Endovia Health Sciences, Inc. 10-K

Item 8. Financial Statements and Supplementary Data. Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 468) F-2&3 Consolidated Balance Sheets December 31, 2024 and December 31, 2023 F-4 Consolidated Statements of Operations For the Years Ended December 31, 2024 and December 31 2023 F-5 Consolidated Statements of Changes in Stockholders’ Equity For the years ended December 31, 2024 and 2023 F-6 Consolidated Statements of Cash Flows For the Year Ended December 30, 2024 and 2023 F-7 Notes to the Consolidated Financial Statements F-8 F- 1 Report of Independent Registered Public Accounting Firm (PCAOB ID: 468 ) Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders Splash Beverage Group, Inc. Fort Lauderdale, Florida Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Splash Beverage Group, Inc. at December 31, 2024 and 2023, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the years ended December 31, 2024 and 2023, and the related notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for the years ended December 31, 2024 and 2023, in conformity with accounting principles generally accepted in the United States of America. Going Concern Uncertainty The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has suffered recurring losses from operations and has an accumulated deficit and a working capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. F- 2 Evaluation of Intangible Assets for Impairment Description of the Matter As discussed in Note 2 to the consolidated financial statements, intangible assets are tested for impairment at least annually or when events or circumstances indicate the fair value of the asset may be below its carrying value. This analysis involves comparing events and circumstances such as general macroeconomic conditions, conditions specific to the industry and company specific factors. These fair value estimates are sensitive to significant assumptions and judgments, such as projections of operating expenditures, discount rates, and future levels of revenue. The Company has experienced a decline in its reported amounts of Beverage revenue and the Beverage operating segment has experienced losses from operations for the past several years. These factors were considered a triggering event indicative of impairment, which resulted in an impairment assessment by management. Pursuant to current accounting guidance, management performed a quantitative analysis and concluded that its intangible assets were impaired and the Company recorded impairment charges of approximately $4.3 million during the year ended December 31, 2024. At December 31, 2024, the Company’s intangible asset balance was $0. Auditing management’s annual impairment tests was complex because of the significant judgment required to evaluate management’s assumptions used to determine the fair value of the intangible assets. How We Addressed the Matter in our Audit Our audit procedures related to the evaluation of intangible assets for impairment included the following, among others: 1. We evaluated managements significant accounting policies related to the impairment of intangible assets for reasonableness. 2. We evaluated management’s assessment of the grouping of long-lived assets for which separately identifiable cash flows can be determined. 3. With respect to the Company’s valuation of its intangible assets: a. We assessed the qualifications and competence of management b. We evaluated the methodologies used to determine the fair value of the Company’s intangible assets c. We reperformed management’s quantitative analysis to assess the impact of intangible asset impairment 4. We assessed the adequacy of the Company’s disclosures regarding impairment assessments included in Note 2. Rose, Snyder & Jacobs LLP We have served as the Company’s auditor since 2023 Encino, CA July 11, 2025 F- 3 Splash Beverage Group, Inc. Consolidated Balance Sheets December 31, 2024 and December 31, 2023 December 31, 2024 December 31, 2023 Assets Current assets: Cash and cash equivalents $ 15,346 $ 379,978 Accounts Receivable, net 396,855 890,631 Prepaid Expenses 364,087 220,320 Inventory 893,061 2,252,469 Other receivables 234,770 233,850 Total current assets 1,904,119 3,977,248 Non-current assets: Deposit 48,922 49,446 Goodwill — 256,823 Intangibles assets, net — 4,459,309 Investment in Salt Tequila USA, LLC 250,000 250,000 Right of use assets 351,336 556,140 Property and equipment, net 204,808 349,802 Total non-current assets 855,066 5,921,520 Total assets $ 2,759,185 $ 9,898,768 Liabilities and Stockholders’ Equity Liabilities: Current liabilities Accounts payable and accrued expenses $ 5,232,241 $ 4,444,286 Right of use liability, current portion 305,167 262,860 Related party notes payable 389,000 380,000 Notes payable, net of discounts 9,632,505 7,748,518 Shareholder advances 200,000 200,000 Accrued interest payable 3,610,329 1,714,646 Total current liabilities 19,369,242 14,750,310 Long-term liabilities : Notes payable, net of discounts 1,971,095 457,656 Right of use liability, net of current portion 53,697 296,128 Total long-term liabilities 2,024,792 753,784 Total liabilities $ 21,394,034 $ 15,504,094 Stockholders’ equity: Preferred stock, $ 0.001 par value, 5,000,000 shares authorized, no shares issued — — Common Stock, $ 0.001 par, 7,500,000 shares authorized, 1,669,835 and 1,108,253 shares issued and outstanding, at December 31, 2024 and December 31, 2023, respectively 1,670 1,108 Additional paid in capital 137,114,578 127,744,932 Accumulated other comprehensive income 81,180 ( 16,583 ) Accumulated deficit ( 155,832,277 ) ( 133,334,783 ) Total stockholders’ equity ( 18,634,849 ) ( 5,605,326 ) Total liabilities and stockholders’ equity $ 2,759,185 $ 9,898,768 The share amounts above have been retroactively adjusted to reflect the 1 for 40 reverse stock split that took effect on March 27, 2025. The accompanying notes are an integral part of these consolidated financial statements. F- 4 Splash Beverage Group, Inc. Consolidated Statements of Operations For the Years Ended December 31, 2024 and December 31, 2023 2024 2023 Net revenues $ 4,155,208 $ 18,850,152 Cost of goods sold ( 3,799,758 ) ( 13,281,457 ) Gross margin 355,450 5,568,695 Operating expenses: Contracted services 928,377 1,402,572 Salary and wages 3,672,759 5,003,392 Non-cash share-based compensation 2,356,684 1,169,858 Other general and administrative 8,693,459 10,786,011 Sales and marketing 750,407 2,493,520 Total operating expenses 16,401,686 20,855,353 Loss from continuing operations ( 16,046,236 ) ( 15,286,658 ) Other income/(expense): Other Income/expense ( 2,552 ) ( 30,328 ) Interest income 1,991 2,634 Interest expense ( 3,702,611 ) ( 1,856,777 ) Legal reserve ( 330,000 ) — Amortization of debt discount ( 3,677,143 ) ( 3,832,628 ) Total other expense ( 7,710,315 ) ( 5,717,099 ) Provision for income taxes — — Net (loss) from continuing operations, net of tax ( 23,756,551 ) ( 21,003,757 ) Net loss $ ( 23,756,551 ) $ ( 21,003,757 ) Other comprehensive loss Foreign currency translation gain (loss) $ 97,763 $ 3,889 Total comprehensive loss $ ( 23,658,788 ) $ ( 20,999,868 ) Loss per share - continuing operations Basic and Diluted ( 17.68 ) ( 19.79 ) Weighted average number of common shares outstanding - continuing operations Basic and Diluted 1,338,428 1,061,241 The share amounts above have been retroactively adjusted to reflect the 1 for 40 reverse stock split that took effect on March 27, 2025. The accompanying notes are an integral part of these consolidated financial statements. F- 5 Splash Beverage Group, Inc. Consolidated Statements of Changes in Stockholders’ Equity For the Years ended December 31, 2024 and 2023 Common stock Additional Paid-in Accumulated Other Comprehensive Accumulated Total Stockholders’ Equity Shares Amount Capital Income Deficit (Deficit) Balances at December 31, 2022 1,027,138 1,027 121,672,606 ( 20,472 ) ( 112,331,026 ) 9,322,135 Note discount created from issuance of common stock and warrants on convertible instruments 56,875 57 4,588,193 — — 4,588,250 Share based compensation — — 840,817 — — 840,817 Conversion of notes payable to common stock 11,323 11 230,332 — — 230,343 Issuance of common stock for services 12,917 13 412,984 — — 412,997 Accumulated Comprehensive Income - Translation — — — 3,889 — 3,889 Net loss — — — — ( 21,003,757 ) ( 21,003,757 ) Balances at December 31, 2023 1,108,252 1,108 127,744,932 ( 16,583 ) ( 133,334,783 ) ( 5,605,326 ) Balances at December 31, 2023 1,108,252 1,108 127,744,932 ( 16,583 ) ( 133,334,783 ) ( 5,605,326 ) Adoption of ASU 2020-06 — — ( 2,191,103 ) — 1,259,057 ( 932,046 ) Stock based compensation — — 1,424,745 — — 1,424,745 Issuance of common stock for convertible note 47,625 48 641,202 — 641,250 Issuance of warrants on convertible instruments — — 4,327,247 — — 4,327,247 Issuance of common stock for services 55,458 55 721,634 — — 721,689 Conversion of notes payable to common stock 458,500 459 4,445,921 — 4,446,380 Accumulated Comprehensive Income - Translation — — — 97,763 — 97,763 Net loss — ( 23,756,551 ) ( 23,756,551 ) Balances at December 31, 2024 1,669,835 1,670 137,114,578 81,180 ( 155,832,277 ) ( 18,634,849 ) The accompanying notes are an integral part of these consolidated financial statements F- 6 Splash Beverage Group, Inc. Consolidated Statements Cash Flows For the Year Ended December 30, 2024 and 2023 2024 2023 Net loss $ ( 23,756,551 ) $ ( 21,003,757 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 540,297 545,977 ROU assets, net 4,680 3,474 Amortization of debt discount 3,677,143 3,832,628 Loss from intangible impairment 4,324,064 — Non-cash share based compensation 2,356,684 1,169,858 Changes in working capital items: Accounts receivable, net 493,777 921,479 Inventory, net 1,359,408 1,468,838 Prepaid expenses and other current assets ( 144,686 ) 238,241 Deposits 524 ( 157 ) Accounts payable and accrued expenses 1,164,003 1,061,101 Accrued Interest payable 1,976,738 1,573,055 Net cash used in operating activities - continuing operations ( 8,003,919 ) ( 10,189,263 ) Cash Flows from Investing Activities: Capital Expenditures ( 3,235 ) ( 14,113 ) Net cash used in investing activities -– continuing operations ( 3,235 ) ( 14,113 ) Cash Flows from Financing Activities: Cash advance (repayment) from shareholder — 200,000 Related party cash advance 9,000 380,000 Proceeds from issuance of debt 9,545,300 6,610,681 Principal repayment of debt ( 2,009,541 ) ( 1,042,961 ) Net cash provided by financing activities - continuing operations 7,544,759 6,147,720 Net cash effect of exchange rate changes on cash 97,763 3,889 Net Change in Cash and Cash Equivalents ( 364,632 ) ( 4,051,767 ) Cash and Cash Equivalents, beginning of year 379,978 4,431,745 Cash and Cash Equivalents, end of year $ 15,346 $ 379,978 Supplemental Disclosure of Cash Flow Information: Cash paid for Interest $ 795,022 $ 243,087 Supplemental Disclosure of Non-Cash Investing and Financing Activities Convertible notes payable and accrued interest converted to common stock (452,914 shares) $ $ 230,000 Convertible notes payable and accrued interest converted to common stock (458,500 shares) $ 4,428,040 $ — The accompanying notes are an integral part of these consolidated financial statements. F- 7 Splash Beverage Group, Inc. Notes to the Consolidated Financial Statements Note 1 – Business Organization and Nature of Operations Splash Beverage Group (“SBG” or “Splash”), formally Canfield Medical Supply, Inc. (“CMS”) was incorporated in the State of Ohio on September 3, 1992, and changed domicile to Colorado on April 18, 2012. CMS was in the business of home health services, primarily the selling of durable medical equipment and medical supplies to the public, nursing homes, hospitals and other end users. On December 31, 2019, CMS entered into an Agreement and Plan of Merger (the “Merger Agreement”) with SBG Acquisition Inc. (“Merger Sub”), a Nevada Corporation wholly owned by CMS, and Splash Beverage Group, Inc. a Nevada corporation (“Splash”) pursuant to which Merger Sub merged with and into Splash (the “Merger”) with Splash as the surviving company and a wholly-owned subsidiary of CMS. The Merger was consummated on March 31, 2020. As the owners and management of Splash have voting and operating control of CMS following the Merger, the Merger transaction was accounted for as a reverse acquisition (that is with Splash as the acquiring entity), followed by a recapitalization. As part of the recapitalization, previously issued shares of SBG preferred stock have been reflected as shares of common stock that were received in the Merger. These common shares have been retrospectively presented as outstanding for all periods. Splash specializes in the manufacturing process, distribution, and sales & marketing of various beverages across multiple channels. Splash operates in both the non-alcoholic and alcoholic beverage segments. Additionally, Splash operates its own vertically integrated B-to-B and B-to-C E-commerce distribution platform called Qplash, further expanding its distribution abilities and visibility. In July 2020 the Company filed a Certificate of Amendment of Articles of Incorporation of CMS with the Secretary of State of the State of Colorado, pursuant to which the Company changed its name from CMS. to Splash Beverage Group, Inc. On July 31, 2020, we received approval from FINRA to change the Company’s name from CMS to Splash Beverage Group, Inc. Our new ticker symbol is SBEV. On December 24, 2020, SBG consummated an Asset Purchase Agreement (the “Copa APA”) with Copa DI Vino ® Corporation (“CdV”), to purchase certain assets and assume certain liabilities that comprise the Copa DI Vino ® business for a total purchase price of $ 5,980,000 , payable in the combination of $ 2,000,000 in cash (“Cash Consideration”), $ 2,000,000 convertible promissory note (the “Convertible Note”) to Seller and a variable number of shares of the Company’s common stock based on a attainment of revenue hurdles. CdV is one of the leading producers of premium wine by the glass in the United States with its primary offices and facilities in The Dalles, Oregon. On February 2021, Management initiated a plan to divest its CMS business. As a result, the assets and operations of CMS have been retrospectively reflected as discontinued operations. On November 12, 2021 the Company changed its state of Domicile from Colorado to Nevada. In coordination with up listing to the NYSE on June 11, 2021 the Company consummated a 1.0 for 3.0 reverse stock split. All common stock shares stated herein have been adjusted to reflect the split. Note 2 – Summary of Significant Accounting Policies Basis of Presentation and Consolidation These consolidated financial statements include the accounts of Splash and its wholly owned subsidiaries, Holdings and Splash Mex, and CdV. All intercompany balances have been eliminated in consolidation. F- 8 Splash Beverage Group, Inc. Notes to the Consolidated Financial Statements Note 2 – Summary of Significant Accounting Policies, continued Our investment in Salt Tequila USA, LLC is accounted for at cost, as the company does not have the ability to exercise significant influence. Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America (GAAP). Certain reclassifications have been made to the prior period financial statements to conform to the current period classifications. These reclassifications had no impact on net loss. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash Equivalents and Concentration of Cash Balance We consider all highly liquid securities with an original maturity of three months or less to be cash equivalents. We had no cash equivalents at December 31, 2024 or December 31, 2023. Our cash in uninsured foreign bank accounts was $ 4,817 and $ 0 at December 31, 2024 and December 31, 2023, respectively. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivables are carried at their estimated collectible amounts and are periodically evaluated for collectability based on past credit history with clients and other factors. We establish provisions for losses on accounts receivable on the basis of loss experience, known and inherent risk in the account balance, and current economic conditions. At December 31, 2024 and December 31, 2023, our accounts receivable amounts are reflected net of allowances of $ 300,827 and $ 183,089 , respectively. Inventory Inventory is stated at the lower of cost or net realizable value, accounted for using the weighted average cost method. The inventory balances at December 31, 2024 and December 31, 2023 consisted of raw materials, work-in-process, and finished goods held for distribution. The cost elements of inventory consist of purchase of products, transportation, and warehousing. We establish provisions for excess or inventory near expiration based on management’s estimates of forecast turnover of inventories on hand and under contract. A significant change in the timing or level of demand for certain products as compared to forecast amounts may result in recording additional provisions for excess or expired inventory in the future. Provisions for excess inventory are included in cost of goods sold and have historically been adequate to provide for losses on inventory. We manage inventory levels and purchase commitments in an effort to maximize utilization of inventory on hand and under commitments. The amount of our reserve was $ 621,178 and $ 290,524 at December 31, 2024 and December 31, 2023, respectively. Property and Equipment We record property and equipment at cost when purchased. Depreciation is recorded for property, equipment, and software using the straight-line method over the estimated economic useful lives of assets, which range from 3-20 years. Company management reviews the recoverability of all long-lived assets, including the related useful lives, whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset might not be recoverable. F- 9 Splash Beverage Group, Inc. Notes to the Consolidated Financial Statements Note 2 – Summary of Significant Accounting Policies, continued Depreciation expense totaled $ 148,229 and $ 153,908 for the years ended December 31, 2024 and 2023 respectively. Property and equipment consisted of the following: Schedule of property and equipment 2024 2023 Auto 45,420 45,420 Machinery & equipment 1,165,313 1,160,578 Buildings & Tanks 233,323 233,323 Leasehold improvements 723,638 723,638 Computer Software 5,979 5,979 Office furniture & equipment 7,657 9,157 Total cost 2,181,330 2,178,095 Accumulated depreciation ( 1,976,522 ) ( 1,828,293 ) Property, plant & equipment, net 204,808 349,802 Excise taxes The Company pays alcohol excise taxes based on product sales to both the Oregon Liquor Control Commission and to the U.S. Department of the Treasury, Alcohol and Tobacco Tax and Trade Bureau (TTB). The Company also pays taxes to the State of Florida – Division of Alcoholic Beverages and Tobacco. The Company is liable for the taxes upon the removal of product from the Company’s warehouse on a per gallon basis. The federal tax rate is affected by a small winery tax credit provision which decreases based upon the number of gallons of wine production in a year rather than the quantity sold. Fair Value of Financial Instruments Financial Accounting Standards (“FASB”) guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows: Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed equities. Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (e.g., quoted prices of similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active). Level 3 - Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable. The liabilities and indebtedness presented on the consolidated financial statements approximate fair values at December 31, 2024 and December 31, 2023, consistent with recent negotiations of notes payable and due to the short duration of maturities. Revenue Recognition We recognize revenue under ASC 606, Revenue from Contracts with Customers (Topic 606). This guidance sets forth a five-step model which depicts the recognition of revenue in an amount that reflects what we expect to receive in exchange for the transfer of goods or services to customers. F- 10 Splash Beverage Group, Inc. Notes to the Consolidated Financial Statements Note 2 – Summary of Significant Accounting Policies, continued We recognize revenue when our performance obligations under the terms of a contract with the customer are satisfied. Product sales occur once control of our products is transferred upon delivery to the customer. Revenue is measured as the amount of consideration that we expect to receive in exchange for transferring goods and is presented net of provisions for customer returns and allowances. The amount of consideration we receive and revenue we recognize varies with changes in customer incentives we offer to our customers and their customers. Sales taxes and other similar taxes are excluded from revenue. Distribution expenses to transport our products, and warehousing expense after manufacture are accounted for in Other General and Administrative cost. Cost of Goods Sold Cost of goods sold include the costs of products, packaging, transportation, warehousing, and costs associated with valuation allowances for expired, damaged or impaired inventory. The cost of transportation from production site to other 3 rd party warehouses or customer is included in Other General and Administrative cost. Other General and Administrative Expenses Other General and Administrative expenses include Amazon selling fees, cost of transportation from production site to other 3 rd party warehouses or customers, insurance cost, consulting cost, legal and audit fees, investor relations expenses, travel & entertainment expenses, occupancy cost and other cost. Stock-Based Compensation We account for stock-based compensation in accordance with ASC 718,” Compensation - Stock Compensation” . Under the fair value recognition provisions, cost is measured at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period, which is generally the option vesting period. We use the Black-Scholes option pricing model to determine the fair value of stock options. We early adopted ASU 2018-07, “Improvements to Nonemployee Share-Based Payment Accounting”, which aligns accounting treatment for such awards to non-employees with the existing guidance on employee share-based compensation in ASC 718. We measure stock-based awards at the grant-date fair value for employees, directors and consultants and recognize compensation expense on a straight-line basis over the vesting period of the award. Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions, including the fair value of our common stock, and for stock options and warrants, the expected life of the option and warrant, and expected stock price volatility and exercise price. We used the Black-Scholes option pricing model to value its stock-based awards. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards. The expected life of stock options/warrants were estimated using the “simplified method,” which calculates the expected term as the midpoint between the weighted average time to vesting and the contractual maturity, we have limited historical information to develop reasonable expectations about future exercise patterns. The simplified method is based on the average of the vesting tranches and the contractual life of each grant. For stock price volatility, we use comparable public companies as a basis for its expected volatility to calculate the fair value of award. The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected life of the award. The estimation of the number of awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from the Company’s current estimates, such amounts are recognized as an adjustment in the period in which estimates are revised. F- 11 Splash Beverage Group, Inc. Notes to the Consolidated Financial Statements Note 2 – Summary of Significant Accounting Policies, continued Income Taxes We use the liability method of accounting for income taxes as set forth in ASC 740,” Income Taxes” . Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. We record a valuation allowance when it is not more likely than not that the deferred tax assets will be realized. Company management assesses its income tax positions and records tax benefits for all years subject to examination based upon its evaluation of the facts, circumstances and information available at the reporting date. In accordance with ASC 740-10, for those tax positions where there is a greater than 50% likelihood that a tax benefit will be sustained, our policy is to record the largest amount of tax benefit that is more likely than not to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where there is less than 50 % likelihood that a tax benefit will be sustained, no tax benefit will be recognized in the financial statements. Company management has determined that there are no material uncertain tax positions at December 31, 2024 and December 31, 2023 . See note 13. Net income (loss) per share The net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common outstanding. Warrants, stock options, and common stock issuable upon the conversion of the Company’s convertible debt or preferred stock (if any), are not included in the computation if the effect would be anti-dilutive. Weighted average number of shares outstanding excludes anti-dilutive common stock equivalents, including warrants to purchase shares of common stock and warrants granted by our Board that have not been exercised totaling 3,424,996 . Advertising We conduct advertising for the promotion of our products. In accordance with ASC 720-35, advertising costs are charged to operations when incurred. We recorded advertising expense of $ 486,942 and $ 1,721,547 for the years ended December 30, 2024 and 2023, respectively. Goodwill and other intangibles Goodwill represents the excess of acquisition cost over the fair value of the net assets acquired and is not subject to amortization. The Company reviews goodwill annually in the fourth quarter for impairment or when circumstances indicate carrying value may exceed the fair value. This evaluation is performed at the reporting unit level. If a qualitative assessment indicates that it is more likely than not that the fair value is less than carrying value, a quantitative analysis is completed using either the income or market approach, or a combination of both. The income approach estimates fair value based on expected discounted future cash flows, while the market approach uses comparable public companies and transactions to develop metrics to be applied to historical and expected future operating results. At the time of acquisition, the Company estimates the fair value of the acquired identifiable intangible assets based upon the facts and circumstances related to the particular intangible asset. Inherent in such estimates are judgments and estimates of future revenue, profitability, cash flows and appropriate discount rates for any present value calculations. The Company preliminarily estimates the value of the acquired identifiable intangible assets and then finalizes the estimated fair values during the purchase allocation period, which does not extend beyond 12 months from the date of acquisition. The Company’s amortization expense for acquired identifiable intangible assets with finite useful lives was $ 392,068 for fiscal years 2024 and 2023. F- 12 Splash Beverage Group, Inc. Notes to the Consolidated Financial Statements In accordance with ASC 350, Intangibles – Goodwill and Other, the Company performed an impairment test for its Brand Name, Customer Relationships and license. Based on this assessment, the Company determined that the carrying value of the intangible asset exceeded its fair value, resulting in an impairment loss of $ 4.3 million. The impairment loss of $ 4.3 million was recorded in the statement of operations within Selling, General, and Administrative Expenses. This impairment was primarily driven by the decline in the Company’s sales and was calculated using the present value of future cash flows. December 31, 2024 Gross Amount Accumulated Amortization Loss on Impairment Net Carrying Value Finite: Goodwill $ 256,823 — $ 256,823 $ 0 Brands $ 4,459,000 $ 1,189,071 $ 3,269,929 $ 0 Customer Relationships 957,000 255,200 701,800 $ 0 License 360,000 264,488 95,512 $ 0 Total Intangible Assets $ 6,032,823 $ 1,708,759 $ 4,324,064 $ 0 Note 2 – Summary of Significant Accounting Policies, continued Long-lived assets The Company evaluates long-lived assets for impairment on an annual basis, when relocating or closing a facility, or when events or changes in circumstances may indicate the carrying amount of the asset group, generally an individual warehouse, may not be fully recoverable. For asset groups held and used, including warehouses to be relocated, the carrying value of the asset group is considered recoverable when the estimated future undiscounted cash flows generated from the use and eventual disposition of the asset group exceed the respective carrying value. In the event that the carrying value is not considered recoverable, an impairment loss is recognized for the asset group to be held and used equal to the excess of the carrying value above the estimated fair value of the asset group. For asset groups classified as held-for-sale (disposal group), the carrying value is compared to the disposal group’s fair value less costs to sell. The Company estimates fair value by obtaining market appraisals from third party brokers or using other valuation techniques. Foreign Currency Gain/Losses Foreign subsidiaries’ functional currency is the local currency of operations and the net assets of foreign operations are translated into U.S. dollars using current exchange rates. Gain or losses from these translation adjustments are included in the consolidated statement of operations and other comprehensive (loss) income as foreign currency translation gains or losses. Translation gains and losses that arise from the translation of net assets from functional currency to the reporting currency, as well as exchange gains and losses on intercompany balances, are included in Other Comprehensive Income. The Company incurred a foreign currency translation net gain during the year ended December 31, 2024 of $ 97,763 and a foreign currency translation net gain during the year ended December 31, 2023 of $ 3,889 . Recent Accounting Pronouncements Adoption of FASB ASU 2020-06 In August 2020, the Financial Accounting Standards Board (FASB) issued ASU No. 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” ASU 2020-06 simplifies the accounting for convertible instruments and contracts by removing certain models that were previously required to be applied. The amendments are effective for the fiscal years beginning after December 15, 2023, with early adoption permitted. The Company adopted ASU 2020-06 effective January 1, 2024 and has removed the effects of any embedded conversion features from certain of our convertible instruments as of that date. F- 13 Splash Beverage Group, Inc. Notes to the Consolidated Financial Statements Note 3 – Liquidity, Capital Resources and Going Concern Considerations During 2024, the Company received $ 9.5 million from issuance of debt. The Company’s consolidated financial statements have been prepared on the basis of US GAAP for a going concern, on the premise that the Company is able to meet its obligations as they come due in the normal course of business. The Company sustained a net loss of approximately $ 22.9 million and negative cash flows from operating activities of approximately $ 0.37 million for the year ended December 31, 2024. To date the Company has generated cash flows from issuances of equity and indebtedness. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As of July 11, 202 5, the Company has incurred significant losses from operations and has experienced negative cash flows from operating activities. Additionally, the Company’s current liabilities exceed its current assets, and it has a working capital deficit. Management’s plans in regard to these matters include actions to sustain the Company’s operations, such as seeking additional funding to meet its obligations and implement its business plan. However, there is no assurance that the Company will be successful in implementing its plans or in raising additional funds. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. If the Company is unable to continue as a going concern, adjustments would be necessary to the carrying values of its assets and liabilities and the reported amounts of revenues and expenses could be materially affected. F- 14 Splash Beverage Group, Inc. Notes to the Consolidated Financial Statements Note 4 – Notes Payable, Related Party Notes Payable, and Revenue Financing Arrangements Notes payable are generally nonrecourse and secured by all Company owned assets. Schedule of notes payable Interest Rate December 31, 2024 December 31, 2023 Notes Payable and Convertible Notes Payable In December 2020, the Company entered into a 56- month loan with a company in the amount of $ 1,578,237 . The loan requires payments of 3.75 % through November 2022 and 4.00 % through September 2025 of the previous month’s revenue. Note is due September 2025. Note is guaranteed by a related party see note 7. Variable $ 195,927 371,693 In April 2021, the Company entered into a six-month loan with an individual in the amount of $ 84,000 . The loan had an original maturity of October 2021 with principal and interest due at maturity. The loan was extended to April 2025. 7 % 168,000 168,000 In May 2021, the Company entered into a six-month loan with two individuals totaling $ 60,000 . The loan had an original maturity of October 2021 with principal and interest due at maturity. The loan was extended to April 2025. 7 % 60,000 60,000 In August 2022, the Company entered into a 56-months auto loan in the amount of $ 45,420 . 2.35 % 23,372 32,996 In December 2022, the Company entered into various eighteen-month loans with individuals totaling in the amount of $ 3,000,000 . The notes included 100 % warrant coverage. One note $ 400,000 was converted. The remaining loans were extended to June 2025 with principal and interest due at maturity with conversion price of $ 1.00 per share. 12 % 2,600,000 3,000,000 In December 2022, the Company entered into an eighteen-month loan with an individual in the amount of $ 1,000,000 . The notes included 100 % warrant coverage. The loans matured in June 2024 and was in default 12 % 1,000,000 1,000,000 In February 2023, the Company entered into a twelve-month loan with an entity in the amount of $ 2,000,000 . The convertible note included the issuance of 1,500,000 shares of common stock. The loan matured in February 2024 with conversion price of $ 0.85 per share and is non-interest bearing. The loan was extended to May, 2024. As of June 2024, the loan was fully converted. — % $ — $ 1,769,656 In May 2023, the Company entered into various eighteen-month loans with individuals totaling in the amount of $ 800,000 . The notes included 50 % warrant coverage. The loans mature in November 2024 with principal and interest due at maturity with conversion price of $ 1.00 per share. The loans were extended to May 2025. 12 % 800,000 800,000 In June 2023, the Company entered into various eighteen-month loans with individuals totaling in the amount of $ 350,000 . The notes included 50 % warrant coverage. The loans mature in May 2025 with principal and interest due at maturity with conversion price of $ 1.00 per share, one of the loans was converted in December 2024. 12 % 100,000 350,000 In July 2023, the Company entered into a twelve-month loan with an individual in the amount of $ 750,000 . The note included 50 % warrant coverage. The loan matures in July 2024 with principal and interest due at maturity with conversion price of $ 1.00 per share. The loan was fully converted in September 2024. 12 % — 750,000 In July 2023, the Company entered into a twelve-month loan with an individual in the amount of $ 100,000 . The note included 50 % warrant coverage. The loan originally matures in June 2024 with principal and interest due at maturity with conversion price of $ 1.00 per share. The loan was extended to June 2025. 12 % $ 100,000 $ 100,000 In August 2023, the Company entered into a twelve-month loan with an individual in the amount of $ 300,000 . The convertible note included the issuance of 150,000 shares of common stocks. The loan matures in August 2024 with principal due at maturity with conversion price of $ 0.85 per share and is non-interest bearing. Partial of the note was converted into common stock. — % 43,000 300,000 In October 2023, the Company entered into a three-month loan with an individual in the amount of $ 500,000 . The loan matures in January 2024 with principal and interest due at maturity. The loan was extended to February 2025 10 % 500,000 500,000 In October 2023, the Company entered into a loan with an individual in the amount of $ 196,725 The loan matures in March 2024. Note is guaranteed by a related party. As of March 2024, the loan was fully paid off. — % — 91,785 In October 2023, the Company entered into a loan with an individual in the amount of $ 130,000 . The loan requires payment of 17 % of daily Shopify sales. — % 66,278 88,431 In October 2023, the Company entered into a eighteen-month loan with individuals totaling in the amount of $ 1,250,000 . The note included 100 % warrant coverage. The loan matures in April 2025 with principal and interest due at maturity with conversion price of $ 1.00 per share. Partial principal and 1 st year interest were converted in September 2024 and December 2024. The loan was fully converted in January 2025 12 % $ 1,143,449 $ 1,250,000 In December 2023, the Company entered into a 2.5-month loan with an individual in the amount of $ 450,000 . The loan had a maturity of March 2024 with principal and interest due at maturity. The loan was extended to February 2025. The loan was fully converted in Decembre 2024. 10 % — 450,000 In January 2024, the Company entered into a 18-month loan with an individual in the amount of $ 250,000 . The note included 100 % warrant coverage. The loan had a maturity of July 2025 with principal and interest due at maturity with conversion price of $ 0.50 per share. 12 % 250,000 — In February 2024, the Company entered into a 18-month loan with an individual in the amount of $ 150,000 . The note included 100 % warrant coverage. The loan had a maturity of August 2025 with principal and interest due at maturity with conversion price of $ 0.40 per share. 12 % 150,000 — In February 2024, the Company entered into a 6-month loan with an individual in the amount of $ 315,000 . The note included 60 % warrant coverage. The loan had a maturity of August 2024 with principal and interest due at maturity with conversion price of $ 0.38 per share. This was extended to July 2025. 12 % $ 315,000 $ — In February 2024, the Company entered into a 18-month loan with an entity in the amount of $ 250,000 . The note included 100 % warrant coverage. The loan matures in August 2025 with principal and interest due at maturity with conversion price of $ 0.46 per share 12 % 250,000 — In April 2024, the Company entered into a commercial financing agreement in the amount of $ 815,000 and will be paid weekly until the loan is paid in full. The loan was in default. — % 357,127 — In May 2024, the Company entered into an eighteen-month loan with individuals totaling in the amount of $ 1,850,000 . The note included warrant coverage . The loan matures in November 2026 with principal and interest due at maturity with conversion price of $ 0.40 per share 12 % 1,850,000 — In June 2024, the Company entered into a revenue purchase agreement in the amount of $ 250,000 . 4 % of revenue will be paid weekly until the loan is paid in full. Note is guaranteed by a related party — % 181,341 — In July 2024, the Company entered into a revenue purchase agreement in the amount of $ 178,250 . The loan matures in May 2025. The loan was fully converted in January 2025. 22 % 91,999 — In July 2024, the Company entered into a revenue purchase agreement in the amount of $ 120,750 . The loan matures in April, 2025. The loan was fully converted in January 2025 22 % $ 120,750 $ — In August 2024, the Company entered into a 5-year loan with individuals totaling in the amount of $ 500,000 . The loan matures in September 2029 with principal and interest due at maturity with conversion price of $ 0.35 per share 9 % 500,000 — In August 2024, the Company entered into a eighteen-month loan with individuals totaling in the amount of $ 1,500,000 . The loan matures in February 2026 with principal and interest due at maturity with conversion price of $ 0.38 per share. 12 % 1,500,000 — In September 2024, we entered into a merchant cash advance agreement in the amount of $ 325,000 to be paid weekly until the loan is paid in full. — % 82,261 — In September 2024, the Company entered into an agreement with individuals totaling in the amount of $ 590,000 , there is no maturity date or interest, convertible into common stock at 25% discount to VWAP, proceeds to be used for acquisitions — % 590,000 — In October 2024, the Company entered into an agreement with individuals totaling in the amount of $ 950,000 there is no maturity date or interest, convertible into common stock at 25% discount to VWAP, proceeds to be used for acquisitions — % 950,000 — In November 2024, we entered into a merchant cash advance agreement in the amount of $ 340,000 to be paid weekly until the loan is paid in full. — % 311,713 — In December 2024, we entered into a merchant cash advance agreement in the amount of $ 111,300 to be paid weekly until the loan is paid in full. Note is guaranteed by a related party — % $ 111,300 $ — In December 2024, the Company entered into a twelve-month loan with an individual in the amount of $ 500,000 . The loan matures in December 2025 with principal and interest due at maturity. 12 % 225,000 — Total notes payable $ 14,635,113 $ 11,082,561 Less notes discount ( 3,031,513 ) ( 2,876,387 ) Less current portion ( 9,632,505 ) ( 7,748,518 ) Long-term notes payable $ 1,971,095 $ 457,656 F- 15 Splash Beverage Group, Inc. Notes to the Consolidated Financial Statements Note 4 – Notes Payable, Shareholder Notes Payable, and Revenue Financing Arrangements, continued Interest expense on notes payable was $ 3,702,611 and $ 1,856,777 for the years ended December 31 , 2024 and 2023 , respectively. Accrued interest was $ 3,610,329 , and $ 1,714,646 at December 31, 2024 and December 31, 2023 , respectively. The Company’s effective interest rate was 20.53 % for the year ended December 31, 2024. The Company’s convertible note balances are convertible into 505,257 and 278,187 shares of common stock for the years ended December 31, 2024 and 2023. These amounts are reflective of the 1 for 40 reverse split. As of December 31, 2024 , and December 31, 2023 , the balance of the unamortized debt discount was $ 3,677,143 and 28,474,946 respectively. The Company adopted ASU 2020-06 on January 1, 2024, which resulted in the reversal of the original beneficial conversion feature (BCF) amount to additional paid in capital for $ 2,191,103 , reversal of the unamortized debt discount related to the beneficial conversion feature (BCF) for $ 932,047 with the balance being recorded through retained earnings for $ 1,259,056 . Notes discount of $ 3,251,106 and $ 3,832,628 for the year ending December 31, 2024 and 2023 respectively is related to the discounted warrants and common shares issued in connection with the notes. In June 2025, the Company exchanged approximately $ 12.67 million of outstanding promissory notes for newly issued preferred equity. The Company is undertaking these transactions to exchange debt for equity as part of its effort to regain compliance with the shareholder equity requirements of the NYSE American. By exchanging debt for equity, the Company enhances balance sheet, reduces interest expense, and improves shareholder equity position in furtherance of its goal of complying with exchange requirements. The exchange was the result of an agreement between note holders and the company. The Company is still assessing the accounting impacts of these exchanges. Schedule of notes payable Interest Rate December 31, 2024 December 31, 2023 Shareholder Notes Payable In April 2024, revised Feb 2023 shareholder advance in the amount of $ 200,000 . The annual interest rate is 12 % with a conversion price of $ 0.35 per share. The revised note included 571,429 share of warrant coverage. The loan matures in July 2025 with interest due semiannually. 12 % 200,000 200,000 Less current portion ( 200,000 ) ( 200,000 ) Long-term notes payable $ — $ — Interest expense on related party notes payable was $24,000 and $20,400 for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, the Company’s convertible note balances are convertible into 553,631 shares of common stock F- 16 Splash Beverage Group, Inc. Notes to the Consolidated Financial Statements Note 5 – Licensing Agreement and Royalty Payable The Company had a licensing agreement with ABG TapouT, LLC (“TapouT”), providing the Company with licensing rights to the brand “TapouT” (i)energy drinks, (ii) energy bars, (iii) coconut water, (iv) electrolyte gum/chews, (v) energy shakes, (vi) powdered drink mix, (viii) water (including enhanced water), (vii) energy shots, (viii) teas, and (ix) sports drinks sold in the North America (including US Territories and Military Bases), United Kingdom, Brazil, South Africa, Australia, Scandinavia, Peru, Colombia, Chile and Guatemala. The Company was required to pay a 6% royalty on net sales, as defined, and are required to make minimum monthly payments of $ 55,000 in 2024 and 2023. The licensing agreement between TapouT LLC and the Company was terminated during Q1 2024. The parties are engaged in active and constructive settlement discussions pursuant to the terms of the agreement’s termination provisions. The Company anticipates that any final settlement will not exceed the amounts already recorded in its legal reserve and accrued accounts payable. The Company has accrued guaranteed minimum royalty payments $ 55,000 for the year ended in December 2024. The royalty expense $ 55,000 is included in general and administrative expenses. The licensing agreement between TapouT LLC and the Company has been terminated. The parties are engaged in active and constructive settlement discussions pursuant to the terms of the agreement’s termination provisions. The Company anticipates that any final settlement will not exceed the amounts already recorded in its legal reserve and accrued accounts payable. The Company has reserved $ 330,000 that is included in legal reserve in the condensed consolidated statement of operations and comprehensive loss. In connection with the Copa Asset Purchase Agreement, we acquired the license to certain patents from 1/4 Vin SARL (“1/4 Vin”) On February 16, 2018, the Copa DI Vino ® entered into three separate license agreements with 1/4 Vin SARL, (1/4 Vin). 1/4 Vin has the right to license certain patents and patent applications relating to inventions, systems, and methods used in the Company’s manufacturing process. In exchange for notes payable, 1/4 Vin granted the Company a nonexclusive, royalty-bearing, non-assignable, nontransferable, terminable license which would continue until the subject equipment is no longer in service or the patents expire. Note 6 – Stockholders’ Equity Common Stock The Company underwent a 1 for 40 reverse split of its common stock on March 27, 2025. All share amounts and per share amounts are retroactively adjusted to reflect the effect of the reverse split. On September 29, 2023, the Company entered into a securities purchase agreement with certain accredited investors. Pursuant to such agreements, the Company sold: (i) senior convertible notes in the aggregate original principal amount of $1,250,000, convertible into up to 36,765 shares of common stock of the Company, par value $0.001 per share (“Common Stock”), subject to adjustments as provided in the Notes, (ii) 15,625 shares of Common Stock (the “Commitment Shares”), (ii) warrants to acquire up to an aggregate of 31,250 additional shares of Common Stock (the “Warrants”) at an exercise price of $34.0 per Warrant Share. On May 1, 2024, the Company entered into a securities purchase agreement with certain accredited investors. Pursuant to such agreements, the Company sold: (i) senior convertible notes in the aggregate original principal amount of $1,850,000, convertible into up to 115,625 shares of Common Stock, subject to adjustments as provided in the Notes, (ii) 23,125 shares of Common Stock (the “Commitment Shares”), (ii) warrants to initially acquire up to an aggregate of 115,625 additional shares of Common Stock (the “Warrants”) at an exercise price of $34.0 per Warrant Share. During the year ended December 31, 2024, the Company granted share-based awards to certain consultants totaling 48,958 shares of common stock at a weighted average price of $9.60, 16,250 shares for extension of note, 466,000 shares on conversion of convertible instruments, 23,125 shares on debt discount and 7,250 shares for non-cash compensation. F- 17 Splash Beverage Group, Inc. Notes to the Consolidated Financial Statements A convertible promissory note was issued to shareholder on April 15, 2024 for $ 200,000 at 12 % with conversion price of $14.0 per share. The note included 14,286 share of warrant coverage. The loan matures in July 2025 with principal and interest due semi-annually. Accrued interest of $ 27,370 was paid prior to August 15, 2024. Preferred Stock As of the date of this filing, the Company has issued four series of preferred stock: Series A, A-1, B, and C , each with distinct rights and preferences as outlined below. Note agreements were amended to be exchanged for Preferred B and the impact of those amendments is subject to further review. Voting Rights ● Series A carries 25,000 votes per share but is limited solely to voting on the authorization of additional shares. It has no other voting rights. Series A is expected to be retired following the special meeting. ● Series A-1 carries 231 votes per share. ● Series B and Series C do not carry any voting rights. Dividends ● Series A does not accrue dividends. ● Series A-1 and Series B carry a fixed 12% annual dividend, payable quarterly in arrears, in either cash or payment-in-kind (PIK) at the Company’s discretion. These dividends are mandatory and take priority over any dividends on common stock, regardless of whether common stock dividends are declared. ● Series C does not accrue dividends. Conversion into Common Stock ● Series A is not convertible. ● Series A-1 is convertible into common stock at 80% of the VWAP, subject to a floor of $1.25 and a ceiling of $4.00. A-1 is convertible into a range of 162,500 to 520,000 common shares. ● Series B is also convertible at 80% of the VWAP, with a floor of $1.25 and a ceiling of $6.00, and is convertible into a range of 2,118,333 to 10,168,000 common shares. ● Series C is convertible at a fixed price of $3.00, resulting in the potential issuance of 6,666,667 common shares upon conversion. Redemption – at the sole discretion of the Company. ● Series A is redeemable by the Company after the special meeting for $1,000. ● Series A-1 and Series B are redeemable by the Company after two years from the date of issuance, for $650,000 and $12,700,000, respectively. ● Series C is not redeemable. Seniority ● Series B is the most senior class (Seniority Level 1). ● Series A-1 ranks junior to Series B (Seniority Level 2). ● Series C is the most junior class (Seniority Level 3). ● Series A is a governance-related instrument and does not participate in liquidation or dividend preferences. F- 18 Splash Beverage Group, Inc. Notes to the Consolidated Financial Statements Stock Plans A summary of the Company’s stock option plan and changes during the year ended is as follows: Schedule of stock option activity Plan Category No. of Shares to be Issued Upon Exercise or Vesting of Outstanding Stock Options Weighted Average Exercise Price of Outstanding Stock Options Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Equity compensation plan approved by board of directors 216,212 29.60 44,534 Total 216,212 29.60 44,534 Please In July 2020, the Board adopted the 2020 Stock Incentive Plan (the “2020 Plan”), which provides for the grant of Options, Restricted Stock Awards, Stock Appreciation Rights, Performance Units and Performance Bonuses to consultants and eligible recipients. The total number of shares that may be issued under the 2020 plan was 42,146 at the time the 2020 plan was adopted as of December 31, 2024. The 2020 Plan has an “evergreen” feature, which provides for the annual increase in the number of shares issuable under the plan by an amount equal to 5% of the number of issued and outstanding common shares at year end, unless otherwise adjusted by the board. At January 1, 2023 and 2024, the number of shares issuable under the 2020 plan increased by 51,357 and 74,607 shares, respectively. In October 2023, the shareholders voted to increase the number of shares issuable under the Plan to 7.5%. At December 31, 2024 the number of shares authorized under the 2020 plan is 44,534 . Note 6 – Stockholders’ Equity, continued The following is a summary of the Company’s stock option activity: Schedule of stock option activity Options 2024 2023 Stock options Weighted average Stock options Weighted average Balance – January 01 106,475 $ 45.04 28,775 $ 44.80 Granted 112,125 14.80 86,025 45.20 Exercises — — — — Cancelled 2,388 30.8 8,325 45.2 Balance – December 216,212 $ 29.60 106,475 $ 45.20 Exercisable - December 31 176,520 $ 32.40 97,770 $ 44.80 * These prices are reflective of the price modification made on April 24, 2023. F- 19 Splash Beverage Group, Inc. Notes to the Consolidated Financial Statements During 2023, the Company granted 84,400 options to employees and directors at weighted average strike price of $ 45.20 , weighted average expected life of 6.0 years, weighted average volatility of 264.3 %, weighted average risk-free rate of 3.6 % and no dividend. On April 24, 2023, the Company modified the price of 103,350 options to $ 44.8 from a weighted average price of $ 102.40 . The options have a weighted average expected life of 6.3 years, weighted average volatility of 266.7 %, weighted average risk-free rate of 3.6 % and no dividend. Following ASC Topic 718 the Company recognized an incremental expense from the modification of the option pricing resulting in an expense of $ 7,348 that was reflected during 2023. The Company determined the grant date fair value of the options granted using the Black Scholes Method using the following assumptions: Schedule of stock option assumption December 31, 2024 December 31, 2023 Risk-free interest rates 4.64 % 3.84 % Exercise price $ 13.20 – 21.60 $ 22.00 Expected life 5 years 5 years Expected volatility 227 % - 256 % 228.34 % Expected dividends — — The fair value of stock options granted in 2024 has been measured at 112,125 shares using the Black-Scholes option pricing model with the following assumptions: exercise price $ 13.2 to $ 21.60 , expected life 5 to 10 years, expected volatility 254 %, expected dividends 0 %, risk free rate 4.64 %. During the year ended December 31, 2024, the fair value of options granted amounted to $ 1,646,200 . As of December 31, 2024, the intrinsic value of stock options outstanding and exercisable was $ 0 . Stock compensation expense for the years ended December 31, 2024 and 2023 was $ 1,411,883 and $ 840,817 , respectively. Note 6 – Stockholders’ Equity, continued At December 31, 2024, there was approximately $ 300,000 unrecognized compensation costs related to stock options which will be recognized over the weighted average remaining years of 0.84 . The following is a summary of the Company’s Warrant activity and reflects the 1 for 40 reverse split. Schedule of warrant activity Warrants December 31, 2024 December 31, 2023 Number of Warrants Weighted Average Exercise Price Number of Warrants Weighted Average Exercise Price Balance – beginning of the year 354,502 $ 62.76 358,597 $ 74.00 Granted 287,086 20.80 56,250 23.20 Exercises — — 1,703 87.60 Cancelled — — 58,642 92.80 Balance - end of the year 641,588 $ 43.79 354,502 $ 62.76 F- 20 Splash Beverage Group, Inc. Notes to the Consolidated Financial Statements The fair value of warrants recognized in the period has been estimated using the Black-Scholes option pricing model with the following assumptions. Schedule of assumptions used in Black-Scholes option pricing model December 31, 2024 December 31, 2023 Risk-free interest rates 4.64 % 3.84 % Exercise price $ 10.0 – 34.0 $ 22.0 Expected life 5 years 5 years Expected volatility 254 % 254 % Expected dividends — — Note 7 – Related Parties During the normal course of business, the Company incurred expenses related to services provided by the CEO or Company expenses paid by the CEO, resulting in related party payables. In conjunction with the acquisition of Copa di Vino, the Company also entered into a Revenue Loan and Security Agreement (the “Loan and Security Agreement”) by and among the Company, Robert Nistico, additional Guarantor and each of the subsidiary guarantors from time-to-time party thereto (each a “Guarantor”, and, collectively, the “Guarantors”), and Decathlon Alpha IV, L.P. (the “Lender”). The Note Payable to Decathlon with a balance of $ 1,995,950 at December 31, 2024 and $ 1,361,395 at December 31, 2023. There were related party advances from our chief executive officer in the amount of approximately $ 0.4 million outstanding as of December 31, 2024 and approximately $ 0.4 million as of December 31, 2023. This amount includes a shareholder note payable in the amount of $ 0.2 million outstanding as of December 31, 2024. The annual interest rate of the note is 12 % with a conversion price of $ 14.0 per share. The note includes 14,285 shares of warrant coverage. Note 8 – Investment in Salt Tequila USA, LLC The Company has a marketing and distribution agreement with SALT in Mexico for the manufacturing of our Tequila product line. The Company has a 22.5 % percentage interest in SALT Tequila USA, LLC (“SALT”), and has the right to increase its ownership to 37.5 %. This investment is accounted for at cost as the Company does not have the ability to exercise significant influence over SALT Tequila USA, LLC. Note 9 – Lease The Company has various operating lease agreements primarily related to real estate and office space. The Company’s real estate leases represent a majority of the lease liability. Lease payments are mainly fixed. Any variable lease payments, including utilities, and common area maintenance are expensed during the period incurred. Variable lease costs were immaterial for the year ended December 31, 2024 and 2023. A majority of the real estate leases include options to extend the lease. Management reviews all options to extend at the inception of the lease and account for these options when they are reasonably certain of being exercised. Operating lease expense is recognized on a straight-line basis over the lease term and is included in operating expense on the Company’s condensed consolidated statement of operations and comprehensive loss. Operating lease cost was $ 360,409 and $ 363,890 during the twelve-month period ended December 31, 2024 and 2023, respectively. The following table sets for the maturities of our operating lease liabilities and reconciles the respective undiscounted payments to the operating lease liabilities in the consolidated balance sheet at December 31, 2024 F- 21 Splash Beverage Group, Inc. Notes to the Consolidated Financial Statements Schedule of operating lease liabilities Undiscounted Future Minimum Lease Payments Operating Lease 2025 $ 318,219 2026 52,703 2027 2,976 Total 373,898 Amount representing imputed interest ( 15,034 ) Total operating lease liability 358,864 Current portion of operating lease liability ( 305,167 ) Operating lease liability, non-current $ 53,697 The table below presents information for lease costs related to our operating leases at December 31, 2024: Schedule of lease costs Operating lease cost: Amortization of leased assets $ 337,228 Interest of lease liabilities 23,181 Total operating lease cost $ 360,409 The table below presents lease- related terms and discount rates at December 31, 2024: Schedule of lease- related terms and discount rates Remaining term on leases 25 months Incremental borrowing rate 5.0 % Note 10 – Segment Reporting We have two reportable operating segments: (1) the manufacture and distribution of non-alcoholic and alcoholic beverages, and (2) the retail sale of beverages and groceries online. These operating segments are managed separately and each segment’s major customers have different characteristics. Segment Reporting is evaluated by our chief operating decision maker, which continues to be our chief executive officer. Schedule of segment reporting information Revenue For the Year Ended, December 31, 2024 For the Year Ended, December 31, 2023 Splash Beverage Group $ 3,509,058 $ 5,072,479 E-Commerce 646,150 13,777,673 Total Revenues, $ 4,155,208 $ 18,850,152 Segment operating loss: 2024 2023 Splash Beverage Group $ ( 14,742,528 ) $ ( 13,669,371 ) E-Commerce ( 1,303,708 ) ( 1,617,287 ) Total segment operating loss $ ( 16,046,236 ) $ ( 15,286,658 ) F- 22 Splash Beverage Group, Inc. Notes to the Consolidated Financial Statements Reconciliation of segment loss to corporate loss: 2024 2023 Other income/expense $ ( 2,552 ) $ ( 30,328 ) Amortization of debt discount ( 3,677,143 ) ( 3,832,628 ) Interest income & expense ( 3,700,620 ) ( 1,854,143 ) Legal reserve ( 330,000 ) — Loss before income tax $ ( 23,756,551 ) $ ( 21,003,757 ) Total Assets December 31, 2024 December 31, 2023 Splash Beverage Group $ 2,610,207 $ 9,188,213 E-Commerce 148,978 710,555 Total Assets $ 2,759,185 $ 9,898,768 Splash Beverage Group revenue decreased for the year ending December 31, 2024 versus December 31, 2023 by $1.6 million or 30% with the main contribution from the decrease in revenue coming from TapouT and Pulpoloco. The contribution after marketing expenses increased by $1.2 million for the year ending December 31, 2024 versus December 31, 2023 due to decreased sales partially offset by cost decreases and marketing expense. E-Commerce revenue decreased for the year ending December 31, 2024 versus December 31, 2023 by $8.9 million driven by low inventory. Contribution after Marketing expenses declined by $4.8 million due to decrease in sales. Note 11 – Commitment and Contingencies The Company is a party to asserted claims and are subject to regulatory actions in the ordinary course of business. The results of such proceedings cannot be predicted with certainty, but the Company does not anticipate that the outcome, if any, arising out of any such matter will have a material adverse effect on its business, financial condition or results of operations. On June 5, 2024, the Company received notification from the NYSE American LLC (“NYSE American”) indicating that it is not in compliance with the NYSE American’s continued listing standards under Section 1003(a)(iii) of the NYSE American Company Guide (the “Company Guide”), requiring a listed company to have stockholders’ equity of $6 million or more if the listed company has reported losses from continuing operations and/or net losses in its five most recent fiscal years. The Company is now subject to the procedures and requirements of Section 1009 of the Company Guide. If the Company is not in compliance with the continued listing standards by April 6, 2025 or if the Company does not make progress consistent with the Plan during the plan period, the NYSE American may commence delisting procedures. The licensing agreement between TapouT LLC and the Company was terminated in Q1 2024. The parties are engaged in active and constructive settlement discussions pursuant to the terms of the agreement’s termination provisions. Based on the settlement discussions, the Company anticipates that any final settlement will not exceed the amounts already recorded in its legal reserve and accrued accounts payable. Note 12 – Tax Provision The Company has evaluated the positive and negative evidence in assessing the realizability of its deferred tax assets. This assessment included the evaluation of scheduled reversals of deferred tax liabilities, estimates of projected future taxable income and tax planning strategies to determine which deferred tax assets are more likely than not to be realized in the future. Due to uncertainty about the Company’s ability to utilize its deferred tax assets, the Company has recorded a full valuation allowance against its deferred tax assets. At December 31, 2024, the Company’s net operating loss carryforward for Federal income tax purposes was $ 99,567,157 , which will be available to offset future taxable income. If not used, these carry forwards will begin to expire in 2032, except for the net operating losses generated January 1, 2018 and after, which amounted to $ 76,541,071 , which can be carried forward indefinitely. There was no income tax expense or benefit for the years ended December 31, 2024 and 2023 due to the full valuation allowance recorded. F- 23 Splash Beverage Group, Inc. Notes to the Consolidated Financial Statements Note 12 – Tax Provision, continued The reconciliation of the income tax benefit is computed at the U.S. federal statutory rate as follows: Schedule of effective income tax rate reconciliation 2024 2023 Federal Statutory Tax Rate 21.00 % 21.00 % Permanent Differences ( 1.57 )% ( 0.89 )% Change in Valuation Allowance ( 19.43 )% ( 20.11 )% Net deferred tax asset — — The tax effects of temporary differences which give rise to the significant portions of deferred tax assets or liabilities at December 31 are as follows: Schedule of deferred tax assets or liabilities 2024 2023 Deferred Tax Assets: Net Operating Losses $ 31,444,821 $ 27,606,474 Accrued Interest/Interest Expense Limitation 2,251,164 1,518,618 Total deferred tax assets 33,695,985 29,125,092 Deferred Tax Liabilities: Depreciation ( 145,467 ) ( 120,502 ) Total deferred tax liabilities ( 145,467 ) ( 120,502 ) Less: Valuation allowance ( 33,550,518 ) ( 29,004,590 ) Total Net Deferred Tax Assets $ — $ — The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. The open tax years subject to examination with respect to the Company’s operations are 2015 through 2024. Note 13 – Subsequent Events In January 2025, the Company entered into a convertible promissory note with a loan company in the amount of $163,000. The note has a six-month 6 term, accrues interest at 12% and is convertible into shares of common stock of the Company with a discount rate of 35% of Market price. In January 2025, the Company issued a 10-month promissory note in the amount of $150,650, that accrues interest at 12% and is convertible into shares of common stock at a 25% discount to the current market price. In January 2025, the Company entered into a twelve-month loan with individuals totaling in the amount of $350,000. The note included warrant coverage of 35,000 5-year warrants with a $10 exercise price. The loan matures in January 2026 with principal and interest due at maturity with conversion price of $10.0 per share In January 2025, the Company entered into an eighteen-month loan with individuals totaling $381,000. The note included warrant coverage of 38,100 5-year warrants with a $10 exercise price. The loan matures in June 2026 with principal and interest due at maturity with conversion price of $10 per share F- 24 Splash Beverage Group, Inc. Notes to the Consolidated Financial Statements On March 27, 2025, the Company implemented a 1.0 for 40.0 reverse stock split. All common stock shares, warrants, and conversion prices stated herein have been adjusted to reflect the split. The purpose of this reverse split was to maintain the Company’s listing on the NYSE American. In April 2025, the Company issued a 5-year promissory note in the amount of 200,000, it accrues interest at 15%, and is convertible into shares of common stock at $1.25. The note also received 125,000 5-year warrants exercisable at $2.00, and 83,334 5-year warrants exercisable at $3.00. In May 2025, the Company issued 650 shares of Series A-1 Preferred Stock in exchange for approximately $650,000. Series A-1 shares are convertible into common stock, subject to shareholder approval, and further discussed in Note 6. Investors of A-1 Shares also received 162,500 1-year A Warrants exercisable into common stock at 80% of 5-day VWAP, and 162,500 5-year B Warrants exercisable into common stock at $4.00. The accounting treatment of this transaction is subject to further review and may be adjusted in the future. In June 2025, the Company issued 1000 shares of Preferred A Stock. Preferred A is super voting preferred, not convertible into common stock, and further discussed in Note 6. In June 2025, the Company issued 126,710 shares of Series B Preferred Stock in exchange for approximately $12.7 million in previously outstanding convertible notes. The Series B shares are convertible into common stock, subject to shareholder approval and further discussed in Note 6. The accounting treatment of this transaction is subject to further review and may be adjusted in the future. In June 2025, the Company acquired certain assets, including all contractual water rights to the aquifer located in Garabito, Puntarenas, Costa Rica. The Company issued 20,000 shares of Series C Preferred Stock as consideration, at an initial stated value of $1000 per share. Management determined that the transaction is an asset acquisition under ASC 805, as substantially all of the fair value is concentrated in a single identifiable asset—the water rights—and no substantive processes were acquired. The preliminary fair value of the acquired assets has been estimated at approximately $20 million and is subject to revision. The Series C shares are convertible into common stock, subject to shareholder approval, and further discussed in Note 6 F- 25 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.