Item 1. Business
Item 1. Business.
Company Overview
Splash is a portfolio company
managing multiple brands across several growth segments within the consumer beverage industry. Splash has built organizational capabilities
and an infrastructure enabling it to incubate and/or acquire brands with the intention of efficiently accelerating them to higher volume
and sales revenue. The management team has proven capabilities in building consumer franchises and marketing and distributing multiple
brands of beverages within the non-alcoholic and alcoholic segments. Manufacturing is typically outsourced to third party co-packers
and distillers, or in select cases for a brand such as Copa DI Vino ® wines, performed within our own facility in Oregon.
We believe the distribution landscape
in the beverage industry is changing rapidly as tech-enabled e-commerce business models are thriving. Direct to consumer, office or home
solutions are projected to continue to gain traction in the future. Recognizing this opportunity Splash continues to shape its operating
model to be vertically integrated with our e-commerce platform, Qplash, which purchases local and regional brands for developing a direct
line of sales to boutique retail stores and consumers.
Splash’s wholly owned subsidiary,
Splash Beverage Group II, Inc. was originally incorporated in the State of Nevada under the name TapouT Beverages, Inc. for the purpose
of acquiring the rights under a license agreement with TapouT, LLC (Authentic Brands Group). Splash has license rights to the TapouT
Performance brand in North America (Including US Territories and Military Bases), United Kingdom, Brazil, South Africa, Scandinavia,
Peru, Colombia, Chile and Guatemala.
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In December 2020, Splash Beverage
Group Inc. purchased the key assets of the Copa DI Vino ® single serve wine company. The operations and IP for Copa DI
Vino ® are wholly owned by Splash and incorporated in the state of Nevada under the name Copa DI Vino ® Wine
Group Inc.
In addition, Splash has a joint
venture with SALT Naturally Flavored Tequila and Pulpoloco sangria that comes in a biodegradable can.
The Company’s leadership
understands the importance of infusing beverage brands with strong popular culture and lifestyle elements that drive trial, belief and,
most importantly, repeat purchases.
Our management team led by Robert
Nistico has over 28 years of experience in all levels of the three-tier distribution system used in the beverage industry working with
brands such as Red Bull and companies such as Gallo Winery and Republic National Distributing Company (RNDC Texas). Our President &
CMO, Bill Meissner, has led major beverage brands including Sparkling Ice, Fuze, Sweet Leaf Tea and Jones Soda. Our CFO, Stacy McLaughlin,
has over 15 years of experience in public company accounting and finance, with an emphasis on reporting, fundraising and mergers and
acquisitions. Our Senior Vice President of Sales, James Allred, has over 25 years’ experience in the beverage industry, predominately
with Anheuser-Busch.
Our Strategy
Our strategy is to combine the
traditional approach of manufacturing, distributing, and marketing of beverages, with early-stage brands that have a reasonable level
of pre-existing brand awareness and market presence, or have attributes that we believe to be purely innovative. We believe this allows
us to break through the clutter of numerous brand introductions and dilute risk. We apply this philosophy regardless of whether the brand
is 100% owned or a joint venture.
For acquisition or joint venture
consideration, we prefer to work with brands that already have one or more of the following in place:
●
Some level of preexisting brand awareness.
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Regional presence that can be expanded.
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Licensing an existing brand name (TapouT for example).
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Add to an underdeveloped and/or growing category capitalizing on consumer
trends.
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Innovation to an existing attractive category (such as flavored tequila).
●
A near term clear path to profitability.
We believe this platform model
provides us with two paths to success: one, developing our wholly owned core brands and two, the ability to tap into high growth, early-stage
brands ready to scale. This platform allows us to limit risk, and significantly reduce development expenses while simultaneously increasing
efficiencies for all brands in our portfolio.
Our management team has over
120 years of combined experience in the beverage industry, including decades of successful brand introductions by our management
team (Gallo, Red Bull, Bacardi, Diageo, Sparkling Ice, Coca-Cola, FUZE Beverage, NOS Energy, PepsiCo, SoBe Beverages, AB InBev, Muscle
Milk, Marley Beverages), we believe our ability to break through the distribution and retail bottlenecks makes us an attractive joint
venture partner to many new brand owners.
Splash has the ability to fully
own a brand or be flexible to engage in business ventures structured with a revenue split, or an equity position.
The benefit to Splash in these
shared brand ownerships is the ability to avoid the development costs for new products. This model spreads our risk over several brands,
contributes to our economies of scale, improves our relationship with distributors and reduces the overall cost of infrastructure.
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The Company also believes the
distribution landscape in the beverage category is changing rapidly. Tech-enabled business models are thriving and direct to consumer,
office and home solutions are projected to continue to gain traction as beverage alcohol regulations evolve. A core strategy for us is
to optimize the early success we’re seeing with the Qplash online platform, our consumer-packaged goods retail division and our
first entry point into the growing e-commerce channel.
Products
We currently produce,
distribute and market SALT Naturally Flavored Tequila (“SALT”), a 100% agave 80 proof line of flavored tequilas, “TapouT
Performance,” a line of performance beverages that complete in the hydration and energy categories, Copa DI Vino ®
single serve wine by the glass, and also import Pulpoloco Sangria in 3 flavors.
The following is a description
of these products.
SALT Flavored Tequila
We oversee production, distribute,
and market the following flavors under the brand name SALT Naturally Flavored Tequila:
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Citrus flavor
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Berry flavor
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Chocolate flavor
Vodka, rum, and brown spirits
have experienced significant growth when flavors are introduced, and we expect this growth of flavors to continue, as the tequila category
continues to rapidly expand.
SALT is currently being distributed
by various Anheuser-Busch & Miller-Coors distributorships, and other distributors in multiple U.S. states. Additionally, SALT is
for sale in Mexico. SALT has also launched in Guatemala and Japan and efforts continue to grow the brand’s international presence.
SALT is a business venture between
the Company and SALT USA, LLC. All aspects of manufacturing, logistics, distribution and marketing are our responsibility.
TapouT Performance Isotonic Sports Drinks
We produce, market, sell and
distribute the following sports beverages under the brand name TapouT:
●
TapouT Performance
●
TapouT Energy
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TapouT Performance Beverages
are a line of unique advanced performance beverages containing ingredients known for various functional benefits including, focus, cognition,
energy, recuperative and cell regeneration which promotes better absorption of nutrients, increase hydration and cellular recovery. They
are exclusively formulated with GRAS (FDA Designation “Generally Regarded as Safe”) ingredients versus controversial ingredients
often used in many competitive products. TapouT Performance Beverages are all natural with highly innovative proprietary blends designed
to enhance physical and or mental performance.
TapouT, formally associated with
the UFC and mixed martial arts has been producing branded clothing and light exercise equipment for over 23 years and has a high level
of aided and unaided brand awareness.
TapouT License Agreement
We have the rights under a License
Agreement with ABG TapouT (the “License Agreement”) to produce, market, sell and distribute TapouT sports beverages
in North America (including US Territories and Military Bases), United Kingdom, Brazil, South Africa, Australia, Scandinavia, Peru, Colombia,
Chile and Guatemala. The beverages covered by the License Agreement include sports drinks, energy drinks, energy shots, electrolyte chews,
energy bars, water, protein, and teas.
We pay a 6% royalty of net sales
or a guaranteed minimum annual royalty of $660,000, whichever is greater. The License Agreement will expire on December 31, 2025, with
a renewal option through December 31, 2028 at which time it will be reviewed and renegotiated if necessary.
We have the right to use the
TapouT brand to market, advertise and promote for sale our TapouT beverages and branded products. As part of the alliance, Splash commits
to investing 2% of sales in marketing to the TapouT Performance Brand. TapouT provides marketing collateral for advertising and promotion
and has influential relationships with select celebrities and athletic talent. TapouT agrees to use reasonable efforts to request its
retained celebrities and/or athletes be present at autograph signings, tradeshows and other similar events.
Copa DI Vino ® Wine Group, Inc.
(CdV) and Related Financing
On December 24, 2020, the
Company entered into an Asset Purchase Agreement with CdV, pursuant to which the Company purchased certain assets and assumed certain
liabilities that comprise the CdV business for a total purchase price of $5,980,000, payable in the combination of $2,000,000 in cash,
a $2,000,000 convertible promissory note to CdV and a variable number of shares of the Company’s common stock based on an attainment
of revenue hurdles.
In conjunction with the acquisition,
the Company also entered into a Revenue Loan and Security Agreement (the “Loan and Security Agreement”) by and among the
Company, Robert Nistico, additional guarantor and each of the subsidiary guarantors from time-to-time party thereto (each a “Guarantor”,
and, collectively, the “Guarantors”), and Decathlon Alpha IV, L.P. (the “Lender”). The Loan and Security Agreement
provided for a revenue-based credit facility of $1,578,237 (the “Gross Amount”) with the Lender (the “Credit Facility”).
Copa DI Vino ® Wine Group, Inc.
Copa DI Vino ®
is the leading producer of premium wine by the glass in the United States. The Copa DI Vino ® product line is highly innovative
as a ready to drink wine glass capable of going anywhere without the need for a bottle, corkscrew or glass. The company also has a growing
keg wine business for on-premises restaurants and bars.
Through our acquisition of Copa
DI Vino ® Corporation, we are now able to offer nine varietals of wine: Pinot Grigio, Riesling, Merlot, Chardonnay, White
Zinfandel, Moscato, Red Blend, Sauvignon Blanc and Cabernet Sauvignon. In addition to its wine varietals, Copa DI Vino ®
also procures Pulpoloco, a sangria which is encased in an eco-friendly fiber based can from Spain. The rights to utilize this packaging
for multiple categories were conveyed to SBG in conjunction with the distribution rights.
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E-commerce
“Qplash” is a wholly
owned division of Splash. It is our first entry point into the growing e-commerce channel. The division sells beverages online through www.qplash.com ,
and third-party storefronts such as Amazon.com. Inside of the division, there are two primary customer groups: business to business retailers,
which in turn offer the products to their customers, and business to consumer, selling direct to end users. The business-to-business
program allows businesses to control inventory, order with payment terms, and offer the convenience of delivery directly to each store.
Currently Qplash offers
over 1,500 listings and has warehouses that ship from both California and Pennsylvania.
Our Competitive Strengths
We believe the following competitive strengths
contribute to the Company’s success and differentiate us from our competitors:
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An established distribution network through global sales channels;
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A hybrid distribution model that leverages multiple routes to market,
including national chains, independent local markets, regional chains, and specialty food and C-Stores
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Long-term relationships with retailers and the establishment of chains;
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Premium customer service;
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Dynamic and sustainable product offerings of natural quality and
freshness with health benefits;
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A highly experienced management team;
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Strategically selected, dedicated sales professionals;
●
Qplash, our e-commerce platform, which provides us an integrated distribution
platform for our non-alcoholic brands;
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Ability to execute and distribute across many geographies on behalf
of our licensed brand portfolio;
●
Strong brand awareness through partnerships and acquisitions of brands
with pre-existing brand awareness, or viewed as truly innovative; and
●
Celebrity and professional athlete endorsement of our brands.
Manufacturing and Co-packing
We are responsible for the manufacturing
of Copa DI Vino ® , TapouT Performance and SALT. The Copa DI Vino ® product line is bottled at our manufacturing
facility in The Dalles, Oregon. Pulpoloco is imported from Spain as a finished product.
Although we are responsible for
manufacturing TapouT Performance and SALT, we do not directly manufacture these products, but instead outsource such manufacturing to
third party bottlers and contract packers and distillers.
Our TapouT Performance and SALT
products are manufactured in the United States and Mexico, respectively under separate arrangements with each party. Our co-packaging
arrangements are terminable upon request and do not obligate us to produce any minimum quantities of products within specified periods.
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We purchase concentrates, flavors,
dietary ingredients, cans, bottles, caps, labels, and other components and ingredients for our beverage products from our suppliers,
which are delivered to our manufacturing operations and various third-party bottlers and co-packers. In some cases, certain common supplies
may be purchased by our various third-party bottlers and co-packers. Depending on the product, the third-party bottlers or packers add
filtered water and/or other ingredients (including dietary ingredients) for the manufacture and packaging of the finished products into
our approved containers in accordance with our formulas.
Distribution
For our beverage-alcohol products,
we operate within what is referred to as a “Three Tier Distribution System” where manufacturers are not permitted to sell
directly to retailers, but instead contract for local and regional distribution with independent distributors. These distributors typically
have geographic rights to distribute major beverage brands and call on every store in a given area such as major cities or regions. Our
management team has extensive experience working within this channel and believes that we will be successful in building a strong network
of these distributors.
In addition to working with these
independent distributors, we also have distribution arrangements with national retail accounts to distribute some of our products directly
through their warehouse operations. Most notably, SBG executed a distribution agreement with AB-InBev, for distribution with their own
operations, AB ONE. This provides SBG very effective distribution capabilities.
Intellectual Property
During the fiscal year ended December 31, 2023, we
were granted a trademark for Copa DI Vino ® . The United States Patent and Trademark Office issued the trademark on March
12, 2024, providing our company exclusive rights to use the trademark in connection with the product categories specified in this Form
10-K.
Employees
We have 32 full-time
employees, including non-officer employees and our executive officers. None of our employees are represented by a labor
union. We have not experienced any work stoppages and consider our relations with our employees to be good.
Listing on the NYSE American
Our common stock and warrants
are listed on the NYSE American exchange under the ticker symbols “SBEV” and “SBEV WT,” respectively.
Recent Developments
In January 2024, the Company
entered into a convertible note with an individual in the amount of $250,000. The note has an eighteen-month term, accrues interest at
12% and is convertible into shares of common stock of the Company at $0.50 per share, which also includes 200% warrants at $0.25
In January 2024, the Company
entered into a commercial loan in the amount of $500,000. The total cost of the loan is $250,000 and is paid in weekly increments of
6.97% of the current receivable balance.
In February 2024, the Company
entered into a convertible note with an individual in the amount of $150,000. The note has an eighteen-month term, accrues interest at
12% and is convertible into shares of common stock of the Company at $0.40 per share, which also includes 250% warrants at $0.25.
In March 2024, the Company received
a $109,000 cash advance from our chief executive officer, resulting in a related party payable. This note bears 0% interest.
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Corporate Information
Splash was originally incorporated
in the State of Nevada under the name TapouT Beverages, Inc. for the purpose of acquiring the rights under a license agreement with TapouT,
LLC (Authentic Brands Group) for the right to use the TapouT brand in connection with manufacturing and selling certain beverages.
Splash executed a reverse merger
with a fully reporting, public entity called Canfield Medical Supply, Inc. and became a wholly-owned subsidiary of Canfield Medical Supply
Inc. on March 31, 2020. At the time of the merger Canfield’s state of incorporation was Colorado. At the time of the merger Canfield’s
common stock was quoted on the OTCQB.
On July 31, 2021, we changed
our name from Canfield Medical Supply, Inc. to Splash Beverage Group, Inc.
On June 11, 2021, our common
stock and warrants to purchase common stock began trading on the NYSE American under the symbols “SBEV” and SBEV WT,”
respectively.
On November 8, 2021, we changed
our state of incorporation from Colorado to Nevada.
Our principal offices are located
at 1314 E. Las Olas Blvd, Suite 221, Fort Lauderdale, Florida 33301. Our website address is www.splashbeveragegroup.com .
We have not incorporated by reference into this Annual Report on Form 10-K the information that can be assessed through our website and
you should not consider it to be part of this Annual Report on Form 10-K.
Available Information
We file annual, quarterly, and current reports, proxy
statements and other information with the U.S. Securities Exchange Commission (the “SEC”). These filings are available to
the public through the SEC’s website at http://www.sec.gov. All statements made in any of our securities filings, including all
forward-looking statements or information, are made as of the date of the document in which the statement is included unless otherwise
specified, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to
do so by law.