10-Q: Splash Beverage Reports Q3 Loss, Strategic Pivot Underway

Splash Beverage Group reported a significant net loss for Q3 2025, with no revenue generated since March, while pursuing strategic shifts into water extraction and tequila distribution, and addressing liquidity challenges.

Summary

• No revenue generated since March 2025 due to lack of operating capital for inventory and business operations.
• Net loss for the three months ended September 30, 2025, was $9.9 million, compared to $4.7 million for the same period in 2024.
• Net loss for the nine months ended September 30, 2025, was $22.0 million, compared to $14.7 million for the same period in 2024.
• Total assets increased significantly to $22.5 million as of September 30, 2025, from $2.8 million at December 31, 2024, primarily due to the acquisition of $20 million in Costa Rican water rights.
• Total liabilities decreased to $15.7 million from $21.4 million, and stockholders' equity improved to $6.8 million from a deficit of $(18.6) million, largely due to debt-to-equity conversions.
• The company requires at least $2 million in working capital to resume minimal operations and $4 million to fulfill a purchase order for water from the UAE.
• Robert Nistico resigned as CEO effective November 14, 2025, and William Devereux resigned as CFO effective November 30, 2025.

Sentiment

Score: 2

Explanation: The company reported no revenue for the quarter and a significant net loss, indicating severe operational challenges and a critical liquidity position. While debt-to-equity conversions improved the balance sheet and NYSE compliance was regained, the 'going concern' warning, management turnover, and continuous need for capital raises highlight extreme financial distress and operational instability.

Positives

• Total stockholders' equity improved significantly to $6,777,552 as of September 30, 2025, from a deficit of $(18,634,849) at December 31, 2024.
• Total liabilities decreased to $15,711,745 as of September 30, 2025, from $21,394,034 at December 31, 2024, due to debt-to-equity conversions.
• Regained compliance with NYSE American listing standards on July 28, 2025, for both financial metrics and timely filing.
• Net cash used in operating activities decreased to $(3,828,797) for the nine months ended September 30, 2025, from $(6,383,464) for the same period in 2024, indicating reduced cash burn.
• Acquired water extraction rights in Costa Rica in June 2025, valued at $20 million, with a purchase order from a customer in the United Arab Emirates.
• Secured a $35 million Equity Line of Credit agreement in September 2025, subject to certain conditions.

Negatives

• No revenue generated since March 2025 due to a lack of adequate capital to acquire inventory and maintain business operations.
• Net loss for the three months ended September 30, 2025, increased to $(9,886,045) from $(4,719,562) in the prior year period.
• Net loss for the nine months ended September 30, 2025, increased to $(22,029,577) from $(14,717,161) in the prior year period.
• Operating expenses for the three months ended September 30, 2025, increased by $6.6 million to $9,544,679, primarily due to non-cash share-based compensation.
• Operating expenses for the nine months ended September 30, 2025, increased by $3.6 million to $13,179,366, primarily due to non-cash share-based compensation.
• Incurred a $5,560,482 non-cash loss on extinguishment of debt during the nine months ended September 30, 2025.
• Current liabilities still exceed current assets, indicating a working capital deficit.
• Substantial doubt about the company's ability to continue as a going concern.
• Robert Nistico resigned as CEO effective November 14, 2025, and William Devereux resigned as CFO effective November 30, 2025.
• The company did not meet all payroll obligations from February to September 2025, with unpaid wages accrued as liabilities.

Risks

• Strategic initiatives, including acquisitions and divestitures, may not be successful and could divert management's attention.
• Unidentified liabilities or issues may arise with the Water Assets, exposing the company to litigation, unexpected costs, and regulatory actions.
• Challenges in utilizing Water Assets due to foreign location (Costa Rica), requiring new personnel, compliance with foreign laws, and establishing a unique production/distribution channel.
• Reliance on third parties for water extraction, production, and distribution may lead to unfavorable terms, relationship issues, or uncontrollable events.
• Inability to extract water in sufficient quantities or comply with regulatory requirements could prevent the launch of water operations or generation of material revenue.
• Demand for products may be adversely affected by changes in consumer preferences or inability to innovate, market, or distribute effectively.
• Volatility in the price or availability of inputs (raw materials, packaging, energy, labor) could adversely impact financial results.
• International trade developments, including U.S. trade tariffs and retaliatory tariffs, could adversely impact the business, especially for products sourced from/sold to Mexico, Costa Rica, and UAE.
• Geopolitical conflicts and related economic impacts or sanctions could materially and adversely affect financial position and operations.
• Competition from traditional and large, well-financed beverage manufacturers may adversely affect distribution relationships and hinder market development.
• Reliance on distributors, retailers, and brokers could affect efficient and profitable distribution and marketing, and these third parties may not adequately perform their functions or could terminate relationships.
• Difficulty in predicting the timing and amount of sales because distributors are not required to place minimum orders.
• Failure to adequately manage inventory levels could damage relationships with distributors and retailers and delay or lose sales opportunities.
• Inability to maintain relationships with independent contract manufacturers (co-packers) or find suitable alternatives could harm the business.
• Disruption within the supply chain, manufacturing, or distribution channels due to various events (weather, natural disaster, labor strikes, etc.) could impair operations.
• Volatility of energy prices and increased regulations may have an adverse impact on gross margin.
• Dependence on ongoing relationships with key flavor suppliers; inability to source flavors on acceptable terms could disrupt business.
• Dependence on a distiller in Mexico for tequila production without a written agreement, posing risks of price increases, unsatisfactory performance, or loss of services.
• Inability to attract and retain key personnel, especially with recent CEO and CFO resignations, could adversely affect efficiency and operations.
• Failure to protect trademarks and trade secrets could harm brand and reputation, and lead to costly litigation.
• Substantial indefinite-lived intangible assets ($20 million for Water Assets) could result in material future impairment expenses.
• Product recalls or other product quality issues, real or imagined, or allegations of product contamination, could damage brand image and business.
• Noncompliance with numerous regulations (production, marketing, labeling, taxes) is costly and could result in penalties, license suspension/revocation, or adverse publicity.
• Exposure to product liability or other related liabilities, including lack of product liability insurance currently.
• Risk of contamination of products (e.g., water from Water Assets) or counterfeit products.
• Significant additional labeling or warning requirements may inhibit sales of affected products.
• Litigation risks, including class actions related to alcohol consumption or marketing practices.
• Risks inherent in sales of products in international markets, including local competition, cultural differences, economic/political volatility, tariffs, and currency fluctuations.
• Water scarcity and poor quality could negatively impact costs and capacity, and diminish the value of Water Assets.
• Failure or interruption of information technology infrastructure or cybersecurity attacks could adversely impact business.
• Failure to comply with personal data protection and privacy laws could lead to adverse publicity, enforcement actions, and litigation.
• Results of operations may fluctuate from quarter to quarter due to seasonality.
• Material weaknesses in internal control over financial reporting (lack of segregation of duties, insufficient accounting personnel) may cause failure to timely and accurately report financial results or lead to material misstatements.
• Substantial doubts about the ability to continue as a going concern due to recurring losses and lack of capital.
• Future sales of common stock or the perception of such sales could cause stock price to decline.
• Dilution to existing stockholders from conversion of multiple classes of preferred stock and other securities.
• Market price of common stock has been volatile and may continue to be volatile.
• Certain principal stockholders own a large percentage of voting stock, limiting other stockholders' voting power.
• Board of Directors may issue preferred stock without stockholder approval, adversely affecting common stockholders' voting power or control.
• Significant additional costs and management time devoted to public company compliance.

Future Outlook

The company intends to re-commence certain operations and establish new ones upon receiving sufficient capital, focusing on Chispo brand tequila distribution, establishing water sales from Costa Rican Water Assets, and re-launching the Qplash platform. It is also exploring strategic alternatives, including potential acquisitions of assets or businesses, and is in preliminary discussions to acquire a majority interest in a beverage product. The company plans to fund operations through debt/equity financing and private placements, but there is no assurance of successful capital raises on favorable terms.

Management Comments

• We remain committed to resolving these constraints and resuming normal business activities in the upcoming quarter.
• We believe the distribution landscape in the beverage industry is changing rapidly as tech-enabled e-commerce business models are thriving.
• Direct to consumer, office or home solutions are projected to continue to gain traction in the future.
• Recognizing this opportunity Splash continues to shape its operating model to be vertically integrated with our e-commerce platform, Qplash.
• Because of our lack of revenue and the amount of capital we acquire to begin to generate revenue for each of our beverage businesses, we have begun looking at strategic alternatives where we may make an acquisition of assets or a business that presents value for our stockholders.
• As of the date of this report, we have not reached any understandings with respect to any business opportunity, and we may not do so.
• Any future acquisition of an unrelated business will likely require us to raise capital to support its operations even if we only issue equity securities to the seller.
• We plan to fund our operations through third party and related party debt/advances, private placement of restricted securities and the issuance of stock in subsequent offerings until such a time as the business achieves profitability or a business combination may be achieved.
• However, there can be no assurance that we will be successful in raising additional capital or that such capital, if available, will be on terms that are favorable to us.
• As such, we have concluded that such plans do not alleviate the substantial doubt about our ability to continue as a going concern for one year from the date the accompanying financial statements are issued.

Industry Context

The company operates in a highly competitive and brand-conscious beverage industry, facing challenges from larger, well-financed competitors. It acknowledges the rapid changes in distribution, with a focus on tech-enabled e-commerce and direct-to-consumer models. The strategic shift towards water extraction and tequila distribution, alongside exploring acquisitions, indicates an attempt to pivot and find new growth avenues in a dynamic market, potentially moving away from its legacy beverage brands. The company also highlights the impact of global economic factors like tariffs and inflation on supply chains and consumer behavior.

Comparison to Industry Standards

• The company's lack of revenue since March 2025 and significant net losses are substantially below industry standards for established beverage companies.
• The reliance on debt-to-equity conversions and continuous capital raises to maintain operations is indicative of a distressed financial state, unlike financially stable industry peers.
• The acquisition of water rights in Costa Rica and a purchase order from the UAE suggests an attempt to diversify and tap into global markets, similar to larger beverage conglomerates that seek international expansion and new product categories, but the company lacks the capital and infrastructure to execute this currently.
• The high volatility in stock price and the need for a reverse stock split to maintain listing standards are not typical for well-performing industry leaders.
• The material weaknesses in internal controls over financial reporting (lack of segregation of duties, insufficient accounting personnel) fall short of best practices for public companies in any industry.

Management Changes

Corporate Governance

Legal Proceedings

• Active and constructive settlement discussions with TapouT LLC regarding the terminated licensing agreement, with a $330,000 legal reserve.
• Settlement agreement with Copa di Vino (CdV) for $0.7 million plus 12% interest, with installment payments starting November 4, 2025, to resolve two lawsuits.

Related Party Transactions

• Robert Nistico, a Director, is the sole holder of 1,000 shares of Series A Preferred Stock, which carries super voting rights (25,000 votes per share) but no dividends or conversion rights.
• Related party advances from Robert Nistico of approximately $0.4 million were outstanding as of September 30, 2025, with interest owed but not yet agreed upon.
• Warrants were granted to directors (including Robert Nistico), the President, the Chief Financial Officer, and certain employees on July 31, 2025, with an exercise price of $0.80 per share and a ten-year term. Robert Nistico's 750,000 warrants are subject to performance and continued service vesting conditions.
• Prepayment of approximately $146,000 representing 90 days of compensation for the CFO and Controller was approved in September 2025.

Stakeholder Impact

• Shareholders face significant dilution risk from ongoing and future capital raises, preferred stock conversions, and warrant exercises. While the balance sheet improved and NYSE compliance was regained, the 'going concern' warning remains a major concern.
• Employees are impacted by unpaid wages from February to September 2025, indicating severe financial strain and potential morale issues. Management turnover (CEO, CFO) creates uncertainty.
• Customers are affected by the temporary suspension of Qplash operations and the company's inability to acquire inventory for other products, potentially leading to loss of customer base and brand loyalty.
• Suppliers and creditors may face payment delays or defaults due to the company's liquidity challenges and inability to meet payroll obligations. While some debt was converted to equity, new debt continues to be raised.
• Management is under significant pressure to raise capital, execute strategic pivots, and address operational challenges amidst high turnover.

Next Steps

• Raise approximately $2 million in working capital to re-commence minimal operations.
• Raise approximately $4 million to bottle, package, and ship the water order from the United Arab Emirates.
• Raise approximately $6 million to achieve short-term goals for the Water Assets.
• Raise approximately $22 million to achieve 12-month goals for the Water Assets, including constructing a bottling facility.
• Focus efforts on distribution of Chispo brand tequila.
• Establish and grow material operations through the sale of water extracted from the Water Assets.
• Re-launch the Qplash platform primarily to provide an online supplement to sales of Chispo and water products.
• Continue exploring strategic alternatives, including potential acquisitions of assets or businesses.
• Seek additional funding to meet obligations and implement the business plan.
• Continue active and constructive settlement discussions with TapouT LLC regarding the terminated licensing agreement.
• Begin installment payments of $63,000 plus interest to CdV starting November 4, 2025.
• Hold an adjourned stockholder meeting on December 10, 2025, to consider increasing authorized common stock.
• Seek a suitable replacement for the Chief Financial Officer.
• Register the resale of shares under the Equity Line of Credit agreement.
• CdV has the right to purchase the IP between January 4, 2026, and January 4, 2027.
• The 2025 Equity Incentive Plan reserve will automatically increase on January 1, 2026.

Key Dates

Recommendation

Despite some balance sheet improvements from debt-to-equity conversions and regaining NYSE compliance, the company's fundamental operational issues are severe. It has generated no revenue since March 2025, reported substantial net losses, and carries a 'going concern' warning from its auditors. The continuous need for significant capital raises, coupled with recent CEO and CFO resignations and material weaknesses in internal controls, indicates extreme instability and high risk. The strategic pivot to water rights and tequila is highly capital-intensive and speculative, with no guarantee of success. Investors face substantial dilution risk and a high probability of further value erosion.

Keywords

Beverage Industry, SEC Filing, Quarterly Report, Financial Performance, Net Loss, Liquidity, Going Concern, Capital Raise, Debt Conversion, Preferred Stock, Water Rights, Tequila Distribution, Chispo Tequila, Qplash, E-commerce, NYSE American Listing, Corporate Governance, Risk Factors, Management Changes, Share-based Compensation, Intangible Assets, Supply Chain Risk, Regulatory Compliance, Product Liability, Market Volatility, Dilution, SBEV