U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2025
☐
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________to _________
Commission File Number 001-40471
SPLASH BEVERAGE GROUP, INC.
(Exact name of registrant as specified in its charter)
1314 E Las Olas Blvd. Suite 221
Fort Lauderdale, FL33301
(Address of principal executive offices) (Zip code)
(954)745-5815
(Registrant’s telephone number, including
area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, $0.001 par value per share SBEV NYSE American LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes
☒No
Indicate by check mark if the registrant is not required
to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐
Yes ☒No
Indicate by check mark whether the registrant (i)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. ☒Yes☐
No
Indicate by checkmark whether the registrant has submitted
electronically every Interactive Data File required to be submitted pursuant to rule 405 of Regulation S-T during the preceding 12 months
(or for such shorter period that the registrant was required to submit such files). ☒Yes☐ No
Indicate by checkmark whether the registrant is a
large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See
the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
“emerging growth company,” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark
if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has
filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting
under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its
audit report. ☐
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements. ☒
Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s
executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a
shell company (as defined in rule 12b-2 of the Act). ☐ Yes ☒No
The aggregate market value of the Registrant’s
common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of the last business
day of the Registrant’s most recently completed second quarter was $6,454,754.
On April 14, 2026, there were 9,953,538 shares of
Common Stock issued and outstanding.
Documents
Incorporated by Reference
Portions
of the registrant’s definitive proxy statement for its 2026 Annual Meeting of Stockholders are incorporated by reference in Items
10, 11, 12, 13, and 14 of Part III of this Annual Report on Form 10-K.
SPLASH BEVERAGE GROUP, INC.
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2025
TABLE OF CONTENTS
Page
PART I 1
Item 1. Business 1
Item 1A. Risk Factors 5
Item 1B Unresolved Staff Comments 23
Item 1C Cybersecurity 23
Item 2. Properties 23
Item 3. Legal Proceedings 23
Item 4. Mine Safety Disclosures 24
Item 6. Selected Financial Data 25
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 30
Item 8. Financial Statements and Supplementary Data F-1
Item 9A. Controls and Procedures 31
Item 9B. Other Information 32
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 33
PART III 34
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 14. Principal Accounting Fees and Services
Item 15. Exhibits and Financial Statement Schedules 35
Signatures 41
i
PART I
Except as otherwise indicated, references to “we”,
“us”, “our”, “Splash” and the “Company” refer to Splash Beverage Group,
Inc. and its wholly owned subsidiaries.
This Annual Report on Form
10-K (this “Annual Report” or this “Report”) contains “forward-looking statements” Forward-looking
statements reflect our current view about future events. When used in this Report, the words “anticipate,” “believe,”
“estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these
terms and similar expressions, as they relate to us or our management, identify forward-looking statements. Such statements include, but
are not limited to, statements contained in this Report relating to our business strategy, our future operating results and liquidity
and capital resources outlook. Forward-looking statements are based on our current expectations and assumptions regarding our business,
the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties,
risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by
the forward-looking statements. They are neither statements of historical fact nor guarantees of assurance of future performance. We caution
you therefore against relying on any of these forward-looking statements. Important factors that could cause actual results to differ
materially from those in the forward-looking statements include, without limitation our need for additional capital to resume our revenue-generating
operations, our ability to raise the capital needed on favorable terms or at all, our ability to meet regulatory requirements including
the rules of the New York Stock Exchange (the “NYSE”) and maintain the listing of our Common Stock on the NYSE American, our
ability to meet our debt obligations and the negative financial and operational consequences of failing to do so, our ability to close
our planned acquisition of a CBD business, and the risks and uncertainties disclosed in “Item 1A -Risk Factors” contained
in this Report. Actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.
Factors or events that could
cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We cannot guarantee
future results, levels of activity, performance or achievements. We undertake no obligation to publicly update any forward-looking statement,
whether as a result of new information, future developments or otherwise, except as may be required by law.
Item 1. Business.
Company Overview
Historically, Splash was a portfolio company seeking
to manage brands across viable growth segments within the consumer beverage industry. As a result of our lack of capital, we did not generate
revenue from February 2025 until March 2026 when we delivered tequila as described below. Our beverage operations have historically not
been profitable. Because of our lack of capital to generate revenue, our management reviewed strategic alternatives inside and outside
of the beverage industry. As a result, on March 4, 2026 the Company entered into a non-binding letter of intent setting forth the principal
terms of a potential acquisition of a leading manufacturer and multi-brand operator of federally compliant cannabinoid wellness products.
See “Letter of Intent” immediately below for more information. As of the date of this Report, the Company has not entered
into a definitive written agreement with respect to such potential transaction. The delay has been caused by a quest to make the acquisition
tax-free for the target’s equity holders. Because the process for doing so would delay the closing of the proposed acquisition until
late 2026, the Company has agreed to pay additional cash to the target company’s investors to cover their income taxes and reduce
the equity component of the acquisition.
1
Letter
of Intent
On March 4, 2026, Splash entered into a letter of intent (the
“Letter”) with the target company, Medterra CBD, LLC (“Medterra”), a leading manufacturer and multi-brand operator
of federally compliant cannabinoid wellness products. Pursuant to the Letter, the parties agreed in principal on the terms of a potential
business combination between Medterra and the Company, which transaction is subject to due diligence and execution of a definitive written
agreement and other applicable agreements, receipt of audited financial statements of Medterra and customary closing conditions. In addition,
the Company shall be required to raise capital to pay off Medterra’s debt of approximately $10.4 million. The proposed terms for
the acquisition reflect an enterprise value of Medterra of $37.6 million or the issuance of approximately 54.4 million shares of Common
Stock, which assumes repayment of its outstanding debt and delivery of approximately $10,000,000 in cash to pay off and extinguish the
debt of Medterra and to cover the income taxes of the Medterra equity holders. At closing the Company will issue Medterra investors a
number of shares of the Company’s Common Stock equal to up to 19.99% of the Company’s Common Stock then outstanding, and the
remaining shares will be of two series of convertible preferred stock (“Series X” and “Series X-1”) to be issued
to Medterra’s equity holders based on their existing ownership interests in Medterra. The Series X and X-1 shares will convert at
$0.50 per share. The Common Stock to be issued at the closing shall have full rights equal to all outstanding Common Stock, except the
holders may not vote upon the stockholder approval of the change of control contemplated by the acquisition. The Letter also provides
that the Company will issue Series X-1 to Medterra’s lender with the stated value based upon the equity value of Medterra. In exchange
the lender shall cancel its warrants to purchase equity of Medterra.
The Company
now expects it can close the acquisition of Medterra in May 2026. The closing will be subject to the Company’s planned meetings
with investors during the week of April 13th and its ability to raise the necessary capital as well as reaching a definitive
agreement with Medterra and the parties meeting the closing conditions.
Because the Company recently rescinded its June 2025 acquisition of certain water
rights in Costa Rica, it derecognized the $20 million of stockholders’ equity which created a stockholders’ deficit of $15,300,828
at December 31, 2025. The NYSE American Rules required us to have at least $6 million in stockholders’ equity. With the expected
stockholder’s equity created by the Medterra acquisition, the Company will be in compliance with the NYSE American Rules. The Company
is seeking to meet with the NYSE American Staff as soon as possible. There is no assurance that the NYSE American will permit us to maintain
the listing of our Common Stock. See Item 1A – “Risk Factors.”
Our Strategy
Our primary focus is to complete the acquisition of
Medterra as described above under “Letter of Intent.”
In addition, we are focusing on re-commencing material revenue-generating
operations through our beverage business, including through sales of our Chispo Tequila brand subject to obtaining sufficient capital.
In the furtherance of this Chispo tequila opportunity, in December 2025 we purchased $50,000 of inventory for the potential Senior Frogs
order described under “Chispo Tequila” below.
The
Company did not make any sales in the 2025 calendar year after March 2025 due to its lack of capital resources. The
Company estimates that it will initially require $3,000,000 for the Chispo brand as well as general and administrative expenses
for the next 12 months.
Chispo Tequila
Chispo is a tequila brand
which we recently began distributing to one customer. See “Senor Frogs Selection” below. Chispo is an authentic
blue agave blanco tequila, with fresh, sweet citrus, herbal floral notes ideal for cocktail mixing. We have entered into an arrangement
with the Chispo producer under which we agreed to distribute the brand in certain states in the U.S., as well as in Guatemala and Europe.
We expect that we will need approximately $500,000 in new financing to implement this business.
2
Senior Frogs Selection
In January 2026 the Company announced that Senor Frog’s, an internationally
recognized restaurant and entertainment brand known for its vibrant atmosphere and authentic cuisine, selected Chispo Tequila as its house
tequila across an initial group of locations in Florida, the Bahamas, and Mexico. Senor Frog’s belongs to Grupo Anderson’s
Mexico who owns more than 50 business units and 15 distinct restaurant brands across 4 countries. In March 2026, we shipped initial inventory
to a distributor which we expect will permit us to recognize revenue for the three months ended March 31, 2026.
The rollout marks Chispo’s first high-profile
national hospitality partner, providing early validation of the brand’s positioning and quality as it begins to scale in the on-premise
channel. Senor Frog’s selected Chispo following an extensive evaluation of authentic tequila brands, with a focus on taste profile,
consistency, and resonance with its broad and diverse customer base. Chispo’s smooth character and approachable style distinguished
it in a competitive field of premium and value-positioned tequilas. Chispo Tequila is produced in Jalisco, Mexico in partnership with
ZB Distillery, a respected distilling operation known for its commitment to quality and traditional tequila craftsmanship.
Costa Rica Water
On June 25, 2025, the Company entered into an Asset
Purchase Agreement (the “Asset Purchase Agreement”) with a third party (the “Seller”) under which the Seller
sold certain water assets located in Costa Rica to the Company in exchange for $20 million of Series C Convertible Preferred Stock
(the “Series C”). The Company issued the Series C to the Seller. Section 1.04 of the Asset Purchase Agreement required the
Seller to deliver the water assets by December 31, 2025 or pay the Company $20 million in cash. Section 1.04 of the Asset Purchase
Agreement further stated that failure to deliver either the water assets or the $20 million by December 31, 2025 rendered the Series
C to be “null, void, and of no further force or effect.” The Seller failed to comply with either requirement. As a result,
on April 14, 2026, the Board of Directors of the Company terminated the Asset Purchase Agreement and cancelled the Series C effective
December 31, 2025.
3
Competition
We compete with a large variety of other companies
in the marketplace for the sale of alcoholic products. The beverage sector is highly competitive, and include international, national,
regional and local producers and distributors. Competitive factors in the beverage industry include price and promotional activity, advertising
and marketing programs, point-of-sale merchandising, retail space management, customer service, product differentiation, packaging innovations
and distribution methods.
Manufacturing and Co-packing
Although we are responsible for manufacturing tequila
products, we do not directly manufacture these products, but instead outsource such manufacturing to third party bottlers and contract
packers and distillers.
Chispo products are manufactured in Mexico, under
contract manufacturing arrangements. These co-packaging arrangements are terminable upon request and do not obligate us to produce any
minimum quantities of products within specified periods.
Historically our business strategy has entailed purchasing
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 other 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 operated 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 President and CMO has
extensive experience working within this channel and believes that we may be successful in building a strong network of these distributors.
In addition to working with these independent distributors,
we also previously established distribution arrangements with national retail accounts.
Employees
We have one full-time employee our President who has
extensive experience in the beverage business, one part-time employee, our Chief Financial Officer and a part-time accounting consultant.
All of our employees and our consultant work remotely.
Listing on the NYSE American
Our Common Stock is listed on the NYSE American exchange
under the ticker symbol “SBEV”.
Corporate Information
We are a Nevada corporation. Our website address is www.splashbeveragegroup.com.
Our website is not incorporated into this Report.
4
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.
Item 1A. Risk Factors.
You should carefully consider the risks described
below as well as other information provided to you in this document, including information in the section of this document entitled “Cautionary
Note Concerning Forward Looking Statements.” If any of the following risks actually occur, the Company’s business, financial
condition or results of operations could be materially adversely affected, the value of the Company’s Common Stock could decline,
and you may lose all or part of your investment.
RISKS RELATED TO OUR BUSINESS
Risks Related to our Financial Condition
Our auditors have included an explanatory paragraph
in their opinion regarding our ability to continue as a going concern. If we are unable to continue as a going concern, our stockholders
will lose all or some of their investments.
Rose, Snyder & Jacobs LLP, our independent registered
public accounting firm for the fiscal year ended December 31, 2025, has included an explanatory paragraph in their opinion that accompanies
our audited consolidated financial statements as of and for the year ended December 31, 2025, indicating that our current liquidity position
raises substantial doubt about our ability to continue as a going concern. If we are unable to improve our liquidity position, we may
not be able to continue as a going concern. This has continued as of the date of this Report.
We have sustained recurring losses and we have had
working capital and stockholders’ equity deficits. These prior losses and expected future losses have had, and will continue to
have, an adverse effect on our financial condition. In addition, continued operations and our ability to continue as a going concern may
be dependent on our ability to obtain additional financing in the near future and thereafter, and there are no assurances that such financing
will be available to us at all or will be available in sufficient amounts or on reasonable terms. Our financial statements do not include
any adjustments that may result from the outcome of this uncertainty. If we are unable to generate additional funds in the future through
sales of our products, financing or from other sources or transactions, we will exhaust our resources and will be unable to continue operations.
These conditions raise substantial doubt about the Company’s ability to continue as a going concern for the next 12 months.
In order to continue and fund its operations, the
Company will be required to obtain additional resources through sales and issuances of equity to successfully execute its business plans
and keep the Common Stock listed on the NYSE American. No assurances can be given the Company will be successful in raising additional
capital, if needed, or on acceptable terms. Sales of Common Stock or Common Stock equivalents would have the effect of diluting existing
stockholders. If we are unable to raise the necessary capital on favorable terms, within the timeframes needed or at all, we could be
forced to cease operations, and you could lose all or some of your investment.
Because we lack the required $6 million of minimum
stockholders’ equity currently as well at December 31, 2025, our Common Stock may be delisted by the NYSE American.
On April 7, 2025, the NYSE American notified the Company
that as a result of its failure to comply with the applicable continued listing rules including maintaining the required minimum stockholders’
equity, it determined to commence proceedings to delist the Company’s Common Stock from the exchange. The Company appealed the determination.
5
On June 25, 2025, we acquired our Water Assets by
issuing the Seller shares of our Series C Convertible Preferred Stock. The Series C contains a stated value of $20 million. Under Generally
Accepted Accounting Principles, we accounted for this issuance by including $20 million of non-current assets on our balance sheet. On
April 14, 2026, the Company rescinded the transaction and canceled the Series C in accordance with the provisions of the Asset Purchase
Agreement, effective December 31, 2025. If we can complete the acquisition of Medterra, we expect we will have stockholders’ equity
substantially above the $6 million minimum requirement. We cannot assure you that we will complete the acquisition of Medterra or that
the NYSE American will permit our Common Stock to remain listed both prior to the planned closing and after the closing of the Medterra
acquisition.
Because we lack the capital to acquire inventory
and market our products, we have generated no revenue in 2025 after the three months ended March 31, 2025, making our ability to remain
in operation more difficult, and there are substantial doubts as to our ability to continue as a going concern.
As reflected in this the consolidated financial statements
contained in this Report, we had only $442,732 in net revenues for the year ended December 31, 2025. In fact, we
did not generate any revenue in fiscal year 2025 after the three months ended March of 2025 due to a lack of operating capital
which has hindered the Company’s ability to generate sales since that time. In order to generate material revenue, we estimate requiring
at least $2,000,000 of working capital in order to acquire inventory and re-commence minimal operations. This does not include our plans
for the Chispo tequila business which will require substantial additional capital. Specifically, management estimates needing approximately
$500,000 to achieve its full year goals. In addition, we need approximately $3 million in working capital to grow our business, pay our
current management, including benefits, an accounting consultant and the public company costs we are required to pay.
We have also entered into the Letter of Intent with Medterra contemplating
a potential business combination with that entity. Assuming we enter into a definitive Agreement with Medterra and close the acquisition,
we expect we will need approximately $10,000,000 to pay its indebtedness and the income taxes of Medterra’s investors and are working
with capital partners and investors to attempt to raise an additional $25,000,000 at or subsequent to the closing of the proposed transaction
to expand Medterra’s existing operations and sales inclusive of their participation in the recently launched federal CMS pilot program,
additional working capital, and reserves. See “Risk Factors - Risks Related to. Our Business.”
Our lack of cash resources has prevented us from carrying
on our commercialization activities. In addition, our lack of working capital has prevented us from marketing our products. Further, even
if we can access the necessary capital, the Company must determine whether and what extent to invest such capital into various aspects
of our business, including recommencing sales of beverage products, and we may be unsuccessful in developing and executing a business
plan in this regard. Unless we raise enough money to not only pay our ongoing general and administrative expenses but also market our
products and purchase inventory, we will not be able to remain operational.
We have experienced recurring losses from operations
and negative cash flows from operating activities and anticipate that we will continue to incur significant operating losses before reaching
profitability.
We have experienced recurring losses from operations and negative cash flows
from operating activities. We expect to continue to incur significant expenses related to our ongoing operations and generate operating
losses for the foreseeable future. The size of our losses will depend, in part, on the rate of future expenditures, our ability to execute
our business plan and our ability to generate revenues. We incurred a net loss from continuing operations of approximately $25.2
million including $14.2 million of non-cash items for the year ended December 31, 2025.
We may encounter unforeseen expenses, difficulties,
complications, delays, and other unknown factors that may adversely affect our financial condition. Our prior losses and expected future
losses have had, and will continue to have, an adverse effect on our financial condition. If our products do not achieve sufficient market
acceptance and we do not generate significant revenues, we may never become profitable. Even if we achieve profitability in the future,
for which we can provide no assurance, we may not be able to sustain profitability in subsequent periods. Our failure to become and remain
profitable would decrease the value of our company and could impair our ability to raise capital, expand our business, diversify our product
offerings or continue our operations. A decline in the value of our Company could cause you to lose all or part of your investment.
6
We may become subject to litigation in connection
with our cancellation of the Series C that we had previously issued under the Asset Purchase Agreement related to certain water assets.
Following the cancellation of
the Series C that we had previously issued to the Seller under the Asset Purchase Agreement related to certain water assets located in
Costa Rica, the Seller may determine to sue us challenging our position with respect to such cancellation. Specifically, Section 1.04
of the Asset Purchase Agreement required the Seller to deliver the water assets by December 31, 2025 or pay the Company $20 million
in cash, and further stated that failure to deliver either the water assets or the $20 million by December 31, 2025 rendered the
Series C to be “null, void, and of no further force or effect.” As a result, the Company cancelled the Series C effective
December 31, 2025. While the Company believes that it has adequate evidence demonstrating that the Seller failed to comply with either
requirement, the Seller may nonetheless seek to sue the Company claiming that the Company was not entitled to cancel the Series C. Any
resulting litigation which may arise from the foregoing could require us to incur significant costs and expenses, subject us to uncertainty
with respect to our outstanding capital stock and any potential future transactions (including the potential business combination with
Medterra), and divert our limited personnel and resources away from operational matters and strategic initiatives.
Risks Related to our
Business
If we are unable to enter
into a definitive agreement and close an acquisition of Medterra following our entry into a non-binding Letter of Intent on March 4, 2026
as described elsewhere in this Report, the Company and its stockholders will not receive the anticipated and intended benefits of such
acquisition, and the Company would be forced to pursue alternative acquisitions or strategic transactions.
As disclosed elsewhere in this Report, we recently
entered into a Letter of Intent with Medterra, a leading manufacturer and multi-brand operator of cannabinoid wellness products. Pursuant
to the Letter, the parties agreed in principal on the terms of a potential business combination between Medterra and the Company, subject
to due diligence and execution of a definitive written agreement and other applicable agreements, receipt of the 2025, audited financial
statements of Medterra and customary closing conditions. In addition, the Company needs approximately $10.4 million of cash to close the
transaction. The proposed terms for the transaction represent an enterprise value of Medterra of $37.6 million or the issuance of approximately
54,400,000 shares of Common Stock, which assumes repayment of its outstanding debt. This would represent substantial dilution to the Company’s
existing stockholders.
While the closing of the
acquisition would result in us becoming the parent holding company of a leading manufacturer and seller of cannabinoid products, the closing
may not occur, including due to regulatory challenges arising from cannabis laws and the NYSE American requirements, our ability to raise
the necessary cash and negotiate the definitive agreement, due diligence, the appearance of a competitive bid from another prospective
purchaser, or the seller’s inability to maintain its operations for a sufficient time to allow the transaction to close, and other
events and requirements that may not occur on favorable terms or at all and subject any potential transaction to substantial uncertainty.
The Letter is non-exclusive and does not provide us with any recourse if Medterra were to decline to move forward with a transaction with
us. The Letter also envisions us being required to raise a substantial amount of additional capital shortly following the closing of the
business combination, which would further dilute our existing stockholders and could subject us to onerous terms that harm our ability
to operate or pursue strategic transactions and alternatives. Even if we do acquire Medterra and raise the necessary capital to fund post-transaction
operations in the future, there can be no assurance that such a development will yield the intended or expected benefits, result in sustained
increases in prices and or volume of trading in our Common Stock, or otherwise create a meaningful return on investment or value to our
stockholders.
Further, if we fail to enter
into a definitive written agreement or a business combination does not close, all of the time and capital resources expended by the Company
in such pursuit of such a transaction may be lost and unrecoverable by the Company or its stockholders. Unanticipated issues which may
be beyond our control or that of the seller may arise that force us to suspend our pursuit of the target, including those referred to
elsewhere herein. Such risks are inherent in any search for a new business and investors should be aware of them before investing in an
enterprise such as ours.
Our strategic initiatives
including acquisitions and divestitures may not be successful and may divert our management’s attention away from operations, and
could create general customer uncertainty.
We have begun to explore
strategic alternatives to our beverage business. Our growth strategy is based in part on growth through strategic initiatives including
both acquisitions and divestitures of brands and assets, which poses a number of risks. We may not be successful in identifying appropriate
acquisition candidates, achieving targeted values as part of a disposition, consummating an acquisition or divestiture on satisfactory
terms, integrating any newly acquired or expanded business with our current operations, or separating a divested business or commingled
operation effectively. We may issue additional equity, incur long-term or short-term indebtedness, spend cash or use a combination of
these for all or part of the consideration paid in future acquisitions or expansion of our operations, which may not be available to us
on terms we find advantageous or acceptable, if at all. In addition, subject to any requirements in the agreements governing our outstanding
indebtedness, we may have significant discretion in how we employ the consideration received in a divestiture and our management may not
apply such consideration in a way that is ultimately accretive to our business.
7
The execution of our strategic
initiatives will likely entail incurring goodwill assets or repositioning or similar actions that in turn require us to record impairments,
restructuring and other charges. Any such charges would result in additional expense. We cannot guarantee that any future business acquisitions
or divestitures will be pursued or that any acquisitions or divestitures that are pursued will be consummated.
Additionally, any acquisition
or disposition (including the successful integration and separation of operations, products and personnel) may place a significant burden
on our management and other internal resources. The diversion of management’s attention, and any difficulties encountered in such
a process, could harm our business, financial condition, and operating results.
If we fail to successfully integrate acquired assets
or businesses, or if integrated, failure to further the Company’s business strategy, may result in the Company’s inability
to realize any benefit from such acquisition or other adverse consequences.
As disclosed above under “Business-Letter of Intent”, we are in
discussions concerning a potential acquisition of Medterra contemplated by the Letter of Intent with that entity. Unidentified liabilities
or other issues may arise with respect to the businesses and assets we have acquired or may in the future acquire, which could expose
us to litigation, unexpected costs, regulatory actions and other negative events that could materially harm our business and financial
condition. Further, we intend for = any such acquisitions to be a critical part of our business plan moving forward, subject to accessing
the necessary capital, and such acquisitions may not yield the benefits expected or desired for our business.
In addition, even if we can access the necessary capital,
we may face challenges in integrating and utilizing any acquired business or assets, particularly given any such undertaking will require
the investment of resources to monetize and integrate into our other operations. Even if we can access the necessary capital to further
these efforts we may be unable to effectively manage these efforts without incurring extensive additional costs or at all. This would
put a further strain on our already limited personnel and resources. Further, the long-term commercial success of any such undertaking
will depend on our ability to timely and in a cost-effective manner pursue and develop an infrastructure and network to obtain and distribute
products in high quantities and in compliance with applicable regulatory and commercial requirements. If we are unsuccessful in navigating
these challenges with respect to any acquired business or assets, it could fail to result in benefits to our Company, and we could be
materially adversely affected by any of the foregoing events.
In general, the consummation and integration of any
acquired business or assets into the Company may be complex and time-consuming and, if such businesses and assets are not successfully
integrated, the Company may not achieve the anticipated benefits, cost-savings or growth opportunities. Furthermore, these acquisitions
and other arrangements, even if successfully integrated, may fail to further the Company’s business strategy as anticipated, expose
the Company to increased competition or other challenges with respect to the Company’s products or geographic markets, and expose
the Company to additional liabilities associated with an acquired business, technology or other asset or arrangement. There are no guarantees
that the Company will successfully consummate such acquisitions, and even if the Company consummates such acquisitions, the procurement
of applications for licenses required to sell or distribute related products may never result in the grant of a license by any state or
local governmental or regulatory agency and the transfer of any rights to licenses may never be approved by the applicable federal, state
and/or local governmental or regulatory agency.
Demand for our products
may be adversely affected by changes in consumer preferences or any inability on our part to innovate, market or distribute our products
effectively, and any significant reduction in demand could adversely affect our business, financial condition or results of operations.
We aim to sell beverages comprised of a number of
unique brands with reputations and consumer imagery that have been built over time. Our investments in marketing as well as our strong
commitment to product quality are intended to have a favorable impact on brand image and consumer preferences. If we do not adequately
anticipate and react to changing demographics, consumer and economic trends, health concerns and product preferences, our financial results
could be adversely affected.
8
Additionally, failure to introduce new brands, products
or product extensions into the marketplace as current ones mature and to meet the changing preferences of consumers could prevent us from
gaining market share and achieving long-term profitability. Product lifecycles can vary, and consumer preferences and loyalties change
over time. Although we try to anticipate these shifts and innovate new products to introduce to our consumers, we may not succeed. Consumer
preferences also are affected by factors other than taste, such as health and nutrition considerations and obesity concerns, shifting
consumer needs, changes in consumer lifestyles, increased consumer information and competitive product and pricing pressures. Sales of
our products may be adversely affected by negative publicity associated with these issues. If we do not adequately anticipate or adjust
to respond to these and other changes in consumer preferences, we may not be able to maintain and grow our brand images, and our sales
may be adversely affected.
Volatility in the price or availability of the
inputs we depend on, including raw materials, packaging, energy and labor, could adversely impact our financial results.
The principal raw materials we use include glass bottles,
aluminum cans, polyethylene terephthalate, fiber-board, labels and cardboard cartons, flavorings and sweeteners. These component and ingredient
costs are subject to fluctuation and environmental regulation. If there were to be substantial increases in the prices of these products,
to the extent that they cannot be recouped through increases in the prices of finished beverage products, it would increase our operating
costs. If our supply of these raw materials is impaired or if prices increase significantly due to tariffs or any other reason, it could
affect the affordability of our products and reduce revenues.
If we are unable to secure sufficient ingredients
or raw materials including glass, sugar, and other key supplies at acceptable prices, within a reasonable timeframe, at the locations
needed or in general, we might not be able to satisfy demand on a short-term basis.
International trade developments, including tariffs
and geopolitical conflicts, could adversely impact our business.
International trade developments, including heightened
tariffs imposed by the United States under the Trump Administration on goods imported from various countries, tariffs imposed by foreign
countries in retaliation, and litigation and uncertainties surrounding these developments, could adversely impact our business. Further,
geopolitical conflicts such as the conflict with Iran and its proxies have had and are expected to continue to have an adverse impact
on supply chains and the costs of purchasing and transporting goods. We and third parties on which we depend source various supplies used
in our products from foreign countries, and tariffs and other international trade developments could therefore result in inflationary
pressures that directly impact our costs for manufacturing and marketing products. These developments could also adversely impact global
supply chains which could further increase costs for us and/or delay delivery of key inventories and supplies.
Significant new or increased tariffs, import and excise
duties, or other taxes on or impacting beverage products, including raw and packaging materials, such as on imports from Mexico and exports
to countries in which we plan to sell our products such as the United Arab Emirates from which we source many of our supplies for our
products, and any additional retaliatory tariffs imposed by those governments on products imported into the U.S., could have a material
adverse effect on our business, liquidity, financial condition, and results of operations. These developments continue to pose a significant
risk to our business as well as the U.S. and global economies, including by shifting consumer behaviors, inhibiting sales, increasing
costs, causing further economic and supply chain disruptions and inflationary pressures, and reducing economic activity. For example,
if the costs of our products increase, we and our collaborators may be forced to increase the prices at which such products are sold,
which could in turn reduce demand for and sales of those products, thereby negatively impacting our operating results. Alternatively,
the heightened production costs would also have a negative impact on operating results even absent a decline in sales. Further, increases
in the cost of oil and other resources used in the production and transportation of products could have a material adverse effect on the
acquisition and use of such resources and gross margins.
9
The extent and duration of the tariffs and the resulting
impact on our business and general economic conditions are uncertain and depend on various factors, including negotiations between the
United States and affected countries, the outcome of the United States tariff litigation, the responses of other countries or regions,
exemptions or exclusions that may be granted, availability and cost of alternative sources of supply, and demand for our products in affected
markets. To the extent we need to locate new sources of raw materials and products as a result of tariffs, we may be unable to locate
alternative sources on favorable terms or in the timeframes needed, and actions we may take to adapt to new tariffs or trade restrictions
may force us to modify our operations or forgo business opportunities. Likewise, tariffs and import and export regulations could also
limit the availability of our products, prompt consumers to seek alternative products, and provide an opportunity for competitors not
subject to such tariffs to more effectively compete with us in markets where we conduct our business.
Our business, operations, financial position and
timelines, could be materially adversely affected by government action and geopolitical conflicts.
Following President Trump’s inauguration in
January 2025, certain trends and events have unfolded and continue to evolve and develop which are affecting and have the potential to
further affect the global and United States capital markets and economies, including the inflation caused by the conflict with Iran, the
continued high central bank interest rates, the imposition and threat of tariffs as well as subsequent developments and uncertainties
surrounding tariffs, trade wars among nations and ongoing wars and geopolitical conflicts, and uncertain capital markets with significant
volatility and declines in leading market indexes thus far 2026. The duration and scope of these events and their impact are at best uncertain,
and their continuation may result in negative consequences on the U.S. or global economies.
The impositions of tariffs by the U.S. and any retaliatory
actions by foreign countries, as well as refunds on tariffs following the U.S. Supreme Court’s ruling to strike down certain tariffs,
could contribute to higher inflation and reduced economic activity for a prolonged period of time, thereby delaying any rate reductions
or potentially resulting in rate increases in the future, as well as reduced demand for mortgages. Similarly, the wars in the Middle East
and the Ukraine could also contribute to increased and prolonged inflation including by increasing the price of oil and causing adverse
impacts on supply chains. These uncertainties and developments could result in supply chain issues, higher prices for goods and services
or other adverse consequences on us and our vendors. In addition, these events come with an increased probability for an economic downturn
or recession by making it more difficult for businesses to borrow money and individuals to maintain employment.
These developments follow the increase in interest
rates that began in 2022 as the Federal Reserve in U.S. and central banks in other jurisdictions have sought to combat inflation. While
in the U.S. inflation has declined, the conflict with Iran seems likely to having another inflationary impact. Further many economists
view additional increases in inflation as a likely or possible consequence of these developments. Uncertainty surrounding rising or elevated
prices and concerning the state and prospects for the U.S. and global economies and capital markets in the near term remains and has amplified
due to the factors described above. If inflation does not fall low enough and/or the Federal Reserve declines to reduce interest rates
in the near term, or tariffs and related developments adversely impact the economy, the result could be tipping the U.S. economy into
a recession. In the wake of these events, the U.S. and global capital markets have demonstrated substantial volatility in the first quarter
of 2026, as many investors consider economic outlooks to be uncertain and consider the risk of a recession and a decline in the marketplace
to be increasingly probable or imminent. Ultimately the economy may turn into a recession with uncertain and potentially severe impacts
upon the public capital markets and us. Among the potential consequences could be a substantial decline in stock prices including ours,
a reduction in demand for securities of public companies (which may be more prevalent for smaller companies such as us) and more difficulty
for us to raise capital we need and accessing capital on favorable terms or at all as a result.
As our ability to continue to operate will be dependent
on raising capital, any adverse impact to markets as a result of these developments, including due to increased market volatility, decreased
availability in third-party financing and/or a deterioration in the terms on which it is available (if at all), could negatively impact
our business, results of operations, cash flows, financial condition, and/or prospects. The extent of any potential impact is not yet
determinable, however.
10
We compete in an industry that is brand-conscious,
so brand name recognition and acceptance of our products are critical to our success.
Our business is dependent upon awareness and market
acceptance of our products and brands by our target markets. In addition, our business depends on acceptance by our independent distributors
and retailers of our brands as beverage brands that have the potential to provide incremental sales growth. If we are not successful in
the revitalization and growth of our brand and product offerings, or in maintaining and expanding upon the brands we offer, we may not
achieve and maintain satisfactory levels of acceptance by independent distributors and retail consumers. Any failure of our brands to
maintain or increase acceptance or market penetration would likely have a material adverse effect on our revenues and financial results.
Our brands and brand images are keys to our business
and any inability to maintain a positive brand image could have a material adverse effect on our results of operations.
Our success depends on our ability to develop brand
images for our existing products and effectively build up brand images for new products and brand extensions. We cannot predict whether
our advertising, marketing and promotional programs will have the desired impact on our products’ branding and on consumer preferences.
In addition, negative public relations and product quality issues, whether real or imagined, could tarnish our reputation and images of
the affected brands and could cause consumers to choose other products. Our brand images can also be adversely affected by unfavorable
reports, studies and articles, litigation, or regulatory or other governmental action, whether involving our products or those of our
competitors.
Competition from traditional
and large, well-financed non-alcoholic and alcoholic beverage manufacturers may adversely affect our distribution relationships and may
hinder development of our existing markets, as well as prevent us from expanding our markets.
The beverage industry is highly competitive. We compete
with other beverage companies not only for consumer acceptance but also for shelf space in retail outlets and for marketing focus by distributors,
all of whom also distribute other beverage brands. Our products will compete with a broad range non-alcoholic and alcoholic beverages,
many of which are marketed by companies with substantially greater financial and marketing resources than ours. Management believes that
some of these competitors are placing severe pressure on independent distributors not to carry competitive brands offered by smaller enterprises
such as ours. We will also compete with regional beverage producers and “private label” brands.
Increased competitor consolidations, market-place
competition, particularly among branded beverage products, and competitive product and pricing pressures could impact our earnings, market
share and volume growth. If, due to such pressure or other competitive threats, we are unable to sufficiently maintain or develop our
distribution channels, we may be unable to achieve our current revenue and financial targets. Competition, particularly from companies
with greater financial and marketing resources than ours, could have a material adverse effect on our existing markets, as well as on
our ability to expand the market for our products.
Our reliance on distributors, retailers and brokers
could affect our ability to efficiently and profitably distribute and market our products, maintain our existing markets and expand our
business into other geographic markets.
Our ability to maintain and expand our existing markets
for our products, and to establish markets in new geographic distribution areas, is dependent on our ability to establish and maintain
successful relationships with reliable distributors, retailers and brokers strategically positioned to serve those areas. All of the distributors,
retailers and brokers we have used in the past sell and distribute competing products, including non-alcoholic and alcoholic beverages,
and our products may represent a small portion of their businesses. The success of this network will depend on the performance of the
distributors, retailers and brokers of this network. There is a risk that the mentioned entities may not adequately perform their functions
within the network by, without limitation, failing to distribute to sufficient retailers or positioning our products in localities that
may not be receptive to our product. Further, these third parties could reduce or terminate their relationship with us for any reason
without liability to us. Our ability to incentivize and motivate distributors to manage and sell our products is affected by competition
from other beverage companies, some of which may have greater resources than we do. To the extent that our distributors, retailers and
brokers are distracted from selling our products or do not employ sufficient efforts in managing and selling our products, including re-stocking
the retail shelves with our products, our results of operations could be adversely affected. Furthermore, such third-parties’ financial
position or market share may deteriorate, which could adversely affect our distribution, marketing and sales activities.
11
Our ability to establish and expand our distribution
network and attract additional distributors, retailers and brokers will depend on a number of factors, some of which are outside our control.
Some of these factors include:
We may not be able to successfully manage all or any
of these factors in any of our current or prospective geographic areas of distribution. Our inability to achieve success with regards
to any of these factors in a geographic distribution area will have a material adverse effect on our relationships in that particular
geographic area, thus limiting our ability to maintain or expand our market, which will likely adversely affect our revenues and financial
results.
These third-party service providers and business partners
are also subject to similar risks as we are relating to cybersecurity, privacy violations, business interruption, and systems and employee
failures, and are subject to legal, regulatory and market risks of their own. Our third-party service providers and business partners
may not fulfill their respective commitments and responsibilities in a timely manner and in accordance with the agreed-upon terms. In
addition, while we have procedures in place for selecting and managing our relationships with third-party service providers and other
business partners, we do not have control over their business operations or governance and compliance systems, practices and procedures,
which increases our financial, legal, reputational and operational risk. If we are unable to effectively manage our third-party relationships,
or for any reason our third-party service providers or business partners fail to satisfactorily fulfill their commitments and responsibilities,
our financial results could suffer.
It is difficult to predict the timing and amount
of our sales because our distributors are not required to place minimum orders with us.
Once we re-commence sales, we plan to use independent
distributors who will not be required to place minimum monthly or annual orders for our products. In order to reduce their inventory costs,
independent distributors typically order products from us on a “just in time” basis in quantities and at such times based
on the demand for the products in a particular distribution area. Accordingly, we cannot predict the timing or quantity of purchases by
any of our independent distributors or whether any of our distributors will purchase products from us in the same frequencies and volumes
as they may have done in the past. Additionally, our larger distributors and national partners may make orders that are larger than we
have historically been required to fill. Shortages in inventory levels, supply of raw materials or other key supplies could negatively