Financial Performance - Net revenues for the three months ended June 30, 2025, were $1,046,782, a significant increase from $438,272 in the same period of 2024[17]. - Gross profit for the six months ended June 30, 2025, was $408,045, compared to a loss of $30,443 in the same period of 2024[17]. - The net loss for the three months ended June 30, 2025, was $8,493,081, compared to a net loss of $5,326,702 in the same period of 2024[17]. - The net loss for the six months ended June 30, 2025, was $8,493,081, compared to a net loss of $3,650,451 for the same period in 2024[21]. - The net loss for 2025 was $12,143,532, compared to a net loss of $9,997,599 in 2024, indicating an increase in losses of approximately 21.5% year-over-year[24]. - Revenue for the six months ended June 30, 2025 was $0.4 million, down from $2.6 million for the same period in 2024, reflecting a $2.2 million decrease driven by declines in both e-commerce and beverage businesses[138]. - The net loss for the three months ended June 30, 2025 was $8.5 million, compared to a net loss of approximately $5.3 million for the same period in 2024[143]. Assets and Liabilities - Total assets increased to $22,236,889 as of June 30, 2025, compared to $2,759,185 on December 31, 2024[13]. - Cash and cash equivalents increased to $17,213 as of June 30, 2025, from $15,346 on December 31, 2024[13]. - Accounts receivable decreased to $140,626 as of June 30, 2025, from $396,855 on December 31, 2024[13]. - Total current liabilities decreased to $13,446,244 as of June 30, 2025, from $19,369,242 on December 31, 2024[13]. - The accumulated deficit increased to $(167,992,381) as of June 30, 2025, from $(155,832,277) on December 31, 2024[13]. - As of June 30, 2025, the total notes payable amounted to $3,862,902, with a current portion of $3,592,462[83]. Operating Expenses - Total operating expenses for the three months ended June 30, 2025, were $1,632,590, down from $3,935,350 in the same period of 2024[17]. - Operating expenses for the three months ended June 30, 2025 were $1.7 million, a decrease of $2.2 million from $3.9 million in the same period in 2024, mainly due to reductions in non-cash expenses and other costs[141]. Stock and Equity - The company issued 1,000 shares of Preferred Stock A and 650 shares of Preferred Stock A-1 during the reporting period[21]. - The issuance of Preferred Stock C for the acquisition of water rights amounted to $20,000,000[21]. - The company issued approximately $1.1 million from debt and $0.7 million from the sale of preferred stocks for the six months ending June 30, 2025[71]. - The Company issued 5,500 shares valued at $35,000 in exchange for services during the six months ended June 30, 2025[92]. - The Company issued 650 shares of Series A-1 Preferred Stock for approximately $650,000 in May 2025, with investors receiving 162,500 1-year A Warrants and 162,500 5-year B Warrants[176]. Cash Flow - Net cash used in operating activities for 2025 was $(1,404,399), a significant improvement from $(3,738,061) in 2024, reflecting a reduction in cash outflow of about 62.4%[24]. - Net cash used for operating activities during the six months ended June 30, 2025 was $1.4 million, compared to $3.7 million for the same period in 2024[150]. Debt and Financing - Proceeds from the issuance of debt in 2025 amounted to $1,081,650, compared to $4,705,000 in 2024, showing a decrease of approximately 77%[24]. - The Company reported a default rate of 37.2% on its loans[81]. - The effective interest rate on related party notes payable was 20.63% for the six months ended June 30, 2025[87]. Compliance and Regulatory - The Company regained compliance with the NYSE American's continued listing standards as of July 28, 2025, after previously being notified of non-compliance[125]. - The Company’s publicly traded warrants were suspended and are set to be delisted due to low trading prices, with delisting expected to be effective on August 15, 2025[186]. - The Company has substantial doubt about its ability to continue as a going concern for one year from the date the financial statements are issued[149]. Strategic Initiatives - The company is expanding its distribution system to select international markets, enhancing its e-commerce access for both B2B and B2C customers[27]. - The company has plans for market expansion through new financing agreements and product development[81]. - The company is focusing on enhancing its product offerings and technology through ongoing research and development initiatives[81]. - The company aims to improve its financial stability and growth through strategic partnerships and acquisitions[81]. - The company is committed to maintaining a strong financial position while exploring new market opportunities[81].

Financial Performance - Net revenues for Q1 2024 were $1,540,680, a decrease of 73.5% compared to $5,822,727 in Q1 2023[16] - Gross profit for Q1 2024 was $163,615, down 90.7% from $1,761,499 in Q1 2023[16] - Net loss for Q1 2024 was $4,670,897, compared to a net loss of $3,729,299 in Q1 2023, representing an increase in loss of 25.2%[16] - For the three months ended March 31, 2024, total revenues decreased to $1,540,680 from $5,822,727 for the same period in 2023, representing a decline of approximately 73.5%[102] - The loss from continuing operations for the three months ended March 31, 2024, was $3,250,297 compared to a loss of $3,454,921 for the same period in 2023, showing a slight improvement[102] - The net loss for Q1 2024 was $5.1 million, compared to a net loss of approximately $3.7 million in Q1 2023, attributed to higher debt discount and interest expenses[114] Assets and Liabilities - Total current assets decreased to $2,836,442 as of March 31, 2024, from $3,977,248 at December 31, 2023, a decline of 28.7%[13] - Total liabilities increased to $18,061,155 as of March 31, 2024, compared to $15,504,094 at December 31, 2023, an increase of 16.7%[13] - Total stockholders' equity was negative $9,502,688 as of March 31, 2024, compared to negative $5,605,326 at December 31, 2023[13] - As of March 31, 2024, the company had a total asset value of $8,558,467, down from $9,898,768 as of March 31, 2023, reflecting a decrease of approximately 13.5%[102] - The Company has a working capital deficit, with current liabilities exceeding current assets[61] Cash Flow - Cash and cash equivalents decreased to $14,757 at the end of Q1 2024, down from $379,978 at the beginning of the year, a decline of 96.1%[20] - The Company used approximately $1.3 million in net cash for operating activities during the three-month period ended March 31, 2024[61] - Net cash used for operating activities in Q1 2024 was $1.3 million, an improvement from $4.0 million in Q1 2023, driven by decreases in inventory and accounts payable[119] Expenses - Operating expenses for Q1 2024 totaled $3,413,912, a decrease of 34.5% from $5,216,420 in Q1 2023[16] - Interest expense on notes payable was $533,578 for the three months ended March 31, 2024, compared to $167,121 for the same period in 2023[76] - Interest expenses increased to $0.5 million in Q1 2024 from $0.2 million in Q1 2023, due to new loans totaling $6.3 million[115] - Advertising expenses for the three months ended March 31, 2024, were $77,627, significantly lower than $195,048 for the same period in 2023, representing a decrease of approximately 60.3%[54] Revenue Segments - The Splash Beverage Group segment reported revenues of $1,200,282, down from $1,898,968, while the E-Commerce segment saw revenues drop to $340,398 from $3,923,759, indicating significant declines in both segments[102] - Revenues for Q1 2024 were approximately $1.5 million, a decrease of $4.3 million or 76% compared to $5.8 million in Q1 2023, primarily due to a 91% decline in revenues from the Qplash e-commerce platform[111] Future Projections and Plans - The Company plans to raise up to $8.0 million to fund acquisitions, equipment purchases, and working capital[122] - The estimated future amortization expense for acquired intangible assets for fiscal year 2024 is projected to be $294,051[58] Shareholder and Stock Information - The company issued 300,000 shares for services, 200,000 shares for the extension of a note, and 1,552,000 shares on conversion of convertible instruments during the three months ended March 31, 2024[85] - The company granted 630,000 stock options under the 2020 Stock Incentive Plan during the three months ended March 31, 2024, compared to 65,000 options granted in the same period of 2023[88] Debt and Financing - The Company entered into various loans totaling approximately $11.6 million as of March 31, 2024, with a significant portion maturing in the next 18 months[74] - The Company received approximately $1.5 million from the issuance of debt for the three months ending March 31, 2024, which helped mitigate concerns about its ability to continue as a going concern[64] - The balance of unamortized debt discount was $1,825,848 as of March 31, 2024, down from $1,944,348 as of December 31, 2023[78] - The Company recognized approximately $886,838 of interest expense attributable to the amortization of the debt discount during the three months ended March 31, 2024[77] Other Financial Information - The Company recorded amortization expense for acquired identifiable intangible assets of $98,017 for the three months ended March 31, 2024, consistent with the same period in 2023[56] - The Company reported no off-balance sheet arrangements that could materially affect its financial condition[127] - The Company has minimum royalty payments of $495,000 due to ABG TapouT, LLC for the remaining nine months of 2024[125]

[Filing Information](index=1&type=section&id=Filing%20Information) This section provides general company information, including incorporation details, principal offices, and stock exchange listings, along with filer status and outstanding securities. [General Company Information](index=1&type=section&id=General%20Company%20Information) Splash Beverage Group, Inc. (SBEV) is a Nevada-incorporated registrant with its principal executive offices in Fort Lauderdale, FL, with common stock and warrants listed on the NYSE American. - Registrant: **SPLASH BEVERAGE GROUP, INC.**[1](index=1&type=chunk) - State of Incorporation: **Nevada**[1](index=1&type=chunk) - Principal Executive Offices: Fort Lauderdale, FL[2](index=2&type=chunk) Trading Information | Title of each class | Trading Symbol | Name of each exchange on which registered | | :------------------ | :------------- | :---------------------------------------- | | Common Stock, $0.001 par value per share | SBEV | NYSE American LLC | | Warrants to purchase shares of Common Stock, $0.001 par value per share | SBEV-WT | NYSE American LLC | [Filer Status and Securities](index=2&type=section&id=Filer%20Status%20and%20Securities) The company is classified as a Non-accelerated filer and a Smaller reporting company, with 45.13 million shares of Common Stock outstanding as of March 29, 2024. Filer Status | Filer Status | Status | | :------------------------ | :----- | | Large accelerated filer | ☐ | | Accelerated filer | ☐ | | Non-accelerated filer | ☒ | | Smaller reporting company | ☒ | | Emerging growth company | ☐ | - Aggregate market value of common equity held by non-affiliates: **$40,216,244** (as of the last business day of the most recently completed second quarter)[4](index=4&type=chunk) - Shares of Common Stock issued and outstanding: **45,129,687** (as of March 29, 2024)[5](index=5&type=chunk) [PART I](index=4&type=section&id=PART%20I) [Item 1. Business](index=4&type=section&id=Item%201.%20Business) Splash Beverage Group manages a diverse beverage portfolio, leveraging its Qplash e-commerce platform and hybrid distribution to incubate and acquire brands for accelerated growth. - Splash is a portfolio company managing multiple brands across several growth segments within the consumer beverage industry, with capabilities to incubate and/or acquire brands for accelerated volume and sales revenue[13](index=13&type=chunk) - The company is shaping its operating model to be vertically integrated with its e-commerce platform, Qplash, which purchases local and regional brands for direct sales to boutique retail stores and consumers[14](index=14&type=chunk) - Strategy involves combining traditional manufacturing, distribution, and marketing with early-stage brands that have pre-existing brand awareness or innovative attributes, aiming to limit risk and reduce development expenses[19](index=19&type=chunk)[20](index=20&type=chunk) [Company Overview](index=4&type=section&id=Company%20Overview) SBG manages a diverse beverage portfolio, outsourcing most manufacturing, holding key brand licenses, and engaging in joint ventures. - Splash Beverage Group, Inc. (SBG) manages a portfolio of brands in the consumer beverage industry, including non-alcoholic and alcoholic segments[13](index=13&type=chunk) - Manufacturing is typically outsourced to third-party co-packers and distillers, except for Copa DI Vino wines, which are produced in their Oregon facility[13](index=13&type=chunk) - Splash's wholly owned subsidiary, Splash Beverage Group II, Inc., holds license rights to the TapouT Performance brand in North America and other international regions[15](index=15&type=chunk) - In December 2020, Splash acquired the key assets of Copa DI Vino, and also has joint ventures with SALT Naturally Flavored Tequila and Pulpoloco Sangria[16](index=16&type=chunk) [Our Strategy](index=5&type=section&id=Our%20Strategy) The strategy combines traditional operations with early-stage brands, prioritizing awareness and profitability, while optimizing the Qplash e-commerce platform. - The company's strategy is to combine traditional beverage manufacturing, distribution, and marketing with early-stage brands that have pre-existing brand awareness or innovative attributes[19](index=19&type=chunk) - Acquisition or joint venture considerations prioritize brands with existing brand awareness, regional presence, licensing potential, ability to capitalize on consumer trends, innovation, and a clear path to profitability[20](index=20&type=chunk) - The platform model offers two paths to success: developing wholly-owned core brands and scaling high-growth, early-stage brands, which helps limit risk and reduce development expenses[20](index=20&type=chunk) - A core strategy is to optimize the Qplash online platform, the consumer-packaged goods retail division, as an entry point into the growing e-commerce channel[23](index=23&type=chunk) [Products](index=6&type=section&id=Products) The product portfolio includes SALT Tequila, TapouT Performance drinks, Copa DI Vino wine, and Pulpoloco Sangria. - Current product portfolio includes SALT Naturally Flavored Tequila, TapouT Performance beverages, Copa DI Vino single-serve wine, and imported Pulpoloco Sangria[24](index=24&type=chunk) [SALT Flavored Tequila](index=6&type=section&id=SALT%20Flavored%20Tequila) SALT is a 100% agave flavored tequila, distributed internationally, with the company managing its manufacturing, logistics, distribution, and marketing. - SALT is a **100% agave 80 proof** line of flavored tequilas, distributed by Anheuser-Busch & Miller-Coors distributorships in multiple U.S. states, Mexico, Guatemala, and Japan[24](index=24&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk) - The company is responsible for all aspects of manufacturing, logistics, distribution, and marketing for SALT as part of a business venture with SALT USA, LLC[27](index=27&type=chunk) [TapouT Performance Isotonic Sports Drinks](index=6&type=section&id=TapouT%20Performance%20Isotonic%20Sports%20Drinks) TapouT Performance drinks enhance physical and mental performance, with Splash holding North American license rights and committing 2% of sales to marketing. - TapouT Performance Beverages are advanced performance drinks with GRAS (Generally Regarded as Safe) ingredients, designed to enhance physical and mental performance, hydration, and cellular recovery[33](index=33&type=chunk) - The company holds license rights to the TapouT brand for sports beverages in North America and other international territories, paying a **6% royalty on net sales** or a minimum annual royalty of **$0.66 million**[15](index=15&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) - Splash commits **2% of sales** to marketing the TapouT Performance Brand, leveraging TapouT's existing brand awareness and influential relationships with celebrities and athletes[34](index=34&type=chunk)[37](index=37&type=chunk) [Copa DI Vino Wine Group, Inc.](index=8&type=section&id=Copa%20DI%20Vino%20Wine%20Group%2C%20Inc.) Splash acquired Copa DI Vino for **$5.98 million** in 2020, making it a leading single-serve wine producer, also offering Pulpoloco sangria in eco-friendly packaging. - In December 2020, Splash acquired Copa DI Vino for **$5,980,000**, comprising cash, a convertible promissory note, and common stock, making it the leading producer of premium wine by the glass in the U.S.[38](index=38&type=chunk)[41](index=41&type=chunk) - Copa DI Vino offers nine varietals of wine and also procures Pulpoloco, a sangria in eco-friendly fiber-based cans, with rights to utilize this packaging for multiple categories[42](index=42&type=chunk) [E-commerce (Qplash)](index=10&type=section&id=E-commerce%20%28Qplash%29) Qplash, a wholly-owned e-commerce division, sells beverages online to B2B and D2C customers, offering over 1,500 listings from two warehouses. - Qplash is a wholly-owned e-commerce division selling beverages online through www.qplash.com and third-party storefronts like Amazon.com[44](index=44&type=chunk) - Qplash serves both business-to-business retailers and direct-to-consumer end-users, offering over **1,500 listings** and shipping from warehouses in California and Pennsylvania[44](index=44&type=chunk)[45](index=45&type=chunk) [Operational Aspects](index=10&type=section&id=Operational%20Aspects) [Competitive Strengths](index=10&type=section&id=Competitive%20Strengths) Competitive strengths include a global distribution network, hybrid model, strong retailer relationships, diverse products, experienced management, Qplash, and brand awareness. - Key competitive strengths include an established global distribution network, a hybrid distribution model, long-term retailer relationships, premium customer service, dynamic product offerings, an experienced management team, and the Qplash e-commerce platform[49](index=49&type=chunk) - The company also benefits from strong brand awareness through partnerships and acquisitions, and celebrity/professional athlete endorsements[49](index=49&type=chunk) [Manufacturing and Co-packing](index=10&type=section&id=Manufacturing%20and%20Co-packing) Splash manufactures Copa DI Vino in-house and outsources TapouT and SALT production, sourcing components from various suppliers. - Splash is responsible for manufacturing Copa DI Vino (bottled in Oregon), TapouT Performance, and SALT Tequila (outsourced to third-party co-packers/distillers in the U.S. and Mexico)[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk) - The company purchases concentrates, flavors, ingredients, and packaging components from suppliers, which are then used by manufacturing operations or third-party bottlers[50](index=50&type=chunk) [Distribution](index=11&type=section&id=Distribution) The company uses a three-tier distribution system for alcohol and has national retail agreements, including with AB-InBev. - For beverage-alcohol products, Splash operates within a 'Three Tier Distribution System' using independent local and regional distributors[51](index=51&type=chunk) - The company also has distribution arrangements with national retail accounts, notably a distribution agreement with AB-InBev for distribution through their AB ONE operations[52](index=52&type=chunk) [Intellectual Property](index=11&type=section&id=Intellectual%20Property) Splash Beverage Group secured a trademark for Copa DI Vino in March 2024, granting exclusive rights for specific product categories. - Splash Beverage Group was granted a trademark for Copa DI Vino by the United States Patent and Trademark Office on March 12, 2024, providing exclusive rights for specified product categories[53](index=53&type=chunk) [Employees](index=11&type=section&id=Employees) The company employs **32 full-time staff**, none unionized, and maintains positive employee relations. - The company has **32 full-time employees**, none of whom are represented by a labor union, and reports good relations with its employees[54](index=54&type=chunk) [Corporate and Recent Developments](index=11&type=section&id=Corporate%20and%20Recent%20Developments) [Listing on the NYSE American](index=11&type=section&id=Listing%20on%20the%20NYSE%20American) Splash Beverage Group's common stock and warrants are listed on the NYSE American under 'SBEV' and 'SBEV WT'. - Splash Beverage Group's common stock and warrants are listed on the NYSE American exchange under the ticker symbols **'SBEV'** and **'SBEV WT,'** respectively[55](index=55&type=chunk) [Recent Developments](index=11&type=section&id=Recent%20Developments) Recent developments include convertible notes totaling **$0.4 million**, a **$0.5 million** commercial loan, and a **$0.109 million** CEO cash advance in early 2024. - In January 2024, the Company entered into a **$0.25 million** convertible note (**12% interest**, convertible at **$0.50/share** with **200% warrants** at **$0.25**)[56](index=56&type=chunk) - Also in January 2024, a **$0.5 million** commercial loan was secured, with a total cost of **$0.25 million**, paid in weekly increments of **6.97%** of the current receivable balance[56](index=56&type=chunk) - In February 2024, another **$0.15 million** convertible note was issued (**12% interest**, convertible at **$0.40/share** with **250% warrants** at **$0.25**)[57](index=57&type=chunk) - In March 2024, the CEO provided a **$0.109 million** cash advance, resulting in a **0% interest** related party payable[57](index=57&type=chunk) [Corporate Information](index=12&type=section&id=Corporate%20Information) Splash was formed via a reverse merger in March 2020, changed its name in July 2021, and reincorporated to Nevada in November 2021. - Splash was originally incorporated in Nevada as TapouT Beverages, Inc., then underwent a reverse merger with Canfield Medical Supply, Inc. in March 2020[58](index=58&type=chunk)[59](index=59&type=chunk) - The company changed its name to Splash Beverage Group, Inc. on July 31, 2021, and reincorporated from Colorado to Nevada on November 8, 2021[60](index=60&type=chunk)[61](index=61&type=chunk) [Available Information](index=12&type=section&id=Available%20Information) The company files annual, quarterly, and current reports, and other information with the SEC, available on its website. - The company files annual, quarterly, and current reports, proxy statements, and other information with the U.S. Securities Exchange Commission (SEC), available on the SEC's website[62](index=62&type=chunk) [Item 1A. Risk Factors](index=12&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including going concern uncertainty, operational challenges, market competition, supply chain issues, and potential delisting from NYSE American. - Auditors have included an explanatory paragraph regarding the company's ability to continue as a going concern due to current liquidity position, recurring losses, and working capital/stockholders' equity deficits[65](index=65&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk) - The company incurred a net loss of **$21.0 million** for the year ended December 31, 2023, and its accumulated deficit increased to **$133.3 million**[69](index=69&type=chunk) - The company is subject to potential delisting from the NYSE American due to non-compliance with stockholders' equity requirements (**$2.0 million** and **$4.0 million** thresholds for reported losses)[131](index=131&type=chunk)[132](index=132&type=chunk) [Risks Related to Our Business](index=12&type=section&id=Risks%20Related%20to%20Our%20Business) Business risks include going concern uncertainty, sales challenges, consumer shifts, cost volatility, competition, regulatory changes, and supply chain, personnel, IP, and cybersecurity issues. - The company's ability to continue as a going concern is uncertain, dependent on obtaining additional financing, which may not be available on reasonable terms[67](index=67&type=chunk)[68](index=68&type=chunk) - Failure to meet sales goals, increase sales volume, manage operating expenses, and expand distribution could materially adversely affect financial condition[71](index=71&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) - Demand for products is sensitive to changes in consumer preferences, health concerns, and the company's ability to innovate and market effectively[74](index=74&type=chunk)[75](index=75&type=chunk) - Volatility in raw material, packaging, energy, and labor costs, as well as supply chain disruptions, could increase operating costs and reduce profitability[76](index=76&type=chunk)[89](index=89&type=chunk)[90](index=90&type=chunk) - Intense competition from larger beverage manufacturers, legislative/regulatory changes (e.g., new taxes), and reliance on third-party distributors pose significant challenges[81](index=81&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk) - Inability to attract and retain key personnel, protect intellectual property, or manage product quality issues (recalls, contamination) could harm business and reputation[92](index=92&type=chunk)[95](index=95&type=chunk)[100](index=100&type=chunk) - International market sales are subject to risks like local competition, economic volatility, regulatory changes, and currency fluctuations[105](index=105&type=chunk) - Water scarcity, grape supply fluctuations, and IT infrastructure failures or cybersecurity attacks could adversely impact operations and financial results[106](index=106&type=chunk)[107](index=107&type=chunk)[109](index=109&type=chunk) [Risks Related to Our Securities](index=24&type=section&id=Risks%20Related%20to%20Our%20Securities) Securities risks include speculative investment, potential stock price decline, preferred stock issuance, limited voting power, no dividends, and delisting risk from NYSE American non-compliance. - Investment in common stock is speculative, with no assurance of return, and investors risk losing their entire investment[125](index=125&type=chunk) - Future sales of common stock by existing stockholders or the perception of such sales could cause the stock price to decline[126](index=126&type=chunk) - The Board of Directors can issue preferred stock without stockholder approval, potentially affecting voting power or preventing a change in control[128](index=128&type=chunk) - Large percentage ownership by certain principal stockholders (**21.2%** by top 10 as of Dec 31, 2023) may limit other stockholders' voting power[129](index=129&type=chunk) - The company does not anticipate paying dividends, meaning economic gain relies solely on stock price appreciation[130](index=130&type=chunk) - The company received a notice from NYSE American in October 2023 for non-compliance with listing standards (stockholders' equity below **$2.0 million** and **$4.0 million** thresholds), posing a delisting risk[132](index=132&type=chunk)[133](index=133&type=chunk) - Issuance of additional common stock, convertible securities, warrants, or options could dilute existing stockholders' holdings and put downward pressure on the stock price[135](index=135&type=chunk) [Item 1B. Unresolved Staff Comments](index=26&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reported no unresolved staff comments from the SEC. - No unresolved staff comments[136](index=136&type=chunk) [Item 1C. Cybersecurity](index=26&type=section&id=Item%201C.%20Cybersecurity) The company manages cybersecurity risks through established policies, periodic assessments, third-party consultants, and Board oversight, having experienced no material challenges. - The company has established policies and processes for assessing, identifying, and managing material risks from cybersecurity threats, integrated into its overall risk management systems[137](index=137&type=chunk) - Periodic risk assessments are conducted to identify threats, evaluate potential damage, and assess the sufficiency of existing safeguards, with primary responsibility resting with the President[138](index=138&type=chunk)[139](index=139&type=chunk) - Third-party service providers are engaged to assist in designing, implementing, monitoring, and testing cybersecurity safeguards, and are required to certify their security measures[140](index=140&type=chunk) - The company has not encountered cybersecurity challenges that have materially impaired its operations or financial standing[141](index=141&type=chunk) [Cybersecurity Risk Management](index=26&type=section&id=Cybersecurity%20Risk%20Management) Cybersecurity risk management involves integrated policies, periodic assessments, third-party consultants, and has not resulted in material operational or financial challenges. - Policies and processes are in place for assessing, identifying, and managing material cybersecurity risks, integrated into overall risk management[137](index=137&type=chunk) - Periodic risk assessments identify threats, potential damage, and evaluate existing safeguards, with the President overseeing the process[138](index=138&type=chunk)[139](index=139&type=chunk) - Third-party consultants are engaged to assist with cybersecurity policies, procedures, monitoring, and testing[140](index=140&type=chunk) - The company has not experienced material cybersecurity challenges impacting operations or financial standing[141](index=141&type=chunk) [Governance](index=26&type=section&id=Governance) The Board's audit committee oversees cybersecurity risk management, with management implementing processes and escalating significant incidents to the CEO and CFO. - The Board of Directors' audit committee is responsible for overseeing the company's cybersecurity risk management processes[142](index=142&type=chunk) - Company management, including the information technology team under the President's direction, implements and maintains cybersecurity risk assessment and management processes[143](index=143&type=chunk) - Cybersecurity incidents are escalated to management, including the CEO and CFO, and significant breaches are reported to the audit committee[144](index=144&type=chunk) [Item 2. Properties](index=27&type=section&id=Item%202.%20Properties) Splash Beverage Group maintains offices in Florida and an Oregon manufacturing facility for Copa DI Vino, but owns no real property. - Splash's physical offices are located at 1500 Cordova Rd; Fort Lauderdale, FL 33316 and 1491 2 Street, Sarasota FL 34236[145](index=145&type=chunk) - The business office is located at 1314 East Las Olas Blvd, Suite 221, Fort Lauderdale, FL 33301[145](index=145&type=chunk) - Copa DI Vino's office/manufacturing facility is located at 901 E. 2 Street; The Dalles, OR 97058[145](index=145&type=chunk) - The Company does not own any real property[145](index=145&type=chunk) [Item 3. Legal Proceedings](index=27&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently involved in material legal proceedings, though it may face claims in the ordinary course of business. - The company is not currently a party to any pending legal proceedings that are believed to have a material adverse effect on its business or financial conditions[146](index=146&type=chunk) - The company may be subject to various claims and legal actions arising in the ordinary course of business from time to time[146](index=146&type=chunk) [Item 4. Mine Safety Disclosures](index=27&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Splash Beverage Group, Inc. - Not applicable[147](index=147&type=chunk) [PART II](index=27&type=section&id=PART%20II) [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=27&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Common stock and warrants trade on NYSE American, with **45.1 million** shares outstanding; no dividends are paid, and **$13.8 million** IPO proceeds were used for working capital. - Common Stock and tradeable warrants are publicly traded on the NYSE American under symbols **'SBEV'** and **'SBEV WS'**[149](index=149&type=chunk) - As of March 29, 2024, there were **45,129,687** shares of Common Stock issued and outstanding, held by approximately **273** holders of record[150](index=150&type=chunk) - The company has not declared cash dividends since inception and does not anticipate paying them in the foreseeable future, planning to retain future earnings for business operations[151](index=151&type=chunk) - No repurchases of common stock occurred during the year ended December 31, 2023[154](index=154&type=chunk) - Net proceeds of approximately **$13.8 million** from the June 2021 public offering were primarily used for working capital and general corporate purposes, with nearly all proceeds utilized by December 31, 2023[155](index=155&type=chunk)[156](index=156&type=chunk) [Common Stock Information](index=27&type=section&id=Common%20Stock%20Information) Common stock and warrants trade on NYSE American; as of March 29, 2024, **45.1 million** shares were outstanding among **273** holders. - The Company's Common Stock and tradeable warrants are publicly traded on the NYSE American under the symbol **'SBEV'** and **'SBEV WS'**[149](index=149&type=chunk) - As of March 29, 2024, there were **45,129,687** shares of Common Stock issued and outstanding, with approximately **273** holders of record[150](index=150&type=chunk) [Dividends and Equity Plans](index=27&type=section&id=Dividends%20and%20Equity%20Plans) The company has not paid dividends and plans to retain earnings; no securities were authorized under equity compensation plans as of the reporting date. - The company has not declared any cash dividends on its common stock since inception and does not anticipate paying such dividends in the foreseeable future, planning to retain future earnings for business operations[151](index=151&type=chunk) - No securities were authorized for issuance under equity compensation plans as of the reporting date, with relevant information incorporated by reference from Part III, Item 12[152](index=152&type=chunk)[153](index=153&type=chunk) [Use of Proceeds](index=28&type=section&id=Use%20of%20Proceeds) The June 2021 IPO generated **$13.8 million** in net proceeds, primarily used for working capital and general corporate purposes, with nearly all proceeds utilized by year-end 2023. - The company's initial public offering in June 2021 generated approximately **$13.8 million** in net proceeds, which were primarily used for working capital and general corporate purposes[155](index=155&type=chunk)[156](index=156&type=chunk) - As of December 31, 2023, approximately all of the net proceeds from the underwritten public offering have been used[156](index=156&type=chunk) [Item 6. {Reserved}](index=28&type=section&id=Item%206.%20%7BReserved%7D) This item is reserved and contains no information. [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenue increased to **$18.9 million** in 2023, but rising costs and other expenses led to liquidity challenges and going concern doubts, with critical accounting estimates requiring significant judgment. - The company's business overview details its formation through a reverse acquisition in March 2020, subsequent name change to Splash Beverage Group, Inc., and listing on the NYSE American in June 2021[158](index=158&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk) [Business Overview](index=28&type=section&id=Business%20Overview) Splash Beverage Group was formed via a reverse acquisition in March 2020, changed its name in July 2020, and listed on NYSE American in June 2021. - Splash Beverage Group, Inc. was formed through a reverse acquisition of Canfield Medical Supply, Inc. in March 2020, with Splash as the acquiring entity[158](index=158&type=chunk)[159](index=159&type=chunk) - The company changed its name to Splash Beverage Group, Inc. in July 2020 and began trading on the NYSE American in June 2021[159](index=159&type=chunk) [Results of Operations (2023 vs 2022)](index=29&type=section&id=Results%20of%20Operations%20for%20the%20Year%20Ended%20December%2031%2C%202023%2C%20compared%20to%20Year%20Ended%20December%2031%2C%202022.) [Revenue](index=29&type=section&id=Revenue) Revenue increased by **$0.8 million (4.4%)** to **$18.9 million**, driven by growth in both E-commerce and Splash Beverage Group segments. Revenue Performance | Metric | 2023 (Millions) | 2022 (Millions) | Change (Millions) | Change (%) | | :----- | :-------------- | :-------------- | :---------------- | :--------- | | Revenue | $18.9 | $18.1 | $0.8 | 4.4% | - Increase in sales mainly due to a **$0.4 million** increase in the E-commerce segment and a **$0.3 million** increase in the Splash Beverage Group segment[161](index=161&type=chunk) [Cost of Goods Sold](index=29&type=section&id=Cost%20of%20Goods%20Sold) Cost of goods sold increased by **$1.1 million (9.0%)** to **$13.3 million**, primarily due to increased sales and inflation. Cost of Goods Sold Analysis | Metric | 2023 (Millions) | 2022 (Millions) | Change (Millions) | Change (%) | | :--------------- | :-------------- | :-------------- | :---------------- | :--------- | | Cost of Goods Sold | $13.3 | $12.2 | $1.1 | 9.0% | - The increase in cost of goods sold was due to increased sales and inflation[162](index=162&type=chunk) [Operating Expenses](index=29&type=section&id=Operating%20Expenses) Operating expenses decreased by **$6.4 million (23.4%)** to **$20.9 million**, mainly due to lower non-cash share-based compensation. Operating Expenses Analysis | Metric | 2023 (Millions) | 2022 (Millions) | Change (Millions) | Change (%) | | :--------------- | :-------------- | :-------------- | :---------------- | :--------- | | Operating Expenses | $20.9 | $27.3 | -$6.4 | -23.4% | - Non-cash share-based compensation decreased significantly from **$7.4 million** in 2022 to **$1.2 million** in 2023[163](index=163&type=chunk) - Other operating expense decrease of **$0.2 million** was due to decreases in sales and marketing expense and other general and administrative expenses of **$1.0 million**, offset by an increase of **$0.8 million** in salary and wages[163](index=163&type=chunk) [Other Income/(Expense)](index=29&type=section&id=Other%20Income%2F%28Expense%29) Total other expense surged by **$5.5 million (2750%)** to **$5.7 million**, driven by increased debt discount amortization and interest expense. Other Income/(Expense) Summary | Metric | 2023 (Millions) | 2022 (Millions) | Change (Millions) | Change (%) | | :----------------- | :-------------- | :-------------- | :---------------- | :--------- | | Total Other Expense | $5.7 | $0.2 | $5.5 | 2750% | - The increase in other expense was mainly driven by a **$3.8 million** increase in amortization of debt discount and a **$1.9 million** increase in interest expense[164](index=164&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and cash equivalents decreased by **$4.05 million** to **$0.38 million**, primarily due to operating expenses, necessitating additional capital raising. Cash Flow Summary | Metric | 2023 (Millions) | 2022 (Millions) | Change (Millions) | | :-------------------------------------- | :-------------- | :-------------- | :---------------- | | Cash and cash equivalents (End of Year) | $0.38 | $4.43 | -$4.05 | | Net cash used in operating activities | -$10.2 | -$14.0 | $3.8 |\ | Net cash provided by financing activities | $6.1 | $14.4 | -$8.3 | - The decrease in cash was primarily due to operating expenses[166](index=166&type=chunk) - The company will need to raise additional equity or debt capital to fund operations, with no assurance of availability or acceptable terms, potentially leading to dilution for existing stockholders[170](index=170&type=chunk) [Critical Accounting Estimates](index=30&type=section&id=Critical%20Accounting%20Estimates) Management's financial statements rely on significant estimates and assumptions that may differ from actual results. - Management makes significant estimates and assumptions in preparing financial statements, which could differ from actual results[171](index=171&type=chunk) [Revenue Recognition](index=30&type=section&id=Revenue%20Recognition) Revenue recognition requires significant judgment due to industry complexities, assessing control transfer, returns, allowances, and trade promotions. - Significant judgment is required in revenue recognition due to the complexities of the beverage industry's competitive landscape and diverse distribution channels, assessing factors like control transfer, returns, allowances, and trade promotions[172](index=172&type=chunk) [Allowance for Doubtful Accounts](index=30&type=section&id=Allowance%20for%20Doubtful%20Accounts) Allowance for doubtful accounts is based on historical data, economic conditions, and customer issues, with ongoing evaluation impacting results. - The allowance is based on historical experience, economic conditions, and specific customer collection issues, with ongoing evaluation and adjustments impacting financial results[173](index=173&type=chunk) [Inventory Valuation](index=30&type=section&id=Inventory%20Valuation) Inventory is valued at the lower of cost or net realizable value, requiring judgment, especially with changing market conditions or obsolescence. - Inventory is valued at the lower of cost or net realizable value, requiring significant judgment in estimating net realizable value, especially with changing market conditions or excess/obsolete inventory[174](index=174&type=chunk) [Fair Value Measurements](index=30&type=section&id=Fair%20Value%20Measurements) Fair value measurements involve significant judgment and estimation, using techniques like discounted cash flow models and market comparables. - Fair value measurements for financial assets and liabilities involve significant judgment and estimation, utilizing valuation techniques like discounted cash flow models and market comparables[175](index=175&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=30&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This item is not applicable for smaller reporting companies. - Not applicable for smaller reporting companies[176](index=176&type=chunk) [PART III](index=31&type=section&id=PART%20III) [Item 8. Financial Statements and Supplementary Data](index=31&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements for 2023 and 2022, including auditor's reports with a going concern uncertainty, and detailed notes on accounting policies and financial position. - The section includes the Report of Independent Registered Public Accounting Firm for both 2022 and 2023[177](index=177&type=chunk)[178](index=178&type=chunk)[188](index=188&type=chunk) - The 2023 auditor's opinion includes a 'Going Concern Uncertainty' paragraph, noting recurring losses, accumulated deficit, and working capital deficiency that raise substantial doubt about the company's ability to continue as a going concern[190](index=190&type=chunk) - The consolidated financial statements (Balance Sheets, Statements of Operations, Changes in Stockholders' Equity, Cash Flows) are presented for December 31, 2023, and 2022[195](index=195&type=chunk)[198](index=198&type=chunk)[200](index=200&type=chunk)[202](index=202&type=chunk) [Independent Auditor's Reports](index=32&type=section&id=Independent%20Auditor's%20Reports) [Report of Independent Registered Public Accounting Firm (2022)](index=32&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm%20%282022%29) Daszkal Bolton LLP issued an unqualified opinion for 2022, noting intangible asset impairment assessment as a critical audit matter. - Daszkal Bolton LLP audited the 2022 financial statements, expressing an unqualified opinion[179](index=179&type=chunk) - A critical audit matter for 2022 was the significant judgment involved in intangible assets impairment assessments, particularly regarding projected future cash flows and discount rates[184](index=184&type=chunk)[185](index=185&type=chunk) [Report of Independent Registered Public Accounting Firm (2023)](index=34&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm%20%282023%29) Rose, Snyder & Jacobs LLP issued an unqualified opinion for 2023, including a 'Going Concern Uncertainty' paragraph, with no critical audit matters. - Rose, Snyder & Jacobs LLP audited the 2023 financial statements, expressing an unqualified opinion[189](index=189&type=chunk) - The 2023 auditor's report includes a 'Going Concern Uncertainty' paragraph due to recurring losses, accumulated deficit, and working capital deficiency[190](index=190&type=chunk) - No critical audit matters were determined for the 2023 audit[194](index=194&type=chunk) [Consolidated Financial Statements](index=35&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Balance Sheets](index=35&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased by **42.8%** to **$9.9 million**, while total liabilities increased by **94.2%** to **$15.5 million**, resulting in a **160.1%** decrease in stockholders' equity to **-$5.6 million**. Consolidated Balance Sheets Summary | Asset/Liability/Equity | Dec 31, 2023 ($) | Dec 31, 2022 ($) | Change ($) | Change (%) | | :--------------------- | :--------------- | :--------------- | :----------- | :--------- | | Total Assets | 9,898,768 | 17,304,703 | (7,405,935) | -42.8% | | Total Liabilities | 15,504,094 | 7,982,569 | 7,521,525 | 94.2% | | Total Stockholders' Equity | (5,605,326) | 9,322,134 | (14,927,460) | -160.1% | - Cash and cash equivalents decreased significantly from **$4.43 million** in 2022 to **$0.38 million** in 2023[196](index=196&type=chunk) - Current liabilities increased substantially from **$4.97 million** in 2022 to **$14.75 million** in 2023, primarily due to an increase in notes payable[196](index=196&type=chunk) - Accumulated deficit increased from **$112.3 million** in 2022 to **$133.3 million** in 2023[196](index=196&type=chunk) [Consolidated Statements of Operations](index=37&type=section&id=Consolidated%20Statements%20of%20Operations) Net revenues increased by **4.2%** to **$18.9 million**, but a **5.9%** gross margin decrease and a **2229.4%** surge in other expenses led to a **$21.0 million** net loss. Consolidated Statements of Operations Summary | Metric | 2023 ($) | 2022 ($) | Change ($) | Change (%) | | :------------------------- | :----------- | :----------- | :----------- | :--------- | | Net revenues | 18,850,152 | 18,087,486 | 762,666 | 4.2% | | Cost of goods sold | (13,281,457) | (12,168,621) | (1,112,836) | 9.1% | | Gross margin | 5,568,695 | 5,918,865 | (350,170) | -5.9% | | Total operating expenses | 20,855,353 | 27,313,498 | (6,458,145) | -23.6% | | Loss from continuing operations | (15,286,658) | (21,394,633) | 6,107,975 | -28.5% | | Total other expense | (5,717,099) | (245,429) | (5,471,670) | 2229.4% |\ | Net loss | (21,003,757) | (21,690,469) | 686,712 | -3.2% | | Loss per share - Basic and Diluted | (0.49) | (0.58) | 0.09 | -15.5% | - Net revenues increased by **4.2%** in 2023, while cost of goods sold increased by **9.1%**, leading to a **5.9%** decrease in gross margin[199](index=199&type=chunk) - Total operating expenses decreased by **23.6%**, primarily due to a significant reduction in non-cash share-based compensation[199](index=199&type=chunk) - Total other expense increased dramatically by **2229.4%**, driven by amortization of debt discount and interest expense[199](index=199&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=38&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Total stockholders' equity decreased by **160.1%** to **-$5.6 million**, primarily due to a **$21.0 million** net loss, despite a **$6.1 million** increase in additional paid-in capital. Consolidated Statements of Changes in Stockholders' Equity Summary | Metric | Dec 31, 2023 ($) | Dec 31, 2022 ($) | Change ($) | | :------------------------- | :--------------- | :--------------- | :----------- | | Common stock (Amount) | 44,330 | 41,086 | 3,244 | | Additional Paid-in Capital | 127,701,710 | 121,632,547 | 6,069,163 | | Accumulated Deficit | (133,334,783) | (112,331,026) | (21,003,757) | | Total Stockholders' Equity | (5,605,326) | 9,322,134 | (14,927,460) | - Total stockholders' equity shifted from a positive **$9.3 million** in 2022 to a negative **$5.6 million** in 2023, primarily due to the net loss of **$21.0 million**[201](index=201&type=chunk) - Additional paid-in capital increased by **$6.1 million**, reflecting note discounts from common stock and warrant issuances, and share-based compensation[201](index=201&type=chunk) [Consolidated Statements of Cash Flows](index=39&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities decreased by **$3.85 million**, while net cash provided by financing activities decreased by **$8.3 million**, resulting in a **$4.05 million** net decrease in cash. Consolidated Statements of Cash Flows Summary | Cash Flow Activity | 2023 ($) | 2022 ($) | Change ($) | | :----------------------------- | :------------ | :------------ | :------------ | | Net cash used in operating activities | (10,189,263) | (14,040,644) | 3,851,381 | | Net cash used in investing activities | (14,113) | (102,698) | 88,585 | | Net cash provided by financing activities | 6,147,720 | 14,446,951 | (8,299,231) | | Net Change in Cash and Cash Equivalents | (4,051,767) | 250,362 | (4,302,129) | | Cash and Cash Equivalents, end of year | 379,978 | 4,431,745 | (4,051,767) | - Net cash used in operating activities decreased by **$3.85 million**, primarily due to an increase in amortization of debt and a decrease in business losses, offset by a decrease in working capital[167](index=167&type=chunk)[203](index=203&type=chunk) - Net cash provided by financing activities decreased by **$8.3 million**, mainly due to no proceeds from common stock issuance in 2023 compared to **$11.4 million** in 2022, despite increased debt issuance[169](index=169&type=chunk)[203](index=203&type=chunk) [Notes to the Consolidated Financial Statements](index=41&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) [Note 1 – Business Organization and Nature of Operations](index=41&type=section&id=Note%201%20%E2%80%93%20Business%20Organization%20and%20Nature%20of%20Operations) SBG was formed via a reverse acquisition in March 2020, specializes in beverage manufacturing and distribution, operates Qplash, acquired Copa DI Vino for **$5.98 million**, and divested CMS. - Splash Beverage Group (SBG) was formed through a reverse acquisition of Canfield Medical Supply, Inc. (CMS) in March 2020, with Splash as the accounting acquirer[207](index=207&type=chunk)[208](index=208&type=chunk) - SBG specializes in manufacturing, distribution, and sales & marketing of non-alcoholic and alcoholic beverages, and operates its own vertically integrated e-commerce platform, Qplash[209](index=209&type=chunk) - In December 2020, SBG acquired Copa DI Vino, a leading producer of premium wine by the glass, for **$5,980,000**[211](index=211&type=chunk) - The CMS business was divested in February 2021 and retrospectively reflected as discontinued operations[212](index=212&type=chunk) [Note 2 – Summary of Significant Accounting Policies](index=41&type=section&id=Note%202%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies) Key accounting policies cover consolidation, cost-method investments, inventory valuation, depreciation, revenue recognition, stock-based compensation, goodwill impairment, and amortization of finite-lived intangible assets. - Consolidated financial statements include Splash and its wholly-owned subsidiaries, with intercompany balances eliminated[213](index=213&type=chunk) - The investment in Salt Tequila USA, LLC is accounted for at cost, as the company does not exercise significant influence[215](index=215&type=chunk) - Key accounting policies include valuing inventory at the lower of cost or net realizable value, depreciating property and equipment using the straight-line method, and recognizing revenue when performance obligations are satisfied[221](index=221&type=chunk)[222](index=222&type=chunk)[230](index=230&type=chunk) - Stock-based compensation is measured at grant-date fair value using the Black-Scholes model and recognized over the vesting period[234](index=234&type=chunk)[235](index=235&type=chunk) - Goodwill is reviewed annually for impairment, and identifiable intangible assets with finite lives are amortized over their useful lives (e.g., Brands, Customer Relationships, License)[243](index=243&type=chunk)[244](index=244&type=chunk) Intangible Assets (2023) | Intangible Asset | Gross Amount (2023 $) | Accumulated Amortization (2023 $) | Amortization Period (years) | | :--------------- | :-------------------- | :-------------------------------- | :-------------------------- | | Brands | 4,459,000 | 891,803 | 15 | | Customer Relationships | 957,000 | 191,400 | 15 | | License | 360,000 | 233,488 | 11 | | Total | 5,776,000 | 1,316,691 | | Estimated Intangible Asset Amortization Expense | Fiscal Year | Estimated Intangible Asset Amortization Expense ($) | | :---------- | :-------------------------------------------------- | | 2024 | 392,068 | | 2025 | 392,068 | | 2026 | 392,068 | | 2027 | 392,068 | | 2028 | 363,580 | | Thereafter | 2,527,457 | | Total | 4,459,309 | [Note 3 – Liquidity, Capital Resources and Going Concern Considerations](index=47&type=section&id=Note%203%20%E2%80%93%20Liquidity%2C%20Capital%20Resources%20and%20Going%20Concern%20Considerations) Despite **$6.6 million** in debt issuance, the company's **$21.0 million** net loss, negative operating cash flow, and current liability deficit raise substantial doubt about its going concern ability. - The company received **$6.6 million** from debt issuance in 2023, which mitigated previous going concern doubts[251](index=251&type=chunk) - Despite this, the company sustained a net loss of **$21.0 million** and negative operating cash flows of **$10.2 million** in 2023, with current liabilities exceeding current assets[252](index=252&type=chunk)[253](index=253&type=chunk) - Management plans to seek additional funding, but there is no assurance of success, raising substantial doubt about the company's ability to continue as a going concern[254](index=254&type=chunk) [Note 4 – Notes Payable, Related Party Notes Payable, and Revenue Financing Arrangements](index=48&type=section&id=Note%204%20%E2%80%93%20Notes%20Payable%2C%20Related%20Party%20Notes%20Payable%2C%20and%20Revenue%20Financing%20Arrangements) Total notes payable increased to **$11.1 million** in 2023, with interest expense surging to **$1.84 million** at an effective rate of **60.17%**, and convertible notes potentially issuing **11.1 million** shares. Notes Payable Summary | Notes Payable Category | Dec 31, 2023 ($) | Dec 31, 2022 ($) | | :--------------------- | :--------------- | :--------------- | | Total notes payable | 11,082,561 | 5,514,841 | | Less notes discount | (2,876,387) | (1,898,265) | | Less current portion | (7,748,518) | (1,080,257) | | Long-term notes payable | 457,656 | 2,536,319 | - Interest expense on notes payable was **$1,836,377** in 2023, significantly up from **$246,090** in 2022, with an effective interest rate of **60.17%** for 2023[262](index=262&type=chunk) - As of December 31, 2023, convertible note balances are convertible into **11,127,500** shares of common stock[263](index=263&type=chunk) - Shareholder notes payable amounted to **$0.2 million** at December 31, 2023, with interest expense of **$0.0204 million** for the year[264](index=264&type=chunk) [Note 5 – Licensing Agreement and Royalty Payable](index=50&type=section&id=Note%205%20%E2%80%93%20Licensing%20Agreement%20and%20Royalty%20Payable) The company has a TapouT licensing agreement with a **6% royalty** or **$0.66 million** minimum, and a patent license from 1/4 Vin SARL with **$31,000** annual amortization. - The company has a licensing agreement with ABG TapouT, LLC for the 'TapouT' brand, requiring a **6% royalty on net sales** or guaranteed minimum annual payments (**$660,000** in 2023)[265](index=265&type=chunk)[266](index=266&type=chunk) - A license to certain patents from 1/4 Vin SARL, acquired with Copa Asset Purchase Agreement, involves notes payable and annual amortization of approximately **$31,000** over a **10-year** useful life[267](index=267&type=chunk) [Note 6 – Stockholders' Equity](index=50&type=section&id=Note%206%20%E2%80%93%20Stockholders'%20Equity) Stockholders' equity changes reflect common stock issuances, an 'evergreen' 2020 Stock Incentive Plan (**7.5%** annual increase), and a 2023 option exercise price modification. - During 2022, the company issued common stock through public offerings, for services, in connection with the Copa DI Vino purchase, and upon conversion of convertible instruments[268](index=268&type=chunk) - The 2020 Stock Incentive Plan has an 'evergreen' feature, annually increasing shares by **5%** of outstanding common shares (increased to **7.5%** in October 2023)[272](index=272&type=chunk)[273](index=273&type=chunk) Stock Option Activity | Stock Option Activity | Dec 31, 2023 | Dec 31, 2022 | | :-------------------- | :----------- | :----------- | | Balance - Jan 1 | 1,151,000 | 1,065,000 | | Granted | 3,441,008 | 146,000 | | Cancelled | 333,000 | 60,000 | | Balance - Dec 31 | 4,259,008 | 1,151,000 | | Exercisable - Dec 31 | 3,910,787 | 732,746 | - In April 2023, the company modified the exercise price of **4,134,008** options to **$1.12** from **$2.56**, resulting in an incremental expense of **$7,348**[279](index=279&type=chunk) Warrant Activity | Warrant Activity | Dec 31, 2023 | Dec 31, 2022 | | :--------------- | :----------- | :----------- | | Balance - Jan 1 | 14,343,896 | 10,143,896 | | Granted | 2,250,000 | 4,200,000 | | Exercises | 68,146 | — | | Cancelled | 2,345,677 | — | | Balance - Dec 31 | 14,180,073 | 14,343,896 | [Note 7 – Related Parties](index=53&type=section&id=Note%207%20%E2%80%93%20Related%20Parties) Related party transactions include a Revenue Loan and Security Agreement guaranteed by the CEO with **$0.372 million** outstanding and **$0.99 million** accrued interest, plus **$0.4 million** in CEO advances. - The company has a Revenue Loan and Security Agreement with Decathlon Alpha IV, L.P., guaranteed by Robert Nistico, with **$371,693** outstanding and **$989,702** accrued interest as of December 31, 2023[284](index=284&type=chunk) - Penalties of **$757,554** associated with this agreement may be waived if the loan is repaid in full prior to maturity[284](index=284&type=chunk) - Related party advances from the CEO amounted to **$0.4 million** outstanding, and a shareholder note payable was **$0.2 million** outstanding as of December 31, 2023[286](index=286&type=chunk) [Note 8 – Investment in Salt Tequila USA, LLC](index=54&type=section&id=Note%208%20%E2%80%93%20Investment%20in%20Salt%20Tequila%20USA%2C%20LLC) The company holds a **22.5%** cost-method investment in SALT Tequila USA, LLC, with an option to increase ownership, and a marketing and distribution agreement in Mexico. - The company holds a **22.5% interest** in SALT Tequila USA, LLC, with the right to increase ownership to **37.5%**, and this investment is accounted for at cost[288](index=288&type=chunk) - Splash has a marketing and distribution agreement with SALT in Mexico for the manufacturing of its Tequila product line[288](index=288&type=chunk) [Note 9 – Lease](index=54&type=section&id=Note%209%20%E2%80%93%20Lease) The company has operating lease agreements for real estate and office space, with fixed payments; operating lease cost increased to **$0.364 million** in 2023. - The company has various operating lease agreements, primarily for real estate and office space, with lease payments mainly fixed[289](index=289&type=chunk) - Operating lease cost was **$363,890** in 2023, up from **$315,980** in 2022[290](index=290&type=chunk) Lease Liability Components (2023) | Lease Liability Component | Amount (2023 $) | | :------------------------ | :-------------- | | Total operating lease liability | 558,988 | | Current portion | (262,860) | | Non-current portion | 296,128 | [Note 10 – Segment Reporting](index=55&type=section&id=Note%2010%20%E2%80%93%20Segment%20Reporting) The company operates in two segments: Splash Beverage Group (beverage manufacturing/distribution) and E-Commerce (online retail), with both segments showing revenue growth in 2023. - The company has two reportable operating segments: (1) manufacture and distribution of non-alcoholic and alcoholic beverages (Splash Beverage Group) and (2) online retail sale of beverages and groceries (E-Commerce)[292](index=292&type=chunk) Segment Revenue | Segment | 2023 Revenue ($) | 2022 Revenue ($) | Change ($) | Change (%) | | :-------------------- | :--------------- | :--------------- | :--------- | :--------- | | Splash Beverage Group | 5,072,479 | 4,759,586 | 312,893 | 6.6% | | E-Commerce | 13,777,673 | 13,327,900 | 449,773 | 3.4% | | Total Revenues | 18,850,152 | 18,087,486 | 762,666 | 4.2% | - Splash Beverage Group revenue increased by **7%** due to TapouT and Pulpoloco, while E-Commerce revenue increased by **$0.4 million** driven by expanded territory, new products, and increased cart size[293](index=293&type=chunk)[294](index=294&type=chunk) Segment Total Assets | Segment | 2023 Total Assets ($) | 2022 Total Assets ($) | Change ($) | | :-------------------- | :-------------------- | :-------------------- | :------------ | | Splash Beverage Group | 9,188,213 | 14,723,553 | (5,535,340) | | E-Commerce | 710,555 | 2,581,150 | (1,870,595) | | Total Assets | 9,898,768 | 17,304,703 | (7,405,935) | [Note 11 – Commitment and Contingencies](index=55&type=section&id=Note%2011%20%E2%80%93%20Commitment%20and%20Contingencies) The company is involved in ordinary course claims and regulatory actions, but does not anticipate a material adverse effect. - The company is a party to asserted claims and regulatory actions in the ordinary course of business but does not anticipate a material adverse effect on its business or financial condition[295](index=295&type=chunk) [Note 12 – Registration Statement](index=56&type=section&id=Note%2012%20%E2%80%93%20Registration%20Statement) The company completed public offerings in 2021 and 2022, raising **$13.2 million**, **$7.9 million**, and **$3.1 million** respectively, and issued Representative's Warrants. - The company completed several underwritten public offerings: June 2021 (**$13.2 million** net proceeds), February 2022 (**$7.9 million** net proceeds), and September 2022 (**$3.1 million** net proceeds)[297](index=297&type=chunk)[298](index=298&type=chunk)[299](index=299&type=chunk) - Representative's Warrants were issued in June 2021 to purchase up to **150,000 shares** of Common Stock at an exercise price of **$4.60 per share**, exercisable until June 2026[300](index=300&type=chunk) [Note 13 – Tax Provision](index=56&type=section&id=Note%2013%20%E2%80%93%20Tax%20Provision) The company has a full valuation allowance against deferred tax assets due to realizability uncertainty, with a **$108.9 million** net operating loss carryforward as of December 31, 2023. - The company has a full valuation allowance against its deferred tax assets due to uncertainty about their realizability[301](index=301&type=chunk) - As of December 31, 2023, the company has a net operating loss carryforward of **$108,922,763** for Federal income tax purposes, with **$90,921,071** generated after January 1, 2018, carrying forward indefinitely[302](index=302&type=chunk) - No income tax expense or benefit was recorded for 2023 and 2022 due to the full valuation allowance[303](index=303&type=chunk) Deferred Tax Assets/Liabilities | Deferred Tax Assets/Liabilities | 2023 ($) | 2022 ($) | | :------------------------------ | :----------- | :----------- | | Net Operating Losses | 27,606,474 | 22,758,336 | | Accrued Interest/Interest Expense Limitation | 1,518,618 | 1,263,639 | | Total deferred tax assets | 29,125,092 | 24,022,355 | | Total deferred tax liabilities | (120,502) | (93,476) | | Less: Valuation allowance | (29,004,590) | (23,928,879) |\ | Total Net Deferred Tax Assets | — | — | [Note 14 – Subsequent Events](index=57&type=section&id=Note%2014%20%E2%80%93%20Subsequent%20Events) Subsequent events include **$0.4 million** in convertible notes, a **$0.5 million** commercial loan, and a **$0.109 million** CEO cash advance in early 2024, with plans to manage expiring notes. - In January 2024, the company entered into a **$0.25 million** convertible note (**12% interest**, convertible at **$0.50/share** with **200% warrants** at **$0.25**) and a **$0.5 million** commercial loan[306](index=306&type=chunk) - In February 2024, another **$0.15 million** convertible note was issued (**12% interest**, convertible at **$0.40/share** with **250% warrants** at **$0.25**)[307](index=307&type=chunk) - In March 2024, the CEO provided a **$0.109 million** cash advance (**0% interest** related party payable)[307](index=307&type=chunk) - The company plans to extend or pay off notes expiring in 2024[308](index=308&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=58&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) Splash Beverage Group reported no changes in or disagreements with accountants on accounting and financial disclosure. - No changes in and disagreements with accountants on accounting and financial disclosure[309](index=309&type=chunk) [Item 9A. Controls and Procedures](index=58&type=section&id=Item%209A.%20Controls%20and%20Procedures) Disclosure controls and internal control over financial reporting were deemed ineffective as of December 31, 2023, due to limited resources and material weaknesses in segregation of duties. - As of December 31, 2023, the CEO and CFO concluded that disclosure controls and procedures were not effective due to limited resources[311](index=311&type=chunk) - Management determined that internal control over financial reporting was not effective as of December 31, 2023, due to material weaknesses related to limited segregation of duties[313](index=313&type=chunk) - New controls and processes were implemented in 2023 following the 2022 evaluation of disclosure controls and procedures[311](index=311&type=chunk) [(1) Evaluation of Disclosure Controls and Procedures](index=58&type=section&id=%281%29%20Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) CEO and CFO concluded disclosure controls were ineffective as of December 31, 2023, due to limited resources, despite new controls implemented in 2023. - The CEO and CFO evaluated the effectiveness of disclosure controls and procedures as of December 31, 2023[311](index=311&type=chunk) - They concluded that due to limited resources, disclosure controls and procedures are not effective in providing material information on a timely basis[311](index=311&type=chunk) - New controls and processes were implemented in 2023 following the 2022 evaluation[311](index=311&type=chunk) [(2) Management's Report on Internal Control over Financial Reporting](index=58&type=section&id=%282%29%20Management's%20Report%20on%20Internal%20Control%20over%20Financial%20Reporting) Management deemed internal control over financial reporting ineffective as of December 31, 2023, due to material weaknesses in segregation of duties. - Management assessed the effectiveness of internal control over financial reporting as of December 31, 2023[313](index=313&type=chunk) - It was determined that internal control over financial reporting was not effective due to material weaknesses related to a limited segregation of duties[313](index=313&type=chunk) - This material weakness could result in material misstatements that would not be prevented or detected[313](index=313&type=chunk) [(3) Changes in Internal Control over Financial Reporting](index=58&type=section&id=%283%29%20Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No material changes in internal control over financial reporting occurred during the most recent fiscal quarter, beyond those noted in the evaluation. - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter, other than the items highlighted in the evaluation[315](index=315&type=chunk) [Item 9B. Other Information](index=58&type=section&id=Item%209B.%20Other%20Information) Splash Beverage Group reported no other information required to be disclosed. - No other information to report[316](index=316&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=58&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to Splash Beverage Group, Inc. - Not applicable[317](index=317&type=chunk) [PART III](index=59&type=section&id=PART%20III) [Item 10. Directors, Executive Officers and Corporate Governance](index=59&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section details executive officers and directors, including CEO Robert Nistico and CFO Stacy McLaughlin, and outlines Board committees, corporate governance, and the new Clawback Policy. Executive Officers and Directors | Name | Age | Position | | :--------------- | :-- | :------------------------- | | Robert Nistico | 60 | Chief Executive Officer and Director | | Stacy McLaughlin | 42 | Chief Financial Officer | | William Meissner | 57 | President, Chief Marketing Officer | | Justin Yorke | 57 | Director | | John Paglia | 56 | Director | | Bill Caple | 65 | Director | - Robert Nistico, CEO, has over **28 years** of experience in the beverage industry, including roles at Red Bull and Gallo Winery[18](index=18&type=chunk)[321](index=321&type=chunk) - Stacy McLaughlin, CFO since January 2024, has over **15 years** of public company accounting and finance experience, including at Willdan Group, Inc. and KPMG LLP[18](index=18&type=chunk)[322](index=322&type=chunk) - William Meissner, President & CMO, has over **twenty years** of experience in growing consumer brand companies, including leadership roles at Sparkling Ice, Fuze, and Sweet Leaf Tea[18](index=18&type=chunk)[323](index=323&type=chunk) - The Board has an Audit Committee, Compensation and Management Resources Committee, and Nominating and Corporate Governance Committee, with John Paglia and Bill Caple identified as independent directors[329](index=329&type=chunk)[331](in

Financial Performance - Net revenues for the three months ended September 30, 2023, increased to $5.14 million, up 5.6% from $4.87 million in the same period of 2022[16] - Gross profit for the nine months ended September 30, 2023, was $4.84 million, compared to $4.41 million for the same period in 2022, reflecting a year-over-year increase of 9.5%[16] - The net loss for the three months ended September 30, 2023, was $5.67 million, compared to a net loss of $5.14 million for the same period in 2022, indicating a 10.4% increase in losses[16] - For the nine months ended September 30, 2023, the net loss was $15,009,628, a decrease from a net loss of $16,897,065 in the same period of 2022, representing a 11.16% improvement[22] - The Company recorded a net loss of approximately $15 million for the nine-month period ended September 30, 2023, with an accumulated deficit of approximately $127.3 million[73] Assets and Liabilities - Total assets decreased from $17.30 million on December 31, 2022, to $11.24 million on September 30, 2023, representing a decline of approximately 35%[13] - Total current liabilities surged from $4.97 million at the end of 2022 to $11.13 million by September 30, 2023, marking an increase of approximately 124%[13] - Total stockholders' equity turned negative, dropping from $9.32 million at the end of 2022 to $(657,830) by September 30, 2023[13] - The company experienced a significant increase in accounts payable and accrued expenses, rising from $3.38 million at the end of 2022 to $4.20 million by September 30, 2023, an increase of approximately 24%[13] - As of September 30, 2023, total notes payable amounted to $9,057,571, with a current portion of $5,548,830[82] Cash Flow - Cash and cash equivalents decreased significantly from $4.43 million at the end of 2022 to $96,121 by September 30, 2023, a decline of over 97%[13] - The company reported a net cash used in operating activities of $(8,503,765) for the nine months ended September 30, 2023, compared to $(10,824,652) for the same period in 2022, reflecting a 21.38% reduction in cash burn[22] - As of September 30, 2023, total cash and cash equivalents were $96,121, down from $2,601,270 at the beginning of the year, indicating a significant cash outflow[22] - The Company’s net cash used in operating activities totaled approximately $8.5 million during the nine-month period ended September 30, 2023[73] Operating Expenses - Operating expenses for the nine months ended September 30, 2023, totaled $16.84 million, down from $21.03 million in the same period of 2022, a decrease of approximately 20%[16] - Operating expenses for the three months ended September 30, 2023, decreased by $1,259,084 to $5,620,398 compared to $6,879,482 in the same quarter last year[122] - Advertising expenses for the three months ended September 30, 2023, were $248,512, a decrease of 66.8% compared to $746,965 in the same period of 2022[61] - The Company’s advertising expenses for the nine months ended September 30, 2023, were $1,075,127, down from $1,918,420 in the same period of 2022, indicating a decrease of approximately 44%[61] Debt and Financing - The Company entered into various loans totaling $1,700,000 in 2023, with interest rates of 12% and warrant coverage ranging from 50% to 100%[82] - The Company’s notes payable included a $2,000,000 convertible note entered into in February 2023, which matures in February 2024 and is non-interest bearing[79] - The company received approximately $1.9 million from the issuance of senior secured convertible notes in October 2023[114] - The company received $800,000 for the sale of convertible notes with a 12.0% interest rate and an eighteen-month term, along with 400,000 warrants at an exercise price of $0.25 per warrant[148] Future Outlook - Future profitability is contingent upon the company's ability to increase product sales and reduce manufacturing costs, which are partially fixed and cannot be easily decreased[146] - The company aims to improve stockholders' equity by increasing sales, which would enhance asset value and reduce liabilities[146] - The company has significant liquidity concerns, as it may need to raise additional equity or debt capital to fund operations[75] - The company continues to explore funding options for acquisitions, equipment purchases, and working capital through the issuance of convertible notes[148] Miscellaneous - The Company incurred shipping and handling costs of $1,279,189 for the three months ending September 30, 2023, compared to $1,268,636 for the same period in 2022, reflecting a year-over-year increase of approximately 0.16%[52] - The Company recognized share-based compensation of $300,912 and $1,025,903 during the three months and nine months ended September 30, 2023[98] - The Company has a 22.5% ownership interest in SALT Tequila USA, LLC, with the right to increase ownership to 37.5%[104] - The Company has minimum royalty payments of $165,000 due to ABG TapouT for the remaining three months of 2023[133]

Financial Performance - Net revenues for Q2 2023 reached $5.19 million, a 15.5% increase from $4.50 million in Q2 2022[14] - Gross profit for Q2 2023 was $1.78 million, up 31.6% from $1.35 million in Q2 2022[14] - The net loss for Q2 2023 was $5.61 million, slightly improved from a net loss of $5.76 million in Q2 2022[14] - Net loss for the first half of 2023 was $9,339,548, an improvement from a net loss of $11,753,264 in the same period of 2022, representing a reduction of approximately 20.5%[1] - For the six months ended June 30, 2023, net revenues were $11,017,678, up $2,592,164 from $8,425,514 in 2022, driven by increases in both e-commerce and beverage businesses[120] - The e-commerce segment's revenue increased by $924,428 in Q2 2023, while the beverage segment saw a decline of $228,417 due to phasing of purchases[118] Expenses and Costs - Operating expenses for Q2 2023 totaled $6.00 million, a decrease of 16.4% from $7.18 million in Q2 2022[14] - Operating expenses for the three months ended June 30, 2023, decreased by $1,180,381 to $5,998,432 compared to $7,178,813 in 2022, primarily due to lower non-cash expenses[123] - Cost of goods sold for the three months ended June 30, 2023, was $3,417,868, an increase of $268,593 from $3,149,275 in 2022, driven by increased sales and a shift to lower margin items[121] - Shipping and handling costs for the six months ending June 30, 2023, were $2,737,205, an increase of 37.4% compared to $1,992,630 in the same period of 2022[1] - Advertising expenses for the three months ended June 30, 2023, were $194,415, an increase from $131,327 in the same period in 2022[58] - The company recorded advertising expenses of $389,462 for the six months ended June 30, 2023, compared to $218,917 for the same period in 2022[58] Assets and Liabilities - Total current assets decreased to $6.90 million as of June 30, 2023, down 35.7% from $10.66 million at December 31, 2022[11] - Total liabilities increased to $9.16 million as of June 30, 2023, compared to $7.98 million at December 31, 2022, representing a 14.8% rise[11] - The company reported a total stockholders' equity of $3.97 million as of June 30, 2023, down 57.5% from $9.32 million at December 31, 2022[11] - Cash and cash equivalents decreased to $903,235 as of June 30, 2023, down 79.6% from $4.43 million at December 31, 2022[11] - Total cash and cash equivalents at the end of the period were $903,235, down from $4,206,208 at the end of 2022, reflecting a decrease of approximately 78.5%[1] Shareholder Information - The weighted average number of common shares outstanding for Q2 2023 was 42,058,047, compared to 36,675,323 for Q2 2022[14] - The company incurred a loss per share of $0.13 for Q2 2023, compared to a loss per share of $0.16 for Q2 2022[14] - As of June 30, 2023, the Company's convertible note balances are convertible into 7,697,968 shares of common stock[83] - The Company granted share-based awards totaling 116,666 shares at a weighted average price of $1.10, recognizing share-based compensation of $127,999 for the three months ended June 30, 2023[91] - The company issued 216,666 shares of common stock to consultants for services, recognizing non-cash compensation of $131,866[147] Financing and Capital - The company may need to raise additional equity or debt capital to fund operations, which could be dilutive to existing stockholders[72] - The company raised approximately $0.85 million from a private placement of convertible notes in July 2023, with a term of 12 to 18 months and an interest rate of 12.0%[114] - The company plans to raise up to $8.5 million to fund acquisitions, equipment purchases, and working capital through future financing activities[114] - The Company entered into multiple loans totaling $8,088,418, with a significant portion maturing in 2024 and 2025, including a $2,000,000 loan in February 2023[82] - Interest expense on notes payable for the three months ended June 30, 2023, was $170,078, compared to $69,015 for the same period in 2022, indicating a year-over-year increase of approximately 146%[82] Internal Controls and Compliance - As of June 30, 2023, the company identified material weaknesses in its internal controls over financial reporting, leading to ineffective disclosure controls and procedures[139] - The company plans to enhance its internal controls by potentially engaging additional internal staff, external staff, or an advisory firm for support on U.S. GAAP technical issues[140] - During the quarter ended June 30, 2023, the company engaged an advisory firm to assist with U.S. GAAP compliance in financial statement preparation[141] Other Financial Metrics - The company incurred a foreign currency translation net loss of $15,773 for the three months ended June 30, 2023, compared to a loss of $6,570 for the same period in 2022[67] - The company has determined that there are no material uncertain tax positions as of June 30, 2023[53] - The company evaluates long-lived assets for impairment when events indicate that the carrying amount may not be fully recoverable[63] - The company adopted ASU No. 2016-13 on January 1, 2023, which requires the immediate recognition of management's estimates of current and expected credit losses, with no material impact on financial statements[65]

PART I: FINANCIAL INFORMATION [ITEM 1: FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201%3A%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements and accompanying notes for the company [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets and stockholders' equity decreased, driven primarily by a reduction in cash and inventory | Metric | March 31, 2023 | December 31, 2022 | | :----------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $2,145,797 | $4,431,745 | | Accounts receivable, net | $2,190,681 | $1,812,110 | | Inventory | $3,144,793 | $3,721,307 | | Total current assets | $8,897,670 | $10,657,574 | | Total assets | $15,348,895 | $17,304,703 | | Total current liabilities | $4,899,980 | $4,965,584 | | Total liabilities | $7,755,441 | $7,982,569 | | Total stockholders' equity | $7,593,454 | $9,322,134 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Net revenues grew significantly, and despite higher costs, the company's net loss narrowed year-over-year | Metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net revenues | $5,822,727 | $3,926,573 | | Cost of goods sold | $(4,061,228) | $(2,635,310) | | Gross profit | $1,761,499 | $1,291,263 | | Total operating expenses | $5,216,420 | $6,975,215 | | Net loss | $(3,729,299) | $(5,994,408) | | Basic and dilutive loss per share | $(0.10) | $(0.16) | - Net revenues increased by **$1,896,154 (48.3%)** for the three months ended March 31, 2023, compared to the same period in 2022[16](index=16&type=chunk)[111](index=111&type=chunk) - Net loss decreased by **$2,265,109 (37.8%)** for the three months ended March 31, 2023, due to higher sales and lower operating expenses[16](index=16&type=chunk)[113](index=113&type=chunk) [Condensed Consolidated Statement of Changes in Shareholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Shareholders'%20Equity) Stockholders' equity declined due to a net loss, partially offset by an increase in additional paid-in capital | Metric | March 31, 2023 | December 31, 2022 | | :----------------------------- | :------------- | :---------------- | | Common Shares Outstanding | 41,085,520 | 41,085,520 | | Additional paid-in capital | $123,634,774 | $121,632,546 | | Accumulated deficit | $(116,060,325) | $(112,331,026) | | Total stockholders' equity | $7,593,454 | $9,322,134 | - Additional paid-in capital increased by **$2,002,228**, including from a convertible promissory note and share-based compensation[18](index=18&type=chunk) - The accumulated deficit increased by **$3,729,299** due to the net loss for the quarter[18](index=18&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash from operations was negative, while financing activities provided a net inflow, resulting in a net decrease in cash | Metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(4,103,827) | $(4,675,886) | | Net cash used in investing activities | $(10,571) | $0 | | Net cash provided by financing activities | $1,830,059 | $8,765,600 | | Net change in cash and cash equivalents | $(2,285,948) | $4,314,289 | | Cash and cash equivalents, end of period | $2,145,797 | $8,495,672 | - Net cash used in operating activities decreased by **$572,059**, primarily due to changes in working capital[21](index=21&type=chunk)[117](index=117&type=chunk) - Financing activities in Q1 2023 included **$2,000,000** from a convertible note and **$200,000** from a shareholder advance[21](index=21&type=chunk)[119](index=119&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section details the company's accounting policies, financial instruments, and going concern status [Note 1 – Business Organization and Nature of Operations](index=11&type=section&id=Note%201%20%E2%80%93%20Business%20Organization%20and%20Nature%20of%20Operations) The company acquires and develops beverage brands, utilizing a comprehensive US distribution system and e-commerce - Splash Beverage Group's core business involves identifying, acquiring, and building early-stage or under-valued beverage brands[24](index=24&type=chunk) - The company's distribution system is comprehensive in the US and is expanding to select international markets[24](index=24&type=chunk) - Qplash, a division of Splash, provides e-commerce access for B2B and B2C customers for direct beverage delivery[24](index=24&type=chunk) [Note 2 – Summary of Significant Accounting Policies](index=11&type=section&id=Note%202%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines key accounting policies and highlights substantial doubt about the company's ability to continue as a going concern - The financial statements are prepared in accordance with U.S. GAAP and SEC interim reporting requirements[25](index=25&type=chunk) - The company's investment in Salt Tequila USA, LLC is carried at cost less impairment[28](index=28&type=chunk) - Revenue is recognized upon delivery of products to the customer, net of returns and allowances[45](index=45&type=chunk) - The company has incurred significant losses, with a net loss of **$3.7 million** and an accumulated deficit of **$116.1 million** as of March 31, 2023, raising substantial doubt about its ability to continue as a going concern[67](index=67&type=chunk)[70](index=70&type=chunk) [Note 3 – Notes Payable, Related Party Notes Payable, Convertible Bridge Loans Payable, Revenue Financing Arrangements and Bridge Loan Payable](index=20&type=section&id=Note%203%20%E2%80%93%20Notes%20Payable%2C%20Related%20Party%20Notes%20Payable%2C%20Convertible%20Bridge%20Loans%20Payable%2C%20Revenue%20Financing%20Arrangements%20and%20Bridge%20Loan%20Payable) Total notes payable increased significantly due to a new convertible note issued in February 2023 | Metric | March 31, 2023 | December 31, 2022 | | :----------------------------- | :------------- | :---------------- | | Total notes payable | $7,144,900 | $5,514,841 | | Less notes discount | $(3,437,072) | $(1,898,265) | | Less current portion | $(1,275,540) | $(1,080,257) | | Long-term notes payable | $2,432,288 | $2,536,319 | - In February 2023, the company entered into a **$2,000,000** twelve-month convertible loan[74](index=74&type=chunk) - Interest expense on notes payable was **$167,121** for the three months ended March 31, 2023, up from $81,700 in the prior year period[74](index=74&type=chunk) [Note 4 – Licensing Agreement and Royalty Payable](index=22&type=section&id=Note%204%20%E2%80%93%20Licensing%20Agreement%20and%20Royalty%20Payable) The company holds licensing agreements for the 'TapouT' brand and manufacturing process patents - The company pays a **6% royalty** on net sales for the 'TapouT' brand, with minimum monthly payments of **$55,000** in 2023[77](index=77&type=chunk) - Guaranteed minimum royalty payments of **$165,000** were paid for the three months ended March 31, 2023[78](index=78&type=chunk) - A license for manufacturing process patents is amortized at approximately **$31,000** annually until 2027[79](index=79&type=chunk) [Note 5 – Stockholders' Equity](index=22&type=section&id=Note%205%E2%80%93%20Stockholders'%20Equity) This note details changes in stockholders' equity, including a private placement and stock option grants - In February 2023, the Board approved a private placement offering of **2,000,000 common shares** at $1.00 per share, generating **$2,000,000** in gross proceeds[80](index=80&type=chunk) - The 2020 Stock Incentive Plan increased available shares by **2,054,276** at January 1, 2023, through its 'evergreen' feature[83](index=83&type=chunk) - **65,000 stock options** were granted to new employees during the quarter with a fair value of **$149,999**[84](index=84&type=chunk)[85](index=85&type=chunk) - The company has an obligation to issue **1,500,000 restricted shares** related to a convertible note and **100,000 shares** for services[86](index=86&type=chunk)[88](index=88&type=chunk) [Note 6 – Related Parties](index=23&type=section&id=Note%206%20%E2%80%93%20Related%20Parties) The company has related party payables for services provided by the CEO, who also guarantees a note payable - Related party payables arise from services provided by the CEO or company expenses paid by the CEO[90](index=90&type=chunk) - A note payable with a balance of **$876,836** at March 31, 2023, is guaranteed by a related party (the CEO)[91](index=91&type=chunk) [Note 7 – Investment in Salt Tequila USA, LLC](index=24&type=section&id=Note%207%20%E2%80%93%20Investment%20in%20Salt%20Tequila%20USA%2C%20LLC) The company holds a 22.5% ownership interest in SALT Tequila USA, LLC and has a distribution agreement - The company has a **22.5% ownership interest** in SALT Tequila USA, LLC, carried at cost less impairment[92](index=92&type=chunk) - A marketing and distribution agreement exists with SALT for the manufacturing of the company's Tequila product line[92](index=92&type=chunk) - The company has the right to increase its ownership in SALT to **37.5%**[92](index=92&type=chunk) [Note 8 – Leases](index=25&type=section&id=Note%208%20%E2%80%93Leases) The company has operating lease agreements for real estate and office space with mainly fixed payments - Operating lease expense was **$93,328** for the three months ended March 31, 2023[96](index=96&type=chunk) | Undiscounted Future Minimum Lease Payments | Operating Lease | | :----------------------------------------- | :-------------- | | 2023 (Nine months remaining) | $214,202 | | 2024 | $252,000 | | 2025 | $252,000 | | Total | $718,202 | | Total operating lease liability | $673,907 | | Current portion of operating lease liability | $250,734 | | Operating lease liability, non-current | $423,173 | - The remaining term on leases ranges from 1 to 33 months, with an incremental borrowing rate of **5.0%**[97](index=97&type=chunk) [Note 9 – Segment Reporting](index=26&type=section&id=Note%209%20%E2%80%93%20Segment%20Reporting) The company operates in two segments, with the e-commerce segment generating higher revenue and contribution - The company has two reportable operating segments: Splash Beverage Group and E-Commerce[100](index=100&type=chunk) | Metric | March 31, 2023 | March 31, 2022 | | :------------------------------------ | :------------- | :------------- | | **Revenue, net:** | | | | Splash Beverage Group | $1,898,968 | $1,478,158 | | E-Commerce | $3,923,759 | $2,448,415 | | Total revenues, net | $5,822,727 | $3,926,573 | | **Contribution after Marketing:** | | | | Splash Beverage Group | $(286,929) | $(459,775) | | E-Commerce | $1,311,602 | $1,030,059 | | Total contribution after marketing | $1,024,673 | $570,283 | | **Total assets:** | | | | Splash Beverage Group | $12,801,083 | $14,723,553 | | E-Commerce | $2,547,812 | $2,581,150 | | Total assets | $15,348,895 | $17,304,703 | [Note 10 – Commitment and Contingencies](index=27&type=section&id=Note%2010%20%E2%80%93%20Commitment%20and%20Contingencies) Management does not expect current legal proceedings to have a material adverse effect on the business - The company is a party to asserted claims and subject to regulatory actions in the ordinary course of business[104](index=104&type=chunk) - Management does not anticipate a material adverse effect on its business from these proceedings[104](index=104&type=chunk) [Note 11 – Subsequent Events](index=27&type=section&id=Note%2011%20%E2%80%93%20Subsequent%20Events) After the quarter, the company issued common stock, granted options, and received funds from a private placement - On May 2, 2023, the company issued **1,500,000 shares** of common stock related to a convertible promissory note[105](index=105&type=chunk) - The company granted **500,000 options** to Board Directors in April and May under the 2020 plan[105](index=105&type=chunk) - In May 2023, the company received approximately **$0.8 million** from a private placement of convertible notes, part of an **$8.0 million** agreement[106](index=106&type=chunk) [ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=28&type=section&id=ITEM%202%3A%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses the company's financial performance, highlighting revenue growth, a reduced net loss, and liquidity challenges [Business Overview](index=28&type=section&id=Business%20Overview) The company acquires and develops beverage brands, leveraging its US distribution network and e-commerce division - Splash Beverage Group identifies, acquires, and builds early-stage or under-valued beverage brands with strong growth potential[109](index=109&type=chunk) - The company's distribution system is comprehensive in the US and is expanding to select international markets[109](index=109&type=chunk) - Qplash, the company's division, offers B2B and B2C e-commerce access for direct beverage delivery[109](index=109&type=chunk) [Results of Operations for the Three Months Ended March 31, 2023 compared to Three Months Ended March 31, 2022](index=29&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202023%20compared%20to%20Three%20Months%20Ended%20March%2031%2C%202022.) The company's revenue increased substantially, leading to improved gross profit and a significantly reduced net loss [Revenue](index=29&type=section&id=Revenue) Revenues grew 48.3%, driven by strong performance in both beverage sales and the Qplash e-commerce platform | Metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 | Change ($) | Change (%) | | :------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Revenues | $5,822,727 | $3,926,573 | $1,896,154 | 48.3% | - Beverage sales increased by **$420,810**, with TapouT and Copa di Vino being the largest contributors[111](index=111&type=chunk) - Qplash e-commerce revenues increased by **$1,475,344 (60%)**, driven by expanded territory and new products[111](index=111&type=chunk) [Cost of Goods Sold](index=29&type=section&id=Cost%20of%20Goods%20Sold) Cost of goods sold increased due to higher sales volumes and a shift in product mix toward lower-margin items | Metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 | Change ($) | | :--------------- | :-------------------------------- | :-------------------------------- | :--------- | | Cost of goods sold | $4,061,228 | $2,635,310 | $1,425,918 | - The increase in cost of goods sold is primarily due to increased sales and a product mix shift in the e-commerce business[112](index=112&type=chunk) [Operating Expenses](index=29&type=section&id=Operating%20Expenses) Operating expenses decreased significantly due to lower non-cash expenses, resulting in a reduced net loss | Metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 | Change ($) | | :--------------- | :-------------------------------- | :-------------------------------- | :--------- | | Operating expenses | $5,216,420 | $6,975,215 | $(1,758,795) | | Net loss | $(3,729,299) | $(5,994,408) | $2,265,109 | - The decrease in operating expenses was primarily due to lower non-cash expenses[113](index=113&type=chunk) [Net Other Income and Expense](index=29&type=section&id=Net%20Other%20Income%20and%20Expense) Interest expense increased, while the company recognized other income from an insurance settlement | Metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :------------------------- | :-------------------------------- | :-------------------------------- | | Interest expense | $167,121 | $85,879 | | Other income | $140,404 | $0 | | Amortization of debt discount | $247,661 | $0 | - Other income of **$140,404** was related to an insurance settlement[114](index=114&type=chunk) [LIQUIDITY, GOING CONCERN CONSIDERATIONS AND CAPITAL RESOURCES](index=29&type=section&id=LIQUIDITY%2C%20GOING%20CONCERN%20CONSIDERATIONS%20AND%20CAPITAL%20RESOURCES) The company's cash position decreased, and historical losses raise substantial doubt about its ability to continue as a going concern | Metric | March 31, 2023 | December 31, 2022 | | :------------------------------------------ | :------------- | :---------------- | | Cash and cash equivalents | $2,145,797 | $4,431,745 | | Metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net cash used for operating activities | $(4,103,827) | $(4,675,886) | | Net cash provided by financing activities | $1,830,059 | $8,765,000 | - The company has a history of significant losses, raising **substantial doubt** about its ability to continue as a going concern[121](index=121&type=chunk) - Additional equity or debt capital is needed to fund operations, which will likely be **dilutive** to existing stockholders[121](index=121&type=chunk) [CONTRACTUAL OBLIGATIONS](index=30&type=section&id=CONTRACTUAL%20OBLIGATIONS) The company has obligations to issue shares and make minimum royalty payments for the remainder of 2023 - The company had an obligation to issue **1,500,000 shares** related to a private placement, which was fulfilled in May 2023[122](index=122&type=chunk) - An obligation exists to issue **100,000 shares** to a consultant for services provided[122](index=122&type=chunk) - Minimum royalty payments to ABG TapouT, LLC are **$495,000** for the remaining nine months of 2023[123](index=123&type=chunk) [Off-Balance Sheet Arrangements](index=30&type=section&id=Off-Balance%20Sheet%20Arrangements) The company does not have any off-balance sheet arrangements likely to have a material effect on its financial condition - The company does not have any off-balance sheet arrangements that are reasonably likely to have a material effect on its financial condition or operations[124](index=124&type=chunk) [ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=31&type=section&id=ITEM%203%3A%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a Smaller Reporting Company, these disclosures are not required - Disclosure about market risk is not required for Smaller Reporting Companies[126](index=126&type=chunk) [ITEM 4: CONTROLS AND PROCEDURES](index=31&type=section&id=ITEM%204%3A%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls were ineffective due to material weaknesses in internal controls [Evaluation of Disclosure Controls and Procedures](index=31&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Disclosure controls were deemed ineffective due to a lack of segregation of duties and insufficient accounting personnel - Disclosure controls and procedures were **not effective** as of March 31, 2023[127](index=127&type=chunk) - Material weaknesses include a **lack of segregation of duties** and insufficient in-house accounting personnel for complex transactions[127](index=127&type=chunk) [Changes in Internal Control Over Financial Reporting](index=31&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) No material changes to internal controls occurred during the quarter, but the company plans to engage additional staff - No additional material changes in internal control over financial reporting occurred during the quarter[129](index=129&type=chunk) - The company plans to engage additional staff or an advisory firm to strengthen its control environment[128](index=128&type=chunk) PART II: OTHER INFORMATION [ITEM 1: LEGAL PROCEEDINGS](index=32&type=section&id=ITEM%201%20LEGAL%20PROCEEDINGS) The company reported no legal proceedings for the period - There are no legal proceedings to report[131](index=131&type=chunk) [ITEM 1A: RISK FACTORS](index=32&type=section&id=ITEM%201A%3A%20RISK%20FACTORS) No new risk factors have been identified since the latest Annual Report on Form 10-K - No new risk factors have been noted since the Annual Report on Form 10-K for the year ended December 31, 2022[132](index=132&type=chunk) [ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=32&type=section&id=ITEM%202%3A%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company reported no unregistered sales of equity securities for the period - There were no unregistered sales of equity securities and use of proceeds to report[133](index=133&type=chunk) [ITEM 3: DEFAULTS UPON SENIOR SECURITIES](index=32&type=section&id=ITEM%203%3A%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) The company reported no defaults upon senior securities for the period - There were no defaults upon senior securities to report[134](index=134&type=chunk) [ITEM 4: MINE SAFETY DISCLOSURES](index=32&type=section&id=ITEM%204%3A%20MINE%20SAFETY%20DISCLOSURES) No disclosure regarding mine safety is required for the company - No mine safety disclosure is required[135](index=135&type=chunk) [ITEM 5: OTHER INFORMATION](index=32&type=section&id=ITEM%205%3A%20OTHER%20INFORMATION) The company reported no other information for the period - There is no other information to report[136](index=136&type=chunk) [ITEM 6: EXHIBITS](index=33&type=section&id=ITEM%206%3A%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications - Exhibits include certifications of the CEO and CFO pursuant to the Sarbanes-Oxley Act of 2002[139](index=139&type=chunk) - XBRL Exhibits are also included[139](index=139&type=chunk) [SIGNATURES](index=34&type=section&id=SIGNATURES) The report is duly signed by the company's CEO and CFO as of June 5, 2023 - The report is signed by Robert Nistico, Chairman and CEO (Principal Executive Officer)[142](index=142&type=chunk) - The report is signed by Ronald Wall, CFO (Principal Accounting Officer and Principal Financial Officer)[142](index=142&type=chunk)

Financial Data and Key Metrics Changes - Net revenues for the full year increased to $18.1 million, up from $11.3 million in 2021, representing a 60% increase [16] - Fourth quarter revenues rose to $4.8 million, up from $3.1 million in the prior year, marking a 56% increase [16] - Gross margins for the year were 32.7%, a decline of 2 percentage points from 2021's 36.6% due to inflationary pressures [17] - Net losses decreased to $21.7 million in 2022 from $29.1 million in 2021 [18] - Cash operating expenses increased by 36% in 2022, with marketing expenses, freight-to-customers, and Amazon fees being the primary drivers [18] Business Line Data and Key Metrics Changes - The increase in revenues was primarily attributed to sales growth from the company's e-commerce division and distribution platform, Qplash [16] Market Data and Key Metrics Changes - The company has signed significant distribution agreements, primarily with Bud Network and MillerCoors, enhancing its distribution capabilities [20][21] Company Strategy and Development Direction - The company is focused on growing its legacy brands and evaluating potential acquisitions, with a strong emphasis on distribution as a key to future success [11][12] - The management team is committed to expanding beyond the current revenue levels and is actively pursuing acquisition targets [12][41] - The company is working on the exclusive rights to CartoCan, which is expected to help reduce costs and create additional revenue opportunities [13][44] Management's Comments on Operating Environment and Future Outlook - Management believes the company is at an inflection point where brands will start to gain traction and accelerate growth [74] - There is an expectation for continued momentum and growth quarter-to-quarter and year-over-year, with a focus on increasing product placements [35][36] Other Important Information - The company is optimistic about the rollout of TapouT energy drinks, with production expected to begin soon [26] - Management is exploring various options for financing acquisitions, depending on the specific brand and market conditions [42] Q&A Session Summary Question: What does the pipeline look like for additional distribution agreements? - Management confirmed that they have signed significant agreements and are building out their distribution network, primarily through direct store delivery agreements [20][21] Question: Can you discuss the rollout of Tapout energy? - The production of TapouT cans is in progress, with an expected rollout by the end of April or early May [26] Question: What growth metrics are being seen in Q1? - Management refrained from providing specific guidance but indicated that they expect continued growth momentum [35][36] Question: Can you provide clarity on the exclusivity of CartoCan? - The company has exclusive rights in the U.S. for CartoCan, but does not hold global exclusive rights [63][64] Question: How have market conditions affected acquisition multiples? - Management noted that challenging capital market conditions could compress multiples, but they remain focused on acquisitions [50][52] Question: What geographic areas are being targeted for growth? - The company is focusing on the Southwest and Southeast regions for expansion, with specific chain-driven strategies [56][57]

Business Strategy and Operations - Splash Beverage Group is focused on managing multiple brands within the consumer beverage industry, leveraging a vertically integrated e-commerce platform called Qplash to enhance distribution and sales[20] - Qplash currently offers over 1,500 product listings and ships from warehouses in California and Pennsylvania, targeting both business-to-business and direct-to-consumer sales[50] - The company aims to capitalize on the growing e-commerce channel as consumer preferences shift towards direct-to-consumer models[28] - Splash's product offerings include SALT Naturally Flavored Tequila, TapouT Performance beverages, and Copa Di Vino wines, with a focus on innovative and health-oriented products[29] - The company has established distribution agreements with major players like AB-InBev, enhancing its market reach and operational efficiency[57] - The management team has over 120 years of combined experience in the beverage industry, enhancing the company's ability to navigate distribution and retail challenges[26] - The company operates in both non-alcoholic and alcoholic beverage segments, with a focus on expanding its distribution capabilities through its Qplash platform[190] Financial Performance - Revenue for the year ended December 31, 2022, was $18.1 million, an increase of $6.8 million from $11.3 million in 2021, primarily due to a $6.4 million increase in the ecommerce division distribution platform, Qplash[156] - Total net revenues for the year ended December 31, 2022, were $18.09 million, a 60% increase from $11.32 million in 2021[182] - Cost of goods sold for the year ended December 31, 2022, was $12.1 million, up from $8.3 million in 2021, reflecting a $4.7 million increase due to higher sales and inflation[157] - Operating expenses for the year ended December 31, 2022, were $27.3 million, a decrease from $33 million in 2021, with non-cash operating expenses related to share issuance dropping from $18.4 million to $7.4 million[158] - The net loss for the year ended December 31, 2022, was $21.69 million, a decrease from a net loss of $29.05 million in 2021, representing a 25% improvement[182] - Total cash as of December 31, 2022, was $4.4 million, an increase from $4.2 million at the end of 2021, primarily due to issuances of notes payable and stock subscription agreements[161] - Total assets rose to $17.30 million in 2022, up from $16.39 million in 2021, marking an increase of approximately 5.5%[181] - Total liabilities increased to $7.98 million in 2022 from $7.51 million in 2021, reflecting a rise of about 6.3%[181] - Stockholders' equity improved to $9.32 million in 2022, compared to $8.87 million in 2021, indicating a growth of approximately 5%[181] Risks and Challenges - The company faces risks related to the lingering impact of the COVID-19 pandemic, which could disrupt business operations and supply chains, affecting sales and brand awareness[67] - The beverage industry is highly competitive, with significant pressure from larger companies that may hinder the company's market expansion and distribution relationships[81] - Changes in consumer preferences and health concerns regarding sweetened beverages could reduce demand for the company's products, impacting financial results[84] - The company relies on distributors and retailers for product distribution, and any failure in these relationships could adversely affect sales and operations[86] - The company is subject to various regulations that could increase costs or reduce demand for its products, impacting financial performance[78] - The company must successfully expand its current markets and introduce new products to improve financial results, as failure to do so could adversely affect operations[72] - The company is vulnerable to economic uncertainties, including fluctuations in foreign currency exchange rates, which could adversely affect business operations[128] - The company faces substantial competition in the alcoholic beverage industry, which could hinder its ability to effectively compete and maintain market share[124] Cash Flow and Financing - Net cash used for continuing operating activities during the year ended December 31, 2022, was $14.1 million, compared to $14.7 million in 2021, with a $0.4 million increase in operating losses offset by a $1.2 million decrease in working capital[162] - Net cash provided by financing activities for the year ended December 31, 2022, was $14.4 million, down from $19 million in 2021, with $11.4 million raised from the issuance of common stock compared to $19.6 million in 2021[164] - The company may need to raise additional equity or debt capital to fund operations, which could be dilutive to existing stockholders[165] - The company has experienced negative cash flows from operating activities and may need to secure additional financing to continue operations[68] Inventory and Production - The company emphasizes the importance of managing inventory levels to avoid adverse effects on operating results, highlighting the risks of underestimating or overestimating demand[89] - The company relies on independent contract manufacturers for production, and any failure to maintain these relationships could increase manufacturing costs and reduce gross profits[90] - Fluctuations in grape supply quality and quantity could reduce wine production, adversely affecting sales and operational results[111] - The company relies on a distiller in Mexico for the production of its finished SALT tequila product, and any failure in performance could lead to lost sales and increased costs[121] Regulatory and Compliance - The company is subject to extensive regulations regarding the production and distribution of beverage alcohol products, which could increase operating costs and reduce profit margins[122] - Changes in personal data protection laws could result in significant penalties for noncompliance, negatively affecting the company's business and operating results[114] - Regulatory changes and increased taxation on beverage alcohol products could harm sales revenue and profit margins[123] Management and Governance - The company does not expect to pay dividends in the foreseeable future, and investors should not purchase common stock expecting cash dividends[135] - The company must protect its intellectual property, as failure to do so could harm brand reputation and competitive ability, potentially leading to costly litigation[98] - Attracting and retaining qualified personnel is critical for operational efficiency, and increased competition for employees could raise costs and impact operating results[95] - The company may struggle to maintain effective internal controls over financial reporting, which could negatively impact stock price and investor confidence[119] Stock-Based Compensation - Stock-based compensation is measured at grant-date fair value and recognized as expense over the vesting period[217] - The Black-Scholes option pricing model is used to determine the fair value of stock options and warrants[218] - The expected life of stock options is estimated using the "simplified method," which averages the time to vesting and contractual maturity[218] - Subjective assumptions are required to determine the fair value of stock-based awards, leading to potential variability in future expense[218] - Changes in assumptions could result in materially different stock-based compensation expenses for future awards[218] - Management's estimates for stock-based compensation involve inherent uncertainties and judgment[218]

Financial Performance - For the three months ended June 30, 2022, net revenues increased to $4,498,940, a 37% increase from $3,287,760 in the same period of 2021[14] - Gross profit for the six months ended June 30, 2022, was $1,505,158, compared to $1,422,473 for the same period in 2021, reflecting a 5.8% increase[14] - The company reported a net loss of $5,758,857 for the three months ended June 30, 2022, compared to a net loss of $6,560,600 for the same period in 2021, indicating a 12.2% improvement[14] - Net loss for 2022 was $11,753,264, compared to a net loss of $10,760,538 in 2021, representing an increase in loss of approximately 9.2%[20] - Operating expenses for the six months ended June 30, 2022, totaled $13,018,259, compared to $12,279,421 for the same period in 2021, an increase of 6.0%[14] Assets and Liabilities - Total current assets rose to $9,469,991 as of June 30, 2022, up from $8,341,892 at the end of 2021, marking a 13.5% increase[11] - Total liabilities decreased to $5,412,054 as of June 30, 2022, down from $7,512,143 at the end of 2021, a reduction of 28.1%[11] - The company’s accumulated deficit increased to $102,393,821 as of June 30, 2022, from $90,640,557 at the end of 2021, reflecting a 12.9% increase[11] - Cash and cash equivalents increased slightly to $4,206,208 as of June 30, 2022, compared to $4,181,383 at the end of 2021[11] Cash Flow - Cash used in operating activities for continuing operations was $7,107,851 in 2022, a decrease of 7.4% from $7,673,122 in 2021[20] - Net cash used for operating activities during the six months ended June 30, 2022, was $7,107,851, a decrease from $7,673,122 in the same period of 2021[1] - Net cash provided by financing activities during the six months ended June 30, 2022, was $7,132,676, down from $19,477,363 in the prior year[1] Stock and Financing - The company issued 2,300,000 shares of common stock for cash, raising $8,067,400 during the reporting period[18] - The weighted average number of common shares outstanding for the three months ended June 30, 2022, was 36,675,323, compared to 27,356,918 for the same period in 2021, a 34.1% increase[14] - The company raised $8,075,074 from the issuance of common stock in 2022, compared to $19,630,565 in 2021, indicating a decrease of approximately 58.8%[20] Operational Highlights - The company is expanding its distribution system to select international markets, enhancing its growth potential[22] - The company aims to identify and build early-stage beverage brands with strong growth potential within its distribution system[22] - The company signed an agreement to acquire 80% of Pulpoloco Sangria, enhancing control over manufacturing and distribution in the US and expanding into international markets[2] Expenses - Advertising expenses for Q2 2022 were $131,327, a decrease of 12.8% compared to $150,753 in Q2 2021[54] - Non-cash share-based compensation increased to $5,070,833 in 2022 from $3,941,904 in 2021, reflecting a rise of approximately 28.7%[20] - The company recognized share-based compensation and warrant expense of $4,122,702 for the six months ended June 30, 2022[1] Legal and Compliance - The company is actively discussing a resolution regarding a lawsuit filed by Copa Di Vino Corporation, which claims that 380,959 shares are owed[2] Miscellaneous - No relevant financial performance or user data was provided in the documents[129] - No future outlook or performance guidance was mentioned in the documents[129] - No information on new products or technology development was included in the documents[129] - No details regarding market expansion or acquisitions were found in the documents[129] - No new strategies were outlined in the documents[129]

Financial Performance - Net revenues for the three months ended March 31, 2022, were $3.93 million, a 83.5% increase from $2.14 million in the same period of 2021[13] - Gross profit for Q1 2022 was $832,002, compared to $517,420 in Q1 2021, reflecting a 60.7% increase[13] - The net loss for the three months ended March 31, 2022, was $5.99 million, compared to a net loss of $4.44 million in the same period of 2021, indicating a 35% increase in losses[13] - Total revenues for the three months ended March 31, 2022, were $3,926,573, representing a 83% increase from $2,138,924 in the same period of 2021[104] - The net loss for the three months ended March 31, 2022, was $5,994,407, compared to a net loss of $4,442,219 for the same period in 2021[105] Assets and Liabilities - Total assets increased to $20.61 million as of March 31, 2022, up from $16.39 million at December 31, 2021, representing a growth of 25.5%[10] - Cash and cash equivalents at the end of Q1 2022 were $8.50 million, up from $4.18 million at the beginning of the year, marking a 103.5% increase[17] - The accumulated deficit increased to $96.63 million as of March 31, 2022, from $90.64 million at the end of 2021, reflecting a growth in losses[15] - Total notes payable decreased from $2,967,812 as of December 31, 2021, to $2,171,068 as of March 31, 2022, reflecting a reduction of approximately 27%[64] - Total operating lease liability as of March 31, 2022, is $953,065, with a current portion of $284,372[87] Operating Expenses - Total operating expenses rose to $6.52 million in Q1 2022, up from $5.07 million in Q1 2021, an increase of 28.8%[13] - Operating expenses increased by $1,449,606 to $6,515,955 for the three months ended March 31, 2022, primarily due to warrant expenses, marketing, and shipping costs[105] - Interest expense on notes payable increased to $81,700 for the three months ended March 31, 2022, compared to $9,625 for the same period in 2021, representing a significant increase of 748%[65] Inventory and Receivables - Accounts receivable net of allowances were $13,949 as of March 31, 2022, down from $45,203 as of December 31, 2021[33] - The company’s inventory reserve increased to $253,703 as of March 31, 2022, compared to $223,223 as of December 31, 2021[34] - The company recorded a reserve for excess inventory based on management's estimates of forecast turnover, indicating proactive inventory management strategies[34] Shareholder Information - The company reported a weighted average of 35,188,404 common shares outstanding for continuing operations in Q1 2022, compared to 24,642,532 in Q1 2021, an increase of 42.7%[13] - The company issued 550,000 shares of common stock in exchange for services and 2,300,000 shares as part of S3 drawdown and convertible instruments during the three months ended March 31, 2022[72] - The total number of shares issuable under the 2020 Stock Incentive Plan increased by 1,679,812 shares as of January 1, 2022, reflecting the plan's "EVERGREEN" feature[76] Business Operations - Splash Beverage Group is expanding its distribution system to select international markets, enhancing its portfolio of beverage brands[21] - The company initiated a plan to divest its Canfield Medical Supply, Inc. business, which is now reflected as discontinued operations[22] - The company completed the acquisition of CdV for a total consideration of approximately $6.0 million, including $2.0 million in cash and $2.0 million in contingent shares[89] - The increase in sales was attributed to a $505,105 contribution from CdV and a $1,135,233 increase from the Qplash e-commerce platform[104] Compliance and Certifications - The report includes certifications from the CEO and CFO as required by regulations[134] - The report was signed by Robert Nistico, Chairman and CEO, and Ron Wall, CFO, on May 16, 2022[138] - The company has no material uncertain tax positions as of March 31, 2022, and December 31, 2021[49] Asset Management - The company evaluates long-lived assets for impairment annually, ensuring asset values are recoverable based on future cash flows[58] - Depreciation expense for the three months ended March 31, 2022, was $30,695, a decrease from $43,487 for the same period in 2021[36] - Total property, plant, and equipment net value decreased to $542,535 as of March 31, 2022, from $569,785 as of December 31, 2021[36]