Filed 2025-07-11 · Period ending 2024-12-31 · 49,540 words · SEC EDGAR
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# SPLASH BEVERAGE GROUP, INC. (SBEV) — 10-K
**Filed:** 2025-07-11
**Period ending:** 2024-12-31
**Accession:** 0001731122-25-000964
**Source:** [SEC EDGAR](https://www.sec.gov/Archives/edgar/data/1553788/000173112225000964/)
**Origin leaf:** 5f47d7141e2e023c2a46a960c27a9ca67e5820142d43e3f55cc776d12a60a41f
**Words:** 49,540
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**
U.S. SECURITIES AND EXCHANGE COMMISSION**
**WASHINGTON, D.C. 20549**
**FORM 10-K**
******ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**
For the fiscal year ended **December 31, 2024**
******TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**
For the transition period from _________to _________
Commission File Number **001-40471**
SPLASH BEVERAGE GROUP, INC.
(Exact name of registrant as specified in its charter)
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Nevada |
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34-1720075 | |
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) | |
**1314 E Las Olas Blvd. Suite 221**
**Fort Lauderdale, FL 33301**
(Address of principal executive offices) (Zip code)
**(954) 745-5815**
**(**Registrants telephone number, including
area code)
**Not Applicable**
(Former name, former address and former fiscal year,
if changed since last report)
**Se**curities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol |
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Name of each exchange on which registered | |
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Common Stock, $0.001 par value per share |
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SBEV |
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NYSE American LLC | |
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Warrants to purchase shares of Common Stock, $0.001 par value per share |
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SBEV-WT |
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NYSE American LLC | |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check mark if the registrant is not required
to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes No
Indicate by check mark whether the registrant (i)
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 checkmark whether the registrant has submitted
electronically every Interactive Data File required to be submitted pursuant to rule 405 of Regulation S-T during the preceding 12 months
(or for such shorter period that the registrant was required to submit such files).
Yes No
Indicate by checkmark 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.
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Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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 has
filed a report on and attestation to its managements assessment of the effectiveness of its internal control over financial reporting
under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its
audit report.
If securities are registered pursuant to Section 12(b)
of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of
an error to previously issued financial statements.
Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrants
executive officers during the relevant recovery period pursuant to 240.10D-1(b).
Indicate by check mark whether the registrant is a
shell company (as defined in rule 12b-2 of the Act). Yes
No
The aggregate market value of the Registrants
common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of the last business
day of the Registrants most recently completed second quarter was $[*].0
On June 30, 2025, there were 1,899,876 shares of Common
Stock issued and outstanding.
**SPLASH BEVERAGE GROUP, INC.**
**FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2024**
**TABLE OF CONTENTS**
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Page | |
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PART I |
1 | |
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Item 1. |
Business |
1 | |
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Item 1A. |
Risk Factors |
9 | |
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Item 1B. |
Unresolved Staff Comments |
26 | |
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Item 2. |
Properties |
27 | |
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Item 3. |
Legal Proceedings |
27 | |
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Item 4. |
Mine Safety Disclosures |
27 | |
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PART II |
28 | |
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Item 5. |
Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
28 | |
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Item 6. |
Selected Financial Data |
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Item 7. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
28 | |
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Item 7A. |
Quantitative and Qualitative Disclosures about Market Risk |
31 | |
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Item 8. |
Financial Statements and Supplementary Data |
F-1 | |
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Item 9. |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
32 | |
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Item 9A. |
Controls and Procedures |
32 | |
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Item 9B. |
Other Information |
32 | |
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Item 9C. |
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections |
32 | |
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PART III |
33 | |
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Item 10. |
Directors, Executive Officers and Corporate Governance |
33 | |
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Item 11. |
Executive Compensation |
40 | |
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Item 12. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
43 | |
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Item 13. |
Certain Relationships and Related Transactions and Director Independence |
44 | |
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Item 14. |
Principal Accounting Fees and Services |
45 | |
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PART IV |
46 | |
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Item 15. |
Exhibits and Financial Statement Schedules |
46 | |
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Signatures |
47 | |
i
**PART I**
*Except as otherwise indicated,
references to we, us, our, Splash, SBG and the Company
refer to Splash Beverage Group, Inc. and its wholly owned subsidiaries.*
This Annual
Report on Form 10-K (this Annual Report) contains forward-looking statements Forward-looking statements reflect
our current view about future events. When used in this Report, the words anticipate, believe, estimate,
expect, future, intend, plan, or the negative of these terms and similar expressions,
as they relate to us or our management, identify forward-looking statements. Such statements include, but are not limited to, statements
contained in this Report relating to our business strategy, our future operating results and liquidity and capital resources outlook.
Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future
conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in
circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements.
They are neither statements of historical fact nor guarantees of assurance of future performance. We caution you therefore against relying
on any of these forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking
statements include, without limitation, our ability to raise capital to fund continuing operations; our ability to protect our intellectual
property rights; the impact of any infringement actions or other litigation brought against us; competition from other providers and products;
our ability to develop and commercialize products and services; changes in government regulation; our ability to complete capital raising
transactions; and other factors (including the risks contained in the section of this Annual Report entitled Risk Factors)
relating to our industry, our operations and results of operations. Actual results may differ significantly from those anticipated, believed,
estimated, expected, intended or planned.
Factors
or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of
them. We cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including
the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements
to actual results.
*Except
as otherwise indicated, references to we, us, our, Splash, SBG and
the Company refer to Splash Beverage Group, Inc. and its wholly owned subsidiaries.*
**Item 1. Business.**
**Company Overview**
Splash is a portfolio company managing
multiple brands across several growth segments within the consumer beverage industry. Splash has built organizational capabilities and
an infrastructure enabling it to incubate and/or acquire brands with the intention of efficiently accelerating them to higher volume and
sales revenue. The management team has proven capabilities in building consumer franchises and marketing and distributing multiple brands
of beverages within the non-alcoholic and alcoholic segments. Manufacturing is typically outsourced to third party co-packers and distillers,
or in select cases for a brand such as Copa DI Vino wines, performed within our own facility in Oregon.
We believe the distribution landscape
in the beverage industry is changing rapidly as tech-enabled e-commerce business models are thriving. Direct to consumer, office or home
solutions are projected to continue to gain traction in the future. Recognizing this opportunity Splash continues to shape its operating
model to be vertically integrated with our e-commerce platform, Qplash, which purchases local and regional brands for developing a direct
line of sales to boutique retail stores and consumers.
Splashs wholly owned subsidiary, Splash Beverage Group II, Inc. was originally
incorporated in the State of Nevada under the name TapouT Beverages, Inc. for the purpose of acquiring the rights under a license agreement
with TapouT, LLC (Authentic Brands Group). In Q1 2024 the relationship between TapouT LLC and the Company was terminated.
1
In December 2020, Splash Beverage
Group Inc. purchased the key assets of the Copa DI Vino single serve wine company. The operations and IP for Copa DI Vino
are wholly owned by Splash and incorporated in the state of Nevada under the name Copa DI Vino Wine Group Inc.
In addition, Splash has a joint
venture with SALT Naturally Flavored Tequila and Pulpoloco sangria that comes in a biodegradable can.
The Companys leadership
understands the importance of infusing beverage brands with strong popular culture and lifestyle elements that drive trial, belief and,
most importantly, repeat purchases.
Our management team led by Robert
Nistico has over 28 years of experience in all levels of the three-tier distribution system used in the beverage industry working with
brands such as Red Bull and companies such as Gallo Winery and Republic National Distributing Company (RNDC Texas). Our President &
CMO, Bill Meissner, has led major beverage brands including Sparkling Ice, Fuze, Sweet Leaf Tea and Jones Soda. Our CFO, William Devereux,
has over 15 years of experience in finance, with an emphasis on investing, fundraising, corporate strategy, and mergers and acquisitions.
Our Senior Vice President of Sales, James Allred, has over 25 years experience in the beverage industry, predominately with Anheuser-Busch.
**Our Strategy**
Our strategy is to combine the
traditional approach of manufacturing, distributing, and marketing of beverages, with early-stage brands that have a reasonable level
of pre-existing brand awareness and market presence, or have attributes that we believe to be purely innovative. We believe this allows
us to break through the clutter of numerous brand introductions and dilute risk. We apply this philosophy regardless of whether the brand
is 100% owned or a joint venture.
For acquisition or joint venture
consideration, we prefer to work with brands that already have one or more of the following in place:
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Some level of preexisting brand awareness. | |
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Regional presence that can be expanded. | |
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Licensing an existing brand name. | |
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Add to an underdeveloped and/or growing category capitalizing on consumer trends. | |
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Innovation to an existing attractive category (such as flavored tequila). | |
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A near term clear path to profitability. | |
We believe this platform model
provides us with two paths to success: one, developing our wholly owned core brands and two, the ability to tap into high growth, early-stage
brands ready to scale. This platform allows us to limit risk, and significantly reduce development expenses while simultaneously increasing
efficiencies for all brands in our portfolio.
Our management team has over 80
years of combined experience in the beverage industry, including decades of successful brand introductions by our management team (Gallo,
Red Bull, Bacardi, Diageo, Sparkling Ice, Coca-Cola, FUZE Beverage, NOS Energy, PepsiCo, SoBe Beverages, AB InBev, Muscle Milk, Marley
Beverages), we believe our ability to break through the distribution and retail bottlenecks makes us an attractive joint venture partner
to many new brand owners.
Splash has the ability to fully
own a brand or be flexible to engage in business ventures structured with a revenue split, or an equity position.
The benefit to Splash in these
shared brand ownerships is the ability to avoid the development costs for new products. This model spreads our risk over several brands,
contributes to our economies of scale, improves our relationship with distributors and reduces the overall cost of infrastructure.
2
The Company also believes the distribution
landscape in the beverage category is changing rapidly. Tech-enabled business models are thriving and direct to consumer, office and home
solutions are projected to continue to gain traction as beverage alcohol regulations evolve. A core strategy for us is to optimize the
early success were seeing with the Qplash online platform, our consumer-packaged goods retail division and our first entry point
into the growing e-commerce channel.
**Products**
During fiscal year 2024 we produced, distributed and marketed SALT Naturally Flavored
Tequila (SALT), a 100% agave 80 proof line of flavored tequilas, Copa DI Vino single serve wine by the glass,
and also import Pulpoloco Sangria in 3 flavors.
The following is a description
of these products.
**SALT Flavored Tequila**
*
We oversee production, distribute,
and market the following flavors under the brand name SALT Naturally Flavored Tequila:
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Citrus flavor | |
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Berry flavor | |
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Chocolate flavor | |
Vodka, rum, and brown spirits have
experienced significant growth when flavors are introduced, and we expect this growth of flavors to continue, as the tequila category
continues to rapidly expand.
SALT is currently being distributed
by various Anheuser-Busch & Miller-Coors distributorships, and other distributors in multiple U.S. states. Additionally, SALT is for
sale in Mexico. SALT has also launched in Guatemala and Japan and efforts continue to grow the brands international presence.
SALT is a business venture between
the Company and SALT USA, LLC. All aspects of manufacturing, logistics, distribution and marketing are our responsibility.
3
**TapouT License Agreement**
We have the rights under a License
Agreement with ABG TapouT (the License Agreement) to produce, market, sell and distribute TapouT sports beverages in North
America (including US Territories and Military Bases), United Kingdom, Brazil, South Africa, Australia, Scandinavia, Peru, Colombia, Chile
and Guatemala. The beverages covered by the License Agreement include sports drinks, energy drinks, energy shots, electrolyte chews, energy
bars, water, protein, and teas.
We pay a 6% royalty of net sales
or a guaranteed minimum annual royalty of $660,000, whichever is greater. The License Agreement will expire on December 31, 2025, with
a renewal option through December 31, 2028 at which time it will be reviewed and renegotiated if necessary.
We have the right to use the TapouT brand to market, advertise and promote
for sale our TapouT beverages and branded products. As part of the alliance, Splash commits to investing 2% of sales in marketing to the
TapouT Performance Brand. TapouT provides marketing collateral for advertising and promotion and has influential relationships with select
celebrities and athletic talent. TapouT agrees to use reasonable efforts to request its retained celebrities and/or athletes be present
at autograph signings, tradeshows and other similar events.In Q1 2024 the relationship between TapouT LLC and the Company
was terminated.
**Copa DI Vino Wine Group, Inc. (CdV)
and Related Financing**
On December 24, 2020, the Company
entered into an Asset Purchase Agreement with CdV, pursuant to which the Company purchased certain assets and assumed certain liabilities
that comprise the CdV business for a total purchase price of $5,980,000, payable in the combination of $2,000,000 in cash, a $2,000,000
convertible promissory note to CdV and a variable number of shares of the Companys common stock based on an attainment of revenue
hurdles.
4
In conjunction with the acquisition,
the Company also entered into a Revenue Loan and Security Agreement (the Loan and Security Agreement) by and among the Company,
Robert Nistico, additional guarantor and each of the subsidiary guarantors from time-to-time party thereto (each a Guarantor,
and, collectively, the Guarantors), and Decathlon Alpha IV, L.P. (the Lender). The Loan and Security Agreement
provided for a revenue-based credit facility of $1,578,237 (the Gross Amount) with the Lender (the Credit Facility).
**Copa DI Vino Wine Group, Inc.**
Copa DI Vino is
the leading producer of premium wine by the glass in the United States. The Copa DI Vino product line is highly innovative
as a ready to drink wine glass capable of going anywhere without the need for a bottle, corkscrew or glass. The company also has a growing
keg wine business for on-premises restaurants and bars.
Through our acquisition of Copa
DI Vino Corporation, we are now able to offer nine varietals of wine: Pinot Grigio, Riesling, Merlot, Chardonnay, White
Zinfandel, Moscato, Red Blend, Sauvignon Blanc and Cabernet Sauvignon. In addition to its wine varietals, Copa DI Vino
also procures Pulpoloco, a sangria which is encased in an eco-friendly fiber based can from Spain. The rights to utilize this packaging
for multiple categories were conveyed to SBG in conjunction with the distribution rights.
**E-commerce**
Qplash is a wholly
owned division of Splash. It is our first entry point into the growing e-commerce channel. The division sells beverages online through
www.qplash.com*, and third-party storefronts such as Amazon.com. Inside of the division, there are two primary customer groups:
business to business retailers, which in turn offer the products to their customers, and business to consumer, selling direct to end users.
The business-to-business program allows businesses to control inventory, order with payment terms, and offer the convenience of delivery
directly to each store.
During fiscal year 2024, Qplash
offered over 1,500 listings and has warehouses that ship from both California and Pennsylvania.
5
**Our Competitive Strengths**
We believe the following competitive strengths
contribute to the Companys success and differentiate us from our competitors:
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An established distribution network through global sales channels; | |
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A hybrid distribution model that leverages multiple routes to market, including national chains, independent local markets, regional chains, and specialty food and C-Stores | |
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Long-term relationships with retailers and the establishment of chains; | |
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Premium customer service; | |
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Dynamic and sustainable product offerings of natural quality and freshness with health benefits; | |
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A highly experienced management team; | |
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Strategically selected, dedicated sales professionals; | |
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Qplash, our e-commerce platform, which provides us an integrated distribution platform for our non-alcoholic brands; | |
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Ability to execute and distribute across many geographies on behalf of our licensed brand portfolio; | |
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Strong brand awareness through partnerships and acquisitions of brands with pre-existing brand awareness, or viewed as truly innovative; and | |
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Celebrity and professional athlete endorsement of our brands. | |
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**Manufacturing and Co-packing**
We are responsible for the manufacturing
of Copa DI Vino and SALT. The Copa DI Vino product line is bottled at our manufacturing facility in The
Dalles, Oregon. Pulpoloco is imported from Spain as a finished product.
Although we are responsible for
manufacturing SALT, we do not directly manufacture these products, but instead outsource such manufacturing to third party bottlers and
contract packers and distillers.
SALT products are manufactured
in Mexico, under separate arrangements. Our co-packaging arrangements are terminable upon request and do not obligate us to produce any
minimum quantities of products within specified periods.
We purchase concentrates, flavors,
dietary ingredients, cans, bottles, caps, labels, and other components and ingredients for our beverage products from our suppliers, which
are delivered to our manufacturing operations and various third-party bottlers and co-packers. In some cases, certain common supplies
may be purchased by our various third-party bottlers and co-packers. Depending on the product, the third-party bottlers or packers add
filtered water and/or other ingredients (including dietary ingredients) for the manufacture and packaging of the finished products into
our approved containers in accordance with our formulas.
6
**Distribution**
For our beverage-alcohol products,
we operate within what is referred to as a Three Tier Distribution System where manufacturers are not permitted to sell
directly to retailers, but instead contract for local and regional distribution with independent distributors. These distributors typically
have geographic rights to distribute major beverage brands and call on every store in a given area such as major cities or regions. Our
management team has extensive experience working within this channel and believes that we will be successful in building a strong network
of these distributors.
In addition to working with these
independent distributors, we also have distribution arrangements with national retail accounts to distribute some of our products directly
through their warehouse operations. Most notably, SBG executed a distribution agreement with AB-InBev, for distribution with their own
operations, AB ONE. This provides SBG very effective distribution capabilities.
**Intellectual Property**
During the fiscal year ended December 31, 2023, we
were granted a trademark for Copa DI Vino. The United States Patent and Trademark Office issued the trademark on March
12, 2024, providing our company exclusive rights to use the trademark in connection with the product categories specified in this Form
10-K.
**Employees**
We have 21 full-time employees,
including non-officer employees and our executive officers. None of our employees are represented by a labor union. We have not experienced
any work stoppages and consider our relations with our employees to be good.
**Listing on the NYSE American**
Our common stock and warrants are
listed on the NYSE American exchange under the ticker symbols SBEV and SBEV WT, respectively.
**Recent Developments**
On February 7, 2025, Julius Ivancsits
resigned as Chief Financial Officer of the Company. Mr. Ivancsitss resignation as Chief Financial Officer was not because of any
disagreement with the Company on any matter relating to the Companys operations, policies, or practices, including accounting principles
and practices. Mr. Ivancsits effective date was February 18, 2025 and the Company thanks
Mr. Ivancsits for his service.
Simultaneously, on February 7,
2025, Dr. John Paglia also notified the Board of his intention to resign as an independent director of the Company and as a member of
each committee of the Board on which he served, effective as of March 7, 2025. Dr. Paglias resignation was not the result of any
dispute or disagreement with the Company or the Companys Board of Directors on any matter relating to the operations, policies
or practices of the Company. Dr. Paglia will be assisting the Company with its search for a new Audit Chair. The Company is grateful for
his service and his assistance in the search for his replacement.
On
March 20, 2025, the Board of Directors of the Company appointed Mr. William Devereux to serve as Chief Financial Officer of the Company,
effective as of the same date.
Simultaneously, the Board of Directors
of the Company appointed Mr. Thomas Fore to serve as a Director of the Company, effective March 20, 2025.
7
Effective March 27, 2025, the Board
of Directors of the Company approved a reverse stock split of the Companys authorized and issued and outstanding shares of Common
Stock at a ratio of 1-for-40 (the Reverse Stock Split). The Company filed a Certificate of Change pursuant to Nevada Revised
Statutes Section 78.209 with the Secretary of State of the State of Nevada on March 26, 2025, to be effective March 27, 2025.
On April 7, 2025, NYSE American
LLC (NYSE American) publicly announced and provided a notice to the Company that NYSE Regulation has determined to commence
proceedings to delist the Companys Common Stock and publicly trading Warrants to purchase one share of Common Stock, from NYSE
American. NYSE Regulation has determined that the Company is no longer suitable for listing pursuant to Section 1009(a) of the NYSE American
Company Guide (the Company Guide) as the Company was unable to demonstrate that it had regained compliance with Sections
1003(a)(i), (ii), and (iii) of the Company Guide by the end of the maximum 18-month compliance plan period, which expired on April 6,
2025.
On April 16, 2025, the Company,received
an official notice of noncompliance (the NYSE American Notice) from NYSE Regulation stating that the Company is not in compliance
with NYSE American continued listing standards (the Filing Delinquency Notification) due to the failure to timely file the
Companys Form 10-K for the year ended December 31, 2024 (the Delinquent Report) by the filing due date of April 15,
2025 (the Filing Delinquency).
On June 9, 2025, the Company filed
a Certificate of Designation (the Certificate of Designation and, collectively with the Subscription Agreement, the Issuance
Documents) classifying and designating the Series A Preferred Shares with the Secretary of State of Nevada, which Certificate of
Designation became effective on June 9, 2025.
On June 10, 2025, the Company entered
into a Subscription and Investment Representation Agreement (the Subscription Agreement) with Robert Nistico, the Companys
Chief Executive Officer (the Purchaser), pursuant to which the Company agreed to issue and sell one thousand (1,000) Series
A Preferred Shares, par value $0.001 per share (the Series A Preferred Shares), to the Purchaser for an aggregate purchase
price of $1,000 (the Purchase Price). The sale closed on June 10, 2025.
Effective June 25, 2025, Splash
Beverage Group, Inc. (the Company) entered into a Securities Purchase Agreement (the Purchase Agreement) with
accredited investors pursuant to which the Company sold and issued a total of 650 shares of newly designated Series A-1 Convertible Redeemable
Preferred Stock (the Series A-1), together with one-year Class A Warrants to purchase a total of 162,500 shares of common
stock (the A Warrants) and five-year Class B Warrants to purchase a total of 162,500 shares of common stock (the B
Warrants and together with the A Warrants, the Warrants) for total gross proceeds of $650,000. The Company intends
to use the proceeds for working capital and general corporate purposes.
Effective June 25, 2025, the Company
entered into Securities Exchange Letter Agreements (the Exchange Agreements) with certain holders of promissory notes issued
by the Company pursuant to which such holders agreed to exchange a total of $12,671,434 of outstanding balance of such notes in exchange
for a total of 126,710 shares of the Companys newly designated Series B Convertible Redeemable Preferred Stock (the Series
B). The Company is engaging in the transactions contemplated by the Exchange Agreement in order to exchange debt for equity in
an effort to regain compliance with the shareholder equity requirements of the NYSE American. This debt exchange is one key step in meeting
the NYSE American continued listing requirements. The other key step is filing its tardy Form 10-K for the year ended December 31, 2024
and Form 10-Q for the three months ended March 31 2025.
On June 26, 2025, the Company entered
into an Asset Purchase Agreement (the Acquisition Agreement) with Utopia Holdings Inc. as seller pursuant to which the Company
agreed to purchase exclusive water rights and related assets to an underground network of aquifers located in Costa Rica (the Assets)
in exchange for 20,000 shares of a newly designated Series C Convertible Preferred Stock (the Series C). On June 26, 2025,
the Company issued such shares of Series C to the seller. Under the Acquisition Agreement, the seller agreed to deliver the Assets to
the Company, or $20 million in lieu thereof (the Alternative Consideration), and if the seller fails to deliver the Assets
or Alternative Consideration by December 31, 2025, the issuance of the Series C to the seller shall be cancelled.
8
**Corporate Information**
Splash was originally incorporated in the State of Nevada under the name TapouT
Beverages, Inc., for the purpose of acquiring the rights under a license agreement with TapouT, LLC (Authentic Brands Group) for the right
to use the TapouT brand in connection with manufacturing and selling certain beverages. In Q1 2024 the relationship between TapouT LLC
and the Company was terminated.
Splash executed a reverse merger
with a fully reporting, public entity called Canfield Medical Supply, Inc. and became a wholly-owned subsidiary of Canfield Medical Supply
Inc. on March 31, 2020. At the time of the merger Canfields state of incorporation was Colorado. At the time of the merger Canfields
common stock was quoted on the OTCQB.
On July 31, 2021, we changed our
name from Canfield Medical Supply, Inc. to Splash Beverage Group, Inc.
On June 11, 2021, our common stock
and warrants to purchase common stock began trading on the NYSE American under the symbols SBEV and SBEV WT, respectively.
On November 8, 2021, we changed
our state of incorporation from Colorado to Nevada.
Our principal offices are located
at 1314 E. Las Olas Blvd, Suite 221, Fort Lauderdale, Florida 33301. Our website address is *www.splashbeveragegroup.com*. We have
not incorporated by reference into this Annual Report on Form 10-K the information that can be assessed through our website and you should
not consider it to be part of this Annual Report on Form 10-K.
**Available Information**
We file annual, quarterly, and current reports, proxy
statements and other information with the U.S. Securities Exchange Commission (the SEC). These filings are available to
the public through the SECs website at http://www.sec.gov. All statements made in any of our securities filings, including all
forward-looking statements or information, are made as of the date of the document in which the statement is included unless otherwise
specified, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do
so by law.
**Item 1A. Risk Factors.**
You should carefully consider the
risks described below as well as other information provided to you in this document, including information in the section of this document
entitled Cautionary Note Concerning Forward Looking Statements. If any of the following risks actually occur, the Companys
business, financial condition or results of operations could be materially adversely affected, the value of the Companys Common
Stock could decline, and you may lose all or part of your investment.
**RISKS RELATED TO OUR BUSINESS**
**Risks Related to our Business**
**Our auditors have included an explanatory paragraph
in their opinion regarding our ability to continue as a going concern. If we are unable to continue as a going concern, our securities
will have little or no value.**
Rose, Snyder & Jacobs LLP,
our independent registered public accounting firm for the fiscal year ended December 31, 2024, has included an explanatory paragraph in
their opinion that accompanies our audited consolidated financial statements as of and for the year ended December 31, 2024, indicating
that our current liquidity position raises substantial doubt about our ability to continue as a going concern. If we are unable to improve
our liquidity position, we may not be able to continue as a going concern.
We have sustained recurring
losses and we have had working capital and stockholders equity deficits. These prior losses and expected future losses have
had, and will continue to have, an adverse effect on our financial condition. In addition, continued operations and our ability to
continue as a going concern may be dependent on our ability to obtain additional financing in the near future and thereafter, and
there are no assurances that such financing will be available to us at all or will be available in sufficient amounts or on
reasonable terms. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. If
we are unable to generate additional funds in the future through sales of our products, financing or from other sources or
transactions, we will exhaust our resources and will be unable to continue operations. If we cannot continue as a going concern, our
shareholders would likely lose most or all of their investment in us.
9
Management recognizes that it may
be required to obtain additional resources via issuances of indebtedness or equity to successfully execute its business plans. No assurances
can be given that management will be successful in raising additional capital, if needed, or on acceptable terms. These conditions raise
substantial doubt about the Companys ability to continue as a going concern for the next 12 months. These financial statements
do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities
that might be necessary should the Company be unable to continue as a going concern.
**Material weaknessesin our internal
control over financial reportingmay cause us to fail to timely and accurately report our financialresults or result in
amaterialmisstatement of our consolidatedfinancialstatements.**
****
A significant deficiency
andmaterialweaknessexistsover ourfinancialreporting. We continue to implement and evaluate the
effectiveness of additional policies and procedures to address identified control deficiencies in the design and operation of
ourinternal control overfinancialreporting, as further described inItem 9A of this Annual Report
(Controlsand Procedures). A material weaknessis a deficiency, or a combinationof deficiencies,
in internal control over financial reporting such that there is a reasonable possibility that amaterialmisstatement of
our consolidated financial statements will not be prevented or detected on a timely basis. Management identified a material weakness
in the Companys internal controls related to dedicated services billing and revenue recognition, and has taken actions in
2025 to have the material weakness remediated. To note, the significant deficiency and material weakness over our financial
reporting or the discovery of additional significant deficiencies or a material weakness and their possible effect on our results,
could have material and adverse effect on our stock price.
**We have experienced recurring losses from operations
and negative cash flows from operating activities and anticipate that we will continue to incur significant operating losses in the future.**
We have experienced recurring losses
from operations and negative cash flows from operating activities. We expect to continue to incur significant expenses related to our
ongoing operations and generate operating losses for the foreseeable future. The size of our losses will depend, in part, on the rate
of future expenditures, our ability to execute on our acquisition strategy and our ability to generate revenues. We incurred a net loss
of $23.8 million
for the year ended December 31, 2024. Our accumulated deficit increased to $155.8
million as of December 31, 2024, compared to the prior years deficit of $133.3
million.
We may encounter unforeseen expenses,
difficulties, complications, delays, and other unknown factors that may adversely affect our financial condition. Our prior losses and
expected future losses have had, and will continue to have, an adverse effect on our financial condition. If our products do not achieve
sufficient market acceptance and our revenues do not increase significantly, we may never become profitable. Even if we achieve profitability
in the future, we may not be able to sustain profitability in subsequent periods. Our failure to become and remain profitable would decrease
the value of our company and could impair our ability to raise capital, expand our business, diversify our product offerings or continue
our operations. A decline in the value of our company could cause you to lose all or part of your investment.
**If we are not able to successfully execute on
our future operating plans and objectives, our financial condition and results of operation may be materially adversely affected, and
we may not be able to continue as a going concern.**
It is important that we meet our
sales goals and increase sales going forward as our operating plan already reflects prior significant cost containment measures and may
make it difficult to achieve top-line growth if further significant reductions become necessary. If we do not meet our sales goals, our
available cash and working capital will decrease and our financial condition will be negatively impacted.
In order to be successful, we believe
that we must, among other things:
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avoid significant increases in variable costs relating to production, marketing and distribution. | |
We may not be able to meet
these objectives, which could have a material adverse effect on our results of operations. We have incurred significant operating
expenses in the past and may do so again in the future and, as a result, will need to increase revenues in order to improve our
results of operations. Our ability to increase sales will depend primarily on success in expanding our current markets, improving
our distribution base, entering into Direct-To-Retail (DTR) arrangements with national accounts, and introducing new brands,
products or product extensions to the market. Our ability to successfully enter new distribution areas and obtain national accounts
will, in turn, depend on various factors, many of which are beyond our control, including, but not limited to, the continued demand
for our brands and products in target markets, the ability to price our products at competitive levels, available positions within
the retailers planograms, the ability to establish and maintain relationships with distributors in each geographic area of
distribution and the ability in the future to create, develop and successfully introduce one or more new brands, products, and
product extensions.
10
**Our
strategic initiatives including acquisitions and divestitures may not be successful and may divert our managements attention away
from operations and could create general customer uncertainty.**
****
Our
growth strategy is based in part on growth through strategic initiatives including both acquisitions and divestitures, which poses a number
of risks. We may not be successful in identifying appropriate acquisition candidates, achieving targeted values as part of a disposition,
consummating an acquisition or divestiture on satisfactory terms, integrating any newly acquired or expanded business with our current
operations, or separating a divested business or commingled operation effectively. We may issue additional equity, incur long-term or
short-term indebtedness, spend cash or use a combination of these for all or part of the consideration paid in future acquisitions or
expansion of our operations, which may not be available to us on terms we find advantageous or acceptable, if at all. In addition, subject
to any requirements in the agreements governing our outstanding indebtedness, we may have significant discretion in how we employ the
consideration received in a divestiture and our management may not apply such consideration in a way that is ultimately accretive to our
business.
The execution of our strategic
initiatives could entail repositioning or similar actions that in turn require us to record impairments, restructuring and other charges.
Any such charges would reduce our earnings. We cannot guarantee that any future business acquisitions or divestitures will be pursued
or that any acquisitions or divestitures that are pursued will be consummated.
Additionally, any acquisition
or disposition (including the successful integration and separation of operations, products and personnel) may place a significant burden
on our management and other internal resources. The diversion of managements attention, and any difficulties encountered in such
a process, could harm our business, financial condition, and operating results. Moreover, our customers may, in response to the announcement
or consummation of a transaction, delay or defer purchasing decisions. If our customers delay or defer purchasing decisions, our revenues
could materially decline or any anticipated increases in revenue could be lower than expected.
**Failureto Successfully Integrate Acquired
Businesses, Its ProductsandOther Assets into the Company, or If Integrated, Failure to Further theCompanys Business
Strategy, May Result in theCompanys Inability to Realize Any Benefit from Such Acquisition.**
The consummation andintegration of any acquired
business, product orother assets into the Companymay be complex and time-consuming and, if suchbusinessesandassetsarenot
successfully integrated, the Company may not achievethe anticipated benefits, cost-savings or growth opportunities. Furthermore,
these acquisitions and other arrangements, even ifsuccessfullyintegrated, may fail to further theCompanysbusinessstrategy
as anticipated, expose theCompanyto increased competition or other challenges with respect to theCompanys products
or geographic markets, and expose theCompanyto additional liabilities associated with anacquiredbusiness, technology
or otherassetor arrangement. When the Company acquires cannabis businesses, it may obtain the rights to applications for licenses
as well as licenses; however, the procurement of such applications for licenses and licenses generally will be subject to governmental
and regulatory approval. There are no guarantees that the Company will successfully consummate such acquisitions, and even if the Company
consummates such acquisitions, the procurement of applications for licenses may never result in the grant of a license by any state or
local governmental or regulatory agency and the transfer of any rights to licenses may never be approved by the applicable state and/or
local governmental or regulatory agency.
**Demand for our products
may be adversely affected by changes in consumer preferences or any inability on our part to innovate, market or distribute our products
effectively, and any significant reduction in demand could adversely affect our business, financial condition or results of operations.**
Our beverage portfolio is comprised
of a number of unique brands with reputations and consumer imagery that have been built over time. Our investments in marketing as well
as our strong commitment to product quality are intended to have a favorable impact on brand image and consumer preferences. If we do
not adequately anticipate and react to changing demographics, consumer and economic trends, health concerns and product preferences, our
financial results could be adversely affected.
Additionally, failure to introduce
new brands, products or product extensions into the marketplace as current ones mature and to meet the changing preferences of consumers
could prevent us from gaining market share and achieving long-term profitability. Product lifecycles can vary and consumer preferences
and loyalties change over time. Although we try to anticipate these shifts and innovate new products to introduce to our consumers, we
may not succeed. Consumer preferences also are affected by factors other than taste, such as health and nutrition considerations and obesity
concerns, shifting consumer needs, changes in consumer lifestyles, increased consumer information and competitive product and pricing
pressures. Sales of our products may be adversely affected by negative publicity associated with these issues. If we do not adequately
anticipate or adjust to respond to these and other changes in consumer preferences, we may not be able to maintain and grow our brand
image and our sales may be adversely affected.
**Volatility in the price or availability of the
inputs we depend on, including raw materials, packaging, energy and labor, could adversely impact our financial results.**
The principal raw materials we
use include glass bottles, aluminum cans, PET, fiber-board, labels and cardboard cartons, flavorings and sweeteners. These component and
ingredient costs are subject to fluctuation. If there were to be substantial increases in the prices of our ingredients, raw materials
and packaging materials, to the extent that they cannot be recouped through increases in the prices of finished beverage products, would
increase our operating costs and could reduce our profitability. If our supply of these raw materials is impaired or if prices increase
significantly, it could affect the affordability of our products and reduce sales.
11
If we are unable to secure sufficient
ingredients or raw materials including glass, sugar, and other key supplies, we might not be able to satisfy demand on a short-term basis.
**International trade disputes, including U.S.
trade tariffs and retaliatory tariffs, could adversely impact our business.**
International trade disputes, including
threatened or implemented tariffs by the United States and threatened or implemented tariffs by foreign countries in retaliation, could
adversely impact our business. Many of our tenants sell imported goods and tariffs or other trade restrictions could increase costs for
these tenants. To the extent our tenants are unable to pass these costs on to their customers, our tenants could be adversely impacted.
In addition, international tradedisputes, including those related to tariffs, could result in inflationary pressures that directly
impact our costs, such as costs for steel, lumber and other materials applicable to our redevelopment projects. Trade disputes could also
adversely impact global supply chains which could further increase costs for us and our tenants or delay delivery of key inventories and
supplies.
**Significant political, trade, regulatory developments,
and other circumstances beyond our control, could have a material adverse effect on our financial condition or results of operations.**
****
Significant political, trade, or
regulatory developments in the jurisdictions in which we sell our products, such as those stemming from the change in U.S. federal administration,
are difficult to predict and may have a material adverse effect on us. Similarly, changes in U.S. federal policy that affect the geopolitical
landscape could give rise to circumstances outside our control that could have negative impacts on our business operations. For example,
during the prior Trumpadministration, increased tariffs were implemented on goods imported into the U.S., particularly from China,
Canada, and Mexico. On February 1, 2025, the U.S. imposed a 25% tariff on imports from Canada and Mexico, which were subsequently suspended
for a period of one month, and a 10% additional tariff on imports from China. Historically, tariffs have led to increased trade and political
tensions, between not only the U.S. and China, but also between the U.S. and other countries in the international community. In response
to tariffs, other countries have implemented retaliatory tariffs on U.S. goods. Political tensions as a result of trade policies could
reduce trade volume, investment, technological exchange, and other economic activities between major international economies, resulting
in a material adverse effect on global economic conditions and the stability of global financial markets. Any changes in political, trade,
regulatory, and economic conditions, including, but not limited to, U.S. and China trade policies, could have a material adverse effect
on our financial condition or results of operations.
**Regulatory changes or actions may alter the
nature of an investment in us or restrict the use of cryptocurrencies in a manner that adversely affects our business, prospects, or operations.**
****
As cryptocurrencies have grown in both popularity
and market size, governments around the world have reacted differently to cryptocurrencies; certain governments have deemed them illegal,
and others have allowed their use and trade without restriction, while some jurisdictions, such as the United States, subject the mining,
ownership and exchange of cryptocurrencies to extensive, and in some cases overlapping, unclear and evolving regulatory requirements.
In January 2025, U.S. President DonaldTrump
issued an executive order forming a presidential working group to establish a clear regulatory framework for digital assets, and leaders
in both houses of the U.S. Congress have announced a bicameral working group with the objective of passing legislation to provide regulatory
clarity for the industry. Committees in both houses of the U.S. Congress have held hearings to ensure fair access to financial services,
including for companies operating in the digital asset space. Additionally, President Trumpand members of the U.S. Congress announced
that they are studying the possibility of creating a national strategic digital asset reserve to include Bitcoin, and at least twelve
states have introduced legislation to create strategic Bitcoin reserves.
While these ongoing regulatory developments appear
to be positive, and we anticipate greater regulatory certainty in the future, given the difficulty of predicting the outcomes of ongoing
and future regulatory actions and legislative developments, it is possible that future developments could have a material adverse effect
on our business, prospects, or operations.
**Our business, operations, financial position and timelines, could be materially adversely affected by the continuing military action in Ukraine and
the war between Israel and Hamas.**
****
As a result of the military action commenced in February
2022 by the Russian Federation and Belarus in Ukraine and the war between Israel and Hamas commenced in October 2023, and related economic
sanctions imposed or that may in the future be imposed by certain governments, our financial position and operations may be materially
and adversely affected. As our ability to continue to operate will be dependent on raising debt and equity finance, any adverse impact
to those markets as a result of these conflicts, including due to increased market volatility, decreased availability in third-party financing
and/or a deterioration in the terms on which it is available (if at all), could negatively impact our business, results of operations,
cash flows, financial condition, and/or prospects. The extent of any potential impact is not yet determinable, however.
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**Changes in government regulation or failure
to comply with existing regulations could adversely affect our business, financial condition and results of operations.**
Our business and properties are
subject to various federal, state and local laws and regulations, including those governing the production, packaging, quality, labeling
and distribution of beverage products. In addition, various governmental agencies have enacted or are considering additional taxes on
soft drinks and other sweetened beverages. Changes in existing laws or regulations could require material expenses and negatively affect
our financial results through lower sales or higher costs.
**We compete in an industry that is brand-conscious,
so brand name recognition and acceptance of our products are critical to our success.**
Our business is dependent upon
awareness and market acceptance of our products and brands by our target markets. In addition, our business depends on acceptance by our
independent distributors and retailers of our brands as beverage brands that have the potential to provide incremental sales growth. If
we are not successful in the revitalization and growth of our brand and product offerings, we may not achieve and maintain satisfactory
levels of acceptance by independent distributors and retail consumers. Any failure of our brand to maintain or increase acceptance or
market penetration would likely have a material adverse effect on our revenues and financial results.
**Our brands and brand images are keys to our
business and any inability to maintain a positive brand image could have a material adverse effect on our results of operations.**
Our success depends on our ability
to maintain brand image for our existing products and effectively build up brand image for new products and brand extensions. We cannot
predict whether our advertising, marketing and promotional programs will have the desired impact on our products branding and on
consumer preferences. In addition, negative public relations and product quality issues, whether real or imagined, could tarnish our reputation
and image of the affected brands and could cause consumers to choose other products. Our brand image can also be adversely affected by
unfavorable reports, studies and articles, litigation, or regulatory or other governmental action, whether involving our products or those
of our competitors.
**Competition from traditional and large, well-financed
non-alcoholic and alcoholic beverage manufacturers may adversely affect our distribution relationships and may hinder development of our
existing markets, as well as prevent us from expanding our markets.**
The beverage industry is highly
competitive. We compete with other beverage companies not only for consumer acceptance but also for shelf space in retail outlets and
for marketing focus by our distributors, all of whom also distribute other beverage brands. Our products compete with all non-alcoholic
and alcoholic beverages, most of which are marketed by companies with substantially greater financial resources than ours. Some of these
competitors are placing severe pressure on independent distributors not to carry competitive brands such as ours. We also compete with
regional beverage producers and private label brands.
Increased competitor consolidations,
market-place competition, particularly among branded beverage products, and competitive product and pricing pressures could impact our
earnings, market share and volume growth. If, due to such pressure or other competitive threats, we are unable to sufficiently maintain
or develop our distribution channels, we may be unable to achieve our current revenue and financial targets. Competition, particularly
from companies with greater financial and marketing resources than ours, could have a material adverse effect on our existing markets,
as well as on our ability to expand the market for our products.
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**Legislative or regulatory changes that affect
our products, including new taxes, could reduce demand for products or increase our costs.**
Taxes imposed on the sale of certain
of our products by federal, state and local governments in the United States, or other countries in which we operate could cause consumers
to shift away from purchasing our beverages. Several municipalities in the United States have implemented or are considering implementing
taxes on the sale of certain sugared beverages, including non-diet soft drinks, fruit drinks, teas and flavored waters to
help fund various initiatives. These taxes could materially affect our business and financial results.
**Our reliance on distributors, retailers and
brokers could affect our ability to efficiently and profitably distribute and market our products, maintain our existing markets and expand
our business into other geographic markets.**
Our ability to maintain and expand
our existing markets for our products, and to establish markets in new geographic distribution areas, is dependent on our ability to establish
and maintain successful relationships with reliable distributors, retailers and brokers strategically positioned to serve those areas.
Most of our distributors, retailers and brokers sell and distribute competing products, including non-alcoholic and alcoholic beverages,
and our products may represent a small portion of their businesses. The success of this network will depend on the performance of the
distributors, retailers and brokers of this network. There is a risk that the mentioned entities may not adequately perform their functions
within the network by, without limitation, failing to distribute to sufficient retailers or positioning our products in localities that
may not be receptive to our product. Our ability to incentivize and motivate distributors to manage and sell our products is affected
by competition from other beverage companies, some of which may have greater resources than we do. To the extent that our distributors,
retailers and brokers are distracted from selling our products or do not employ sufficient efforts in managing and selling our products,
including re-stocking the retail shelves with our products, our sales and results of operations could be adversely affected. Furthermore,
such third-parties financial position or market share may deteriorate, which could adversely affect our distribution, marketing
and sales activities.
Our ability to maintain and expand
our distribution network and attract additional distributors, retailers and brokers will depend on a number of factors, some of which
are outside our control. Some of these factors include:
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We may not be able to successfully
manage all or any of these factors in any of our current or prospective geographic areas of distribution. Our inability to achieve success
with regards to any of these factors in a geographic distribution area will have a material adverse effect on our relationships in that
particular geographic area, thus limiting our ability to maintain or expand our market, which will likely adversely affect our revenues
and financial results.
**It is difficult to predict the timing and amount
of our sales because our distributors are not required to place minimum orders with us.**
Our independent distributors and
national accounts are not required to place minimum monthly or annual orders for our products. In order to reduce their inventory costs,
independent distributors typically order products from us on a just in time basis in quantities and at such times based
on the demand for the products in a particular distribution area. Accordingly, we cannot predict the timing or quantity of purchases by
any of our independent distributors or whether any of our distributors will continue to purchase products from us in the same frequencies
and volumes as they may have done in the past. Additionally, our larger distributors and national partners may make orders that are larger
than we have historically been required to fill. Shortages in inventory levels, supply of raw materials or other key supplies could negatively
affect us.
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**If we do not adequately manage our inventory
levels, our operating results could be adversely affected.**
We need to maintain adequate inventory
levels to be able to deliver products to distributors on a timely basis. Our inventory supply depends on our ability to correctly estimate
demand for our products. Our ability to estimate demand for our products is imprecise, particularly for new products, seasonal promotions
and new markets. If we materially underestimate demand for our products or are unable to maintain sufficient inventory of raw materials,
we might not be able to satisfy demand on a short-term basis. If we overestimate distributor or retailer demand for our products, we may
end up with too much inventory, resulting in higher storage costs, increased trade spend and the risk of inventory spoilage. If we fail
to manage our inventory to meet demand, we could damage our relationships with our distributors and retailers and could delay or lose
sales opportunities, which would unfavorably impact our future sales and adversely affect our operating results. In addition, if the inventory
of our products held by our distributors and retailers is too high, they will not place orders for additional products, which would also
unfavorably impact our sales and adversely affect our operating results.
**If we fail to maintain relationships with our
independent contract manufacturers, our business could be harmed.**
We do not manufacture SALT Tequila, Pulpoloco Sangria but instead outsource
the manufacturing process to third-party bottlers and independent contract manufacturers (co-packers). We do not own the plants or the
majority of the equipment required to manufacture and package these brands. Our ability to maintain effective relationships with contract
manufacturers and other third parties for the production and delivery of our beverage products in a particular geographic distribution
area is important to the success of our operations within each distribution area. We may not be able to maintain our relationships with
current contract manufacturers or establish satisfactory relationships with new or replacement contract manufacturers, whether in existing
or new geographic distribution areas. The failure to establish and maintain effective relationships with contract manufacturers for a
distribution area could increase our manufacturing costs and thereby materially reduce gross profits from the sale of our products in
that area. Poor relations with any of our contract manufacturers could adversely affect the amount and timing of product delivered to
our distributors for resale, which would in turn adversely affect our revenues and financial condition. In addition, our agreements with
our contract manufacturers are terminable at any time, and any such termination could disrupt our ability to deliver products to our customers.
**The volatility of energy and increased regulations
may have an adverse impact on our gross margin.**
Over the past few years, volatility
in the global oil markets has resulted in variable fuel prices, which many shipping companies have passed on to their customers by way
of higher base pricing and increased fuel surcharges. If fuel prices increase, we expect to experience higher shipping rates and fuel
surcharges, as well as energy surcharges on our raw materials. It is hard to predict what will happen in the fuel markets in 2025 and
beyond. Due to the price sensitivity of our products, we may not always be able to pass such increases on to our customers.
**Disruption within our supply chain, contract
manufacturing or distribution channels could have an adverse effect on our business, financial condition and results of operations.**
Our ability, through our suppliers,
business partners, contract manufacturers, independent distributors and retailers, to make, move and sell products is critical to our
success. Damage or disruption to our suppliers or to manufacturing or distribution capabilities due to weather, natural disaster, fire
or explosion, terrorism, pandemics, labor strikes or other reasons, could impair the manufacture, distribution and sale of our products.
Many of these events are outside of our control. Failure to take adequate steps to protect against or mitigate the likelihood or potential
impact of such events, or to effectively manage such events if they occur, could adversely affect our business, financial condition and
results of operations.
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**We rely upon our ongoing relationships with
our key flavor suppliers. If we are unable to source our flavors on acceptable terms from our key suppliers, we could suffer disruptions
in our business.**
We currently purchase our flavor
concentrate from various flavor concentrate suppliers, and continually develop other sources of flavor concentrate for each of our products.
Generally, flavor suppliers hold the proprietary rights to their flavor-specific ingredients. Although we have the exclusive rights to
flavor concentrates developed with our current flavor concentrate suppliers, and while we have the rights to the ingredients for our products,
we do not have the list of ingredients for our flavor extracts and concentrates. Consequently, we may be unable to obtain these exact
flavors or concentrates from alternative suppliers on short notice. If we have to replace a flavor supplier, we could experience disruptions
in our ability to deliver products to our customers, which could have a material adverse effect on our results of operations.
**If we are unable to attract and retain key personnel,
our efficiency and operations would be adversely affected; in addition, management turnover causes uncertainties and could harm our business.**
Our success depends on our ability
to attract and retain highly qualified employees in such areas as finance, sales, marketing and product development. We compete to hire
new employees, and, in some cases, must train them and develop their skills and competencies. We may not be able to provide our employees
with competitive salaries, and our operating results could be adversely affected by increased costs due to increased competition for employees,
higher employee turnover or increased employee benefit costs.
Changes to operations, policies
and procedures, which can often occur with the appointment of new personnel, can create uncertainty, may negatively impact our ability
to execute quickly and effectively, and may ultimately be unsuccessful. In addition, management transition periods are often difficult
as the new employees gain detailed knowledge of our operations, and friction can result from changes in strategy and management style.
Management turnover inherently causes some loss of institutional knowledge, which can negatively affect strategy and execution.
Further, to the extent we experience
additional management turnover, our operations, financial condition and employee morale could be negatively impacted. In addition, competition
for top management is high and it may take months to find a candidate that meets our requirements. If we are unable to attract and retain
qualified management personnel, our business could suffer.
**If we fail to protect our trademarks and trade
secrets, we may be unable to successfully market our products and compete effectively.**
We rely on a combination of trademark
and trade secrecy laws, confidentiality procedures and contractual provisions to protect our intellectual property rights. Failure to
protect our intellectual property could harm our brand and our reputation, and adversely affect our ability to compete effectively. Further,
enforcing or defending our intellectual property rights, including our trademarks,
copyrights, licenses and trade
secrets, could result in the expenditure of significant financial and managerial resources. We regard our intellectual property, particularly
our trademarks and trade secrets to be of considerable value and importance to our business and our success, and we actively pursue the
registration of our trademarks in the United States and internationally. However, the steps taken by us to protect these proprietary rights
may not be adequate and may not prevent third parties from infringing or misappropriating our trademarks, trade secrets or similar proprietary
rights. In addition, other parties may seek to assert infringement claims against us, and we may have to pursue litigation against other
parties to assert our rights. Any such claim or litigation could be costly. In addition, any event that would jeopardize our proprietary
rights or any claims of infringement by third parties could have a material adverse effect on our ability to market or sell our brands,
profitably exploit our products or recoup our associated research and development costs.
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As part of the licensing strategy
of our brands, we enter into licensing agreements under which we grant our licensing partners certain rights to use our trademarks and
other designs. Although our agreements require that the use of our trademarks and designs is subject to our control and approval, any
breach of these provisions, or any other action by any of our licensing partners that is harmful to our brands, goodwill and overall image,
could have a material adverse impact on our business.
**If we encounter product recalls or other product
quality issues, our business may suffer.**
Product quality issues, real or
imagined, or allegations of product contamination, even when false or unfounded, could tarnish our image and could cause consumers to
choose other products. In addition, because of changing government regulations or implementation thereof, or allegations of product contamination,
we may be required from time to time to recall products entirely or from specific markets. Product recalls could affect our profitability
and could negatively affect brand image.
**Our business is subject to many regulations and noncompliance is
costly.**
The production, marketing and sale
of our beverages, including contents, labels, caps and containers, are subject to the rules and regulations of various federal, provincial,
state and local health agencies. If a regulatory authority finds that a current or future product or production batch or run
is not in compliance with any of these regulations, we may be fined, or production may be stopped, which would adversely affect our financial
condition and results of operations. Similarly, any adverse publicity associated with any noncompliance may damage our reputation and
our ability to successfully market our products. Furthermore, the rules and regulations are subject to change from time to time and while
we closely monitor developments in this area, we cannot anticipate whether changes in these rules and regulations will impact our business
adversely. Additional or revised regulatory requirements, whether labeling, environmental, tax or otherwise, could have a material adverse
effect on our financial condition and results of operations.
**Significant additional labeling or warning requirements
may inhibit sales of affected products.**
Various jurisdictions may seek
to adopt significant additional product labeling or warning requirements relating to the chemical content or perceived adverse health
consequences of certain of our products. These types of requirements, if they become applicable to one or more of our products under current
or future environmental or health laws or regulations, may inhibit sales of such products. In California, a law requires that a specific
warning appear on any product that contains a component listed by the state as having been found to cause cancer or birth defects. This
law recognizes no generally applicable quantitative thresholds below which a warning is not required. If a component found in one of our
products is added to the list, or if the increasing sensitivity of detection methodology that may become available under this law and
related regulations as they currently exist, or as they may be amended, results in the detection of an infinitesimal quantity of a listed
substance in one of our beverages produced for sale in California, the resulting warning requirements or adverse publicity could affect
our sales.
**Litigation or legal could expose us to significant
liabilities and damage our reputation.**
We may become party to litigation
claims and legal proceedings. Litigation involves significant risks, uncertainties and costs, including distraction of management attention
away from our business operations. We evaluate litigation claims and legal proceedings to assess the likelihood of unfavorable outcomes
and to estimate, if possible, the amount of potential losses. Based on these assessments and estimates, we establish reserves and disclose
the relevant litigation claims or legal proceedings, as appropriate. These assessments and estimates are based on the information available
to management at the time and involve a significant amount of management judgment. Actual outcomes or losses may differ materially from
those envisioned by our current assessments and estimates. Our policies and procedures require strict compliance by our employees and
agents with all U.S. and local laws and regulations applicable to our business operations, including those prohibiting improper payments
to government officials. Nonetheless, our policies and procedures may not ensure full compliance by our employees and agents with all
applicable legal requirements. Improper conduct by our employees or agents could damage our reputation or lead to litigation or legal
proceedings that could result in civil or criminal penalties, including substantial monetary fines, as well as disgorgement of profits.
17
Additionally, there has been public
attention directed at the beverage alcohol industry, which we believe is due to concern over problems related to harmful use of alcohol,
including drinking and driving, underage drinking and health consequences from the misuse of alcohol. We could be exposed to lawsuits
relating to product liability or marketing or sales practices with respect to our alcoholic products. Adverse developments in lawsuits
concerning these types of matters or a significant decline in the social acceptability of beverage alcohol products that may result from
lawsuits could have a material adverse effect on our business, liquidity, financial condition and results of operations.
**We are subject to risks inherent in sales of
products in international markets.**
Our operations outside of the United
States, contribute to our revenue and profitability, and we believe that developing and emerging markets could present future growth opportunities
for us. However, there can be no assurance that existing or new products that we manufacture, distribute or sell will be accepted or be
successful in any particular foreign market, due to local or global competition, product price, cultural differences, and consumer preferences
or otherwise. There are many factors that could adversely affect demand for our products in foreign markets, including our inability to
attract and maintain key distributors in these markets; volatility in the economic growth of certain of these markets; changes in economic,
political or social conditions, the status and renegotiations of the North American Free Trade Agreement, imposition of new or increased
labeling, product or production requirements, or other legal restrictions; restrictions on the import or export of our products or ingredients
or substances used in our products; inflationary currency, devaluation or fluctuation; increased costs of doing business due to compliance
with complex foreign and U.S. laws and regulations. If we are unable to effectively operate or manage the risks associated with operating
in international markets, our business, financial condition or results of operations could be adversely affected.
**Water scarcity and poor quality could negatively impact our costs
and capacity.**
Water is a main ingredient in substantially
all of our products, is vital to the production of the agricultural ingredients on which our business relies and is needed in our manufacturing
process. It also is critical to the prosperity of the communities we serve. Water is a limited resource in many parts of the world, facing
unprecedented challenges from overexploitation, increasing demand for food and other consumer and industrial products whose manufacturing
processes require water, increasing pollution and emerging awareness of potential contaminants, poor management, lack of physical or financial
access to water, sociopolitical tensions due to lack of public infrastructure in certain areas of the world and the effects of climate
change. As the demand for water continues to increase around the world, and as water becomes scarcer and the quality of available water
deteriorates, we may incur higher costs or face capacity constraints and the possibility of reputational damage, which could adversely
affect our profitability or net operating revenues in the long run.
**Fluctuations in quantity and quality of grape
supply could adversely affect our business.**
A shortage in the supply of quality
grapes may result from a variety of factors that determine the quality and quantity of our grape supply, including weather conditions,
pruning methods, diseases and pests, the ability to buy grapes on long and short-term contracts and the number of vines producing grapes.
Any shortage in grape production could cause a reduction in the amount of wine we are able to produce, which could reduce sales and adversely
impact our results from operations. Factors that reduce the quantity of our grapes may also reduce their quality, which in turn could
reduce the quality or amount of wine we produce. Deterioration in the quality of our wines could harm our brand name, reduce sales and
adversely impact our business and results of operations.
**Contamination of our wines could harm our business.**
We are subject to certain hazards
and product liability risks, such as potential contamination, through tampering or otherwise, of ingredients or products. Contamination
of any of our wines could force us to destroy wine held in inventory and could cause the need for a product recall, which could significantly
damage our reputation for product quality. We maintain insurance against certain of these kinds of risks, and others, under various insurance
policies. However, the insurance may not be adequate or may not continue to be available at a price or on terms that are satisfactory
to us and this insurance may not be adequate to cover any resulting liability.
18
**Our business and operations would be adversely
impacted in the event of a failure or interruption of our information technology infrastructure or as a result of a cybersecurity attack.**
The proper functioning of our own
information technology (IT) infrastructure is critical to the efficient operation and management of our business. We may not have the
necessary financial resources to update and maintain our IT infrastructure, and any failure or interruption of our IT system could adversely
impact our operations. In addition, our IT is vulnerable to cyberattacks, computer viruses, worms and other malicious software programs,
physical and electronic break-ins, sabotage and similar disruptions from unauthorized tampering with our computer systems. We believe
that we have adopted appropriate measures to mitigate potential risks to our technology infrastructure and our operations from these IT-related
and other potential disruptions. However, given the unpredictability of the timing, nature and scope of any such IT failures or disruptions,
we could potentially be subject to downtimes, transactional errors, processing inefficiencies, operational delays, other detrimental impacts
on our operations or ability to provide products to our customers, the compromising of confidential or personal information, destruction
or corruption of data, security breaches, other manipulation or improper use of our systems and networks, financial losses from remedial
actions, loss of business or potential liability, and/or damage to our reputation, any of which could have a material adverse effect on
our cash flows, competitive position, financial condition or results of operations.
**If we fail to comply with personal data protection and privacy laws,
we could be subject to adverse publicity, government enforcement actions and/or private litigation, which could negatively affect our
business and operating results.**
In the ordinary course of our business,
we receive, process, transmit and store information relating to identifiable individuals (personal data), primarily employees,
former employees and consumers with whom we interact. As a result, we are subject to various U.S. federal and state and foreign laws and
regulations relating to personal data. These laws have been subject to frequent changes, and new legislation in this area may be enacted
in other jurisdictions at any time. These laws impose operational requirements for companies receiving or processing personal data, and
many provide for significant penalties for noncompliance. These requirements with respect to personal data have subjected and may continue
in the future to subject the Company to, among other things, additional costs and expenses and have required and may in the future require
costly changes to our business practices and information security systems, policies, procedures and practices. Our security controls over
personal data, the training of employees and vendors on data privacy and data security, and the policies, procedures and practices we
implemented or may implement in the future may not prevent the improper disclosure of personal data by us or the third-party service providers
and vendors whose technology, systems and services we use in connection with the receipt, storage and transmission of personal data. Unauthorized
access or improper disclosure of personal data in violation of personal data protection or privacy laws could harm our reputation, cause
loss of consumer confidence, subject us to regulatory enforcement actions (including fines), and result in private litigation against
us, which could result in loss of revenue, increased costs, liability for monetary damages, fines and/or criminal prosecution, all of
which could negatively affect our business and operating results.
**If our third-party service providers and business
partners do not satisfactorily fulfill their commitments and responsibilities, our financial results could suffer.**
In the conduct of our business,
we rely on relationships with third parties, including cloud data storage and other information technology service providers, suppliers,
distributors, contractors, joint venture partners and other external business partners, for certain functions or for services in support
of key portions of our operations. These third-party service providers and business partners are subject to similar risks as we are relating
to cybersecurity, privacy violations, business interruption, and systems and employee failures, and are subject to legal, regulatory and
market risks of their own. Our third-party service providers and business partners may not fulfill their respective commitments and responsibilities
in a timely manner and in accordance with the agreed-upon terms. In addition, while we have procedures in place for selecting and managing
our relationships with third-party service providers and other business partners, we do not have control over their business operations
or governance and compliance systems, practices and procedures, which increases our financial, legal, reputational and operational risk.
If we are unable to effectively manage our third-party relationships, or for any reason our third-party service providers or business
partners fail to satisfactorily fulfill their commitments and responsibilities, our financial results could suffer.
19
**Our results of operations may fluctuate from
quarter to quarter for many reasons, including seasonality.**
Our sales are seasonal, and we
experience fluctuations in quarterly results as a result of many factors. Companies similar to ours have historically generated a greater
percentage of our revenues during the warm weather months of April through September. Timing of customer purchases will vary each year
and sales can be expected to shift from one quarter to another. As a result, management believes that period-to-period comparisons of
results of operations are not necessarily meaningful and should not be relied upon as any indication of future performance or results
expected for the fiscal year.
**Changes in accounting standards and subjective
assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our financial results.**
The U.S. GAAP and related pronouncements,
implementation guidelines and interpretations with regard to a wide variety of matters that are relevant to our business, such as, but
not limited to, stock-based compensation, trade spend and promotions, and income taxes are highly complex and involve many subjective
assumptions, estimates and judgments by our management. Changes to these rules or their interpretation or changes in underlying assumptions,
estimates or judgments by our management could significantly change our reported results.
**If we are unable to maintain effective disclosure
controls and procedures and internal control over financial reporting, our stock price and investor confidence could be materially and
adversely affected.**
We are required to maintain both
disclosure controls and procedures and internal control over financial reporting that are effective. Because of their inherent limitations,
internal control over financial reporting, however well designed and operated, can only provide reasonable, and not absolute, assurance
that the controls will prevent or detect misstatements. Because of these and other inherent limitations of control systems, there is only
the reasonable assurance that our controls will succeed in achieving their goals under all potential future conditions. The failure of
controls by design deficiencies or absence of adequate controls could result in a material adverse effect on our business and financial
results, which could also negatively impact our stock price and investor confidence.
**We are dependent on a distiller in Mexico to
provide us with our finished SALT tequila product. Failure to obtain satisfactory performance from them or a loss of their services could
cause us to lose sales, incur additional costs, and lose credibility in the marketplace.**
We depend on a distiller in Mexico,
a company in Jalisco, for the production, bottling, labeling, capping and packaging of our finished tequila product. We do not have a
written agreement with our distiller in Mexico obligating it to produce our product. The termination of our relationship with our distiller
in Mexico distiller or an adverse change in the terms of its services could have a negative impact on our business. If our distiller in
Mexico increases its prices, we may not have alternative sources of supply at comparable prices and may not be able to raise the prices
of our products to cover all, or even a portion, of the increased costs. In addition, if our distiller in Mexico fails to perform satisfactorily,
fails to handle increased orders, or the loss of the services of our distiller in Mexico, along with delays in shipments of products,
could cause us to fail to meet orders, lose sales, incur additional costs, and/or expose us to product quality issues. In turn, this could
cause us to lose credibility in the marketplace and damage our relationships with our customers and consumers, ultimately leading to a
decline in our business and results of operations.
**Regulatory decisions and changes in the legal,
regulatory and tax environment where our tequila is produced and where we operate could limit our business activities or increase our
operating costs and reduce our margins.**
Our business is subject to extensive
regulation regarding production, distribution, marketing, advertising and labeling of beverage alcohol products in the U.S. and in Mexico,
where our tequila is produced. We are required to comply with these regulations and maintain various permits and licenses. We are also
required to conduct business only with holders of licenses to import, warehouse, transport, distribute, and sell spirits. We cannot assure
you that these and other governmental regulations, applicable to our industry, will not change or become more stringent. Moreover, because
these laws and regulations are subject to interpretation, we may not be able to predict when, and to what extent, liability may arise.
Additionally, due to increasing public concern over alcohol-related societal problems,
20
including driving while intoxicated, underage drinking,
alcoholism and health consequences from the abuse of alcohol, various levels of government may seek to impose additional restrictions
or limits on advertising or other marketing activities promoting beverage alcohol products. Failure to comply with any of the current
or future regulations and requirements relating to our industry and products, could result in monetary penalties, suspension or even revocation
of our licenses and permits. Costs of compliance with changes in regulations could be significant and could harm our business, as we may
find it necessary to raise our prices in order to maintain profit margins, which could lower the demand for our products and reduce our
sales and profit potential.
In addition, the distribution of
beverage alcohol products is subject to extensive taxation both in the United States and internationally (and, in the United States, at
both the federal and state government levels), and beverage alcohol products themselves are the subject of national import and excise
duties in most countries around the world. An increase in taxation or in import or excise duties could also significantly harm our sales
revenue and margins, both through the reduction of overall consumption and by encouraging consumers to switch to lower-taxed categories
of beverage alcohol.
**We face substantial competition in the alcoholic
and non-alcoholic beverage industry, and we may not be able to effectively compete.**
Consolidation among spirits producers,
distributors, wholesalers, or retailers could create a more challenging competitive landscape for our products. Consolidation at any level
could hinder the distribution and sale of our products as a result of reduced attention and resources allocated to our brands, both during
and after transition periods, because our brands might represent a smaller portion of the new business portfolio. Expansion into new product
categories by other suppliers, or innovation by new entrants into the market, could increase competition in our product categories. Changes
to our route-to-consumer models or partners in important markets could result in temporary or longer-term sales disruption, higher implementation-related
or fixed costs, and could negatively affect other business relationships we might have with that partner. Distribution network disruption
or fluctuations in our product inventory levels with distributors, wholesalers, or retailers could negatively affect our results for a
particular period.
Our competitors may respond to
industry and economic conditions more rapidly or effectively than we do. Our competitors offer products that compete directly with ours
for shelf space, promotional displays, and consumer purchases. Pricing, (including price promotions, discounting, couponing, and free
goods), marketing, new product introductions, entry into our distribution networks, and other competitive behavior by our competitors
could adversely affect our sales margins, and profitability.
**Our business operations may be adversely affected
by social, political and economic conditions affecting market risks and the demand for and pricing of our products. These risks include:**
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Unfavorable economic conditions and related low consumer confidence, high unemployment, weak credit or capital markets, sovereign debt defaults, sequestrations, austerity measures, higher interest rates, political instability, higher inflation, deflation, lower returns on pension assets, or lower discount rates for pension obligations; | |
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Changes in laws, regulations, or policies - especially those that affect the production, importation, marketing, sale, or consumption of our beverage alcohol products; | |
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| Tax rate changes (including excise, sales, tariffs, duties, corporate, individual income, dividends, capital gains), or changes in
related reserves, changes in tax rules or accounting standards, and the unpredictability and suddenness with which they can occur; | |
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| Dependence upon the continued growth of brand names; | |
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| Changes in consumer preferences, consumption, or purchase patterns - particularly away from tequila, and our ability to anticipate
and react to them; bar, restaurant, travel, or other on-premise declines; | |
21
|
| Unfavorable consumer reaction to our products, package changes, product reformulations, or other product innovation; | |
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| Decline in the social acceptability of beverage alcohol products in our markets; | |
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| Production facility or supply chain disruption; | |
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| Imprecision in supply/demand forecasting; | |
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| Higher costs, lower quality, or unavailability of energy, input materials, labor, or finished goods; | |
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| Route-to-consumer changes that affect the timing of our sales, temporarily disrupt the marketing or sale of our products, or result
in higher implementation related or fixed costs; | |
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| Inventory fluctuations in our products by distributors, wholesalers, or retailers; Competitors consolidation or other competitive
activities, such as pricing actions (including price reductions, promotions, discounting, couponing, or free goods), marketing, category
expansion, product introductions, or entry or expansion in our geographic markets; | |
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| Insufficient protection of our intellectual property rights; | |
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| Product recalls or other product liability claims; product counterfeiting, tampering, or product quality issues; | |
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| Significant legal disputes and proceedings; government investigations (particularly of industry or company business, trade or marketing
practices; | |
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| Failure or breach of key information technology systems; | |
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| Negative publicity related to our company, brands, marketing, personnel, operations, business performance or prospects; and | |
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| Business disruption, decline, or costs related to organizational changes, reductions in workforce, or other cost-cutting measures,
or our failure to attract or retain key executive or employee talent. | |
**Uncertainty in the financial markets and other
adverse changes in general economic or political conditions in any of the major countries in which we do business could adversely affect
our industry, business and results of operations.**
Global economic uncertainties,
including foreign currency exchange rates, affect businesses such as ours in a number of ways, making it difficult to accurately forecast
and plan our future business activities. There can be no assurance that economic improvements will occur, or that they would be sustainable,
or that they would enhance conditions in markets relevant to us.
**Our limited operating history makes it difficult
to forecast our future results, making any investment in us highly speculative.**
We have a limited operating history,
and our historical financial and operating information is of limited value in predicting our future operating results. We may not accurately
forecast customer behavior and recognize or respond to emerging trends, changing preferences or competitive factors facing us, and, therefore,
we may fail to make accurate financial forecasts. Our current and future expense levels are based largely on our investment plans and
estimates of future revenue. As a result, we may be unable to adjust our spending in a timely manner to compensate for any unexpected
revenue shortfall, which could then force us to curtail or cease our business operations.
22
**Risks Related to Our Securities**
**An investment in our common stock is speculative
and there can be no assurance of any return on any such investment.**
An investment in our common stock
is speculative and there is no assurance that investors will obtain any return on their investment. Investors will be subject to substantial
risks involved in an investment in the Company, including the risk of losing their entire investment.
**Future sales of common stock, or the perception
of such future sales, by some of our existing stockholders could cause our stock price to decline.**
The market price of our common
stock could decline as a result of sales of a large number of shares of our common stock in the market or the perception that these sales
may occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell shares in the
future at a time and at a price that we deem appropriate.
From time to time, certain of our
stockholders may be eligible to sell all or some of their common shares by means of ordinary brokerage transactions in the open market
pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended (the Securities Act), subject to certain limitations.
In general, pursuant to Rule 144, non-affiliate stockholders may sell freely after six months subject only to the current public information
requirement. Affiliates may sell after six months subject to the Rule 144 volume, manner of sale (for equity securities), and current
public information and notice requirements.
**Our Board of Directors may issue and fix the terms of shares of our
Preferred Stock without stockholder approval, which could adversely affect the voting power of holders of our Common Stock or any change
in control of our Company.**
Our Articles of Incorporation authorize
the issuance of up to 5,000,000 shares of blank check preferred stock, with par value $0.001 per share, with such designation
rights and preferences as may be determined from time to time by the Board of Directors. Our Board of Directors is empowered, without
shareholder approval, to issue shares of preferred stock with dividend, liquidation, conversion, voting or other rights which could adversely
affect the voting power or other rights of the holders of our common stock. In the event of such issuances, the preferred stock could
be used, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our company. Any such
issuance would be subject to terms and conditions of any current offering that may disallow any such issuance.
**We have 1,000 shares of Series A Preferred Stock
authorized and outstanding with mirrored voting rights.**
Series A Preferred Stock
Pursuant to a certificate of designation filed with
the Secretary of State of the State of Nevada on June 10, 2025 (the Certificate of Designation of Series A Preferred Stock),
one thousand (1,000) shares of preferred stock have been designated as Series A Preferred Stock, par value $0.001 per share, of the Company
(Series A Preferred Stock). The Certificate of Designation provides that each Series A Preferred Share will have twenty-five
thousand (25,000) votes and will vote together with the Companys outstanding common shares, par value $0.001 (the Common
Shares), as a single class, only with respect to the proposal related to the increase of authorized shares at the Special Meeting.
The holder of the Series A Preferred Shares has granted an irrevocable proxy to certain officers of the Company to vote the Series A Preferred
Shares in accordance with the terms of the Issuance Documents, in connection with the Special Meeting. Per the terms of the Issuance Documents,
if voted, the Series A Preferred Shares are required to vote on the applicable proposals in the same mirrored proportion
aggregate votes cast FOR and AGAINST on the proposal to increase the authorized shares by the holders of the
Common Shares who properly vote on such proposal (but excluding any abstentions). Mr. Nistico, the Companys Chief Executive Officer,
directly beneficially owns such one thousand (1,000) share of Series A Preferred Stock.
The outstanding Series A Preferred Shares are required
to be redeemed in whole, but not in part, upon the earliest of: (i) if such redemption is authorized and directed by the Board in its
sole discretion, automatically and effective on such time and date specified by the Board in its sole discretion, (ii) automatically upon
the approval by the Companys shareholders of the increase of the authorized shares at any meeting of shareholders or (iii) immediately
prior to the record date for the 2025 Annual Meeting of Shareholders of the Company Upon such redemption, the holder of the Series A Preferred
Shares will receive aggregate consideration equal to the Purchase Price.
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The Series A Preferred will vote as described above
to increase the number of authorized shares of our common stock, which could result in substantial dilution to existing stockholders if
additional shares are issued. The increase in authorized shares provides us with greater flexibility to issue additional equity securities
for various corporate purposes, including financings, equity compensation, or other strategic transactions. However, any such issuances
may dilute the ownership interests of existing stockholders and could adversely affect the market price of our common stock. In addition,
the issuance of additional shares may make it more difficult for a third party to acquire control of the Company, which could discourage
or delay takeover attempts that could benefit stockholders. There can be no assurance as to when or if any additional shares will be issued
or the terms on which such issuances may occur.
**We have issued multiple classes of preferred
stock in the Company that will result in dilution to existing stockholders upon their conversion**
****
The issuance of common stock upon conversion of the
our Series A-1 Preferred Stock, our Series B Redeemable Preferred Stock, and our Series C Convertible Preferred Stock will result in immediate
and substantial dilution to the interests of other stockholders. Although holders may not receive shares of common stock exceeding 4.99%
of our outstanding shares of common stock immediately after affecting such conversion, this restriction does not prevent holders from
receiving shares up to the 4.99% limit, selling those shares, and then receiving the rest of the shares it is due, in one or more tranches,
while still staying below the 4.99% limit. If holders choose to do this, it will cause substantial dilution to the then holders of our
common stock. Additionally, the continued sale of shares issuable upon successive conversions will likely create significant downward
pressure on the price of our common stock as holders sells material amounts of our common stock over time and/or in a short period of
time. This could place further downward pressure on the price of our common stock and in turn result in holders receiving an ever-increasing
number of additional shares of common stock upon conversion of its securities, and adjustments thereof, which in turn will likely lead
to further dilution, reductions in the exercise/conversion price of holders securities and even more downward pressure on our common stock,
which could lead to our common stock becoming devalued or worthless
****
**Themarketprice of our common stock
has been volatileover the year andmay continue to be volatile.**
Themarketpriceand
trading volume of ourcommonstockhas beenvolatileover the past year, and itmay continue to be volatile.
Over fiscal year 2024 and the date of this annual report, ourcommonstockhas traded as low as $0.96 and as high as $29.20
pershare. We cannot predict thepriceat which ourcommonstockwill trade in the future, and thepriceof
ourcommonstockmay decline. Thepriceat which ourcommon stock trades may fluctuate significantlyand
may be influenced by many factors, including our financial results, developments generally affecting the coffee industry, general economic,
industry andmarketconditions, the depth and liquidity of themarket for our common stock, fluctuations in coffeeprices,
investor perceptions of our business, reports by industry analysts, negative announcements by our customers, competitors or suppliers
regarding their own performances, and the impact of other Risk Factors discussed in the Annual Report.
**Because certain principal stockholders own a
large percentage of our voting stock, other stockholders voting power may be limited.**
As of December 31, 2024, our ten
(10) largest shareholders own or controlled approximately 57% of our outstanding common stock. If those stockholders act together,
they would have the ability to have a substantial influence on matters submitted to our stockholders for approval, including the election
and removal of directors and the approval of any merger, consolidation or sale of all or substantially all of our assets. As a result,
our other stockholders may have little or no influence over matters submitted for shareholder approval. In addition, the ownership of
such stockholders could preclude any unsolicited acquisition of us, and consequently, adversely affect the price of our common stock.
These stockholders may make decisions that are adverse to your interests.
**We do not expect to pay dividends and investors
should not buy our Common Stock expecting to receive dividends.**
We do not anticipate that we will
declare or pay any dividends in the foreseeable future. Consequently, you will only realize an economic gain on your investment in our
common stock if the price appreciates. You should not purchase our common stock expecting to receive cash dividends. Therefore, our failure
to pay dividends may cause you to not see any return on your investment even if we are successful in our business operations.
24
**There can be no assurances that our common stock
will not be subject to potential delisting if we do not continue to maintain the listing requirements of the NYSE American.**
Since June 11, 2021, our common
stock has been listed on the NYSE American, under the symbol SBEV. The NYSE American has rules for continued listing, including,
without limitation, minimum market capitalization and other requirements. Failure to maintain our listing (i.e., being de-listed from
the NYSE American), would make it more difficult for shareholders to sell our common stock and more difficult to obtain accurate price
quotations on our common stock. This could have an adverse effect on the price of our common stock. Our ability to issue additional securities
for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely
affected if our common stock is not traded on a national securities exchange.
On October 6, 2023, the NYSE American
notified the Company that we were not in compliance with Section 1003(a)(i) of the continued listing standards set forth in the NYSE American
Company Guide (the Company Guide), requiring a listed company to have stockholders equity of (i) at least $2.0 million
if it has reported losses from continuing operations or net losses in two of its three most recent fiscal years. The notice had no immediate
impact on the listing of our common stock, subject to our compliance with the other continued listing requirements. In accordance with
applicable NYSE American procedures, we submitted a plan of compliance (the Plan) advising of the definitive action(s) the
Company has taken, is taking, or would take, that would bring us into compliance with the continued listing standards within the 18 months
of receipt of the notice. The NYSE American reviewed and accepted the Plan as a reasonable demonstration of an ability to conform to the
relevant standards in the 18-month period. On December 20, 2023, we received a notification (the Plan Letter), with NYSE
American acceptance of the proposed plan and further deficiency notice. In the Plan Letter the NYSE American indicated that in addition
to Section 1003(a)(i), the Company was also not in compliance with Section 1003(a)(ii) of the Company Guide, requiring a listed company
to have stockholders equity of at least $4.0 million if it has reported losses from continuing operations or net losses in three
of its four most recent fiscal years.
On June 5, 2024, the Company received
notification from the NYSE American indicating that it is not in compliance withthe Exchanges continued listing standards
under Section 1003(a)(iii) of theCompany Guide, requiringa listed company to have stockholders equity of $6 million
or more if the listed company has reported losses from continuing operations and/or net losses in its five most recent fiscal years.
On April 7, 2025, Company, NYSE
American publicly announced and provided a notice to the Company that NYSE Regulation has determined to commence proceedings to delist
the Companys Common Stock and publicly trading Warrants to purchase one share of Common Stock, from NYSE American. NYSE Regulation
has determined that the Company is no longer suitable for listing pursuant to Section 1009(a) of the NYSE American Company Guide as the
Company was unable to demonstrate that it had regained compliance with Sections 1003(a)(i), (ii), and (iii) of the Company Guide by the
end of the maximum 18-month compliance plan period, which expired on April 6, 2025.
On
April 16, 2025, the Company,received an official notice of noncompliance from NYSE Regulation stating that the Company is
not in compliance with NYSE American continued listing standards due to the failure to timely file the Companys Form 10-K for the
year ended December 31, 2024 by the filing due date of April 15, 2025.
Our common stock will continue
to be listed and traded on the NYSE American during the 18-month period, subject to the Companys compliance with the other continued
listing standards of the NYSE American and continued periodic review by the NYSE American of the Companys progress with respect
to its Plan. There can be no assurance that the Company will be able to meet its goals set forth in the Plan. If we are unable to satisfy
the NYSE American rules and listing standards, or are unable to make progress on our Plan, our securities could be subject to delisting.
If the NYSE American were to delist
our securities from trading, we could face significant consequences, including, but not limited to, the following:
25
a limited availability
for market quotations for our securities;
reduced liquidity with
respect to our securities;
a determination that
our common stock is a penny stock, which will require brokers trading in our common stock to adhere to more stringent rules
and possibly result in a reduced level of trading activity in the secondary trading market for our common stock;
limited amount of news
and analyst coverage; and
a decreased ability
to issue additional securities or obtain additional financing in the future.
**Our common stock could be further diluted as
the result of the issuance of additional common stock, convertible securities, warrants or options.**
Our issuance of additional common
stock, convertible securities, options and warrants could affect the rights of our stockholders, result in a reduction in the overall
percentage holdings of our stockholders, could put downward pressure on the market price of our common stock, could result in adjustments
to conversion and exercise prices of outstanding notes and warrants, and could obligate us to issue additional common stock to certain
of our stockholders.
**Item 1B. Unresolved Staff Comments.**
None.
**Item 1C. Cybersecurity**
We have established policies and processes for assessing,
identifying, and managing material risk from cybersecurity threats, and have integrated these processes into our overall risk management
systems and processes. We routinely assess material risks from cybersecurity threats, including any potential unauthorized occurrence
on or conducted through our information systems that may result in adverse effects on the confidentiality, integrity, or availability
of our information systems or any information residing therein.
We conduct periodic risk assessments to identify cybersecurity
threats, as well as assessments in the event of a material change in our business practices that may affect information systems that are
vulnerable to such cybersecurity threats. These risk assessments include identification of reasonably foreseeable internal and external
risks, the likelihood and potential damage that could result from such risks, and the sufficiency of existing policies, procedures, systems,
and safeguards in place to manage such risks.
Following these risk assessments, we re-design, implement,
and maintain reasonable safeguards to minimize identified risks; reasonably address any identified gaps in existing safeguards; and regularly
monitor the effectiveness of our safeguards. Primary responsibility for assessing, monitoring and managing our cybersecurity risks rests
with the President who reports to our Chief Executive Officer, to manage the risk assessment and mitigation process.
We engage consultants, or other third parties in connection
with our risk assessment processes. These service providers assist us to design and implement our cybersecurity policies and procedures,
as well as to monitor and test our safeguards. We require each third-party service provider to certify that it has the ability to implement
and maintain appropriate security measures, consistent with all applicable laws, to implement and maintain reasonable security measures
in connection with their work with us, and to promptly report any suspected breach of its security measures that may affect our company.
We have not encountered cybersecurity challenges that
have materially impaired our operations or financial standing.
26
**Governance**
Our board of directors addresses the Companys
cybersecurity risk management as part of its general oversight function. The board of directors audit committee is responsible
for overseeing Companys cybersecurity risk management processes, including oversight and mitigation of risks from cybersecurity
threats.
Our cybersecurity risk assessment and management processes
are implemented and maintained by certain Company management, including the information technology team at the direction of our President.
Our executive team including our Chief Executive Officer, and Chief Financial Officer are responsible for hiring appropriate personnel,
helping to integrate cybersecurity risk considerations into the Companys overall risk management strategy, and communicating key
priorities to relevant personnel. This executive team is responsible for approving budgets, helping prepare for cybersecurity incidents,
approving cybersecurity processes, and reviewing security assessments and other security-related reports.
Our cybersecurity incident response and vulnerability
management policies are designed to escalate certain cybersecurity incidents to members of management depending on the circumstances,
including our Chief Executive Officer, and Chief Financial Officer. In addition, the Companys incident response and vulnerability
management policies include reporting to the audit committee of the board of directors for certain cybersecurity incidents including significant
breaches to the Companys networks or systems. The audit committee receives regular reports from the information technology team
concerning the Companys significant cybersecurity threats and risk and the processes the Company has implemented to address them.
The audit committee also has access to various reports, summaries or presentations related to cybersecurity threats, risk and mitigation.
**Item 2. Properties.**
Splashs physical offices are located at 1500
Cordova Rd; Fort Lauderdale, FL 33316 and 1491 2nd Street, Sarasota FL 34236 while our business office is located at 1314 East
Las Olas Blvd, Suite 221, Fort Lauderdale, FL 33301. Copas office/manufacturing facility is located at 901 E. 2nd Street;
The Dalles, OR 97058. Currently, the Company does not own any real property.
**Item 3. Legal Proceedings.**
We are not
currently a party to any pending legal proceedings that we believe will have a material adverse effect on our business or financial conditions.
We may, however, be subject to various claims and legal actions arising in the ordinary course of business from time to time.
The licensing agreement between TapouT LLC and the Company has been terminated.
The parties are engaged in active and constructive settlement discussions pursuant to the terms of the agreements termination provisions.
The Company anticipates that any final settlement will not exceed the amounts already recorded in its legal reserve and accrued accounts
payable.
**Item 4. Mine Safety Disclosures.**
Not applicable.
27
**PART II**
**Item 5. Market for Registrants Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity Securities.**
The Companys Common Stock and tradeable warrants
are publicly traded on the NYSE American under the symbol SBEV and SBEV WS.
**Aggregate Number of Holders of Common Stock**
As of June 30, 2025, there were 1,899,876 shares of
Common Stock issued and outstanding. As of June 30, 2025, at our transfer agent owners totaled approximately 281 holders of record of
our Common Stock.
**Dividends**
We have not declared any cash dividends on our common
stock since inception and do not anticipate paying such dividends in the foreseeable future. We plan to retain any future earnings for
use in our business operations. Any decisions as to future payment of cash dividends will depend on our earnings and financial position
and such other factors as the Board of Directors deems relevant.
**Securities Authorized for Issuance under Equity
Compensation Plans**
None.
**Equity Compensation Plan Information**
The information required by this item with respect
to securities authorized for issuance under equity compensation plans is set forth in Part III, Item 12 of this Annual Report on Form
10-K, and is incorporated herein by reference.
**Purchases of Equity Securities by the Issuer.**
There were no repurchases of our common stock during
the year ended December 31, 2024.
**Item 6. {Reserved}**
**Item 7. Managements Discussion and Analysis
of Financial Condition and Results of Operations.**
*The following discussion and analysis should be
read in conjunction with the Audited Consolidated Financial Statements and Notes to Audited Consolidated Financial Statements filed herewith.
This Managements Discussion and Analysis of Financial Condition and Results of Operations contains statements that are forward-looking.
These statements are based on current expectations and assumptions that are subject to risk, uncertainties, and other factors. These statements
are often identified by the use of words such as may, will, expect, believe, anticipate,
intend, could, estimate, or continue, and similar expressions or variations. Actual
results could differ materially because of the factors discussed in Risk Factors elsewhere in this Annual Report, and other
factors that we may not know.*
**Business Overview**
Canfield Medical Supply, Inc. (CMS)
a companys whose common stock was quoted on the OTCQB entered into an Agreement and Plan of Merger with SBG Acquisition Inc. (Merger
Sub), a Nevada Corporation wholly-owned by Canfield, and Splash Beverage Group, II 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 Canfield. The Merger was consummated on March 31, 2020.
28
As the owners and management of Splash had 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.
On July 31, 2020, CMS changed its name to Splash Beverage
Group, Inc. (SBG). On June 11, 2021, SBGs common stock and warrant to purchase common stock began trading on the
NYSE American under the symbols SBEV and SBEV WT, respectively.
On November 8, 2021, SBG reincorporated into the State
of Nevada and became a Nevada corporation.
Our principal offices are located at 1314 E. Las Olas Blvd, Suite 221,
Fort Lauderdale, Florida 33301. Our website address is www.splashbeveragegroup.com. We have not incorporated by reference into this Annual
Report on Form 10-K the information that can be assessed through our website and you should not consider it to be part of this Annual
Report on Form 10-K.
**Results of Operations for the Year Ended December
31, 2024, compared to Year Ended December 31, 2023.**
Revenue
Revenues
for the year ended December 31, 2024 were $4.2 million comparedto revenues of $18.9
million for the year ended December 31, 2023. Part of the $14.7` million decrease in sales
was mainly due to a decrease in our beverage sales of $1.7 million. Additionally, revenues
from our vertically integrated B2B and B2C e-commerce distribution platform called Qplash
decreased approximately $13 million or 88.5% due to low inventory. Total sales declined
due to limited liquidity to procure inventory to drive third-party sales.
Cost of Goods Sold
Cost of goods sold for the year ended December 31,
2024 were $3.8 million compared to cost of goods sold for the year ended December 31, 2023 of $13.3 million. The $9.5 million decrease
in cost of goods sold was due to our decreased sales. The $8.4 million decrease in cost of goods sold was driven by decreased
sales in the e-commerce and $1.1 million was driven by beverage business.
Operating Expenses
Operating expenses for the year ended December 31,
2024 were $16.4 million compared to $20.9 million for the year ended December 31, 2023. The decrease in operating expenses was primarily
due to $1.7 million of marketing expense, $0.5 million of contracted services, $2.1 million of other general and administrative expenses
partially offset by increases of the non-cash expenses related to share issuance of $1.2 million. The loss of intangible impairment of
$4.2 million was recorded in the other general and administrative expenses.
Other Income/(Expense)
Other expenses for the year ended December 31, 2024
were $6.9 million compared to $5.7 million for the year ended December 31, 2023. The other expense increased of $1.2 million is mainly
driven by an increase in interest expense. Interest expenses for the year ended December 31, 2024 were $2.9 million compared to $1.9
million for the year ended December 31, 2023. The $1.0 million increase in interest expense is due to new loans with a principal of $3.2
million with higher interest rates. The Company also reserved $0.3 million for legal settlement. Offset by a decrease in
amortization of debt discount of $0.2 million and $0.03 million in other expenses.
29
**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.
In addition, the Company has an active registration statement on Form S-3 to facilitate raising additional funds.
As of December 31, 2024, we had total cash of $15,346,
as compared with $379,978 at December 31, 2023. The decrease was primarily due to expenses relating to operating the business.
Net cash used for continuing operating activities
during the year ended December 31, 2024, was $8.0 million as compared to the net cash used by continuing operating activities for the
year ended December 31, 2023, of $10.2 million. The primary reason for the change in net cash used was due to an increase of $1.2 million
in non-cash share-based compensation, and a decrease of $1.6 million in losses of the business, offset by a decrease of $0.6 million in
working capital.
Net cash used for investing activities during the
year ended December 31, 2024, was $0.01 million as compared to the net cash used for investing activities during the year ended December
31, 2023, of $0.01 million. The net cash used in the year 2024 was for machinery & equipment.
Net cash provided by financing activities during the
year ended December 31, 2024, was $7.5 million compared to $6.1 million provided from financing activities for the year ended December
31, 2023. Company received $9.5 million and $6.6 million proceeds from the issuance of debt in years ending December 31, 2024 and 2023,
respectively. No cash advance from shareholders in 2024, $0.2 million was received from a shareholder advance in the year ending December
31, 2023. Principal repayment of debt of $2.0 million and $1.0 million were made in years ending December 31, 2024 and 2023 respectively.
A cash advance from related party of $0.01 million and $0.4 million was received in 2024 and 2023 respectively.
In order to have sufficient cash to fund our operations,
we will need to raise additional equity or debt capital. There can be no assurance that additional funds will be available when needed
from any source or, if available, will be available on terms that are acceptable to us. We will be required to pursue sources of additional
capital through various means, including debt or equity financings. Future financings through equity investments are likely to be dilutive
to existing stockholders. Also, the terms of securities we may issue in future capital transactions may be more favorable for new investors.
Newly issued securities may include preferences, superior voting rights, the issuance of warrants or other derivative securities, and
the issuance of incentive awards under equity employee incentive plans, which may have additional dilutive effects. Further, we may incur
substantial costs in pursuing future capital and/or financing, including investment banking fees, legal fees, accounting fees, printing
and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities
we may issue, such as convertible notes and warrants, which will adversely impact our financial condition. Our ability to obtain needed
financing may be impaired by such factors as the capital markets and our history of losses, which could impact the availability or cost
of future financings. If the amount of capital we are able to raise from financing activities together with our revenues from operations,
is not sufficient to satisfy our capital needs, even to the extent that we reduce our operations accordingly, we may be required to curtail
or cease operations.
**Critical Accounting Estimates**
The preparation of our consolidated financial statements
in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, as well as the disclosure of contingent assets
and liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable
under the circumstances. Actual results could differ from those estimates.
30
Revenue
The Company faces significant judgment
in revenue recognition due to the complexities of the beverage industrys competitive landscape and diverse distribution channels.
Determining the timing of revenue recognition involves assessing factors such as control transfer, returns, allowances, trade promotions,
and distributor sell-through data. Historical analysis, market trends assessment, and contractual term evaluations inform revenue recognition
judgments. However, inherent uncertainties persist, underscoring the critical nature of revenue recognition as it significantly impacts
financial statements and performance evaluation.
Allowance for Doubtful Accounts
The allowance for doubtful accounts is established
based on historical experience, current economic conditions, and specific customer collection issues. Management evaluates the collectability
of accounts receivable on an ongoing basis and adjusts the allowance as necessary. Changes in economic conditions or customer creditworthiness
could result in adjustments to the allowance for doubtful accounts, impacting our reported financial results.
Inventory Valuation
We value inventory at the lower of cost or net realizable
value. Estimating the net realizable value of inventory involves significant judgment, particularly when market conditions change rapidly
or when excess or obsolete inventory exists. Management regularly assesses inventory quantities on hand, future demand forecasts, and
market conditions to determine whether write-downs to inventory are necessary.
Fair Value Measurements
We measure certain financial assets and liabilities
at fair value on a recurring basis. Fair value measurements involve significant judgment and estimation, particularly when observable
inputs are limited or not available. Management utilizes valuation techniques such as discounted cash flow models, market comparables,
and third-party appraisals to determine fair values.
**Item 7A. Quantitative and Qualitative Disclosures
about Market Risk.**
Not applicable for smaller reporting companies.
31
**Item 8. Financial Statements and Supplementary
Data.**
|
Financial Statements |
|
Page | |
|
|
Report of Independent Registered Public Accounting Firm (PCAOB ID: 468) |
|
F-2&3 | |
|
|
Consolidated Balance Sheets December 31, 2024 and December 31, 2023 |
|
F-4 | |
|
|
Consolidated Statements of Operations For the Years Ended December 31, 2024 and December 31 2023 |
|
F-5 | |
|
|
Consolidated Statements of Changes in Stockholders Equity For the years ended December 31, 2024 and 2023 |
|
F-6 | |
|
|
Consolidated Statements of Cash Flows For the Year Ended December 30, 2024 and 2023 |
|
F-7 | |
|
|
Notes to the Consolidated Financial Statements |
|
F-8 | |
****
F-1
Report
of Independent Registered Public Accounting Firm (PCAOB ID: 468)
**Report of Independent Registered
Public Accounting Firm**
To the Board of Directors and Stockholders
Splash Beverage Group, Inc.
Fort Lauderdale, Florida
**Opinion on the Financial Statements**
We have audited the accompanying consolidated balance sheets of Splash
Beverage Group, Inc. at December 31, 2024 and 2023, and the related consolidated statements of operations, changes in stockholders
equity and cash flows for the years ended December 31, 2024 and 2023, and the related notes (collectively referred to as the financial
statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial
position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for the years ended December
31, 2024 and 2023, in conformity with accounting principles generally accepted in the United States of America.
**Going Concern Uncertainty**
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has suffered
recurring losses from operations and has an accumulated deficit and a working capital deficiency that raise substantial doubt about its
ability to continue as a going concern. Managements plans regarding these matters are also described in Note 3. The consolidated
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 Companys
management. Our responsibility is to express an opinion on the Companys 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 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 Companys 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.
**Critical Audit Matters**
Critical audit matters are matters arising from the current period audit
of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts
or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
F-2
**Evaluation of Intangible Assets for Impairment**
****
*Description of the Matter*
**
As discussed in Note 2 to the consolidated financial statements, intangible
assets are tested for impairment at least annually or when events or circumstances indicate the fair value of the asset may be below its
carrying value. This analysis involves comparing events and circumstances such as general macroeconomic conditions, conditions specific
to the industry and company specific factors. These fair value estimates are sensitive to significant assumptions and judgments, such
as projections of operating expenditures, discount rates, and future levels of revenue.
The Company has experienced a decline in its reported amounts of Beverage
revenue and the Beverage operating segment has experienced losses from operations for the past several years. These factors were considered
a triggering event indicative of impairment, which resulted in an impairment assessment by management. Pursuant to current accounting
guidance, management performed a quantitative analysis and concluded that its intangible assets were impaired and the Company recorded
impairment charges of approximately $4.3 million during the year ended December 31, 2024. At December 31, 2024, the Companys intangible
asset balance was $0.
Auditing managements annual impairment tests was complex because
of the significant judgment required to evaluate managements assumptions used to determine the fair value of the intangible assets.
*How We Addressed the Matter
in our Audit*
**
Our audit procedures related to the evaluation of intangible assets for
impairment included the following, among others:
|
1. | We
evaluated managements significant accounting policies related to the impairment of intangible
assets for reasonableness. | |
|
2. | We
evaluated managements assessment of the grouping of long-lived assets for which separately
identifiable cash flows can be determined. | |
|
3. | With
respect to the Companys valuation of its intangible assets: | |
|
a. | We
assessed the qualifications and competence of management | |
|
b. | We
evaluated the methodologies used to determine the fair value of the Companys intangible
assets | |
|
c. | We
reperformed managements quantitative analysis to assess the impact of intangible asset
impairment | |
|
4. | We
assessed the adequacy of the Companys disclosures regarding impairment assessments
included in Note 2. | |
Rose, Snyder & Jacobs LLP
We have served as the Companys auditor since 2023
Encino, CA
July 11, 2025
F-3
|
Splash Beverage Group, Inc. | |
|
Consolidated Balance Sheets | |
|
December 31, 2024 and December 31, 2023 | |
|
| |
| | | |
| | | |
|
| |
December 31, 2024 | |
December 31, 2023 | |
|
Assets | |
| | | |
| | | |
|
Current assets: | |
| | | |
| | | |
|
Cash and cash equivalents | |
$ | 15,346 | | |
$ | 379,978 | | |
|
Accounts Receivable, net | |
| 396,855 | | |
| 890,631 | | |
|
Prepaid Expenses | |
| 364,087 | | |
| 220,320 | | |
|
Inventory | |
| 893,061 | | |
| 2,252,469 | | |
|
Other receivables | |
| 234,770 | | |
| 233,850 | | |
|
Total current assets | |
| 1,904,119 | | |
| 3,977,248 | | |
|
| |
| | | |
| | | |
|
Non-current assets: | |
| | | |
| | | |
|
Deposit | |
| 48,922 | | |
| 49,446 | | |
|
Goodwill | |
| | | |
| 256,823 | | |
|
Intangibles assets, net | |
| | | |
| 4,459,309 | | |
|
Investment in Salt Tequila USA, LLC | |
| 250,000 | | |
| 250,000 | | |
|
Right of use assets | |
| 351,336 | | |
| 556,140 | | |
|
Property and equipment, net | |
| 204,808 | | |
| 349,802 | | |
|
Total non-current assets | |
| 855,066 | | |
| 5,921,520 | | |
|
| |
| | | |
| | | |
|
Total assets | |
$ | 2,759,185 | | |
$ | 9,898,768 | | |
|
| |
| | | |
| | | |
|
Liabilities and Stockholders Equity | |
| | | |
| | | |
|
| |
| | | |
| | | |
|
Liabilities: | |
| | | |
| | | |
|
Current liabilities | |
| | | |
| | | |
|
Accounts payable and accrued expenses | |
$ | 5,232,241 | | |
$ | 4,444,286 | | |
|
Right of use liability, current portion | |
| 305,167 | | |
| 262,860 | | |
|
Related party notes payable | |
| 389,000 | | |
| 380,000 | | |
|
Notes payable, net of discounts | |
| 9,632,505 | | |
| 7,748,518 | | |
|
Shareholder advances | |
| 200,000 | | |
| 200,000 | | |
|
Accrued interest payable | |
| 3,610,329 | | |
| 1,714,646 | | |
|
Total current liabilities | |
| 19,369,242 | | |
| 14,750,310 | | |
|
| |
| | | |
| | | |
|
Long-term liabilities: | |
| | | |
| | | |
|
Notes payable, net of discounts | |
| 1,971,095 | | |
| 457,656 | | |
|
Right of use liability, net of current portion | |
| 53,697 | | |
| 296,128 | | |
|
Total long-term liabilities | |
| 2,024,792 | | |
| 753,784 | | |
|
| |
| | | |
| | | |
|
Total liabilities | |
$ | 21,394,034 | | |
$ | 15,504,094 | | |
|
| |
| | | |
| | | |
|
Stockholders equity: | |
| | | |
| | | |
|
Preferred stock, $0.001 par value, 5,000,000 shares authorized, no shares issued | |
| | | |
| | | |
|
Common Stock, $0.001 par, 7,500,000 shares authorized, 1,669,835 and 1,108,253 shares issued and outstanding, at December 31, 2024 and December 31, 2023, respectively | |
| 1,670 | | |
| 1,108 | | |
|
Additional paid in capital | |
| 137,114,578 | | |
| 127,744,932 | | |
|
Accumulated other comprehensive income | |
| 81,180 | | |
| (16,583 | ) | |
|
Accumulated deficit | |
| (155,832,277 | ) | |
| (133,334,783 | ) | |
|
Total stockholders equity | |
| (18,634,849 | ) | |
| (5,605,326 | ) | |
|
| |
| | | |
| | | |
|
Total liabilities and stockholders equity | |
$ | 2,759,185 | | |
$ | 9,898,768 | | |
The share amounts above have been retroactively adjusted to reflect the
1 for 40 reverse stock split that took effect on March 27, 2025.
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
|
Splash Beverage Group, Inc. | |
|
Consolidated Statements of Operations | |
|
For the Years Ended December 31, 2024 and December 31, 2023 | |
|
| |
| | | |
| | | |
|
| |
2024 | |
2023 | |
|
Net revenues | |
$ | 4,155,208 | | |
$ | 18,850,152 | | |
|
Cost of goods sold | |
| (3,799,758 | ) | |
| (13,281,457 | ) | |
|
Gross margin | |
| 355,450 | | |
| 5,568,695 | | |
|
| |
| | | |
| | | |
|
Operating expenses: | |
| | | |
| | | |
|
Contracted services | |
| 928,377 | | |
| 1,402,572 | | |
|
Salary and wages | |
| 3,672,759 | | |
| 5,003,392 | | |
|
Non-cash share-based compensation | |
| 2,356,684 | | |
| 1,169,858 | | |
|
Other general and administrative | |
| 8,693,459 | | |
| 10,786,011 | | |
|
Sales and marketing | |
| 750,407 | | |
| 2,493,520 | | |
|
Total operating expenses | |
| 16,401,686 | | |
| 20,855,353 | | |
|
| |
| | | |
| | | |
|
Loss from continuing operations | |
| (16,046,236 | ) | |
| (15,286,658 | ) | |
|
| |
| | | |
| | | |
|
Other income/(expense): | |
| | | |
| | | |
|
Other Income/expense | |
| (2,552 | ) | |
| (30,328 | ) | |
|
Interest income | |
| 1,991 | | |
| 2,634 | | |
|
Interest expense | |
| (3,702,611 | ) | |
| (1,856,777 | ) | |
|
Legal reserve | |
| (330,000 | ) | |
| | | |
|
Amortization of debt discount | |
| (3,677,143 | ) | |
| (3,832,628 | ) | |
|
Total other expense | |
| (7,710,315 | ) | |
| (5,717,099 | ) | |
|
| |
| | | |
| | | |
|
Provision for income taxes | |
| | | |
| | | |
|
| |
| | | |
| | | |
|
Net (loss) from continuing operations, net of tax | |
| (23,756,551 | ) | |
| (21,003,757 | ) | |
|
| |
| | | |
| | | |
|
Net loss | |
$ | (23,756,551 | ) | |
$ | (21,003,757 | ) | |
|
Other comprehensive loss | |
| | | |
| | | |
|
Foreign currency translation gain (loss) | |
$ | 97,763 | | |
$ | 3,889 | | |
|
| |
| | | |
| | | |
|
Total comprehensive loss | |
$ | (23,658,788 | ) | |
$ | (20,999,868 | ) | |
|
| |
| | | |
| | | |
|
Loss per share - continuing operations | |
| | | |
| | | |
|
Basic and Diluted | |
| (17.68 | ) | |
| (19.79 | ) | |
|
| |
| | | |
| | | |
|
Weighted average number of common shares outstanding - continuing operations | |
| | | |
| | | |
|
Basic and Diluted | |
| 1,338,428 | | |
| 1,061,241 | | |
The share amounts above have been retroactively adjusted to reflect the
1 for 40 reverse stock split that took effect on March 27, 2025.
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
|
Splash Beverage Group, Inc. | |
|
Consolidated Statements of Changes in Stockholders Equity | |
|
For the Years ended December 31, 2024 and 2023 | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
| |
Common stock | |
Additional Paid-in | |
Accumulated Other Comprehensive | |
Accumulated | |
Total Stockholders Equity | |
|
| |
Shares | |
Amount | |
Capital | |
Income | |
Deficit | |
(Deficit) | |
|
Balances at December 31, 2022 | |
| 1,027,138 | | |
| 1,027 | | |
| 121,672,606 | | |
| (20,472 | ) | |
| (112,331,026 | ) | |
| 9,322,135 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Note discount created from issuance of common stock and warrants on convertible instruments | |
| 56,875 | | |
| 57 | | |
| 4,588,193 | | |
| | | |
| | | |
| 4,588,250 | | |
|
Share based compensation | |
| | | |
| | | |
| 840,817 | | |
| | | |
| | | |
| 840,817 | | |
|
Conversion of notes payable to common stock | |
| 11,323 | | |
| 11 | | |
| 230,332 | | |
| | | |
| | | |
| 230,343 | | |
|
Issuance of common stock for services | |
| 12,917 | | |
| 13 | | |
| 412,984 | | |
| | | |
| | | |
| 412,997 | | |
|
Accumulated Comprehensive Income - Translation | |
| | | |
| | | |
| | | |
| 3,889 | | |
| | | |
| 3,889 | | |
|
Net loss | |
| | | |
| | | |
| | | |
| | | |
| (21,003,757 | ) | |
| (21,003,757 | ) | |
|
Balances at December 31, 2023 | |
| 1,108,252 | | |
| 1,108 | | |
| 127,744,932 | | |
| (16,583 | ) | |
| (133,334,783 | ) | |
| (5,605,326 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Balances at December 31, 2023 | |
| 1,108,252 | | |
| 1,108 | | |
| 127,744,932 | | |
| (16,583 | ) | |
| (133,334,783 | ) | |
| (5,605,326 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Adoption of ASU 2020-06 | |
| | | |
| | | |
| (2,191,103 | ) | |
| | | |
| 1,259,057 | | |
| (932,046 | ) | |
|
Stock based compensation | |
| | | |
| | | |
| 1,424,745 | | |
| | | |
| | | |
| 1,424,745 | | |
|
Issuance of common stock for convertible note | |
| 47,625 | | |
| 48 | | |
| 641,202 | | |
| | | |
| | | |
| 641,250 | | |
|
Issuance of warrants on convertible instruments | |
| | | |
| | | |
| 4,327,247 | | |
| | | |
| | | |
| 4,327,247 | | |
|
Issuance of common stock for services | |
| 55,458 | | |
| 55 | | |
| 721,634 | | |
| | | |
| | | |
| 721,689 | | |
|
Conversion of notes payable to common stock | |
| 458,500 | | |
| 459 | | |
| 4,445,921 | | |
| | | |
| | | |
| 4,446,380 | | |
|
Accumulated Comprehensive Income - Translation | |
| | | |
| | | |
| | | |
| 97,763 | | |
| | | |
| 97,763 | | |
|
Net loss | |
| | | |
| | | |
| | | |
| | | |
| (23,756,551 | ) | |
| (23,756,551 | ) | |
|
Balances at December 31, 2024 | |
| 1,669,835 | | |
| 1,670 | | |
| 137,114,578 | | |
| 81,180 | | |
| (155,832,277 | ) | |
| (18,634,849 | ) | |
The accompanying notes are an integral part of these
consolidated financial statements
F-6
|
Splash Beverage Group, Inc. | |
|
Consolidated Statements Cash Flows | |
|
For the Year Ended December 30, 2024 and 2023 | |
|
| |
| | | |
| | | |
|
| |
2024 | |
2023 | |
|
| |
| |
| |
|
Net loss | |
$ | (23,756,551 | ) | |
$ | (21,003,757 | ) | |
|
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | | |
|
Depreciation and amortization | |
| 540,297 | | |
| 545,977 | | |
|
ROU assets, net | |
| 4,680 | | |
| 3,474 | | |
|
Amortization of debt discount | |
| 3,677,143 | | |
| 3,832,628 | | |
|
Loss from intangible impairment | |
| 4,324,064 | | |
| | | |
|
Non-cash share based compensation | |
| 2,356,684 | | |
| 1,169,858 | | |
|
Changes in working capital items: | |
| | | |
| | | |
|
Accounts receivable, net | |
| 493,777 | | |
| 921,479 | | |
|
Inventory, net | |
| 1,359,408 | | |
| 1,468,838 | | |
|
Prepaid expenses and other current assets | |
| (144,686 | ) | |
| 238,241 | | |
|
Deposits | |
| 524 | | |
| (157 | ) | |
|
Accounts payable and accrued expenses | |
| 1,164,003 | | |
| 1,061,101 | | |
|
Accrued Interest payable | |
| 1,976,738 | | |
| 1,573,055 | | |
|
Net cash used in operating activities - continuing operations | |
| (8,003,919 | ) | |
| (10,189,263 | ) | |
|
| |
| | | |
| | | |
|
Cash Flows from Investing Activities: | |
| | | |
| | | |
|
Capital Expenditures | |
| (3,235 | ) | |
| (14,113 | ) | |
|
| |
| | | |
| | | |
|
Net cash used in investing activities - continuing operations | |
| (3,235 | ) | |
| (14,113 | ) | |
|
| |
| | | |
| | | |
|
Cash Flows from Financing Activities: | |
| | | |
| | | |
|
Cash advance (repayment) from shareholder | |
| | | |
| 200,000 | | |
|
Related party cash advance | |
| 9,000 | | |
| 380,000 | | |
|
Proceeds from issuance of debt | |
| 9,545,300 | | |
| 6,610,681 | | |
|
Principal repayment of debt | |
| (2,009,541 | ) | |
| (1,042,961 | ) | |
|
| |
| | | |
| | | |
|
Net cash provided by financing activities - continuing operations | |
| 7,544,759 | | |
| 6,147,720 | | |
|
| |
| | | |
| | | |
|
Net cash effect of exchange rate changes on cash | |
| 97,763 | | |
| 3,889 | | |
|
| |
| | | |
| | | |
|
Net Change in Cash and Cash Equivalents | |
| (364,632 | ) | |
| (4,051,767 | ) | |
|
| |
| | | |
| | | |
|
Cash and Cash Equivalents, beginning of year | |
| 379,978 | | |
| 4,431,745 | | |
|
| |
| | | |
| | | |
|
Cash and Cash Equivalents, end of year | |
$ | 15,346 | | |
$ | 379,978 | | |
|
| |
| | | |
| | | |
|
Supplemental Disclosure of Cash Flow Information: | |
| | | |
| | | |
|
Cash paid for Interest | |
$ | 795,022 | | |
$ | 243,087 | | |
|
| |
| | | |
| | | |
|
Supplemental Disclosure of Non-Cash Investing and Financing Activities | |
| | | |
| | | |
|
Convertible notes payable and accrued interest converted to common stock (452,914 shares) | |
$ | | |
$ | 230,000 | | |
|
Convertible notes payable and accrued interest converted to common stock (458,500 shares) | |
$ | 4,428,040 | | |
$ | | | |
The accompanying notes are an integral part of these
consolidated financial statements.
F-7
**Splash Beverage Group, Inc.**
**Notes to the Consolidated Financial Statements**
**Note 1 Business Organization and Nature of Operations**
Splash Beverage Group (SBG or Splash),
formally Canfield Medical Supply, Inc. (CMS)was incorporated in the State of Ohio on September 3, 1992, and changed
domicile to Colorado on April 18, 2012. CMS was 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 process, 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 the Company filed a Certificate of Amendment
of Articles of Incorporation of CMS with the Secretary of State of the State of Colorado, pursuant to which the Company changed its name
from CMS. to Splash Beverage Group, Inc. On July 31, 2020, we received approval from FINRA to change the Companys name from CMS
to Splash Beverage Group, Inc. Our new ticker symbol is SBEV.
On December 24, 2020, SBG consummated an Asset Purchase
Agreement (the Copa APA) with Copa DI Vino Corporation (CdV), to purchase certain assets and
assume certain liabilities that comprise the Copa DI Vino business for a total purchase price of $5,980,000, payable in
the combination of $2,000,000 in cash (Cash Consideration), $2,000,000 convertible promissory note (the Convertible
Note) to Seller and a variable number of shares of the Companys common stock based on a attainment of revenue hurdles. CdV
is one of the leading producers of premium wine by the glass in the United States with its primary offices and facilities in The Dalles,
Oregon.
On February 2021, Management initiated a plan to divest its CMS business.
As a result, the assets and operations of CMS have been retrospectively reflected as discontinued operations. On November 12, 2021 the
Company changed its state of Domicile from Colorado to Nevada.
In coordination with up listing to the NYSEon
June 11, 2021 the Company consummated a 1.0 for 3.0 reverse stock split. All common stock shares stated herein have been adjusted to reflect
the split.
**Note 2 Summary of Significant Accounting
Policies**
**Basis of Presentation and Consolidation**
These consolidated financial statements include the
accounts of Splash and its wholly owned subsidiaries, Holdings and Splash Mex, and CdV. All intercompany balances have been eliminated
in consolidation.
F-8
**Splash Beverage Group, Inc.**
**Notes to the Consolidated Financial Statements**
**Note 2 Summary of Significant Accounting
Policies, continued**
Our investment in Salt Tequila USA, LLC is accounted
for at cost, as the company does not have the ability to exercise significant influence.
Our accounting and reporting policies conform to accounting
principles generally accepted in the United States of America (GAAP).
Certain reclassifications have been made to the prior
period financial statements to conform to the current period classifications. These reclassifications had no impact on net loss.
**Use of Estimates**
The preparation of consolidated financial statements
in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosures of contingent assets and liabilities at the date of the 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 December 31, 2024 or December 31, 2023.
Our cash in uninsured foreign bank accounts was $4,817
and $0 at December 31, 2024 and December 31, 2023, respectively.
**Accounts Receivable and Allowance for Doubtful
Accounts**
Accounts receivables 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, 2024 and December 31, 2023, our accounts receivable amounts are reflected net of allowances
of $300,827 and $183,089, 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 December 31, 2024 and December 31, 2023 consisted
of raw materials, work-in-process, and finished goods held for distribution. The cost elements of inventory consist of purchase of products,
transportation, and warehousing. We establish provisions for excess or inventory near expiration based on managements 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. The
amount of our reserve was $621,178 and $290,524 at December 31, 2024 and December 31, 2023, respectively.
**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 3-20 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.
F-9
**Splash Beverage Group, Inc.**
**Notes to the Consolidated Financial Statements**
**Note 2 Summary of Significant Accounting
Policies, continued**
Depreciation expense totaled $148,229 and $153,908
for the years ended December 31, 2024 and 2023 respectively. Property and equipment consisted of the following:
|
Schedule of property and equipment | |
| | | |
| | | |
|
| |
2024 | |
2023 | |
|
Auto | |
| 45,420 | | |
| 45,420 | | |
|
Machinery & equipment | |
| 1,165,313 | | |
| 1,160,578 | | |
|
Buildings & Tanks | |
| 233,323 | | |
| 233,323 | | |
|
Leasehold improvements | |
| 723,638 | | |
| 723,638 | | |
|
Computer Software | |
| 5,979 | | |
| 5,979 | | |
|
Office furniture & equipment | |
| 7,657 | | |
| 9,157 | | |
|
Total cost | |
| 2,181,330 | | |
| 2,178,095 | | |
|
Accumulated depreciation | |
| (1,976,522 | ) | |
| (1,828,293 | ) | |
|
Property, plant & equipment, net | |
| 204,808 | | |
| 349,802 | | |
**Excise taxes**
The Company pays alcohol excise taxes based on product
sales to both the Oregon Liquor Control Commission and to the U.S. Department of the Treasury, Alcohol and Tobacco Tax and Trade Bureau
(TTB). The Company also pays taxes to the State of Florida Division of Alcoholic Beverages and Tobacco. The Company is liable
for the taxes upon the removal of product from the Companys warehouse on a per gallon basis. The federal tax rate is affected by
a small winery tax credit provision which decreases based upon the number of gallons of wine production in a year rather than the quantity
sold.
**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
consolidated financial statements approximate fair values at December 31, 2024 and December 31, 2023, consistent with recent negotiations
of notes payable and due to the short duration of maturities.
**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.
F-10
**Splash Beverage Group, Inc.**
**Notes to the Consolidated Financial Statements**
**Note 2 Summary of Significant Accounting
Policies, continued**
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, and
warehousing expense after manufacture are accounted for in Other General and Administrative cost.
**Cost of Goods Sold**
Cost of goods sold include the costs of products,
packaging, transportation, warehousing, and costs associated with valuation allowances for expired, damaged or impaired inventory. The
cost of transportation from production site to other 3rd party warehouses or customer is included in Other General and Administrative
cost.
**Other General and Administrative Expenses**
Other General and Administrative expenses include Amazon selling fees, cost of
transportation from production site to other 3rd party warehouses or customers, insurance cost, consulting cost, legal and
audit fees, investor relations expenses, travel & entertainment expenses, occupancy cost and other cost.
**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.
We measure stock-based awards at the grant-date fair
value for employees, directors and consultants and recognize compensation expense on a straight-line basis over the vesting period of
the award. Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions, including the fair
value of our common stock, and for stock options and warrants, the expected life of the option and warrant, and expected stock price volatility
and exercise price. We used the Black-Scholes option pricing model to value its stock-based awards. The assumptions used in calculating
the fair value of stock-based awards represent managements best estimates and involve inherent uncertainties and the application
of managements judgment. As a result, if factors change and management uses different assumptions, stock-based compensation expense
could be materially different for future awards. The expected life of stock options/warrants were estimated using the simplified
method, which calculates the expected term as the midpoint between the weighted average time to vesting and the contractual maturity,
we have limited historical information to develop reasonable expectations about future exercise patterns. The simplified method is based
on the average of the vesting tranches and the contractual life of each grant. For stock price volatility, we use comparable public companies
as a basis for its expected volatility to calculate the fair value of award. The risk-free interest rate is based on U.S. Treasury notes
with a term approximating the expected life of the award. The estimation of the number of awards that will ultimately vest requires judgment,
and to the extent actual results or updated estimates differ from the Companys current estimates, such amounts are recognized as
an adjustment in the period in which estimates are revised.
F-11
**Splash Beverage Group, Inc.**
**Notes to the Consolidated Financial Statements**
**Note 2 Summary of Significant Accounting
Policies, continued**
**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 December 31, 2024 and December 31, 2023. See note 13.
**Net income (loss) per share**
The net income (loss) per share is computed by dividing
the net income (loss) by the weighted average number of shares of common outstanding. Warrants, stock options, and common stock issuable
upon the conversion of the Companys convertible debt or preferred stock (if any), are not included in the computation if the effect
would be anti-dilutive.
Weighted average number of shares outstanding excludes
anti-dilutive common stock equivalents, including warrants to purchase shares of common stock and warrants granted by our Board that have
not been exercised totaling 3,424,996.
**Advertising**
We conduct advertising for the promotion of our products.
In accordance with ASC 720-35, advertising costs are charged to operations when incurred. We recorded advertising expense of $486,942
and $1,721,547 for the years ended December 30, 2024 and 2023, respectively.
**Goodwill and otherintangibles**
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.
At the time of acquisition, the Company estimates
the fair value of the acquired identifiable intangible assets based upon the facts and circumstances related to the particular intangible
asset. Inherent in such estimates are judgments and estimates of future revenue, profitability, cash flows and appropriate discount rates
for any present value calculations. The Company preliminarily estimates the value of the acquired identifiable intangible assets and then
finalizes the estimated fair values during the purchase allocation period, which does not extend beyond 12 months from the date of acquisition.
The Companys amortization expense for acquired identifiable intangible assets with finite useful lives was $392,068 for fiscal
years 2024 and 2023.
F-12
**Splash Beverage Group, Inc.**
**Notes to the Consolidated Financial Statements**
In accordance with ASC 350, Intangibles Goodwill
and Other, the Company performed an impairment test for its Brand Name, Customer Relationships and license. Based on this assessment,
the Company determined that the carrying value of the intangible asset exceeded its fair value, resulting in an impairment loss of $4.3
million.
The impairment loss of $4.3 million was recorded in the statement of operations
within Selling, General, and Administrative Expenses. This impairment was primarily driven by the decline in the Companys
sales and was calculated using the present value of future cash flows.
|
| |
| | | |
| | | |
| | | |
| | | |
|
| |
December 31, 2024 | |
| |
| |
|
| |
Gross Amount | |
Accumulated Amortization | |
Loss on Impairment | |
Net Carrying Value | |
|
Finite: | |
| | | |
| | | |
| | | |
| | | |
|
| |
| | | |
| | | |
| | | |
| | | |
|
Goodwill | |
$ | 256,823 | | |
| | | |
$ | 256,823 | | |
$ | 0 | | |
|
|
| | | |
| | | |
| | | |
| | | |
|
Brands | |
$ | 4,459,000 | | |
$ | 1,189,071 | | |
$ | 3,269,929 | | |
$ | 0 | | |
|
Customer Relationships | |
| 957,000 | | |
| 255,200 | | |
| 701,800 | | |
$ | 0 | | |
|
License | |
| 360,000 | | |
| 264,488 | | |
| 95,512 | | |
$ | 0 | | |
|
Total Intangible Assets | |
$ | 6,032,823 | | |
$ | 1,708,759 | | |
$ | 4,324,064 | | |
$ | 0 | | |
**Note 2 Summary of Significant Accounting
Policies, continued**
**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 groups fair value less costs to sell. The Company estimates fair value by obtaining market appraisals
from third party brokers or using other valuation techniques.
**Foreign Currency Gain/Losses**
Foreign subsidiaries functional currency is
the local currency of operations and the net assets of foreign operations are translated into U.S. dollars using current exchange rates.
Gain or losses from these translation adjustments are included in the consolidated statement of operations and other comprehensive (loss)
income as foreign currency translation gains or losses. Translation gains and losses that arise from the translation of net assets from
functional currency to the reporting currency, as well as exchange gains and losses on intercompany balances, are included in Other Comprehensive
Income. The Company incurred a foreign currency translation net gain during the year ended December 31, 2024 of $97,763 and a foreign
currency translation net gain during the year ended December 31, 2023 of $3,889.
**Recent Accounting Pronouncements**
*Adoption of FASB ASU 2020-06*
In
August 2020, the Financial Accounting Standards Board (FASB) issued ASU No. 2020-06, Accounting
for Convertible Instruments and Contracts in an Entitys Own Equity. ASU 2020-06
simplifies the accounting for convertible instruments and contracts by removing certain models
that were previously required to be applied. The amendments are effective for the fiscal
years beginning after December 15, 2023, with early adoption permitted. The Company adopted
ASU 2020-06 effective January 1, 2024 and has removed the effects of any embedded conversion
features from certain of our convertible instruments as of that date.
F-13
**Splash Beverage Group, Inc.**
**Notes to the Consolidated Financial Statements**
**Note 3 Liquidity, Capital Resources
and Going Concern Considerations**
During 2024, the Company received $9.5 million from
issuance of debt.
The Companys consolidated financial
statements have been prepared on the basis of US GAAP for a going concern, on the premise that the Company is able to meet its
obligations as they come due in the normal course of business. The Company sustained a net loss of approximately $22.9
million and negative cash flows from operating activities of approximately $0.37
million for the year ended December 31, 2024. To date the Company has generated cash flows from issuances of equity and
indebtedness.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As of July 11, 2025, the Company
has incurred significant losses from operations and has experienced negative cash flows from operating activities. Additionally, the Companys
current liabilities exceed its current assets, and it has a working capital deficit.
Managements plans in regard to these matters
include actions to sustain the Companys operations, such as seeking additional funding to meet its obligations and implement its
business plan. However, there is no assurance that the Company will be successful in implementing its plans or in raising additional funds.
These conditions raise substantial doubt about the Companys ability to continue as a going concern.
The financial statements do not include any adjustments
that might result from the outcome of this uncertainty. If the Company is unable to continue as a going concern, adjustments would be
necessary to the carrying values of its assets and liabilities and the reported amounts of revenues and expenses could be materially affected.
F-14
**Splash Beverage Group, Inc.**
**Notes to the Consolidated Financial Statements**
**Note 4 Notes Payable, Related Party
Notes Payable, and Revenue Financing Arrangements**
Notes payable are generally nonrecourse and secured
by all Company owned assets.
|
Schedule of notes payable | |
| | | |
| | | |
| | | |
|
| |
Interest Rate | |
December 31, 2024 | |
December 31, 2023 | |
|
Notes Payable and Convertible Notes Payable | |
| | | |
| | | |
| | | |
|
| |
| | | |
| | | |
| | | |
|
In December 2020, the Company entered into a 56- month loan with a company in the amount of $1,578,237. The loan requires payments of 3.75% through November 2022 and 4.00% through September 2025 of the previous months revenue. Note is due September 2025. Note is guaranteed by a related party see note 7. | |
| Variable | | |
$ | 195,927 | | |
| 371,693 | | |
|
| |
| | | |
| | | |
| | | |
|
In April 2021, the Company entered into a six-month loan with an individual in the amount of $84,000. The loan had an original maturity of October 2021 with principal and interest due at maturity. The loan was extended to April 2025. | |
| 7 | % | |
| 168,000 | | |
| 168,000 | | |
|
| |
| | | |
| | | |
| | | |
|
In May 2021, the Company entered into a six-month loan with two individuals totaling $60,000. The loan had an original maturity of October 2021 with principal and interest due at maturity. The loan was extended to April 2025. | |
| 7 | % | |
| 60,000 | | |
| 60,000 | | |
|
| |
| | | |
| | | |
| | | |
|
In August 2022, the Company entered into a 56-months auto loan in the amount of $45,420. | |
| 2.35 | % | |
| 23,372 | | |
| 32,996 | | |
|
| |
| | | |
| | | |
| | | |
|
In December 2022, the Company entered into various eighteen-month loans with individuals totaling in the amount of $3,000,000. The notes included 100% warrant coverage. One note $400,000 was converted. The remaining loans were extended to June 2025 with principal and interest due at maturity with conversion price of $1.00 per share. | |
| 12 | % | |
| 2,600,000 | | |
| 3,000,000 | | |
|
| |
| | | |
| | | |
| | | |
|
In December 2022, the Company entered into an eighteen-month loan with an individual in the amount of $1,000,000. The notes included 100% warrant coverage. The loans matured in June 2024 and was in default | |
| 12 | % | |
| 1,000,000 | | |
| 1,000,000 | | |
|
| |
| | | |
| | | |
| | | |
|
In February 2023, the Company entered into a twelve-month loan with an entity in the amount of $2,000,000. The convertible note included the issuance of 1,500,000 shares of common stock. The loan matured in February 2024 with conversion price of $0.85 per share and is non-interest bearing. The loan was extended to May, 2024. As of June 2024, the loan was fully converted. | |
| | % | |
$ | | | |
$ | 1,769,656 | | |
|
| |
| | | |
| | | |
| | | |
|
In May 2023, the Company entered into various eighteen-month loans with individuals totaling in the amount of $800,000. The notes included 50% warrant coverage. The loans mature in November 2024 with principal and interest due at maturity with conversion price of $1.00 per share. The loans were extended to May 2025. | |
| 12 | % | |
| 800,000 | | |
| 800,000 | | |
|
| |
| | | |
| | | |
| | | |
|
In June 2023, the Company entered into various eighteen-month loans with individuals totaling in the amount of $350,000. The notes included 50% warrant coverage. The loans mature in May 2025 with principal and interest due at maturity with conversion price of $1.00 per share, one of the loans was converted in December 2024. | |
| 12 | % | |
| 100,000 | | |
| 350,000 | | |
|
| |
| | | |
| | | |
| | | |
|
In July 2023, the Company entered into a twelve-month loan with an individual in the amount of $750,000. The note included 50% warrant coverage. The loan matures in July 2024 with principal and interest due at maturity with conversion price of $1.00 per share. The loan was fully converted in September 2024. | |
| 12 | % | |
| | | |
| 750,000 | | |
|
| |
| | | |
| | | |
| | | |
|
In July 2023, the Company entered into a twelve-month loan with an individual in the amount of $100,000. The note included 50% warrant coverage. The loan originally matures in June 2024 with principal and interest due at maturity with conversion price of $1.00 per share. The loan was extended to June 2025. | |
| 12 | % | |
$ | 100,000 | | |
$ | 100,000 | | |
|
| |
| | | |
| | | |
| | | |
|
In August 2023, the Company entered into a twelve-month loan with an individual in the amount of $300,000. The convertible note included the issuance of 150,000 shares of common stocks. The loan matures in August 2024 with principal due at maturity with conversion price of $0.85 per share and is non-interest bearing. Partial of the note was converted into common stock. | |
| | % | |
| 43,000 | | |
| 300,000 | | |
|
| |
| | | |
| | | |
| | | |
|
In October 2023, the Company entered into a three-month loan with an individual in the amount of $500,000. The loan matures in January 2024 with principal and interest due at maturity. The loan was extended to February 2025 | |
| 10 | % | |
| 500,000 | | |
| 500,000 | | |
|
| |
| | | |
| | | |
| | | |
|
In October 2023, the Company entered into a loan with an individual in the amount of $196,725 The loan matures in March 2024. Note is guaranteed by a related party. As of March 2024, the loan was fully paid off. | |
| | % | |
| | | |
| 91,785 | | |
|
| |
| | | |
| | | |
| | | |
|
In October 2023, the Company entered into a loan with an individual in the amount of $130,000. The loan requires payment of 17% of daily Shopify sales. | |
| | % | |
| 66,278 | | |
| 88,431 | | |
|
| |
| | | |
| | | |
| | | |
|
In October 2023, the Company entered into a eighteen-month loan with individuals totaling in the amount of $1,250,000. The note included 100% warrant coverage. The loan matures in April 2025 with principal and interest due at maturity with conversion price of $1.00 per share. Partial principal and 1st year interest were converted in September 2024 and December 2024. The loan was fully converted in January 2025 | |
| 12 | % | |
$ | 1,143,449 | | |
$ | 1,250,000 | | |
|
| |
| | | |
| | | |
| | | |
|
In December 2023, the Company entered into a 2.5-month loan with an individual in the amount of $450,000. The loanhad a maturity of March 2024 with principal and interest due at maturity. The loan was extended to February 2025. The loan was fully converted in Decembre 2024. | |
| 10 | % | |
| | | |
| 450,000 | | |
|
| |
| | | |
| | | |
| | | |
|
In January 2024, the Company entered into a 18-month loan with an individual in the amount of $250,000. The note included 100% warrant coverage. The loanhad a maturity of July 2025 with principal and interest due at maturity with conversion price of $0.50 per share. | |
| 12 | % | |
| 250,000 | | |
| | | |
|
| |
| | | |
| | | |
| | | |
|
In February 2024, the Company entered into a 18-month loan with an individual in the amount of $150,000. The note included 100% warrant coverage. The loanhad a maturity of August 2025 with principal and interest due at maturity with conversion price of $0.40 per share. | |
| 12 | % | |
| 150,000 | | |
| | | |
|
| |
| | | |
| | | |
| | | |
|
In February 2024, the Company entered into a 6-month loan with an individual in the amount of $315,000. The note included 60% warrant coverage. The loanhad a maturity of August 2024 with principal and interest due at maturity with conversion price of $0.38 per share. This was extended to July 2025. | |
| 12 | % | |
$ | 315,000 | | |
$ | | | |
|
| |
| | | |
| | | |
| | | |
|
In February 2024, the Company entered into a 18-month loan with an entity in the amount of $250,000. The note included 100% warrant coverage. The loan matures in August 2025 with principal and interest due at maturity with conversion price of $0.46 per share | |
| 12 | % | |
| 250,000 | | |
| | | |
|
| |
| | | |
| | | |
| | | |
|
In April 2024, the Company entered into a commercial financing agreement in the amount of $815,000 and will be paid weekly until the loan is paid in full. The loan was in default. | |
| | % | |
| 357,127 | | |
| | | |
|
| |
| | | |
| | | |
| | | |
|
In May 2024, the Company entered into an eighteen-month loan with individuals totaling in the amount of $1,850,000. The note included warrant coverage. The loan matures in November 2026 with principal and interest due at maturity with conversion price of $0.40 per share | |
| 12 | % | |
| 1,850,000 | | |
| | | |
|
| |
| | | |
| | | |
| | | |
|
In June 2024, the Company entered into a revenue purchase agreement in the amount of $250,000. 4% of revenue will be paid weekly until the loan is paid in full. Note is guaranteed by a related party | |
| | % | |
| 181,341 | | |
| | | |
|
| |
| | | |
| | | |
| | | |
|
In July 2024, the Company entered into a revenue purchase agreement in the amount of $178,250. The loan matures in May 2025. The loan was fully converted in January 2025. | |
| 22 | % | |
| 91,999 | | |
| | | |
|
| |
| | | |
| | | |
| | | |
|
In July 2024, the Company entered into a revenue purchase agreement in the amount of $120,750. The loan matures in April, 2025. The loan was fully converted in January 2025 | |
| 22 | % | |
$ | 120,750 | | |
$ | | | |
|
| |
| | | |
| | | |
| | | |
|
In August 2024, the Company entered into a 5-year loan with individuals totaling in the amount of $500,000. The loan matures in September 2029 with principal and interest due at maturity with conversion price of $0.35 per share | |
| 9 | % | |
| 500,000 | | |
| | | |
|
| |
| | | |
| | | |
| | | |
|
In August 2024, the Company entered into a eighteen-month loan with individuals totaling in the amount of $1,500,000. The loan matures in February 2026 with principal and interest due at maturity with conversion price of $0.38 per share. | |
| 12 | % | |
| 1,500,000 | | |
| | | |
|
| |
| | | |
| | | |
| | | |
|
In September 2024, we entered into a merchant cash advance agreement in the amount of $325,000 to be paid weekly until the loan is paid in full. | |
| | % | |
| 82,261 | | |
| | | |
|
| |
| | | |
| | | |
| | | |
|
In September 2024, the Company entered into an agreement
with individuals totaling in the amount of $590,000, there is no maturity date or interest, convertible into common stock
at 25% discount to VWAP, proceeds to be used for acquisitions | |
| | % | |
| 590,000 | | |
| | | |
|
| |
| | | |
| | | |
| | | |
|
In October 2024, the Company entered into an agreement
with individuals totaling in the amount of $950,000there is no maturity date or interest, convertible into common stock at
25% discount to VWAP, proceeds to be used for acquisitions | |
| | % | |
| 950,000 | | |
| | | |
|
| |
| | | |
| | | |
| | | |
|
In November 2024, we entered into a merchant cash advance agreement in the amount of $340,000 to be paid weekly until the loan is paid in full. | |
| | % | |
| 311,713 | | |
| | | |
|
| |
| | | |
| | | |
| | | |
|
In December 2024, we entered into a merchant cash advance agreement in the amount of $111,300 to be paid weekly until the loan is paid in full. Note is guaranteed by a related party | |
| | % | |
$ | 111,300 | | |
$ | | | |
|
| |
| | | |
| | | |
| | | |
|
In December 2024, the Company entered into a twelve-month loan with an individual in the amount of $500,000. The loan matures in December 2025 with principal and interest due at maturity. | |
| 12 | % | |
| 225,000 | | |
| | | |
|
| |
| | | |
| | | |
| | | |
|
| |
| | | |
| | | |
| | | |
|
| |
| Total notes payable | | |
$ | 14,635,113 | | |
$ | 11,082,561 | | |
|
| |
| | | |
| | | |
| | | |
|
| |
| Less notes discount | | |
| (3,031,513 | ) | |
| (2,876,387 | ) | |
|
| |
| Less current portion | | |
| (9,632,505 | ) | |
| (7,748,518 | ) | |
|
| |
| | | |
| | | |
| | | |
|
| |
| Long-term notes payable | | |
$ | 1,971,095 | | |
$ | 457,656 | | |
F-15
**Splash Beverage Group, Inc.**
**Notes to the Consolidated Financial Statements**
**Note 4 Notes Payable, Shareholder Notes Payable, and Revenue
Financing Arrangements, continued**
Interest expense on notes payable was $3,702,611 and
$1,856,777 for the years ended December 31, 2024
and 2023, respectively. Accrued interest was $3,610,329, and $1,714,646
at December 31, 2024 and December 31, 2023, respectively.
The Companys effective interest rate was20.53% for the year ended December 31, 2024.
The Companys convertible note balances
are convertible into505,257
and 278,187shares
of common stock for the years ended December 31, 2024 and 2023. These amounts are reflective of the 1 for 40 reverse split.
As of December 31, 2024,
and December 31, 2023, the balance of the unamortized debt discount was $3,677,143
and 28,474,946
respectively. The Company adopted ASU 2020-06 on January 1, 2024, which resulted in the reversal of the original
beneficial conversion feature (BCF) amount to additional paid in capital for $2,191,103,
reversal of the unamortized debt discount related to the beneficial conversion feature (BCF) for $932,047
with the balance being recorded through retained earnings for $1,259,056.
Notes discount of $3,251,106 and $3,832,628
for the year ending December 31, 2024 and 2023 respectively is related to the discounted warrants and common shares issued
in connection with the notes.
In June 2025, the Company exchanged
approximately $12.67
million of outstanding promissory notes for newly issued preferred equity. The Company is undertaking these transactions to exchange
debt for equity as part of its effort to regain compliance with the shareholder equity requirements of the NYSE American.
By exchanging debt for equity, the Company enhances balance sheet, reduces interest expense, and improves shareholder equity
position in furtherance of its goal of complying with exchange requirements. The exchange was the result of an agreement between
note holders and the company. The Company is still assessing the accounting impacts of these exchanges.
|
Schedule of notes payable |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Interest Rate |
|
December 31, 2024 |
|
December 31, 2023 | |
|
Shareholder Notes Payable |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
In April 2024, revised Feb 2023 shareholder advance in
the amount of $200,000. The annual interest rate is 12% with a conversion price of $0.35 per share.
The revised note included 571,429 share of warrant coverage. The loan matures in July 2025 with interest due semiannually. |
|
|
12 |
% |
|
|
200,000 |
|
|
|
200,000 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
Less current portion |
|
|
|
(200,000 |
) |
|
|
(200,000 |
) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
Long-term notes payable |
|
|
$ |
|
|
|
$ |
|
| |
Interest expense on related party notes payable was
$24,000 and $20,400 for the years ended December 31, 2024 and 2023, respectively.
As of December 31, 2024, the Companys convertible
note balances are convertible into 553,631 shares of common stock
F-16
**Splash Beverage Group, Inc.**
**Notes to the Consolidated Financial Statements**
**Note 5 Licensing Agreement and Royalty
Payable**
The Company had a licensing agreement with ABG TapouT,
LLC (TapouT), providing the Company with licensing rights to the brand TapouT (i)energy drinks, (ii) energy
bars, (iii) coconut water, (iv) electrolyte gum/chews, (v) energy shakes, (vi) powdered drink mix, (viii) water (including enhanced water),
(vii) energy shots, (viii) teas, and (ix) sports drinks sold in the North America (including US Territories and Military Bases), United
Kingdom, Brazil, South Africa, Australia, Scandinavia, Peru, Colombia, Chile and Guatemala. The Company was required to pay a 6% royalty
on net sales, as defined, and are required to make minimum monthly payments of $55,000
in 2024 and 2023. The licensing agreement between TapouT LLC and the Company was terminated during
Q1 2024. The parties are engaged in active and constructive settlement discussions pursuant to the terms of the agreements termination
provisions. The Company anticipates that any final settlement will not exceed the amounts already recorded in its legal reserve and accrued
accounts payable.
The Company has accrued guaranteed minimum royalty payments $55,000 for the
year ended in December 2024. The royalty expense $55,000 is included in general and administrative expenses. The licensing agreement between
TapouT LLC and the Company has been terminated. The parties are engaged in active and constructive settlement discussions pursuant to
the terms of the agreements termination provisions. The Company anticipates that any final settlement will not exceed the amounts
already recorded in its legal reserve and accrued accounts payable. The Company has reserved $330,000 that is included in legal reserve
in the condensed consolidated statement of operations and comprehensive
loss.
In connection with the Copa Asset Purchase Agreement,
we acquired the license to certain patents from 1/4 Vin SARL (1/4 Vin) On February 16, 2018, the Copa DI Vino
entered into three separate license agreements with 1/4 Vin SARL, (1/4 Vin). 1/4 Vin has the right to license certain patents and
patent applications relating to inventions, systems, and methods used in the Companys manufacturing process. In exchange for notes
payable, 1/4 Vin granted the Company a nonexclusive, royalty-bearing, non-assignable, nontransferable, terminable license which would
continue until the subject equipment is no longer in service or the patents expire.
**Note 6 Stockholders Equity**
**Common Stock**
The Company underwent a 1 for 40 reverse split of
its common stock on March 27, 2025. All share amounts and per share amounts are retroactively adjusted to reflect the effect of the reverse
split.
On September 29, 2023, the Company entered into a
securities purchase agreement with certain accredited investors. Pursuant to such agreements, the Company sold: (i) senior convertible
notes in the aggregate original principal amount of $1,250,000, convertible into up to 36,765 shares of common stock of the Company, par
value $0.001 per share (Common Stock), subject to adjustments as provided in the Notes, (ii) 15,625 shares of Common Stock
(the Commitment Shares), (ii) warrants to acquire up to an aggregate of 31,250 additional shares of Common Stock (the Warrants)
at an exercise price of $34.0 per Warrant Share.
On May 1, 2024, the Company entered into a securities
purchase agreement with certain accredited investors. Pursuant to such agreements, the Company sold: (i) senior convertible notes in the
aggregate original principal amount of $1,850,000, convertible into up to 115,625 shares of Common Stock, subject to adjustments as provided
in the Notes, (ii) 23,125 shares of Common Stock (the Commitment Shares), (ii) warrants to initially acquire up to an aggregate
of 115,625 additional shares of Common Stock (the Warrants) at an exercise price of $34.0 per Warrant Share.
During the year ended December 31, 2024, the Company
granted share-based awards to certain consultants totaling 48,958 shares of common stock at a weighted average price of $9.60, 16,250
shares for extension of note, 466,000 shares on conversion of convertible instruments, 23,125 shares on debt discount and 7,250 shares
for non-cash compensation.
F-17
**Splash Beverage Group, Inc.**
**Notes to the Consolidated Financial Statements**
A convertible promissory note was issued to shareholder on April 15, 2024
for $200,000 at 12% with conversion price of $14.0 per share. The note included 14,286 share of warrant coverage. The loan matures in
July 2025 with principal and interest due semi-annually. Accrued interest of $27,370 was paid prior to August 15, 2024.
**Preferred Stock**
As of the date of this filing, the Company has issued four series of preferred
stock: **Series A, A-1, B, and C**, each with distinct rights and preferences as outlined below. Note agreements were amended to be
exchanged for Preferred B and the impact of those amendments is subject to further review.
Voting
Rights
|
|
|
Series A carries 25,000 votes per share but is limited
solely to voting on the authorization of additional shares. It has no other voting rights. Series A is expected to be retired following
the special meeting. | |
|
|
|
Series A-1 carries 231 votes per share. | |
|
|
|
Series B and Series C do not carry any voting rights. | |
Dividends
|
|
|
Series A does not accrue dividends. | |
|
|
|
Series A-1 and Series B carry a fixed 12% annual dividend, payable quarterly in arrears, in either cash or payment-in-kind (PIK) at the Companys discretion. These dividends are mandatory and take priority over any dividends on common stock, regardless of whether common stock dividends are declared. | |
|
|
|
Series C does not accrue dividends. | |
Conversion
into Common Stock
|
|
|
Series A is not convertible. | |
|
|
|
Series A-1 is convertible
into common stock at 80% of the VWAP, subject to a floor of $1.25 and a ceiling of $4.00. A-1 is convertible into a range of 162,500
to 520,000 common shares. | |
|
|
|
Series B is also convertible
at 80% of the VWAP, with a floor of $1.25 and a ceiling of $6.00, and is convertible into a range of 2,118,333 to 10,168,000 common
shares. | |
|
|
|
Series C is convertible
at a fixed price of $3.00, resulting in the potential issuance of 6,666,667 common shares upon conversion. | |
Redemption at the sole discretion of the Company.
|
|
|
Series A is redeemable by the Company after the special
meeting for $1,000. | |
|
|
|
Series A-1 and Series B
are redeemable by the Company after two years from the date of issuance, for $650,000 and $12,700,000, respectively. | |
|
|
|
Series C is not redeemable. | |
Seniority
|
|
|
Series B is the most senior class (Seniority Level 1). | |
|
|
|
Series A-1 ranks junior to Series B (Seniority Level 2). | |
|
|
|
Series C is the most junior class (Seniority Level 3). | |
|
|
|
Series A is a governance-related instrument and does not participate in liquidation or dividend preferences. | |
F-18
**Splash Beverage Group, Inc.**
**Notes to the Consolidated Financial Statements**
**Stock Plans**
A summary of the Companys stock option plan
and changes during the year ended is as follows:
|
Schedule of stock option activity | |
| | | |
| | | |
| | | |
|
Plan Category | |
No. of Shares to be Issued Upon Exercise or Vesting of Outstanding Stock Options | |
Weighted Average Exercise Price of Outstanding Stock Options | |
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities | |
|
Equity compensation plan approved by board of directors | |
| 216,212 | | |
| 29.60 | | |
| 44,534 | | |
|
| |
| | | |
| | | |
| | | |
|
Total | |
| 216,212 | | |
| 29.60 | | |
| 44,534 | | |
Please
In July 2020, the Board adopted the 2020 Stock Incentive
Plan (the 2020 Plan), which provides for the grant of Options, Restricted Stock Awards, Stock Appreciation Rights, Performance
Units and Performance Bonuses to consultants and eligible recipients. The total number of shares that may be issued under the 2020 plan
was 42,146 at the time the 2020 plan was adopted as of December 31, 2024.
The 2020 Plan has an evergreen feature,
which provides for the annual increase in the number of shares issuable under the plan by an amount equal to 5% of the number of issued
and outstanding common shares at year end, unless otherwise adjusted by the board. At January 1, 2023 and 2024, the number of shares issuable
under the 2020 plan increased by 51,357 and 74,607 shares, respectively.
In October 2023, the shareholders voted to increase
the number of shares issuable under the Plan to 7.5%.
At December 31, 2024 the number of shares authorized
under the 2020 plan is 44,534.
**Note 6 Stockholders Equity, continued**
The following is a summary of the Companys
stock option activity:
|
Schedule of stock option activity | | |
| | | |
| | | |
| | | |
| | | |
|
Options | |
2024 | |
2023 | |
|
| |
Stock
options | |
Weighted
average | |
Stock options | |
Weighted average | |
|
Balance January 01 | | |
| 106,475 | | |
$ | 45.04 | | |
| 28,775 | | |
$ | 44.80 | | |
|
| | |
| | | |
| | | |
| | | |
| | | |
|
Granted | | |
| 112,125 | | |
| 14.80 | | |
| 86,025 | | |
| 45.20 | | |
|
Exercises | | |
| | | |
| | | |
| | | |
| | | |
|
Cancelled | | |
| 2,388 | | |
| 30.8 | | |
| 8,325 | | |
| 45.2 | | |
|
| | |
| | | |
| | | |
| | | |
| | | |
|
Balance December | | |
| 216,212 | | |
$ | 29.60 | | |
| 106,475 | | |
$ | 45.20 | | |
|
| | |
| | | |
| | | |
| | | |
| | | |
|
Exercisable - December 31 | | |
| 176,520 | | |
$ | 32.40 | | |
| 97,770 | | |
$ | 44.80 | | |
* These prices are reflective of
the price modification made on April 24, 2023.
F-19
**Splash Beverage Group, Inc.**
**Notes to the Consolidated Financial Statements**
During 2023, the Company granted 84,400 options to
employees and directors at weighted average strike price of $45.20, weighted average expected life of 6.0 years, weighted average volatility
of 264.3%, weighted average risk-free rate of 3.6% and no dividend. On April 24, 2023, the Company modified the price of 103,350 options
to $44.8 from a weighted average price of $102.40. The options have a weighted average expected life of 6.3 years, weighted average volatility
of 266.7%, weighted average risk-free rate of 3.6% and no dividend. Following ASC Topic 718 the Company recognized an incremental expense
from the modification of the option pricing resulting in an expense of $7,348 that was reflected during 2023.
The Company determined the grant date fair value of
the options granted using the Black Scholes Method using the following assumptions:
|
Schedule of stock option assumption | |
| | | |
| | | |
|
| |
December 31, 2024 | |
December 31, 2023 | |
|
Risk-free interest rates | |
| 4.64 | % | |
| 3.84 | % | |
|
Exercise price | |
$ | 13.20 21.60 | | |
$ | 22.00 | | |
|
Expected life | |
| 5 years | | |
| 5 years | | |
|
Expected volatility | |
| 227% - 256 | % | |
| 228.34 | % | |
|
Expected dividends | |
| | | |
| | | |
The fair value of stock options granted in 2024 has
been measured at 112,125 shares using the Black-Scholes option pricing model with the following assumptions: exercise price $13.2 to $21.60,
expected life 5 to 10 years, expected volatility 254%, expected dividends 0%, risk free rate 4.64%.
During the year ended December 31, 2024, the fair
value of options granted amounted to $1,646,200. As of December 31, 2024, the intrinsic value of stock options outstanding and exercisable
was $0. Stock compensation expense for the years ended December 31, 2024 and 2023 was $1,411,883 and $840,817, respectively.
**Note 6 Stockholders Equity, continued**
At December 31, 2024, there was approximately $300,000
unrecognized compensation costs related to stock options which will be recognized over the weighted average remaining years of 0.84.
The following is a summary of the Companys
Warrant activity andreflects the 1 for 40 reverse split.
|
Schedule of warrant activity | |
| |
| |
| |
| |
|
Warrants | |
December 31, 2024 | |
December 31, 2023 | |
|
| |
Number of Warrants | |
Weighted Average Exercise Price | |
Number of Warrants | |
Weighted Average Exercise Price | |
|
| |
| |
| |
| |
| |
|
Balance beginning of the year | |
| 354,502 | | |
$ | 62.76 | | |
| 358,597 | | |
$ | 74.00 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
|
Granted | |
| 287,086 | | |
| 20.80 | | |
| 56,250 | | |
| 23.20 | | |
|
Exercises | |
| | | |
| | | |
| 1,703 | | |
| 87.60 | | |
|
Cancelled | |
| | | |
| | | |
| 58,642 | | |
| 92.80 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
|
Balance - end of the year | |
| 641,588 | | |
$ | 43.79 | | |
| 354,502 | | |
$ | 62.76 | | |
F-20
**Splash Beverage Group, Inc.**
**Notes to the Consolidated Financial Statements**
The fair value of warrants recognized in the period
has been estimated using the Black-Scholes option pricing model with the following assumptions.
|
Schedule of assumptions used in Black-Scholes option pricing model | |
| | | |
| | | |
|
| |
December 31, 2024 | |
December 31, 2023 | |
|
Risk-free interest rates | |
| 4.64 | % | |
| 3.84 | % | |
|
Exercise price | |
$ | 10.0 34.0 | | |
$ | 22.0 | | |
|
Expected life | |
| 5 years | | |
| 5 years | | |
|
Expected volatility | |
| 254 | % | |
| 254 | % | |
|
Expected dividends | |
| | | |
| | | |
**Note 7 Related Parties**
During the normal course of business, the
Company incurred expenses related to services provided by the CEO or Company expenses paid by the CEO, resulting in related party
payables. In conjunction with the acquisition of Copa di Vino, the Company also entered into a Revenue Loan and Security Agreement
(the Loan and Security Agreement) by and among the Company, Robert Nistico, additional Guarantor and each of the
subsidiary guarantors from time-to-time party thereto (each a Guarantor, and, collectively, the
Guarantors), and Decathlon Alpha IV, L.P. (the Lender). The Note Payable to Decathlon with a balance of
$1,995,950
at December 31, 2024 and $1,361,395
at December 31, 2023.
There were related party advances from our chief executive officer in the amount
of approximately $0.4 million outstanding as of December 31, 2024 and approximately $0.4 million as of December 31, 2023. This amount
includes a shareholder note payable in the amount of $0.2 million outstanding as of December 31, 2024. The annual interest rate of the
note is 12% with a conversion price of $14.0 per share. The note includes 14,285 shares of warrant coverage.
**Note 8 Investment in Salt Tequila USA,
LLC**
The Company has a marketing and distribution agreement
with SALT in Mexico for the manufacturing of our Tequila product line.
The Company has a 22.5% percentage interest in SALT Tequila USA, LLC (SALT),
and has the right to increase its ownership to 37.5%. This investment is accounted for at cost as the Company does not have the ability
to exercise significant influence over SALT Tequila USA, LLC.
**Note 9 Lease**
The Company has various operating lease agreements
primarily related to real estate and office space. The Companys real estate leases represent a majority of the lease liability.
Lease payments are mainly fixed. Any variable lease payments, including utilities, and common area maintenance are expensed during the
period incurred. Variable lease costs were immaterial for the year ended December 31, 2024 and 2023. A majority of the real estate leases
include options to extend the lease. Management reviews all options to extend at the inception of the lease and account for these options
when they are reasonably certain of being exercised.
Operating lease expense is recognized on a straight-line
basis over the lease term and is included in operating expense on the Companys condensed consolidated statement of operations and
comprehensive loss. Operating lease cost was $360,409 and $363,890 during the twelve-month period ended December 31, 2024 and 2023, respectively.
The following table sets for the maturities of our
operating lease liabilities and reconciles the respective undiscounted payments to the operating lease liabilities in the consolidated
balance sheet at December 31, 2024
F-21
**Splash Beverage Group, Inc.**
**Notes to the Consolidated Financial Statements**
|
Schedule
of operating lease liabilities | |
| | | |
|
Undiscounted Future Minimum Lease Payments | |
Operating Lease | |
|
| |
| |
|
2025 | |
$ | 318,219 | | |
|
2026 | |
| 52,703 | | |
|
2027 | |
| 2,976 | | |
|
Total | |
| 373,898 | | |
|
Amount representing imputed interest | |
| (15,034 | ) | |
|
Total operating lease liability | |
| 358,864 | | |
|
Current portion of operating lease liability | |
| (305,167 | ) | |
|
Operating lease liability, non-current | |
$ | 53,697 | | |
The table below presents information for lease costs
related to our operating leases at December 31, 2024:
|
Schedule of lease costs | |
| | | |
|
Operating lease cost: | |
| | | |
|
Amortization of leased assets | |
$ | 337,228 | | |
|
Interest of lease liabilities | |
| 23,181 | | |
|
Total operating lease cost | |
$ | 360,409 | | |
The table below presents lease- related terms and
discount rates at December 31, 2024:
|
Schedule of lease- related terms and
discount rates |
|
|
|
| |
|
Remaining term on leases |
|
|
25 months |
| |
|
Incremental borrowing rate |
|
|
5.0 |
% | |
**Note 10 Segment Reporting**
We have two reportable operating segments: (1) the
manufacture and distribution of non-alcoholic and alcoholic beverages, and (2) the retail sale of beverages and groceries online. These
operating segments are managed separately and each segments major customers have different characteristics. Segment Reporting is
evaluated by our chief operating decision maker, which continues to be our chief executive officer.
|
Schedule
of segment reporting information | |
| | | |
| | | |
|
Revenue | |
For the Year Ended, December 31, 2024 | |
For the Year Ended, December 31, 2023 | |
|
Splash Beverage Group | |
$ | 3,509,058 | | |
$ | 5,072,479 | | |
|
E-Commerce | |
| 646,150 | | |
| 13,777,673 | | |
|
| |
| | | |
| | | |
|
Total Revenues, | |
$ | 4,155,208 | | |
$ | 18,850,152 | | |
|
Segment operating loss: | |
2024 | |
2023 | |
|
Splash Beverage Group | |
$ | (14,742,528 | ) | |
$ | (13,669,371 | ) | |
|
E-Commerce | |
| (1,303,708 | ) | |
| (1,617,287 | ) | |
|
| |
| | | |
| | | |
|
Total segment operating loss | |
$ | (16,046,236 | ) | |
$ | (15,286,658 | ) | |
F-22
**Splash Beverage Group, Inc.**
**Notes to the Consolidated Financial Statements**
|
Reconciliation of segment loss to corporate loss: | |
2024 | |
2023 | |
|
Other income/expense | |
$ | (2,552 | ) | |
$ | (30,328 | ) | |
|
Amortization of debt discount | |
| (3,677,143 | ) | |
| (3,832,628 | ) | |
|
Interest income & expense | |
| (3,700,620 | ) | |
| (1,854,143 | ) | |
|
Legal reserve | |
| (330,000 | ) | |
| | | |
|
| |
| | | |
| | | |
|
Loss before income tax | |
$ | (23,756,551 | ) | |
$ | (21,003,757 | ) | |
|
Total Assets | |
December 31, 2024 | |
December 31, 2023 | |
|
Splash Beverage Group | |
$ | 2,610,207 | | |
$ | 9,188,213 | | |
|
E-Commerce | |
| 148,978 | | |
| 710,555 | | |
|
| |
| | | |
| | | |
|
Total Assets | |
$ | 2,759,185 | | |
$ | 9,898,768 | | |
Splash Beverage Group revenue decreased for the year
ending December 31, 2024 versus December 31, 2023 by $1.6 million or 30% with the main contribution from the decrease in revenue coming
from TapouT and Pulpoloco. The contribution after marketing expenses increased by $1.2 million for the year ending December 31, 2024 versus
December 31, 2023 due to decreased sales partially offset by cost decreases and marketing expense.
E-Commerce revenue decreased for the year ending December
31, 2024 versus December 31, 2023 by $8.9 million driven by low inventory. Contribution after Marketing expenses declined by $4.8 million
due to decrease in sales.
**Note 11 Commitment and Contingencies**
The Company is a party to asserted claims and are
subject to regulatory actions in the ordinary course of business. The results of such proceedings cannot be predicted with certainty,
but the Company does not anticipate that the outcome, if any, arising out of any such matter will have a material adverse effect on its
business, financial condition or results of operations.
On June 5, 2024, the Company received notification
from the NYSE American LLC (NYSE American) indicating that it is not in compliance with the NYSE Americans continued
listing standards under Section 1003(a)(iii) of the NYSE American Company Guide (the Company Guide), requiring a listed
company to have stockholders equity of $6 million or more if the listed company has reported losses from continuing operations
and/or net losses in its five most recent fiscal years. The Company is now subject to the procedures and requirements of Section 1009
of the Company Guide. If the Company is not in compliance with the continued listing standards by April 6, 2025 or if the Company does
not make progress consistent with the Plan during the plan period, the NYSE American may commence delisting procedures.
The licensing agreement between TapouT LLC and the Company was terminated
in Q1 2024. The parties are engaged in active and constructive settlement discussions pursuant to the terms of the agreements termination
provisions. Based on the settlement discussions, the Company anticipates that any final settlement will not exceed the amounts already
recorded in its legal reserve and accrued accounts payable.
**Note 12 Tax Provision**
The Company has 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. Due to uncertainty about the Companys ability to utilize its deferred tax
assets, the Company has recorded a full valuation allowance against its deferred tax assets.
At December 31, 2024, the Companys net operating
loss carryforward for Federal income tax purposes was $99,567,157, which will be available to offset future taxable income. If not used,
these carry forwards will begin to expire in 2032, except for the net operating losses generated January 1, 2018 and after, which amounted
to $76,541,071, which can be carried forward indefinitely.
There was no income tax expense or benefit for the
years ended December 31, 2024 and 2023 due to the full valuation allowance recorded.
F-23
**Splash Beverage Group, Inc.**
**Notes to the Consolidated Financial Statements**
**Note 12 Tax Provision, continued**
The reconciliation of the income tax benefit is computed
at the U.S. federal statutory rate as follows:
|
Schedule of effective
income tax rate reconciliation | |
| | | |
| | | |
|
| |
2024 | |
2023 | |
|
| |
| |
| |
|
Federal Statutory Tax Rate | |
| 21.00 | % | |
| 21.00 | % | |
|
Permanent Differences | |
| (1.57 | )% | |
| (0.89 | )% | |
|
Change in Valuation Allowance | |
| (19.43 | )% | |
| (20.11 | )% | |
|
Net deferred tax asset | |
| | | |
| | | |
The tax effects of temporary differences which give
rise to the significant portions of deferred taxassets or liabilities at December 31 are as follows:
|
Schedule of deferred
taxassets or liabilities | |
| | | |
| | | |
|
| |
2024 | |
2023 | |
|
Deferred Tax Assets: | |
| | | |
| | | |
|
Net Operating Losses | |
$ | 31,444,821 | | |
$ | 27,606,474 | | |
|
Accrued Interest/Interest Expense Limitation | |
| 2,251,164 | | |
| 1,518,618 | | |
|
Total deferred tax assets | |
| 33,695,985 | | |
| 29,125,092 | | |
|
| |
| | | |
| | | |
|
Deferred Tax Liabilities: | |
| | | |
| | | |
|
Depreciation | |
| (145,467 | ) | |
| (120,502 | ) | |
|
Total deferred tax liabilities | |
| (145,467 | ) | |
| (120,502 | ) | |
|
| |
| | | |
| | | |
|
Less: Valuation allowance | |
| (33,550,518 | ) | |
| (29,004,590 | ) | |
|
Total Net Deferred Tax Assets | |
$ | | | |
$ | | | |
The Company continually evaluates 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 the
Companys operations are 2015 through 2024.
**Note 13 Subsequent Events**
In January 2025, the Company entered into a
convertible promissory note with a loan company in the amount of $163,000.
The note has a six-month 6 term, accrues interest at 12%
and is convertible into shares of common stock of the Company with a discount rate of 35% of Market price.
In January 2025, the Company issued a 10-month promissory
note in the amount of $150,650, that accrues interest at 12% and is convertible into shares of common stock at a 25% discount to the current
market price.
In January 2025, the Company entered into a twelve-month loan with individuals
totaling in the amount of $350,000. The note included warrant coverage of 35,000 5-year warrants with a $10 exercise price. The loan matures
in January 2026 with principal and interest due at maturity with conversion price of $10.0 per share
In January 2025, the Company entered into an eighteen-month
loan with individuals totaling $381,000. The note included warrant coverage of 38,100 5-year warrants with a $10 exercise price. The loan
matures in June 2026 with principal and interest due at maturity with conversion price of $10 per share
F-24
**Splash Beverage Group, Inc.**
**Notes to the Consolidated Financial Statements**
On
March 27, 2025, the Company implemented a 1.0 for 40.0 reverse stock split. All common stock shares, warrants, and conversion prices
stated herein have been adjusted to reflect the split. The purpose of this reverse split was to maintain the Companys listing
on the NYSE American.
In April 2025, the Company
issued a 5-year promissory note in the amount of 200,000, it accrues interest at 15%, and is convertible into shares of common stock
at $1.25. The note also received 125,000 5-year warrants exercisable at $2.00, and 83,334 5-year warrants exercisable at $3.00.
In
May 2025, the Company issued 650 shares of Series A-1 Preferred Stock in exchange for approximately $650,000. Series A-1 shares are convertible
into common stock, subject to shareholder approval, and further discussed in Note 6. Investors of A-1 Shares also received 162,500 1-year
A Warrants exercisable into common stock at 80% of 5-day VWAP, and 162,500 5-year B Warrants exercisable into common stock at $4.00.
The accounting treatment of this transaction is subject to further review and may be adjusted in the future.
In
June 2025, the Company issued 1000 shares of Preferred A Stock. Preferred A is super voting preferred, not convertible into common stock,
and further discussed in Note 6.
In
June 2025, the Company issued 126,710 shares of Series B Preferred Stock in exchange for approximately $12.7 million in previously outstanding
convertible notes. The Series B shares are convertible into common stock, subject to shareholder approval and further discussed in Note
6. The accounting treatment of this transaction is subject to further review and may be adjusted in the future.
In
June 2025, the Company acquired certain assets, including all contractual water rights to the aquifer located in Garabito, Puntarenas,
Costa Rica. The Company issued 20,000 shares of Series C Preferred Stock as consideration, at an initial stated value of $1000 per share.
Management determined that the transaction is an asset acquisition under ASC 805, as substantially all of the fair value is concentrated
in a single identifiable assetthe water rightsand no substantive processes were acquired. The preliminary fair value of
the acquired assets has been estimated at approximately $20 million and is subject to revision. The Series C shares are convertible into
common stock, subject to shareholder approval, and further discussed in Note 6
F-25
**Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.**
None.
**Item 9A. Controls and Procedures.**
**(1) Evaluation of Disclosure Controls and Procedures**
We have adopted and maintain
disclosure controls and procedures (as such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e) under the Exchange Act), that
are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized
and reported within the time periods required under the SECs rules and forms and that the information is gathered and communicated
to our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial
Officer), to allow for timely decisions regarding required disclosure.
As required by Exchange Act Rule 13a-15, our Chief
Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Exchange Act Rule 13a-15 as of the end of the period covered by this report. Based on the foregoing
evaluation, our Chief Executive Officer and Chief Financial Officer concluded that due to our limited resources our disclosure controls
and procedures are not effective in providing material information required to be included in our periodic SEC filings on a timely basis
and to ensure that information required to be disclosed in our periodic SEC filings is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure about our internal
control over financial reporting discussed below Following the 2022 evaluation by management of the effectiveness of the design and operation
of our disclosure controls and procedures we implemented new controls and process in 2023.
**(2) Managements Report on Internal Control
over Financial Reporting**
Our management is responsible
for establishing and maintaining adequate internal control over financial reporting for our company. Our internal control system was designed
to, in general, provide reasonable assurance to our management and board regarding the preparation and fair presentation of published
financial statements, but because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our
management assessed the effectiveness of our internal control over financial reporting as of December 31, 2024. Based on that assessment,
our management has determined that as of December 31, 2024, our internal control over financial reporting was not effective due to material
weaknesses related to a limited segregation of duties due to our limited resources and the small number of employees, resulting in a lack
of controls to ensure maintenance of documentation
supporting transactions recorded in the Companys accounting records. Management has determined that this control deficiency constitutes
a material weakness which could result in material misstatements of significant accounts and disclosures that could result in a material
misstatement to our interim or annual financial statements that would not be prevented or detected. In addition, due to limited staffing,
we are not always able to detect minor errors or omissions in reporting.
This Annual Report does not
include an attestation report of our independent registered public accounting firm regarding managements assessment of our internal
control over financial reporting pursuant to temporary rules of the SEC.
**(3) Changes in Internal Control over Financial
Reporting**
There has been no change in our internal control over
financial reporting other than items highlighted above, identified in connection with the evaluation required by paragraph (d) of Rules
13a-15 or 15d-15 under the Securities Exchange Act of 1934 that occurred during our most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, our internal control over financial reporting.
**Item 9B. Other Information.**
None.
**ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.**
Not applicable.
32
**PART III**
**Item 10. Directors, Executive Officers and Corporate Governance.**
The following table sets forth our executive officers
and directors, their ages and position(s) with the Company.
|
Name |
|
Age |
|
Position | |
|
|
|
|
|
| |
|
Robert Nistico |
|
61 |
|
Chief Executive Officer and Director | |
|
|
|
|
|
| |
|
William Devereux(4) |
|
50 |
|
Chief Financial Officer | |
|
|
|
|
|
| |
|
Stacy McLaughlin(1) |
|
43 |
|
Former Chief Financial Officer | |
|
|
|
|
|
| |
|
Julius Ivancisits(2) |
|
53 |
|
Former Chief Financial Officer | |
|
|
|
|
|
| |
|
Ron Wall(5) |
|
57 |
|
Former Chief Financial Officer | |
|
|
|
|
|
| |
|
Fatima Dhalla(6) |
|
70 |
|
Former Interim Chief Financial Officer | |
|
|
|
|
|
| |
|
William Meissner |
|
58 |
|
President, Chief Marketing Officer | |
|
|
|
|
|
| |
|
Justin Yorke |
|
58 |
|
Director | |
|
|
|
|
|
| |
|
John Paglia(3) |
|
57 |
|
Director | |
|
|
|
|
|
| |
|
Thomas Fore |
|
59 |
|
Director | |
|
|
|
|
|
| |
|
Bill Caple |
|
66 |
|
Director | |
|
(1) | Ms. McLaughlin resigned as the Chief Financial Officer of the Company on March 29, 2024 | |
|
(2) | Mr. Ivancsits informed the Company of his intention to resign as Chief Financial Officer of the Company
Ion February 7, 2025, to be effective as of February 18, 2025. | |
|
(3) | Dr. Paglia informed the Company of his intention to resign as a member of the Board, as well
as any other positions at the Company, on February 7, 2025, to be effective as of March 7, 2025. | |
|
(4) | On March 20, 2025, William Devereux was appointed as the Companys Chief Financial Officer | |
|
(5) | Mr. Ron Wall resigned as the Chief Financial Officer of the Company on September 26, 2023 | |
|
(6) | Ms Fatima Dhalla resigned as the Interim Chief Financial Officer of the Company on January19, 2024. | |
Directors are elected annually
and hold office until the next annual meeting of the stockholders of the Company and until their successors are elected. Officers are
elected annually by the Board of Directors (the Board) and serve at the discretion of the Board.
33
Robert Nistico, age 60, on March
31, 2020 became the Chief Executive Officer and a member of the Board of the Company. Since 2012, Mr. Nistico has served as the Chief
Executive Officer and a member of the Board of Splash Beverage Group, Inc., prior to the Companys acquisition by CMS. Mr. Nistico
also served as the president of Viva Beverages, LLC from 2009 to 2011. Mr. Nistico was the fifth employee at Red Bull North America, Inc.
where he worked from 1996 to 2007 and served as Vice President of Field Marketing and Sr. Vice President/General Manager. Mr. Nistico
was instrumental in building the Red Bull brand in North and Central America and the Caribbean from no revenues to $1.45 billion in annual
revenues. Earlier, he held the brand position of Regional Portfolio V.P and Division Manager for Diageo (formerly I.D.V. / Heublein),
General Sales Manager for Republic National (formerly The Julius Schepps Company) and North Texas State Manager for The E & J Gallo
Winery (and a variety of other management positions for those companies). Mr. Nistico serves as a director of Apollo Brands. Mr. Nistico
has more than 27 years of experience in the beverage industry, including direct and indirect sales management, strategic brand management
& marketing, finance, operations, production and logistics. Mr. Nistico holds a B.A. from the University of Colorado.
William
Devereux, age 50, on March 20, 2025 became our Chief Financial Officer. Mr. Devereux was CFO at Hembal Labs and Akin AI, where he secured
enterprise contracts, sourced a merger offer, and positioned companies for significant investment. Earlier, he was a Partner at Daruma
Capital, where he played a key leadership role in managing a $2B portfolio. He also advised on M&A and regulatory matters at Dames
Point Partners and held leadership roles in investment strategy and corporate governance. An expert in corporate finance, capital allocation,
and M&A strategy, William holds an MBA from the University of North Carolina at Chapel Hill and a BS in Finance from the University
of Florida.
Julius
Ivancsits, age 53, became the Chief Financial Officer of the Company on April 24, 2024. Prior to joining the Company, Mr. Ivancsits was
the Chief Financial Officer of HEXO Corporation, from May 2022 to July 2023, assisting HEXO in its successful sale to Tilray brands in
2023. He founded and has been serving as the managing director at endurance CFO Advisory Services since the HEXO sale. Prior to his time
at HEXO he served as the Chief Financial Officer at Goba Capital from 2021 until 2022, as the Chief Financial Officer at AlpHa Measurement
Solutions, LLC from 2019 until 2021, and as the Chief Financial Officer at Be Green Packaging from 2017 until 2019. He also served in
multiple roles at CPKelco with progressively increasing experience. Mr. Ivancsits has a BS in Business from Eastern Illinois University.
Stacy McLaughlin, age 43, became
the Chief Financial Officer on January 24, 2024. Prior to serving as our Chief Financial Officer, Ms. McLaughlin was the Chief Financial
Officer of Material Technologies, Corp. from 2022 to 2023. From 2013 to 2021, Ms. McLaughlin was the Vice President and Chief Financial
Officer of Willdan Group, Inc. (Willdan), and prior to that, she was their Compliance Manager from 2010 to 2013. During her tenure at
Willdan, she was responsible for accounting and finance functions, SEC reporting, investor relations, treasury, and managed a follow-on
equity offering. Prior to Willdan, Ms. McLaughlin was, from 2009 to 2010, Senior Associate at Windes & McClaughry Accountancy Corporation
and, from 2004 to 2009, Senior Audit Associate at the public accounting firm KPMG LLP. Ms. McLaughlin has a Masters in Accounting from
the University of Southern California and BS from the University of Arizona. Ms. McLaughlin is a Certified Public Accountant (CPA).
William Meissner, age 58, became
the President and Chief Marketing Officer of the Company in May of 2020. Mr. Meissner is a proven leader with more than twenty years of
success in growing consumer brand companies with both large multinational and medium sized entrepreneurial organizations. Meissner has
held several other leadership and board director roles. Prior to Splash Meissner was a board director and CEO in a beverage vertical organized
by a mid-cap PE firm designed to acquire and build emerging brands, where he acquired two legacy tea brands from Nestle, Sweet Leaf Tea
and Tradewinds Tea. Meissner served as CEO and Board Director or Genesis Today, Inc. a plant based superfood and supplement company, CEO
and Board Director of a joint venture between Distant Lands Coffee Inc. and Caffitaly Systems s.p.a called Tazza Pronto Inc., CEO and
Board Director of Jones Soda Inc., President of Talking Rain Beverages, Inc., Chief Marketing Officer of Coca-Colas Fuze Beverages,
Brand Director of PepsiCos SoBe Beverages and Category Manager of Nutritional Beverages for Tetra Pak Inc. Meissner has an MBA
from the University of Pittsburghs Katz Graduate School of Business and a Bachelors degree from Michigan State University.
34
Thomas Fore, age 59, became an
independent director of the Board of the Company on March 20, 2025. Mr. Fore currently leads the real estate investment strategy for Epogee
Capital Management, a Boston-based Registered Investment Advisory, and for Wise Capital, an international investment fund with more than
$500MM AUM. Previously, he served as the CEO of TideRock Media from 2011 to 2024. TideRock has produced more than 15 feature films for
the Sundance Labs Program and has worked with top Hollywood talent including: Elizabeth Banks, Richard Gere, Common, Danny Glover, and
Christopher Columbus. TideRock co-founded the Sundance Investors Catalyst Lab in 2013 in order to provide education and resources
to film investors. Thomas is a board member of My Pebble Inc., a private technology company which is involved in the effort to help companies
become carbon neutral, and is a graduate of Towson University (1991) and has retired from the Baltimore City Police Department as a Detective
Agent in 2000.
Justin Yorke, age 58, became a
member of the Board of the Company on March 31, 2020. Since March 31, 2020, Mr. Yorke has also served as the Companys Secretary.
Mr. Yorke has over 25 years of experience in finance. Based in Hong Kong for over 10 years, he managed funds for a private Swiss Bank,
Darier Henstch from 1997 to 2000. Prior to that, from 1995 to 1997, Mr. Yorke managed funds for Peregrine Investments and from 1990 to
1995 Unifund, Asia, Ltd, Hong Kong, a high net-worth family office headquartered Geneva, Switzerland. From 2000 to 2004, he was a partner
at Asiatic Investment Management, based in San Francisco. Since 2004, Mr. Yorke has been a partner in San Gabriel Advisors, LLC and Arroyo
Capital Management, LLC and is the manager of the San Gabriel Fund, JMW Fund and Richland Fund. The funds are highly diversified in focus
with investment holdings, public, private equity and debt investments and real estate investments. He has a B.A. degree from UCLA. Mr.
Yorke is the principal of WesBev LLC, which prior to the merger between CMS and our Company was the majority shareholder of the Company.
He also is an acting director and audit committee chair of Processa Pharmaceuticals, (Nasdaq: PCSA). Mr. Yorke served as non-executive
Chairman of Jed Oil and a Director/CEO at JMG Exploration.
Dr. Paglia, age 57, became a member
of the Board of the Company as an independent director on February 26, 2024. He is currently an independent director, Audit Committee
Chair and a member of the Nominating & Corporate Governance and Compensation Committee of Simulations Plus, Inc., from 2014 to present.
Mr. Paglia is also an independent director, Audit Committee Chair and a member of the Nominating & Corporate Governance and Compensation
Committee of Aeluma, Inc., from 2021 to present. Additionally, Dr. Paglia is currently on the Advisory Board of multiple companies, including
SUM Ventures, Axxes Capital Inc., VitaNav Inc., and DigiLife Fund, among others. Dr. Paglia, a Professor of Finance, currently works at
Pepperdine University in various positions, which have included Senior Associate Dean and Executive Director, since 2000-present. Dr.
Paglia has a Doctor of Philosophy in Business Administration, from the University of Kentucky, a Master of Business Administration from
Gannon University, a Bachelor of Science from Gannon University, and is also a Certified Public Accountant and Charted Financial Analyst.
Bill Caple, age 66, has served
as an independent director of the Company since May 3, 2023. Over the past five years, Mr. Caple has primarily served as a consultant
on corporate strategies, business development, corporate finance, and M&A. Mr. Caple is currently a board member of Covax Data, Inc.
(Covax), where he also assists with establishing sales channels and business development for Covaxs cyber security
AI blockchain product and assisting the company raise growth capital. Mr. Caple also founded and runs Caple
Advisory, an international management consulting practice and investment banking firm, with a concentration in Asia. Previously,
Mr. Caple served as a board member and C-suite executive of multiple hi-tech businesses, netting successful
exits and public offerings of his companies (e.g. OTG Software NASDAQ: OTGS, now part of Dell EMC and OpenText). The Company believes
that Mr. Caple is an asset to the Company because of his wealth of experience and success in corporate finance strategies, M&A, and
business development to round out the Boards top-tier level of expertise in key subjects.
**Family Relationships**
There are no family relationships
among and between the issuers directors, officers, persons nominated or chosen by the issuer to become directors or officers, or
beneficial owners of more than ten percent of any class of the issuers equity securities.
35
**Section 16(a) Beneficial Ownership Reporting Compliance**
Com
Section 16(a) of the Securities
Exchange Act requires that our directors and executive officers and persons who beneficially own more than 10% of our common stock (referred
to herein as the reporting persons) file with the SEC various reports as to their ownership of and activities relating to
our common stock. Such reporting persons are required by the SEC regulations to furnish us with copies of all Section 16(a) reports they
file. Based solely on our review of copies of the reports filed with the SEC and the written representations of our directors and executive
officers, we believe that all reporting requirements for fiscal year 2024 were complied with by each person who at any time during the
2024 fiscal year was a director or an executive officer or held more than 10% of our common stock, except for the following: Julius Ivancsits,
and Stacy McLaughlin each filed a late Form 3 report at the time of their appointments and on becoming insiders of the Company. Julius
Ivancsits filed a late Form 4 report on May 6, 2024.
**Committees of the Board
of Directors**
**Audit Committee**
We have separately designated
an Audit Committee. The Audit Committee is responsible for, among other things, the appointment, compensation, removal and oversight of
the work of the Companys independent registered public accounting firm, overseeing the accounting and financial reporting process
of the Company, and reviewing related person transactions. During fiscal year 2024 our Audit Committee is comprised of John Paglia and
Bill Caple. Under NYSE listing standards and applicable SEC rules, all the directors on the audit committee must be independent. Also,
as a smaller reporting company, we are only required to maintain an audit committee of two independent directors. Our Board has determined
that John Paglia and Bill Caple are independent under NYSE listing standards and applicable SEC rules. John Paglia is the Chairperson
of the audit committee. Each member of the audit committee is financially literate and our Board has determined that John Paglia qualifies
as an audit committee financial expert as defined in applicable SEC rules. The Audit Committee operates under a written
charter adopted by the Board of Directors, which can be found on our website at www.splashbeveragegroup.com. During 2024, the Audit Committee
held four meetings in person or through conference calls. The Company has replaced Dr. Paglia on the Audit Committee with Thomas Fore.
*Compensation and Management Resources Committee*
We have established a Compensation
and Management Resources Committee of our Board of Directors. The purpose of the Compensation and Management Resources Committee is to
assist the Board in discharging its responsibilities relating to executive compensation, succession planning for the Companys executive
team, and to review and make recommendations to the Board regarding employee benefit policies and programs, incentive compensation plans
and equity-based plans.
During fiscal year 2024 the members
of our Compensation and Management Resources Committee were Bill Caple and John Paglia. Bill Caple is the chairperson of the Compensation
and Management Resources Committee. As of March 7, 2025, Dr. Paglia is no longer be a member of the Compensation and Management Resources
Committee. The Company has replaced Dr. Paglia on the Compensation Committee with Thomas Fore.
Under NYSE listing standards, we
are required to have at least two members of the compensation committee, all of whom must be independent directors. Our board of directors
has determined that each of John Paglia and Bill Caple is independent under NYSE listing standards. The Compensation and Management Resources
Committee is responsible for, among other things, (a) reviewing all compensation arrangements for the executive officers of the Company
and (b) administering the Companys stock option plans. The Compensation and Management Resource Committee operates under a written
charter adopted by the Board of Directors, which can be found on our website at *www.splashbeveragegroup.com* within the Investor
Information section.
36
The duties and responsibilities
of the Compensation and Management Resources Committee in accordance with its charter are to review and discuss with management and the
Board the objectives, philosophy, structure, cost and administration of the Companys executive compensation and employee benefit
policies and programs; no less than annually, review and approve, with respect to the Chief Executive Officer and the other executive
officers (a) all elements of compensation, (b) incentive targets, (c) any employment agreements, severance agreements and change in control
agreements or provisions, in each case as, when and if appropriate, and (d) any special or supplemental benefits; make recommendations
to the Board with respect to the Companys major long-term incentive plans applicable to directors, executives and/or non-executive
employees of the Company and approve (a) individual annual or periodic equity-based awards for the Chief Executive Officer and other executive
officers and (b) an annual pool of awards for other employees with guidelines for the administration and allocation of such awards; recommend
to the Board for its approval a succession plan for the Chief Executive Officer, addressing the policies and principles for selecting
a successor to the Chief Executive Officer, both in an emergency situation and in the ordinary course of business; review programs created
and maintained by management for the development and succession of other executive officers and any other individuals identified by management
or the Compensation and Management Resources Committee; review the establishment, amendment and termination of employee benefits plans,
review employee benefit plan operations and administration; and any other duties or responsibilities expressly delegated to the Compensation
and Management Resources Committee by the Board from time to time relating to the Committees purpose.
The Compensation and Management
Resources Committee may request any officer or employee of the Company or the Companys outside counsel to attend a meeting of the
Compensation and Management Resources Committee or to meet with any members of, or consultants to, the Compensation and Management Resources
Committee. The Companys Chief Executive Officer does not attend any portion of a meeting where the Chief Executive Officers
performance or compensation is discussed, unless specifically invited by the Compensation and Management Resources Committee.
The Compensation and Management
Resources Committee has the sole authority to retain and terminate any compensation consultant to be used to assist in the evaluation
of director, Chief Executive Officer or other executive officer compensation or employee benefit plans and has sole authority to approve
the consultants fees and other retention terms. The Compensation and Management Resources Committee also has the authority to obtain
advice and assistance from internal or external legal, accounting or other experts, advisors and consultants to assist in carrying out
its duties and responsibilities and has the authority to retain and approve the fees and other retention terms for any external experts,
advisors or consultants.
During 2024, the Compensation Management
Resources Committee held two meetings in person or through conference calls.
**Nominating and Corporate Governance Committee**
The Nominating and Corporate Governance
Committee is responsible for overseeing the appropriate and effective governance of the Company, including, among other things, (a) nominations
to the Board of Directors and making recommendations regarding the size and composition of the Board of Directors and (b) the development
and recommendation of appropriate corporate governance principles. During fiscal year 2024 the Nominating and Corporate Governance Committee
consists of John Paglia and Bill Caple, each of whom is an independent director (as defined under Section 803 of the NYSE American LLC
Company Guide). The Chairperson of the committee is Bill Caple. The Nominating and Corporate Governance Committee operates under a written
charter adopted by the Board of Directors, which can be found on our website at www.splashbeveragegroup.com within the Investor
Information section. The Company is currently in the process of replacing Dr. Paglia.
The Nominating and Corporate Governance
Committee adheres to the Companys bylaws provisions and Securities and Exchange Commission rules relating to proposals by stockholders
when considering director candidates that might be recommended by stockholders, along with the requirements set forth in the committees
Policy with Regard to Consideration of Candidates Recommended for Election to the Board of Directors, also available on our website. The
Nominating and Corporate Governance Committee of the Board of Directors is responsible for identifying and selecting qualified candidates
for election to the Board of Directors prior to each annual meeting of the Companys stockholders. In identifying and evaluating
nominees for director, the Committee considers each candidates qualities, experience, background and skills, as well as other factors,
such as the individuals ethics, integrity and values which the candidate may bring to the Board of Directors.
37
During 2024, the Nominating and
Corporate Governance Committee held two meetings in person or through conference calls.
**Meetings of the Board of Directors same as
above**
During 2024, the Board of
Directors held six meetings. During 2024, each member of our Board of Directors attended at least 75% of the aggregate of
all meetings of our Board of Directors and of all meetings of committees of our Board of Directors on which such member served that were
held during the period in which such director served.
The Board of Directors also approved certain actions
by unanimous written consent.
**Director Independence**
The NYSE
listing standards require that a majority of our Board be independent. Our Board has determined that John Paglia and Bill Caple are independent
directors as defined in the NYSE listing standards. Our independent directors will have regularly scheduled meetings at which only
independent directors are present. The Company is currently in the process of replacing Dr. Paglia.
**Involvement in Certain
Legal Proceedings**
Our Directors and Executive Officers have not been
involved in any of the following events during the past ten years:
|
1. |
any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; | |
|
|
| |
|
2. |
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); | |
|
|
| |
|
3. |
being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or banking activities or to be associated with any person practicing in banking or securities activities; | |
|
|
| |
|
4. |
being found by a court of competent jurisdiction in a civil action, the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; | |
|
|
| |
|
5. |
being subject of, or a party to, any federal or state judicial or administrative order, judgment decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or | |
|
|
| |
|
6. |
being subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. | |
|
7. |
Such person was the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: | |
i. Any federal or
state securities or commodities law or regulation; or
ii. Any law or regulation
respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of
disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or
iii. Any law or
regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
38
|
8. |
Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. | |
**Board leadership structure
and role in risk oversight**
The Board of Directors oversees
our business and affairs and monitors the performance of management. In accordance with corporate governance principles, the Board of
Directors does not involve itself in day-to-day operations. The directors keep themselves informed through discussions with the Chief
Executive Officer and other key executives, visits to the Companys facilities, by reading the reports and other materials that
we send them and by participating in Board and committee meetings. Each directors term will continue until the election and qualification
of his or her successor, or his or her earlier death, resignation or removal. The information set forth in Item 1C is incorporated herein
by reference.
**Code of Ethics**
We have
adopted a code of business conduct and ethics that applies to our directors, officers (including our Chief Executive Officer, Chief Financial
Officer and any person performing similar functions) and employees. Our Code of Ethics is available at our website at *www.splashbeveragegroup.com*.
**Clawback Policy**
On September 20, 2023, the Board adopted the Splash
Beverage Group Clawback Policy (the Clawback Policy), effective September 20, 2023, providing for the recovery of certain
incentive-based compensation from current and former executive officers of the Company in the event the Company is required to restate
any of its financial statements filed with the SEC under the Exchange Act in order to correct an error that is material to the previously-issued
financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected
in the current period. Adoption of the Clawback Policy was mandated by new Nasdaq listing standards introduced pursuant to Exchange Act
Rule 10D-1. The Clawback Policy is in addition to Section 304 of the Sarbanes-Oxley Act of 2002 which permits the SEC to order the disgorgement
of bonuses and incentive-based compensation earned by a registrant issuers chief executive officer and chief financial officer
in the year following the filing of any financial statement that the issuer is required to restate because of misconduct, and the reimbursement
of those funds to the issuer. A copy of the Clawback Policy has been filed herewith, and can also be found at *www.splashbeveragegroup.com*.
**Insider Trading Policy**
****
The Company has adopted an insider trading policy
that governs the purchase, sale, and/or other transactions of our securities by our directors, officers and employees. A copy of our
insider trading policy is filed as Exhibit 19.1 to this Annual Report on Form 10-K for the fiscal year ended December 31, 2024. In addition,
with regard to the Companys trading in its own securities, it is the Companys policy to comply with the federal securities
laws and the applicable exchange listing requirements.
****
39
****
**Item 11. Executive Compensation**
****
**EXECUTIVE AND DIRECTOR COMPENSATION**
The following table sets forth information for our
two most recently completed fiscal years ending December 31, 2024 and December 31, 2023 concerning all of the compensation awarded to,
earned by the executive officers named below.
|
Name and Principal Position |
|
Year |
|
Salary |
|
Bonus |
|
Other |
|
Stock Awards |
|
Option Awards |
|
Nonequity Incentive Plan Compensation |
|
Nonqualified Deferred Compensation Earnings |
Total | |
|
|
|
Robert Nistico, CEO |
|
2024 |
|
$ |
324,819 |
|
|
|
|
$ |
13,800 |
|
|
|
|
$ |
396,000 |
|
|
|
|
|
|
|
$ |
734,619 |
| |
|
|
2023 |
|
$ |
333,125 |
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
347,525 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
William Meissner, President and CMO |
|
2024 |
|
$ |
324,819 |
|
|
|
|
$ |
9,200 |
|
|
|
|
$ |
247,500 |
|
|
|
|
|
|
|
$ |
581,519 |
| |
|
|
2023 |
|
$ |
333,125 |
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
333,125 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Ronald Wall, CFO(1) |
|
2024 |
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
| |
|
|
2023 |
|
$ |
249,438 |
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
249,438 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Fatima Dhalla, Interim CFO(2) |
|
2024 |
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
16,200 |
|
|
|
|
|
|
|
$ |
16,200 |
| |
|
|
2023 |
|
$ |
55,950 |
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
55,950 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Stacy McLaughlin, Former CFO(3) |
|
2024 |
|
|
$ |
60,937 |
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
60,937 |
| |
|
|
|
|
2023 |
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Julius Ivancsits, CFO(3) |
|
|
2024 |
|
|
$ |
209,280 |
|
|
|
|
|
|
$ |
4,000 |
|
|
|
|
|
|
|
247,500 |
|
|
|
|
|
|
|
|
|
|
$ |
460,780 |
| |
|
|
|
|
2023 |
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
William Devereux(4) |
|
|
2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
| |
|
|
|
|
2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
| |
(1) On September 26, 2023, Ronald Wall resigned as
Chief Financial Officer of the Company.
(2) Effective January 19, 2024, Fatima Dhalla, resigned
as the Interim Chief Financial Officer of the Company.
(3) The individual listed was appointed during fiscal
year 2024 and received no compensation during the last completed fiscal year.
(4) The individual listed was appointed during fiscal
year 2025 and received no compensation during the last two completed fiscal year.
**Employment Agreements**
Except as described below, the Company does not have
any employment agreements in place with any of its executive officers. The board of directors reserves the right to increase the salary
of our executive officers, and/or to grant them equity awards, including stock, options or other equity securities, from time to time,
as additional compensation or bonuses.
40
*Robert Nistico - CEO and Director*
On March 12, 2012, the Company entered into an employment agreement with Robert Nistico, pursuant to which Mr. Nistico serves as Chief
Executive Officer of the Company. Pursuant to Mr. Nisticos employment agreement, the Company pays Mr. Nistico an annual salary
of $275,000. Mr. Nistico is also eligible to receive an annual bonus of 50% of his annual salary, and was granted an option to purchase
350,000 shares of common stock. In the event Mr. Nistico terminates his employment with the Company he shall provide the Company a minimum
of 45 days of written notice.
On December 9, 2019, the board of directors of the
Company extended Mr. Nisticos employment agreement beginning December 1, 2019, and ending on November 30, 2024. Pursuant to the
amendment, the Company increased Mr. Nisticos base salary from $275,000 to $325,000.
*William Devereux -- CFO*
**
Pursuant to the terms of
an employment agreement dated February 21, 2025, the Company employed Mr. William Devereux as its Chief Financial Officer on a full-time
basis. Effective March 3, 2025, Mr. Devereuxs annual salary is $325,000. He is also entitled to a $60,000 signing bonus and discretionary
annual performance bonus of up to $162,500, upon achieving certain targets that are to be defined on an annual basis. Mr. Devereux is
also entitled to participate in all qualified plans, holidays and other employee benefits which the Company, in its sole discretion, may
maintain from time to time for the benefit of its employees in general. Pursuant to his employment agreement, granted 600,000 options
to acquire shares of common stock of the Company, with such shares vesting in 200,000 share increments annually (with the first vest to
occur on March 3, 2025). Continued vesting of these options and the underlying shares is subject to Mr. Devereuxs employment remaining
in good standing with the Company.
*Julius Ivancsits
Former CFO*
Pursuant to the terms of
an employment agreement dated April 22, 2024, the Company employed Mr. Julius Ivancsits as its Chief Financial Officer on a full-time
basis. Effective April 24, 2024, Mr. Ivancsits annual salary is $325,000. He is also entitled to a discretionary annual performance bonus
of up to $162,500, upon achieving certain targets that are to be defined on an annual basis. Mr. Ivancsits is also entitled to participate
in all qualified plans, holidays and other employee benefits which the Company, in its sole discretion, may maintain from time to time
for the benefit of its employees in general. Pursuant to his employment agreement, granted 750,000 options to acquire shares of common
stock of the Company, with such shares vesting in 250,000 share increments annually (with the first vest to occur on April 24, 2024).
Continued vesting of these options and the underlying shares is subject to Mr. Ivancsits employment remaining in good standing
with the Company.
*Stacy McLaughlin Former CFO*
Pursuant to the terms of an employment agreement dated
January 22, 2024, the Company employs Ms. Stacy McLaughlin as its Chief Financial Officer on a full-time basis. Effective January 24,
2024, Ms. McLaughlins annual salary is $325,000. She is also entitled to an annual performance bonus of up to $162,500, upon achieving
certain targets that are to be defined on an annual basis. Ms. McLaughlin is also entitled to participate in all qualified plans, holidays
and other employee benefits which the Company, in its sole discretion, may maintain from time to time for the benefit of its employees
in general. On March 5, 2024, pursuant to her employment agreement, Ms. McLaughlin was granted 600,000 restricted shares of Common Stock.
These shares will vest in tranches of 50,000 per quarter, until exhausted, with the first tranche vesting upon the completion of the first
quarter of 2024. Continued vesting of these shares is subject to Ms. McLaughlins employment remaining in good standing with the
Company. In the event that the company is acquired within the two years of January 24, 2024, the vesting schedule that the shares are
subject to will accelerate, contingent on Ms. McLaughlins employment being in good standing to the date on which the acquisition
closes.
41
*William Meissner - CMO and President*
On May 4, 2020, the Company entered into an employment
agreement with William Meissner, pursuant to which Mr. Meissner serves as President and Chief Marketing Officer of Company. Pursuant to
Mr. Meissners employment agreement, the Company pays Mr. Meissner an annual base salary of $325,000 and includes annual increases
based on cost of living adjustments and performance at the discretion of the Companys Chief Executive Officer. Mr. Meissner is
also eligible for a discretionary bonus, as determined by the Companys Chief Executive Officer, of up to 50% of Mr. Meissners
base salary. Mr. Meissner also received a grant of an option to purchase 666,667 shares of common stock under the Companys equity
incentive plan. The employment agreement with Mr. Meissners does not have a fixed termination date and permits the Company to terminate
Mr. Meissner upon twenty days prior written notice and grants Mr. Meissner the right to resign upon twenty days prior written notice.
**Directors Compensation**
****
**Directors Compensation**
During the fiscal year ended December
31, 2024, our directors were paid compensation in cash and options for serving as Directors of the Company. The awards below have been
adjusted for the 1 for 40 reverse split.
|
Name | |
Year | |
Fees Earned or Paid in Cash | |
All Other Compensation | |
Stock Awards | |
Option Awards | |
Total Compensation | |
|
| |
| |
| |
| |
| |
| |
|
Thomas Fore(1) | |
| 2024 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Justin Yorke | |
| 2024 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Bill Caple | |
| 2024 | | |
$ | 69,996 | | |
| | | |
| | | |
$ | 161,500 | | |
$ | 231,496 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
John Paglia | |
| 2024 | | |
$ | 45,000 | | |
| | | |
| | | |
$ | 318,000 | | |
$ | 363,000 | | |
|
(1) | Mr. Fore was appointed as a director of the Company in 2025, and received no compensation during fiscal
year 2024. | |
**Pension, Retirement or Similar Benefit Plans**
There are no arrangements or plans in which we provide
pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing plans pursuant
to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted
at the discretion of the Board or a committee thereof.
**Indebtedness of Directors, Senior Officers, Executive
Officers and Other Management**
None of our directors, executive officers or any associate
or affiliate of our Company during the last two fiscal years is or has been indebted to our Company by way of guarantee, support agreement,
letter of credit or other similar agreement or understanding currently outstanding.
**Equity Compensation Plan**
On May 21, 2020, the Board adopted the 2020 Long-Term
Incentive Compensation Plan (the 2020 Plan), which provides for the grant of Options, Restricted Stock Awards, Stock Appreciation
Rights, Performance Units and Performance Bonuses to consultants and other eligible recipients. The Plan has been in effect since July
1, 2020, for a period of ten years thereafter. The Plan continues to remain in effect until all matters relating to the payment of Awards
and administration of the Plan have been settled.
42
**Outstanding Equity Awards at Fiscal Year-End**
The following table has been adjusted for the 1 for
40 reverse split and summarizes the total outstanding equity awards as of December 31, 2024, for each Named Executive Officer:
|
Name | |
Grant Date | |
Number of Securities Underlying Unexercised Options Exercisable | |
Number of Securities Underlying Unexercised Options Un-Exercisable | |
Plan Awards: Number of Securities Underlying Unexercised Unearned Options | |
Option Exercise Price | |
Option Expiration Date | |
|
Robert Nistico | |
2/28/2020 | |
| 3,975 | | |
| | | |
| | | |
$ | 44.80 | | |
2/21/2025 | |
|
Robert Nistico | |
10/16/2020 | |
| 25,000 | | |
| | | |
| | | |
$ | 44.80 | | |
10/15/2025 | |
|
Robert Nistico | |
9/16/2021 | |
| 13,250 | | |
| | | |
| | | |
$ | 44.80 | | |
9/16/2031 | |
|
Robert Nistico | |
4/18/2024 | |
| 30,000 | | |
| | | |
| | | |
$ | 13.20 | | |
4/18/2034 | |
|
William Meissner | |
10/16/2020 | |
| 10,417 | | |
| | | |
| | | |
$ | 44.80 | | |
10/16/2025 | |
|
William Meissner | |
9/16/2021 | |
| 2,500 | | |
| | | |
| | | |
$ | 44.80 | | |
9/16/2031 | |
|
William Meissner | |
4/18/2024 | |
| 18,750 | | |
| | | |
| | | |
$ | 13.20 | | |
4/18/2034 | |
|
Julius Ivancsits | |
4/22/2024 | |
| 6,250 | | |
| 12,500 | | |
| | | |
$ | 13.20 | | |
4/22/2034 | |
|
Fatima Dhalla | |
3/31/2024 | |
| 750 | | |
| | | |
| | | |
$ | 13.20 | | |
3/31/2034 | |
**Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters.**
The following table sets forth
certain information with respect to the beneficial ownership of our common stock as of July 9, 2025, for:
|
|
|
each of our current directors and executive officers; | |
|
|
|
| |
|
|
|
all of our current directors and executive officers as a group; and | |
|
|
|
| |
|
|
|
each person, or group of affiliated persons, who beneficially owned more than 5% of our common stock. | |
Except as indicated by the footnotes
below, we believe, based on information furnished to us, that the persons and entities named in the table below have sole voting and sole
investment power with respect to all shares of common stock that they beneficially, subject to applicable community property laws. Unless
otherwise specified, the address for each of the persons named in the table is 1314 E Las Olas Blvd. Suite 221, Fort Lauderdale, Florida
33301.
Our calculation of the percentage
of beneficial ownership is based on 1,547,776 shares of common stock outstanding as of March 31, 2025. We have determined beneficial ownership
in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose.
Under Rule 13d-3 of the Exchange Act of 1934, as amended (the Exchange Act), a beneficial owner of a security includes any
person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has or shares: (i) voting
power, which includes the power to vote or to direct the voting of shares; and (ii) investment power, which includes the power to dispose
or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons
share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if
the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information
is provided. In computing the percentage ownership of any person or persons, the amount of shares outstanding is deemed to include the
amount of shares beneficially owned by such person or persons (and only such person or persons) by reason of these acquisition rights.
43
|
Name | |
Shares of Common Stock | |
Percentage of Common Stock | |
|
Executive Officers and Directors | |
| | | |
| | | |
|
Robert Nistico | |
| 36,752 | | |
| 2.20 | % | |
|
| |
| | | |
| | | |
|
Justin Yorke(1) | |
| 137,153 | | |
| 8.21 | % | |
|
| |
| | | |
| | | |
|
John Paglia | |
| | | |
| | | |
|
| |
| | | |
| | | |
|
William Meissner | |
| | | |
| | | |
|
| |
| | | |
| | | |
|
Julius Ivancsits | |
| | | |
| | | |
|
| |
| | | |
| | | |
|
Officers and Directors as a Group (5 individuals) | |
| 173,905 | | |
| 10.21 | % | |
|
5% or greater owners: | |
| | | |
| | | |
|
LK Family Partnership | |
| 74,800 | | |
| 4.48 | % | |
|
| |
| | | |
| | | |
|
Total | |
| 248,705 | | |
| 14.89 | % | |
|
C |
(1) |
Of which 82,431 shares are held by Richland Fund LLC, 34,950 shares are held by JMW Fund LLC and 19,772 shares are held by San Gabriel LLC. All funds are managed by Mr. Yorke. | |
**Securities Authorized for Issuance under our Equity Compensation Plan**
The following table gives information as of December
31, 2024, the end of the most recently completed fiscal year, about shares of common stock that have been issued under our Splash Beverage
Group, Inc. 2020 Incentive Plan. Under the 2020 Incentive Plan we have 8,648,486 options outstanding as of December 31, 2023. See Note
6. On October 6, 2023, at our 2023 annual meeting of stockholders our stockholders approved an amendment to the 2020 Incentive Plan to:
(1) increase the aggregate number of shares of common stock available by 1,500,000 shares to a total of 1,807,415 shares and (2) increase
the automatic annual increase in the number of shares under the 2020 Incentive Plan from 5% to 7.5% of the total number of shares of common
stock outstanding as of December 31st of the preceding fiscal year.
|
Plan Category | |
No. of Shares to be Issued Upon Exercise or Vesting of Outstanding Stock Options | |
Weighted Average Exercise Price of Outstanding Stock Options | |
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | |
|
Equity compensation plan approved by board of directors | |
| 106,475 | | |
$ | 32.40 | | |
| 42,146 | | |
|
| |
| | | |
| | | |
| | | |
|
Total | |
| 106,475 | | |
$ | 32.40 | | |
| 42,146 | | |
**Item 13. Certain Relationships and Related Transactions
and Director Independence.**
The following is a description
of the transactions and series of similar transactions, since December 31, 2024, that we were a participant or will be a participant in,
which:
44
|
|
the amount involved exceeds the lesser of $120,000 or one percent of the average of the smaller reporting companys total assets at year-end for the last two completed fiscal years; and | |
|
|
any of our directors, executive officers, holders of more than 5% of our capital stock (which we refer to as 5% stockholders) or any member of their immediate family had or will have a direct or indirect material interest, other than compensation arrangements with directors and executive officers. | |
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.
In conjunction with the acquisition of Copa DI Vino, the Company also entered into a Revenue Loan and Security Agreement
(the Loan and Security Agreement) by and among the Company, Robert Nistico, additional Guarantor and each of the subsidiary
guarantors from time-to-time party thereto (each a Guarantor, and, collectively, the Guarantors), and Decathlon
Alpha IV, L.P. (the Lender). The Loan and Security Agreement provided for a revenue-based credit facility of $1,578,237
(the Gross Amount) with the Lender (the Credit Facility). There was $195,927 outstanding and $1,800,023 accrued
interest under this agreement as of December 31, 2024.
On April 2024, the Company also
entered into a Merchant Cash Advance Agreement (the Loan and Security Agreement) by and among the Company, Robert Nistico,
additional Guarantor and each of the subsidiary guarantors from time-to-time party thereto (each a Guarantor, and, collectively,
the Guarantors), and Cobalt Funding Solutions (the Lender). The Loan and Security Agreement provided a loan
of $815,000, with the gross and interest amount of $326,028] with the Lender (the Credit Facility). There was $455,335 outstanding
under this agreement as of December 31, 2024.
On September 2024 and November
2024 the Company also entered into a Merchant Cash Advance Agreement (the Loan and Security Agreement) by and among the
Company, Robert Nistico, additional Guarantor and each of the subsidiary guarantors from time-to-time party thereto (each a Guarantor,
and, collectively, the Guarantors), and with Timeless Funding LLC (the Lender). The Loan and Security Agreement
provided a loan of $325,000 and $340,000, with the gross and interest amount of $172,250 and $173,400 respectively with the Lender (the
Credit Facility). There was $85,260 and $311,713 respectively outstanding under this agreement as of December 31, 2024.
There were related party advances
from our chief executive officer in the amount of $0.4 million outstanding as of December 31, 2024 and a shareholder note payable outstanding
in the amount of $200,000 as of December 31, 2024.
**Item 14. Principal Accounting Fees and Services.**
December 31, 2024
|
Audit - Rose, Snyder & Jacobs LLP |
|
$ |
180,500 |
| |
|
Audit related -CohnReznick LLP |
|
$ |
7,500 |
| |
|
Audit related - Rose, Snyder & Jacobs LLP |
|
|
|
| |
|
Tax |
|
|
32,000 |
| |
|
Total |
|
$ |
220,000 |
| |
December 31, 2023
|
Audit - Rose, Snyder & Jacobs LLP | |
$ | 40,000 | | |
|
Audit - Daszkal Bolton, LLP and CohnReznick LLP | |
| 10,000 | | |
|
Audited related | |
| | | |
|
Tax | |
| 29,000 | | |
|
Total | |
$ | 79,000 | | |
45
**PART IV**
**Item 15. Exhibits and Financial Statement Schedules.**
The following documents are filed as part of this Annual Report on Form
10-K:
1. Financial Statements. See the Financial Statements
starting on page F-1, of this Annual Report, which is incorporated into this Item by reference.
2. Exhibits. The exhibits listed
in the Exhibit Index, which appears immediately following the signature page and is incorporated herein by reference, and filed as part
of this Annual Report on Form 10-K.
46
**SIGNATURES**
Pursuant to the requirements of
Section 13 or 15(d) 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. (Registrant) | |
|
|
|
| |
|
Date:July 11, 2025 |
By: |
/s/ Robert Nistico | |
|
|
Name: |
Robert Nistico | |
|
|
|
Chairman of the Board and Chief Executive Officer | |
|
|
|
(Principal Executive Officer) | |
Pursuant to the requirements of
the Securities Act of 1934 this Annual Report on Form 10-K was signed by the following persons on behalf of the Registrant and in the
capacities and on the dates stated:
|
Signature |
|
Title |
|
Date | |
|
|
|
|
|
| |
|
/s/ Robert Nistico |
|
Chief Executive Officer and Director |
|
July 11, 2025 | |
|
Robert Nistico |
|
(Principle Executive Officer) |
|
| |
|
|
|
|
|
| |
|
/s/ William Devereux |
|
Chief Financial Officer, Treasurer |
|
July 11, 2025 | |
|
William Devereux |
|
(Principal Financial and Accounting Officer) |
|
| |
|
|
|
|
|
| |
|
/s/ Justin Yorke |
|
Director, Secretary |
|
July 11, 2025 | |
|
Justin Yorke |
|
|
|
| |
|
|
|
|
|
| |
|
/s/ Thomas Fore |
|
Director |
|
July 11, 2025 | |
|
/sThomas Fore |
|
|
|
| |
|
|
|
|
|
| |
|
/s/ Bill Caple |
|
Director |
|
July 11, 2025 | |
|
Bill Caple |
|
|
|
| |
47
**EXHIBIT INDEX**
|
Exhibit
No. |
|
Description
of Exhibit | |
|
|
|
| |
|
1.1 |
|
Underwriting
Agreement dated June 10, 2021 between Splash Beverage Group and EF Hutton, division of Benchmark Investments, LLC, as representative
of the underwriters named therein (incorporated by reference herein to Exhibit 1.1 to the Current report on Form 8-K filed with the
Securities and Exchange Commission on June 15, 2021) | |
|
|
|
| |
|
1.2 |
|
Underwriting
Agreement dated February 14, 2022 between Splash Beverage Group and EF Hutton, division of Benchmark Investments, LLC, as representative
of the underwriters named therein (incorporated by reference herein to Exhibit 1.1 to the Current report on Form 8-K filed with the
Securities and Exchange Commission on February 17, 2022) | |
|
|
|
| |
|
1.3 |
|
Underwriting
Agreement dated September 23, 2022, between Splash Beverage Group and EF Hutton, division of Benchmark Investments, LLC, as representative
of the underwriters named therein (incorporated by reference herein to Exhibit 1.1 to the Current report on Form 8-K filed with the
Securities and Exchange Commission on September 27, 2022) | |
|
|
|
| |
|
2.1 |
|
Agreement
and Plan of Merger dated December 31, 2019 by and among Canfield Medical Supply, Inc., SBG Acquisition, Inc., and Splash Beverage
Group, Inc. (incorporated by reference to Exhibit 2.1 to the Registrants Form 8-K dated January 7, 2020) | |
|
|
|
| |
|
2.2 |
|
Form
of Amendment No. 1 to the Agreement and Plan of Merger (incorporated by reference herein to Exhibit 10.1 filed with Form 8-K filed
with the SEC on October 7, 2020) | |
|
|
|
| |
|
3.1 |
|
Bylaws
(incorporated by reference herein to Exhibit 3.2 filed with Form 8-K1 filed with the SEC on November 15, 2021) | |
|
|
|
| |
|
3.2 |
|
Articles
of Incorporation filed with the Secretary of State of Nevada (incorporated by reference herein to Exhibit 3.1 filed with Form8-K
filed with the SEC on November 15, 2021) | |
|
|
|
| |
|
3.3 |
|
Articles
of Merger filed with the Secretary of State of the State of Nevada (incorporated by reference herein to Exhibit 2.2 filed with Form8-K
filed with the SEC on November 15, 2021) | |
|
|
|
| |
|
3.4 |
|
Statement
of Merger filed with the Secretary of State of the State of Colorado (incorporated by reference herein to Exhibit 2.3 filed with
Form8-K filed with the SEC on November 15, 2021) | |
|
|
|
| |
|
3.5 |
|
Certificate
of Amendment to Articles of Incorporation filed with the Secretary of State of Nevada (incorporated by reference herein to Exhibit
3.1 filed with Form 8-K filed with the SEC on December 22, 2022) | |
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3.6 |
|
Certificate of Designation of Series A Preferred Stock (incorporated by reference herein to Exhibit 3.1 filed with Form 8-K filed with the SEC on June 13, 2025) | |
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3.7 |
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Certificate of Change filed with the Secretary of State of Nevada | |
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3.8 |
|
Certificate of Designations, Preferences Rights and Limitations of the Series A-1 Convertible Redeemable Preferred Stock (incorporated by reference herein to Exhibit 3.1 filed with Form 8-K filed with the SEC on June 26, 2025) | |
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3.9 |
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Certificate of Designations, Preferences Rights and Limitations of the Series B Convertible Redeemable Preferred Stock (incorporated by reference herein to Exhibit 3.2 filed with Form 8-K filed with the SEC on June 26, 2025) | |
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3.10 |
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Certificate of Designations, Preferences Rights and Limitations of the Series C Convertible Preferred Stock (incorporated by reference herein to Exhibit 3.3 filed with Form 8-K filed with the SEC on June 26, 2025) | |
48
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4.1 |
|
Form
of Common Stock Certificate (incorporated by reference to exhibit 4.1 filed with the Annual Report on Form 10-K filed with the SEC
on March 31, 2022) | |
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| |
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4.2 |
|
Form
of Investor Warrant (incorporated by reference to exhibit 4.1 filed with the Current Report on Form 8-K filed with the SEC on June
15, 2021) | |
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| |
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4.3 |
|
Warrant
Agent Agreement between Splash Beverage Group Inc. and Equinity Trust Company dated as of June 15, 2001 (incorporated by reference
to exhibit 10.1 filed with the Current Report on Form 8-K filed with the SEC on June 15, 2021) | |
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4.4 |
|
Description of Capital Stock * | |
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| |
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4.5 |
|
Form of A Warrant (incorporated by reference herein to Exhibit 4.1 filed with Form 8-K filed with the SEC on June 26, 2025) | |
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4.6 |
|
Form of B Warrant (incorporated by reference herein to Exhibit 4.2 filed with Form 8-K filed with the SEC on June 26, 2025) | |
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| 10.1 |
|
2020
Long-Term Incentive Compensation Plan (incorporated herein by reference to the Schedule 14C Information Statement filed with the
SEC on June 8, 2020) | |
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| |
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10.2 |
|
Form
of SBG Warrant (incorporated by reference herein to Exhibit 10.4 filed with Form 8-K filed with the SEC on April 6, 2020) | |
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| |
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10.3 |
|
Form
of New Warrant (incorporated by reference herein to Exhibit 10.5 filed with Form 8-K filed with the SEC on April 6, 2020) | |
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10.4 |
|
Form
of Warrant (incorporated by reference herein to Exhibit 10.2 filed with Form 8-K filed with the SEC on August 18, 2020) | |
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| |
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10.5 |
|
Revenue
Loan and Security Agreement dated (incorporated by reference herein to Exhibit 10.1 filed with Form 8-K filed with the SEC on December
31, 2020) | |
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| |
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10.6 |
|
Asset
Purchase Agreement dated (incorporated by reference herein to Exhibit 10.2 filed with Form 8-K filed with the SEC on December 31,
2020) | |
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| |
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10.7 |
|
Convertible
Promissory Note dated (incorporated by reference herein to Exhibit 10.3 filed with Form 8-K filed with the SEC on December 31, 2020) | |
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| |
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10.8 |
|
An
Agreement Regarding Other Accounts Payable dated (incorporated by reference herein to Exhibit 10.4 filed with Form 8-K filed with
the SEC on December 31, 2020) | |
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| |
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10.9 |
|
Martin
Employment Agreement dated (incorporated by reference herein to Exhibit 10.5 filed with Form 8-K filed with the SEC on December 31,
2020) | |
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| |
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10.10 |
|
Non-Competition,
Non-Solicitation and Confidential Information Agreement (incorporated by reference herein to Exhibit 10.6 filed with Form 8-K filed
with the SEC on December 31, 2020) | |
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| |
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10.11 |
|
Form
of Subscription Agreement (incorporated by reference herein to Exhibit 10.1 filed with Form 8-K filed with the SEC on January 21,
2021) | |
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| |
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10.12 |
|
Form
of Warrant (incorporated by reference herein to Exhibit 10.2 filed with Form 8-K filed with the SEC on January 21, 2021) | |
49
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10.13 |
|
Form
of Subscription Agreement (incorporated by reference herein to Exhibit 10.1 filed with Form 8-K filed with the SEC on February 2,
2021) | |
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| |
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10.14 |
|
Form
of Warrant (incorporated by reference herein to Exhibit 10.2 filed with Form 8-K filed with the SEC on February 2, 2021) | |
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| |
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10.15 |
|
Form
of Subscription Agreement (incorporated by reference herein to Exhibit 10.1 filed with Form 8-K filed with the SEC on February 12,
2021) | |
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| |
| 10.16 |
Form
of Warrant (incorporated by reference herein to Exhibit 10.2 filed with Form 8-K filed with the SEC on February 12, 2021) | |
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| |
|
10.17 |
Form
of Subscription Agreement (incorporated by reference herein to Exhibit 10.1 filed with Form 8-K filed with the SEC on March 2, 2021) | |
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| |
|
10.18 |
Form
of Warrant (incorporated by reference herein to Exhibit 10.2 filed with Form 8-K filed with the SEC on March 2, 2021) | |
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| |
|
10.19 |
Securities
Purchase Agreement (incorporated by reference herein to Exhibit 10.1 filed with Form 8-K filed with the SEC on January 3, 2023) | |
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| |
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10.20 |
Form
of Warrant (incorporated by reference herein to Exhibit 4.1 filed with Form 8-K filed with the SEC on January 3, 2023) | |
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| |
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10.21 |
Form
of Promissory Note (incorporated by reference herein to Exhibit 10.2 filed with Form 8-K filed with the SEC on January 3, 2023) | |
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| |
|
10.22 |
Form
of Warrant (incorporated by reference herein to Exhibit 4.1 filed with Form 8-K filed with the SEC on August 16, 2023) | |
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| |
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10.23 |
Form
of Securities Purchase Agreement (incorporated by reference herein to Exhibit 10.1 filed with Form 8-K filed with the SEC on August
16, 2023) | |
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| |
|
10.24 |
Form
of Investor Note (incorporated by reference herein to Exhibit 10.1 filed with Form 8-K filed with the SEC on August 16, 2023) | |
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| |
|
10.25 |
Form
of Second Investor Note (incorporated by reference herein to Exhibit 10.1 filed with Form 8-K filed with the SEC on August 16, 2023) | |
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| |
|
10.26 |
Form
of Purchase Agreement (incorporated by reference herein to Exhibit 10.5 filed with Form 8-K filed with the SEC on August 16, 2023) | |
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| |
|
10.27 |
Form
of Investor Note (incorporated by reference herein to Exhibit 10.6 filed with Form 8-K filed with the SEC on August 16. 2023) | |
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| |
|
10.28 |
Form
of Warrant (incorporated by reference herein to Exhibit 4.1 filed with Form 8-K filed with the SEC on October 6, 2023) | |
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| |
|
10.29 |
Form
of Purchase Agreement (incorporated by reference herein to Exhibit 10.1 filed with Form 8-K filed with the SEC on October 6, 2023) | |
50
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10.30 |
Form
of Note (incorporated by reference herein to Exhibit 10.2 filed with Form 8-K filed with the SEC on October 6, 2023) | |
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| |
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10.31 |
|
Form
of Registration Rights Agreement (incorporated by reference herein to Exhibit 10.3 filed with Form 8-K filed with the SEC on October
6, 2023) | |
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| |
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10.32 |
|
Form
of Waiver Agreement (incorporated by reference herein to Exhibit 10.1 filed with Form 8-K filed with the SEC on December 18, 2023) | |
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| |
|
10.33 |
|
Form
of Registration Rights Agreement (incorporated by reference herein to Exhibit 10.2 filed with Form 8-K filed with the SEC on December
18, 2023) | |
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| |
|
10.34 |
Employment Agreement dated March 12, 2012 with Robert Nistico (incorporated by reference herein to Exhibit 10.34 filed with Form 10-K filed with the SEC on March 29, 2024) | |
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10.35 |
Employment Agreement dated May 4, 2020 with William Meissner(incorporated by reference herein to Exhibit 10.35 filed with Form 10-K filed with the SEC on March 29, 2024) | |
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| |
|
10.36 |
Employment
Agreement dated January 22, 2024 with Stacy McLaughlin (incorporated herein by reference to Exhibit 10.1 filed with Form 8-K filed
with the SEC on January 30, 2024) | |
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|
| |
|
10.37 |
Subscription and Investment Representation Agreement, dated June 10, 2025, Between Splash Beverage Group, Inc., and Robert Nistico (incorporated herein by reference to Exhibit 10.1 filed with Form 8-K filed with the SEC on June 13, 2025) | |
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| |
|
10.38 |
Form of Securities Purchase Agreement (incorporated herein by reference to Exhibit 10.1 filed with Form 8-K filed with the SEC on June 26, 2025) | |
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| |
|
10.39 |
Form of Securities Exchange Letter Agreement*** (incorporated herein by reference to Exhibit 10.2 filed with Form 8-K filed with the SEC on June 26, 2025) | |
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| |
|
10.40 |
Form of Registration Rights Agreement*** (incorporated herein by reference to Exhibit 10.3 filed with Form 8-K filed with the SEC on June 26, 2025) | |
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| |
|
10.41 |
Form of Side Letter Agreement (incorporated herein by reference to Exhibit 10.4 filed with Form 8-K filed with the SEC on June 26, 2025) | |
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| |
|
10.42 |
Acquisition Agreement*** (incorporated herein by reference to Exhibit 10.5 filed with Form 8-K filed with the SEC on June 26, 2025) | |
|
|
| |
|
19.1 |
Splash Beverage, Inc., Insider Trading Policy | |
|
|
| |
|
21.1 |
Subsidiaries
(incorporated by reference herein to Exhibit 21.1 filed with Form 10-K filed with the SEC on March 8, 2021) | |
|
|
| |
|
23.1 |
Consent of Rose, Snyder & Jacobs LLP* | |
51
|
31.1 |
Rule 13a-14(a)/ 15d-14(a) Certification of Principal Executive Officer* | |
|
|
| |
|
31.2 |
Rule 13a-14(a)/ 15d-14(a) Certification of Principal Financial Officer* | |
|
|
| |
|
32.1 |
Certification of CEO pursuant to 18. U.S.C. Section 1350 as adopted, pursuant to Section 906 of Sarbanes-Oxley Act of 2002** | |
|
|
| |
|
32.2 |
Certification of CFO pursuant to 18. U.S.C. Section 1350 as adopted, pursuant to Section 906 of Sarbanes-Oxley Act of 2002** | |
|
|
| |
|
97.1 |
Clawback Policy of the Company (incorporated by reference herein to Exhibit 97.1 filed with Form 10-K filed with the SEC on March 29, 2024) | |
|
|
| |
|
*101.INS |
Inline XBRL Instance Document
(filed herewith) | |
|
*101.SCH |
Inline XBRL Taxonomy Extension
Schema (filed herewith) | |
|
*101.CAL |
Inline XBRL Taxonomy Extension
Calculation Linkbase (filed herewith) | |
|
*101.LAB |
Inline XBRL Taxonomy Extension
Label Linkbase (filed herewith) | |
|
*101.PRE |
Inline XBRL Taxonomy Extension
Presentation Linkbase (filed herewith) | |
|
*101.DEF |
Inline XBRL Taxonomy Definition
Linkbase (filed herewith) | |
|
*104 |
Cover Page Interactive
Data File (embedded within the Inline XBRL document filed as Exhibit 101) | |
|
|
* |
Filed herewith | |
|
|
** |
Furnished herewith | |
|
|
*** |
Certain schedules, appendices and exhibits to this agreement have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished supplementally to the Securities and Exchange Commission staff upon request. | |
52