Grigio KeyKeg.	 	 	21.00	 
	6Tier Circular Wire Rack	 	6 Tier Circular Wire Rack, packed with labels and header	 	 	10.00	 
	FinishedCupWhiteZin	 	Printed Drop 19 Glass - White Zinfandel	 	 	3,739.00	 
	FinishedCupMerlot	 	Printed Drop 19 Glass - Merlot	 	 	3,646.00	 
	Cap	 	Plastic Cap	 	 	42,694.00	 
	SWG-315	 	1 Inch Lanyard	 	 	1,000.00	 
	POP-107	 	EcoTrac 10/12 oz Gravity Glide Part Three Lanes	 	 	94.00	 
	RED WMC 187ml Case	 	Wine Makers Cut Red 187ml Cardboard Case	 	 	914.00	 
	EVK-204	 	Branded Table Cloth	 	 	6.00	 
	WHITE WMC 750ml Case	 	Wine Makers Cut White 750ml Cardboard Case	 	 	119.00	 
	CIP-803	 	Paddles (Copa Di Vino)	 	 	5.00	 
	POP-203	 	Mini Fridge	 	 	3.00	 

 

    5

     

    

 

	FinishedCupPinotGris	 	Printed Drop 19 Glass - Pinot Gris	 	 	1,987.00	 
	SWG-302	 	Coasters (sleeves of 125ea)	 	 	38.00	 
	SWG-308	 	6 Panel Patio Umbrella	 	 	9.00	 
	CopaKeg-RI	 	5.15 Gallon Copa Di Vino Riesling KeyKeg.	 	 	9.00	 
	R16-VVM-10C	 	10 Glass Vertical Suction Cup	 	 	4.00	 
	FinishedCupMoscato	 	Printed Drop 19 Glass - Moscato	 	 	1,397.00	 
	Copa12-MO	 	12 - 187ml Moscato	 	 	42.00	 
	SWG-317	 	Sunglasses	 	 	150.00	 
	 	 	 	 	 	 	 
	Item	 	Item Description	 	On Hand	 
	 Copa12-PN	 	12 - 187ml Pinot Noir	 	 	19.00	 
	APP-707 S	 	Men’s Dry Moisture Wicking Polo Small	 	 	16.00	 
	FinishedCupRiesling	 	Printed Drop 19 Glass - Riesling	 	 	968.00	 
	Copa12-RI	 	12 - 187ml Riesling	 	 	25.00	 
	WHITE WMC 187ml Case	 	Wine Makers Cut White 187ml Cardboard Case	 	 	211.00	 
	POP-106	 	EcoTrac 10/12 oz Gravity Glide Part One Single Lane	 	 	108.00	 
	SWG-323	 	Acrylic Table Menu Holder	 	 	195.00	 
	Keg Cap	 	Plastic Cap For KeyKeg	 	 	1,074.00	 
	RED WMC 750ml Case	 	Wine Makers Cut Red 750ml Cardboard Case	 	 	38.00	 
	SWG-320	 	Tattoos (bundle of 200)	 	 	14.00	 
	POP-205	 	Small Glorifier	 	 	4.00	 
	APP-702-XXL	 	Men’s Fitted T (size 2XL)	 	 	13.00	 
	ip-SY	 	In Process - Syrah	 	 	 	 
	CopaKeg-MO	 	5.15 Gallon Copa Di Vino Moscato KeyKeg.	 	 	1.00	 
	SWG-306	 	21 Inch Inflatable Cup	 	 	1.00	 
	Copa1-RI	 	01 - 187ml Copa - Riesling	 	 	15.00	 
	Copa1-WZ	 	01 - 187ml Copa - White Zinfandel	 	 	7.00	 
	Copa1-PN	 	01 - 187ml Copa - Pinot Noir	 	 	3.00	 
	Copa1-CH	 	01 - 187ml Copa - Chardonnay	 	 	3.00	 
	ip-CH	 	In Process - Chardonnay	 	 	0.12	 
	Printing Chardonnay	 	Printing Chardonnay Logo onto Blank Drop 19	 	 	-	 
	Printing Pinot Gris	 	Printing Pinot Gris Logo onto Blank Drop 19	 	 	-	 
	Printing White Zinfandel	 	Printing White Zin Logo onto Blank Drop 19	 	 	-	 
	Printing Moscato	 	Printing Moscato Logo onto Blank Drop 19	 	 	-	 
	 	 	 	 	 		 
	Item	 	Item Description	 	On Hand	 
	Printing Cabernet	 	Printing Cabernet Logo onto Blank Drop 19	 	 	-	 

 

    6

     

    

 

	Copa12-Variety	 	12 Individual Copa - Mixed Variety Pack Two cups of: WZ, ME, CA, CH, RI, PG	 	 	(20.00	)
	POP-111	 	7 Tier Small Square Wooden Rack, packed with labels and header in a shipper box.	 	 	(2.00	)
	CopaKeg-ME	 	5.15 Gallon Copa Di Vino Merlot KeyKeg.	 	 	(7.00	)
	CopaKeg-CH	 	5.15 Gallon Copa Di Vino Chardonnay KeyKeg.	 	 	(18.00	)

 

Exhibit
1.01(e) List of Tangible Property Being Sold and Transferred 

 

	In
    Service	 	Description
	11/14/2011	 	Sunshine Mill Bldg Improv
	8/1/2012	 	Bottling Lines #2/#3
	8/1/2012	 	Warehouse improvement
	8/1/2012	 	Production room improvements
	11/14/2011	 	U4 line
	9/1/2012	 	Fire sprinkler system
	1/1/2013	 	Warehouse Floor
	2/1/2013	 	ChillerPlumb
	10/1/2012	 	Production Room Electrical
	6/1/2012	 	Warehouse insulation
	10/1/2012	 	Concrete pad/retaining wall, MM tanks
	7/1/2012	 	Office improvement
	10/1/2012	 	Laboratory/bathroom/lunchroom improvement
	7/10/2013	 	Chiller, G&D
	8/1/2013	 	Tum-A-Lum office improvements
	11/1/2012	 	Loading dock
	10/1/2012	 	Production Room Floor
	4/1/2012	 	Electrical improvements, warehouse
	1/1/2013	 	Warehouse Electrical Improvement
	11/1/2012	 	Production room HVAC
	8/1/2012	 	Lenticular Filter
	9/1/2012	 	Air Compressor, screw type
	10/1/2013	 	Bugbuster GS24 Ozone Sanitation System
	6/10/2013	 	Pump, Waukesha 60 positive displacement
	12/1/2012	 	Concrete pad, HVAC/chiller equipment
	6/4/2019	 	16 Cavity mold insert
	7/20/2013	 	Glycol plumbing extension
	3/22/2013	 	CLFence
	 	 	 
	In
    Service	 	Description
	7/1/2013	 	Whse electrical upgrades
	7/5/2013	 	Filters, (2) MIC Lenticular
	3/1/2013	 	GlycHeat
	2/2/2012	 	Security system
	7/10/2013	 	Chiller electrical install
	2/8/2019	 	Acer Aspire (x3)
	1/24/2013	 	AlarmUpgrade

 

    7

     

    

 

	11/11/2009	 	Videojet 1210
	5/1/2014	 	Tum-A-Lum storage improvement
	11/14/2011	 	Electro Steam Generator
	10/16/2019	 	LG Gram Laptop
	8/1/2012	 	Hoses, miscellaneous wine
	11/14/2011	 	Dual Membrane Sys on Stainless C
	11/1/2012	 	Sterile Filters (3)
	3/25/2013	 	Pumps, Yamada (2)
	11/14/2011	 	Waukesha 60 Positive Displacement Pump
	3/1/2013	 	GlycHeat plumbing install
	9/1/2013	 	Heat Exchanger, Statco Eng.
	8/24/2016	 	Wine tanks
	11/18/2009	 	U4 compressor
	8/1/2013	 	Multi-gas detector confined space
	5/1/2016	 	Walkie stacker- Purchased from Uline
	10/20/2017	 	RS Tester
	12/7/2012	 	(2) 3 IN INOXPA BALL VALVE
	5/1/2016	 	Flowmeter
	11/14/2011	 	Winery Equipment
	5/1/2016	 	Shaving down carriers
	9/2/2009	 	Hand pallet jack

 

Exhibit
1.01(f) List of Prepaids Not Being Sold or Transferred

None

 

Schedule
1.02

 

Assumed
Liabilities

 

All
of Seller’s trade accounts payable listed below plus any accounts payable arising in the ordinary course of business after
November 30, 2020 through the Closing: 

 

	Vendor	 	TOTAL	 
	1/4 Vin USD	 	 	20,000.00	 
	1/4Vin EUR	 	 	6,094.81	 
	Airgas-Nor Pac	 	 	5,144.04	 
	Ajax Turner Beverages Billback	 	 	296.47	 
	Alliance Bev. Distributing Billback	 	 	309.56	 
	Allstate Beverage Co. Billback	 	 	394.05	 
	Andersen Plastics	 	 	57,890.91	 
	Andrew Peace Wines	 	 	146.70	 
	Arthur Gren Billback	 	 	9,542.61	 
	Atlanta Beverage Billback	 	 	387.40	 
	Bedford Industries	 	 	(29.73	)

 

    8

     

    

 

	Bemiss Distributing Billback	 	 	95.20	 
	Ben E. Keith Beverages Billback	 	 	333.90	 
	Better Brands, Inc Billback	 	 	2,635.47	 
	Bigfoot Beverages Billback	 	 	392.25	 
	Blue Coast Beverages Billback	 	 	2.94	 
	Bobby Fisher Billback	 	 	613.56	 
	Brown Distributing FL Billback	 	 	1,376.21	 
	Budweiser Distributing Co. Billback	 	 	109.20	 
	Burkhardt Sales & Service Billback	 	 	174.90	 
	C&L Distributing Billback	 	 	106.23	 
	Capital Beverages Billback	 	 	15.00	 
	Capital Group Retirement Plan Services	 	 	192.21	 
	Capitol Beverage Sales Billback	 	 	44.55	 
	Capitol-Husting Billback	 	 	208.00	 
	Carey Distributing Billback	 	 	924.75	 
	CCMR	 	 	3,304.00	 
	Central Distributors Billback	 	 	299.60	 
	City Beverages Billback	 	 	2,542.55	 
	City of The Dalles	 	 	495.82	 
	CNA Surety	 	 	100.00	 
	College City Beverage Billback	 	 	700.00	 
	Columbia Corrugated Box	 	 	11,236.18	 
	Commute Options	 	 	10.00	 
	 	 	 	 	 
	Vendor	 	TOTAL	 
	Conexis	 	 	680.00	 
	Crown Aberdeen Billback	 	 	105.40	 
	Dei Rossi Marketing	 	 	2,487.50	 
	Del Papa Distributing Billback	 	 	3,950.45	 
	Devco Mechanical, Inc.	 	 	402.50	 
	Discover Development	 	 	15,000.00	 
	Double Eagle FL Billback	 	 	78.40	 
	Eagle Beverage-TN Billback	 	 	36.00	 
	Eagle Brand Sales Billback	 	 	1,249.92	 
	Ernie’s Locks & Keys	 	 	12.50	 
	Faire	 	 	3.28	 
	Falls Distributing Company Billback	 	 	1,151.80	 
	Farrell Distributing Billback	 	 	408.30	 
	Festivals Acadiens et Creoles	 	 	500.00	 
	Flint Hills Beverage	 	 	10.00	 
	Fourway Warehouse & Distribution, Inc	 	 	477.50	 
	FreeBridge Brewing	 	 	(5.00	)
	Gamer	 	 	82,277.06	 
	Girardi Distributors Billback	 	 	25.50	 

 

    9

     

    

 

	Gold Coast Eagle Billback	 	 	1,216.90	 
	Gorge Networks Inc	 	 	168.41	 
	Gray Billback	 	 	45.60	 
	Great Plains Distributors, LP Billback	 	 	123.50	 
	Gulf Coast Wine & Spirits Billback	 	 	1,338.28	 
	H Boyd Nelson Billback	 	 	1,129.20	 
	Hand Family Wine & Spirits Billback	 	 	663.68	 
	Harrison Beverage Billback	 	 	1,187.81	 
	Heimark Billback	 	 	95.00	 
	High Peaks Distributing LLC billback	 	 	45.00	 
	Hire Electric	 	 	20.89	 
	 	 	 	 	 
	Vendor	 	TOTAL	 
	Indian River Transport Co.	 	 	1,560.00	 
	Jack Hilliard Distributing Co. Billback	 	 	162.50	 
	Kansas Office of the Secretary of State	 	 	55.00	 
	Kelly Distributors billback	 	 	896.00	 
	Kelly Wheat	 	 	9.00	 
	Kentucky Eagle Billback	 	 	76.00	 
	L&H Distributing Billback	 	 	60.40	 
	L&L Distributing Billback	 	 	67.50	 
	Lake Beverage Corporation Billback	 	 	1,735.53	 
	Lakeshore Beverage Billback	 	 	248.00	 
	LaMonica Distributing Billback	 	 	144.08	 
	Lawrence Dist Co Billback	 	 	18.97	 
	Lawrence Public Relations	 	 	5,550.00	 
	Lipman Brothers, LLC Billback	 	 	1,067.26	 
	Louisiana Department of Revenue	 	 	76.91	 
	LTI, Inc.	 	 	1,186.81	 
	M. Price Distributing Co. Billback	 	 	429.00	 
	Madison Bottling Company Billback	 	 	102.50	 
	Manhattan Beer Distributors Billback	 	 	816.00	 
	McCraith Beverages Billback	 	 	185.20	 
	Meadow Outdoor Advertising	 	 	4,828.83	 
	Mike Hopkins Billback	 	 	165.10	 
	Moss Adams Vendor for Adjustments	 	 	10,102.22	 
	Moss Adams Vendor for Adjustments EURO	 	 	(28,803.73	)
	Moss-Adams LLP	 	 	30,000.00	 
	Mussetter Distributing Billback	 	 	7.00	 
	New York Dept of Taxation and Finance	 	 	4,346.57	 
	North Florida Sales Billback	 	 	108.00	 
	Northeast Beverage Billback	 	 	107.10	 
	Northern Wasco County PUD	 	 	3,565.98	 
	NorthWest Payroll Solutions, Inc	 	 	35.75	 

 

    10

     

    

 

	NW Natural Gas	 	 	108.96	 
	O&W Distributors Billback	 	 	68.12	 
	Old Dominion Freight Line, Inc.	 	 	12,365.30	 
	 	 	 	 	 
	Vendor	 	TOTAL	 
	O’Neill Vintners and Distillers	 	 	28,729.75	 
	Optimist Printers	 	 	498.10	 
	Oregon Dept of Revenue	 	 	388.00	 
	Oregon Secretary of State	 	 	100.00	 
	PA Short Billback	 	 	358.80	 
	Pacific Beverage Billback	 	 	75.90	 
	Pacific Machine and Development Inc.	 	 	440.00	 
	Peace River Distributors Billback	 	 	245.80	 
	Pepin Dist Billback	 	 	18.00	 
	Pine State Beverage Co. Billback	 	 	55.12	 
	Principal Financial Group	 	 	1,150.52	 
	Quality Beverage Billback	 	 	27.00	 
	Quill Corporation	 	 	1,172.15	 
	Rage Graphix & Design	 	 	448.00	 
	Red’s Trading Post	 	 	239.60	 
	Rehrig Pacific Company	 	 	1,525.00	 
	SAIF Corporation	 	 	333.83	 
	Saratoga Eagle Billback	 	 	731.25	 
	Savannah Distributing Billback	 	 	570.00	 
	Sawyer’s True Value	 	 	963.93	 
	Saxco International	 	 	1,640.49	 
	Schneider Enterprises LLC	 	 	3,649.00	 
	Solutions IT	 	 	422.50	 
	Southern Arizona Distributing Billback	 	 	12.25	 
	Southern Eagle Florida Billback	 	 	236.90	 
	Southern Eagle Sales & Service Billback	 	 	1,185.06	 
	Staples Promotional Products	 	 	588.00	 
	State - NYS Dept. of Taxation & Finance	 	 	152.07	 
	Stoel Rives LLP	 	 	14,643.89	 
	Straub Distributing Billback	 	 	129.30	 
	Suncoast Beverage Sales Billback	 	 	108.10	 
	Sunshine Mountain Vineyards, LLC	 	 	29,274.52	 
	Superior Beverages LLC Billback	 	 	258.70	 
	The Dalles Disposal	 	 	1,893.74	 
	 	 	 	 	 
	Vendor	 	TOTAL	 
	Tri-S	 	 	19,439.41	 
	TryIt Distributing Billback	 	 	1,583.10	 
	United Parcel Service	 	 	682.67	 

 

    11

     

    

 

	United-Johnson Brothers Billback	 	 	12.80	 
	UPS Freight	 	 	9,401.35	 
	Valencia Lawn Care, LLC	 	 	947.50	 
	Verizon Wireless	 	 	259.12	 
	Vermont Information Processing, Inc	 	 	1,373.72	 
	Vigilant	 	 	300.00	 
	Vigilant Services, Inc.	 	 	11,662.92	 
	Vinobrokerage	 	 	18,272.45	 
	Wahluke Wine Company	 	 	31,115.60	 
	Wantz Distributors Inc. Billback	 	 	959.04	 
	Wayne Densch Inc. Billback	 	 	243.00	 
	WCP Solution	 	 	(43.16	)
	Wismer Distributing Billback	 	 	167.08	 
	WSH&B	 	 	241.96	 
	Young’s Market Company Billback	 	 	14.35	 
	Zion Packaging / Organic Deco	 	 	32,455.73	 

 

Schedule
1.03

 

Wire
Transfer Instructions

 

    12

     

    

 

 

 

Schedule
2.02

 

Retained
Employees

 

Upon
closing of the transaction contemplated in the Agreement, Buyer shall retain the services of each individuals listed below and
the Buyer Parties jointly and severally agree to pay and perform the obligations owed to each Retained Employee pursuant to the
Employee’s respective Employee Retention Agreement. The following individuals are the Retained Employees:

		1.	James
                                         Martin

		2.	Natasha
                                         Skov

 

    13

     

    

 

		3.	Anthony
                                         La Bond

		4.	Angela
                                         Krause

		5.	Adrian
                                         Avilez

		6.	Scott
                                         Byrd

		7.	Rob
                                         Watkins

		8.	Joyce
                                         Shore

		9.	Bill
                                         Eggleston

  

Schedule
3.02

 

Additional
Consents, Approvals, Waivers or Authorizations

 

Written
consents of Seller’s board of directors and Seller’s majority shareholder approving the Transaction.

 

Schedule
3.05(a)

 

Material
Contracts

 

Need
to list below all contracts that are described in 3.05(a)(i)-(vi) of the APA. For each such contract we need to list the name
of the contract, the parties, and the date of the contract.

 

Schedule
3.06

 

Assigned
Contracts

 

Jason
Zwibel Promissory Note - 08.31.2016

 

Columbia Bank Guarantee Signed - 12.26.2019

 

Oneill
wine contract between Oneill and Copa Di Vino – 12.07.2017

 

Wahluke wine contract between Wahluke and Copa Di Vino

 

Vino
Brokerage/Ancient Lakes Wine Contract between Vino

 

Brokerage and Copa Di Vino Quart Vin License Agreements (3) – 02.16.2018

 

Pupoloco
Distribution Agreement - 07.16.2018

 

Supplier
Agreement - Organic Deco and Copa Di Vino – 11.15.2020

 

Supplier Agreement – Gamer Packaging
and Copa Di Vino – 11.13.2015

 

Supplier
Agreement – Andersen Plastics and Copa Di Vino – 1.17.2012

 

    14

     

    

 

Schedule
3.09

 

Inventory
That is Not Salable in the Ordinary Course of Business

 

Need
to list any inventory that is not of a quality or quantity that is usable and salable in the ordinary course of business. 

 

	Item	 	On Hand	 
	1.BoxVariety9pack	 	 	4,200.00	 
	4pk Crisp White	 	 	4,782.00	 
	4pk Soft Rose	 	 	4,300.00	 
	4pk Tray ROSE	 	 	1,900.00	 
	4pk Tray WHITE	 	 	1,769.00	 
	RED WMC 187ml Case	 	 	914.00	 
	RED WMC 750ml Case	 	 	38.00	 
	WHITE WMC 187ml Case	 	 	211.00	 
	WHITE WMC 750ml Case	 	 	119.00	 

 

Schedule
3.10(b)

 

Intellectual
Property 

 

Patents
and Patent Applications: None

 

Trademarks
(United States): None

 

Copyrights:
None

 

Domain
Names:

 

    15

     

    

 

COPADIVINO.COM 

COPADIVINO.NET 

COPADIVINO.US 

COPALIGHTWINE.COM 

COPALITEWINE.COM 

COPASEAL.COM 

COPAWINES.COM 

COPAWINES.INFO 

COPAWINES.NET 

COPAWINES.ORG

JUSTADDCOPA.COM

pulpolocosangria.com

SINGLESERVEWINE.COM

WINEBYTHEGLASS.BIZ

WINEBYTHEGLASS.COM

WINEBYTHEGLASS.INFO

WINEBYTHEGLASS.ME

 

Trade
Secrets and Know-How: None 

 

Schedule
3.11 Governmental Permits

 

Need
to list all of Copa’s permits, licenses, franchises, approvals, authorizations, registrations, certificates, variances and
similar rights obtained from governmental authorities. This would include all business licenses, liquor licenses, winery licenses,
winery permits, etc.

 

Copa
Di Vino License List

 

	STATE	 	Type of License	 	License #
	ALABAMA	 	Out of State 210-Importers	 	11216599
	ALASKA	 	None required	 	N/A
	ARIZONA	 	Out of State Producer	 	0+C8:C352OR3163
	ARKANSAS	 	Supplier’s Permit-Vinous Liquor	 	06208

 

    16

     

    

 

	CALIFORNIA	 	Direct Shipper’s Permit	 	82-525081
	COLORADO	 	Wine Delivery Permit	 	4702493
	DELAWARE	 	Unlimited Out of State Supplier- Beer/Wine/Spirits	 	91757
	DISTRICT OF COLUMBIA	 	not required	 	not required
	FLORIDA	 	Brand Registrant	 	803210
	GEORGIA	 	Foreign Importer (Shipper)	 	56855
	IDAHO	 	Not required	 	N/A
	ILLINOIS	 	NonResident Dealer, Wine Shipper not to Exceed 250,000	 	Non Resident Dealer: 12-3I- 0096549, Wine Shipper: 3U-1137188
	INDIANA	 	Primary Source	 	PS-OR-08242
	IOWA	 	Vintner’s Certificate of Compliance (CV)	 	CV0001770
	IOWA	 	Brewer’s Certificate of Compliance (CB)	 	CB0001396
	KANSAS	 	Supplier Permit	 	19001201222
	KENTUCKY	 	Out of State Suppliers License	 	999-LOSDWS-1152
	LOUISIANA	 	Out of State Manu/Supplier Permit	 	OS.68.0000000371-H
	MARYLAND	 	Non Resident Dealer	 	ND-56910
	MASSACHUSETTS	 	Winery Shipment License	 	C24837
	MICHIGAN	 	OutState Seller of Wine	 	191997-2013
	MINNESOTA	 	Wine Importer’s License	 	33507
	MISSOURI	 	Out of State License	 	201550
	MONTANA	 	Foreign Winery Import License	 	97-999-w909-250
	NEVADA	 	Certificate of Compliance	 	Taxpayer ID: 1009257811-002
	NEW JERSEY	 	Brand Registration only	 	N/A
	NEW MEXICO	 	Nonresident Liquor License	 	15917
	NEW YORK	 	Broker Appointment	 	N/A

 

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	NORTH CAROLINA	 	Authorization of nonresident wine vendor permit	 	Permit#: 00179490WV File#: 00179490CM - 999
	NORTH DAKOTA	 	Supplier License, Direct Shipping Permit	 	1678 (Listed for Capa Di Vino)Direct Shipping Permit Number: 91053
	OHIO	 	Out-of-State Supplier of Wine	 	S5029890
	OREGON	 	Winery-TGE, LLC, Trade Name, James Martin Family Estates/Copa Di Vino	 	901 E 2nd ST: 260329, 4010 Emerson LP: 
260328
	PENNSYLVANIA	 	Vendor’s Permit	 	VP37925
	SOUTH CAROLINA	 	Beer/Wine Producer/Importer	 	320564821
	SOUTH DAKOTA	 	Brand Registration	 	Brand Registration#: BR-2375
	TENNESSEE	 	Non-Resident Liquor Seller’s Permit	 	N-2057
	TEXAS	 	Nonresident Seller’s Permit	 	S793438
	VIRGINIA	 	Importer Designation for Wholesalers & Territory only	 	N/A
	WASHINGTON	 	Ship to Retailers; Tax Registration: Out of State Cert of Approval	 	403075
	WEST VIRGINIA	 	Non-Resident Wine Supplier	 	00-W-010-000385
	WISCONSIN	 	Tax Registration: OS Shipper of Liquor	 	305-1027449752-02
	WYOMING	 	Ship to Wyoming Liquor Division for special orders only	 	N/A

 

Distributor
contracts list:

 

 

 

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Schedule
3.13

Legal
Proceedings

 

Need
to list any claim, action, lawsuit, proceeding or governmental investigation that is pending or threatened against Copa.

 

9/10/2020
-Demand for Payment old accounts payable wine $108,792 Coventry Vail Winery

 

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