S-1: Splash Beverage Group Files for Resale of 82.9 Million Shares Amidst Financial Challenges

Splash Beverage Group is registering for resale up to 82.9 million shares of common stock held by selling stockholders, primarily from convertible notes and warrants, while the company faces ongoing financial difficulties.

Summary

• Splash Beverage Group has filed a registration statement for the resale of up to 82,912,163 shares of its common stock by existing shareholders.
• These shares include 68,164,790 shares issuable upon conversion of convertible promissory notes, 13,634,873 shares issuable upon exercise of outstanding warrants, and 1,112,500 incentive shares.
• The selling stockholders acquired these shares through private placements in October 2023, May 2024, and August 2024.
• The company will not receive any proceeds from the sale of these shares by the selling stockholders, except for approximately $1,863,486.75 if warrants are exercised for cash.
• Splash Beverage Group is a portfolio company managing multiple beverage brands, with a focus on acquiring and accelerating growth in the consumer beverage industry.
• The company outsources most of its manufacturing, except for Copa DI Vino wines which are produced in their own facility in Oregon.
• The company's common stock is currently traded on the NYSE American under the symbol SBEV.
• The company has experienced recurring losses and negative cash flows, raising substantial doubt about its ability to continue as a going concern.
• As of September 30, 2024, the company had an accumulated deficit of $146.8 million and cash and cash equivalents of $456,889.
• The company incurred a net loss of $14.7 million for the nine months ended September 30, 2024.

Sentiment

Score: 3

Explanation: The document presents a concerning financial picture with significant losses, a going concern warning, and reliance on future capital raises. While there are some positive aspects like brand portfolio and e-commerce platform, the overall sentiment is negative due to the company's financial instability.

Positives

• The company has a diverse portfolio of beverage brands across multiple growth segments.
• The company has a vertically integrated e-commerce platform, Qplash, for direct sales to consumers and boutique retail stores.
• The company has a management team with extensive experience in the beverage industry.
• The company has a distribution agreement with AB-InBev for distribution with their own operations, AB ONE.

Negatives

• The company has a history of recurring losses and negative cash flows from operating activities.
• The company has a significant accumulated deficit of $146.8 million as of September 30, 2024.
• The company's independent auditor has raised substantial doubt about its ability to continue as a going concern.
• The company's revenue decreased significantly in the three and nine months ended September 30, 2024, due to low inventory.
• The company is dependent on third-party manufacturers for most of its products.
• The company has a significant amount of debt, including convertible notes and related party notes.

Risks

• The company's ability to continue as a going concern is uncertain due to recurring losses and negative cash flows.
• The company may not be able to obtain additional financing on acceptable terms.
• The company's products may not achieve sufficient market acceptance.
• The company faces intense competition from larger, well-financed beverage manufacturers.
• The company relies on distributors, retailers, and brokers, and their performance can affect sales.
• The company's supply chain, contract manufacturing, and distribution channels are subject to disruption.
• The company may face product recalls or other product quality issues.
• The company is subject to various regulations, and noncompliance could be costly.
• The company may be exposed to litigation and legal proceedings.
• The company's business operations may be adversely affected by social, political, and economic conditions.
• The company's common stock may be subject to potential delisting if it does not maintain NYSE American listing requirements.
• The company's common stock could be further diluted as a result of the issuance of additional common stock, convertible securities, warrants or options.

Future Outlook

The company expects to continue to incur significant operating losses in the future and will need to raise additional equity or debt capital to fund operations. There is no assurance that additional funds will be available when needed or on acceptable terms.

Management Comments

• The company's leadership understands the importance of infusing beverage brands with strong popular culture and lifestyle elements that drive trial, belief and, most importantly, repeat purchases.
• The management team has over 120 years of combined experience in the beverage industry.
• The company believes its ability to break through the distribution and retail bottlenecks makes it an attractive joint venture partner to many new brand owners.

Industry Context

The document highlights the competitive nature of the beverage industry, with Splash competing against larger, well-financed companies. The company is also adapting to the changing distribution landscape, with a focus on e-commerce and direct-to-consumer models. The company is also focused on the growing flavored tequila market.

Comparison to Industry Standards

• The company's financial performance, particularly its recurring losses and negative cash flows, is significantly below industry standards for established beverage companies.
• Companies like Coca-Cola and PepsiCo have strong balance sheets and consistent profitability, unlike Splash.
• Smaller, emerging beverage companies often face challenges in achieving profitability, but Splash's financial situation is particularly concerning due to the auditor's going concern warning.
• The company's reliance on third-party manufacturers is common in the industry, but its lack of control over its supply chain poses a risk.
• The company's e-commerce platform, Qplash, is a positive step towards adapting to changing consumer preferences, but its current performance is not yet significant enough to offset the company's financial challenges.
• The company's distribution agreement with AB-InBev is a positive development, but its overall distribution network is still less established than major competitors.

Management Changes

Corporate Governance

Legal Proceedings

• TapouT, LLC filed a complaint against the Company for breach of a licensing agreement, seeking $1.4 million. The Company has booked a legal reserve of $330,000 as the estimate for the potential liability.

Related Party Transactions

• The company has incurred expenses related to services provided by the CEO or Company expenses paid by the CEO, resulting in related party payables.
• There were related party advances from our chief executive officer in the amount of approximately $0.4 million outstanding as of September 30, 2024.
• A shareholder note payable outstanding in the amount of $0.2 million as of September 30, 2024.

Stakeholder Impact

• Shareholders face the risk of losing their investment due to the company's financial instability and potential delisting.
• Employees may be affected by potential cost-cutting measures or operational changes.
• Customers may experience disruptions in product availability or quality if the company faces supply chain issues.
• Suppliers and creditors face the risk of non-payment if the company's financial situation worsens.

Next Steps

• The company needs to improve its financial performance and achieve profitability.
• The company needs to secure additional financing to fund its operations.
• The company needs to effectively manage its supply chain and distribution network.
• The company needs to continue to develop and market its brands effectively.

Key Dates

Keywords

beverage, common stock, convertible notes, warrants, resale, distribution, e-commerce, financial results, liquidity, going concern, TapouT, Copa DI Vino, SALT Tequila, Pulpoloco