SPLASH BEVERAGE GROUP, INC.

**Note 1 –Business Organization and Nature of Operations **

Splash Beverage Group, Inc. (the “Company”, “Splash”) seeks to identify, acquire, and build early stage or under-valued beverage brands that have strong growth potential within its distribution system. Splash’s distribution system is comprehensive in the US and is also seeking to expand to select attractive international markets. Through its division Qplash, Splash’s distribution reach includes e-commerce access to both business-to-business (B2B) and business-to-consumer (B2C) customers. Prior to pausing its operations in February 2025, Qplash marketed well known beverage brands to customers throughout the US that prefer delivery direct to their office, facilities, and or homes.

On March 27, 2025, the Company implemented a 1.0 for 40.0 reverse stock split. All common stock shares 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 June 2025 the Company acquired water extraction rights to an aquifer located in Costa Rica, which assets are referred to herein as the “Water Assets.” Subject to accessing the necessary capital and infrastructure, the Company’s business plan for the Water Assets envisions the extraction, bottling and sale of high quality drinking water. As of September 30, 2025, the Company has received a purchase order from a customer in the United Arab Emirates. The Company needs to raise approximately $4,000,000 in order to bottle, package, and ship this order.

Beginning in February, 2025, the Company temporarily suspended its operations due to its lack of adequate capital to acquire inventory and otherwise maintain its business operations. The Company intends to re-commence certain operations and to establish new operations upon its receipt of sufficient capital and determining appropriate updates to its strategy and business plan. Subject to receiving sufficient capital, the Company intends to focus its efforts on distribution of the Chispo brand tequila, establishing and growing material operations through the sale of water extracted from the Water Assets, and re-launching its Qplash platform primarily to provide an online supplement to sales of these products. Subject to receipt of at least $20 million, the Company intends to secure a facility to extract water from the Water Assets in greater quantities and other strategic relationships to allow for additional revenue generation from thus business venture and expansion of sales and brand recognition.

**Note 2 –Summary of Significant Accounting Policies **

Basis of Accounting

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), and the requirements of the U.S. Securities and Exchange Commission (the “SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. Accordingly, they do not include all of the information and footnotes normally included in financial statements prepared in conformity with U.S. GAAP. They should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2024 Annual Report on Form 10-K, filed with the SEC on July 11, 2025 (the “Form 10-K”).

The accompanying condensed consolidated financial statements are unaudited and include all adjustments (consisting of normal recurring adjustments) that management considers necessary for a fair presentation of its condensed financial position and results of operations for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the entire year.

Basis of Presentation and Consolidation

These consolidated financial statements include the accounts of Splash and its wholly owned subsidiaries Splash Beverage Holdings LLC (“Holdings”), Splash International Holdings LLC (“International”), Splash Mex SA de CV (“Splash Mex”), and Copa di Vino Wine Group, Inc. (“Copa di Vino”). All intercompany balances have been eliminated in consolidation.

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 confirm to accounting principles generally accepted in the United States of America (GAAP).

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 condensed 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 ***

The Company considers all highly liquid securities with an original maturity of three months or less to be cash equivalents. The Company hadno cash equivalents at September 30, 2025 or December 31, 2024.

Our cash in bank deposit accounts, at times, may exceed federally insured limits of $250,000. At September 30, 2025 the Company had $15,667 in excess of the federally insured limits. and December 31, 2024, the Company’s cash on deposit with financial institutions had not exceeded federally insured limits of $250,000.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are carried at their estimated recoverable amounts and are periodically evaluated for collectability based on past credit history with clients and other factors. The Company establishes provisions for losses on accounts receivable on the basis of loss experience, known and inherent risk in the account balance, and current economic conditions.

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 September 30, 2025 and December 31, 2024 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. The Company establish provisions for excess or inventory near expiration are 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. The Company manages inventory levels and purchase commitments in an effort to maximize utilization of inventory on hand and under commitments. The amount of our reserve was $621,516 at September 30, 2025 and December 31, 2024.

Property and Equipment

The Company records 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 3-39 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.

Depreciation expense totaled $37,017 and $37,017 for the three months ended September 30, 2025 and September 30, 2024, respectively. For the nine months ended September 30, 2025 and September 30, 2024, depreciation expense totaled $111,053 and $111,246, respectively. Property and equipment as of September 30, 2025 and December 31, 2024 consisted of the following:

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:

The liabilities and indebtedness presented on the condensed consolidated financial statements approximate fair values at September 30, 2025 and December 31, 2024, consistent with recent negotiations of notes payable and due to the short duration of maturities and market rates of interest.

Embedded Debt Costs in Convertible Debt Instruments

In August 2020, the FASB issued “ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”) which simplifies the accounting for convertible instruments. The guidance removes certain accounting models which separate the embedded conversion features from the host contract for convertible instruments. Either a modified retrospective method of transition or a fully retrospective method of transition was permissible for the adoption of this standard. Update No. 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption was permitted no earlier than the fiscal year beginning after December 15, 2020. The Company has adopted ASU 2020-06 effective January 1, 2024 and has removed the effects of any embedded conversion features from certain of our convertible instruments.

Revenue Recognition

The Company recognizes 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 the Company expects to receive in exchange for the transfer of goods or services to customers.

The Company recognizes revenue when the Company’s performance obligations under the terms of a contract with the customer are satisfied. Product sales occur for the Splash Beverage and E-commerce businesses once control of the Company’s products are transferred upon delivery to the customer. Revenue is measured as the amount of consideration that the Company expects to receive in exchange for transferring goods, and revenue is presented net of provisions for customer returns and allowances. The amount of consideration the Company receives and revenue the Company recognizes varies with changes in customer incentives offered to the Company’s 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 includes Amazon selling fees, cost associated with the outbound shipping and handling of finished goods, insurance cost, consulting cost, legal and audit fees, Investor Relations expenses, travel & entertainment expenses, occupancy cost and other cost.

Stock-Based Compensation

The Company accounts 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 award’s vesting period. The Company uses the Black-Scholes option pricing model to determine the fair value of stock-based awards.

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.

Income Taxes

The Company uses 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. The Company records a valuation allowance when it is 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 September 30, 2025 and December 31, 2024.

Net income (loss) per share

The net income (loss) per share is computed by dividing the net income (loss) less preferred stock dividends by the weighted average number of shares of common stock 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 stock options, warrants to purchase shares of common stock and shares issuable upon the conversion of notes payable.

Advertising

The Company conducts advertising for the promotion of its products. In accordance with ASC 720-35, advertising costs are charged to operations when incurred. The Company recorded advertising expense of $8,833 and $216,359 for the three months ended September 30, 2025 and 2024, respectively. The Company recorded advertising expense of $49,554 and $403,610 for the nine months ended September 30, 2025 and 2024, respectively.

Goodwill and Intangibles Assets

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. The Company’s goodwill and intangible assets were impaired to $0 at December 31, 2024.

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.

On June 25, 2025, the Company acquired water concession rights and related permits in Garabito, Puntarenas, Costa Rica, as part of the Utopia asset acquisition. The concession grants the legal right to extract up to 0.81 liters per second from the approved aquifer, with renewals available every ten years, contingent on approval by regulatory agencies in Costa Rica. Management expects the concession to be renewed for at least 100 years. The water rights are classified as indefinite-lived intangible assets under ASC 350 and are not amortized. Indefinite-lived intangible assets are tested for impairment annually or more frequently if indicators of impairment are present. As of September 30, 2025, the carrying amount of the water rights was $20.0 million, and no impairment was recorded.

Long-lived assets

The Company evaluates long-lived assets for impairment 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 Gains/Losses

Foreign Currency Gains/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. Gains or losses from these translation adjustments are included in the condensed consolidated statement of operations and other comprehensive loss 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 foreign currency translation in the condensed consolidated statement of operations and comprehensive loss. The Company incurred foreign currency translation net loss of $1,277 and net gain of $85,074 for the three months ending September 30, 2025 and 2024 respectively and net loss of $47,179 and net gain of $77,819 for the nine months ending September 30, 2025 and 2024 respectively.

Liquidity, Capital Resources and Going Concern Considerations

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 historically has incurred significant losses and negative cash flows from operation since inception and had net-loss of approximately $10.0 million for three-month period ended September 30, 2025 and accumulated deficit of approximately $178.3 million through September 30, 2025. During the nine-month period ended September 30, 2025, the Company’s net cash used in operating activities totaled approximately $3.7 million. Additionally, the Company’s current liabilities exceed its current assets, and it has a working capital deficit. To date the Company has generated cash flows from issuances of equity and indebtedness.

The Company received approximately $3.7 million from the issuance of debt and $0.8 million from sale of preferred stock and warrants for the nine months ending September 30, 2025.

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. The Company has issued preferred stock as part of its strategy to regain compliance with the NYSE American listing standards and reduce debt. These preferred shares, specifically Series B 12% convertible preferred stock, were issued in exchange for promissory notes. The preferred stock offers a 12% cumulative dividend and potential conversion to common stock, subject to shareholder approval and an increase in authorized common stock. In June 2025, the Company exchanged approximately $12.67 million outstanding promissory notes and accrued interest for 126,710 shares of Series B Preferred Stock. By converting debt into equity, the Company enhanced its balance sheet, reduced interest expense, and improved its shareholder equity position in furtherance of its goal of complying with exchange requirements.

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.

Recent Accounting Pronouncements

In August 2020, the FASB issued “ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”) which simplifies the accounting for convertible instruments. The guidance removes certain accounting models which separate the embedded conversion features from the host contract for convertible instruments. Either a modified retrospective method of transition or a fully retrospective method of transition was permissible for the adoption of this standard.

Update No. 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption was permitted no earlier than the fiscal year beginning after December 15, 2020. The Company has adopted ASU 2020-06 effective January 1, 2024, the Company recorded approximately $2.2 million as a reduction to the additional paid in capital and added approximately $1.3 million to the opening retained earnings in accordance with the authoritative guidance under ASU 2020-06.

All other newly issued but not yet effective accounting pronouncements have been deemed to be not applicable or immaterial to the Company.

Note 3 – Notes Payable, Related Party Notes Payable, Convertible Bridge Loans Payable, Revenue Financing Arrangements and Bridge Loan Payable

Notes payable are generally nonrecourse and secured by all Company owned assets.

Note 3 – Notes Payable, Related Party Notes Payable, Convertible Bridge Loans Payable, Revenue Financing Arrangements and Bridge Loan Payable, continued

Interest expense on notes payable was $315,794 and $877,772 for the three months ended September 30, 2025 and 2024, respectively. Interest expense on notes payable was $1,578,186 and $2,026,523 for the nine months ended September 30, 2025 and 2024, respectively. Accrued interest amounted to $2,165,697 as of September 30, 2025.

The Company recognized approximately $25,653 and approximately $1,125,409 of interest expense attributable to the amortization of the debt discount during the three months ended September 30, 2025 and 2024, respectively. The Company recognized approximately $1,679,336 and approximately $2,730,857 of interest expense attributable to the amortization of the debt discount during the nine months ended September 30, 2025 and 2024, respectively. As of September 30, 2025, and December 31, 2024, the balance of the unamortized debt discount was $192,254 and $3,677,143 respectively.

Interest expense on related party notes payable was $0 and $6,000 for the three months ended September 30, 2025 and 2024, respectively. Interest expense on related party notes payable was $0 and $12,000 for the nine months ended September 30, 2025 and 2024, respectively. The Company’s effective interest rate was 26.33% for the nine months ended September 30, 2025.

As of September 30, 2025, the Company’s convertible note balances are convertible into 6,126,419 shares of common stock

Note 4 – Licensing Agreement and Royalty Payable

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. The Company has reserved $330,000 that is included in legal reserve in the condensed consolidated statement of operations and comprehensive loss relating to the termination of the ABG agreement.

In connection with the Copa di Vino APA, the Company acquired the license to certain patents from 1/4 Vin SARL (“1/4 Vin”) for the packaging that Copa di Vino goes into. On February 16, 2018, Copa di Vino entered into three separate license agreements with 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 5–Stockholders’ Equity **

Common Stock

On March 27, 2025, the Company implemented a 1.0 for 40.0 reverse stock split. The reverse stock split was authorized by the Company’s Board of Directors on March 14, 2025. All numbers of shares of common stock have been adjusted to reflect the split. The purpose of this reverse split was to ensure that the Company could meet the per share price requirements of the NYSE American.

During the nine-months September 30, 2025, we issued 55,500 shares valued at $141,595 in exchange for services,586,037 shares for conversion of notes payable and accrued interest totaling $2,122,244.

Preferred Stock

The Company evaluated the classification of the Preferred Stock and related warrants issued with the Series A-1 Preferred Stock in accordance with ASC 480,Distinguishing Liabilities from Equity, and ASC 815,Derivatives and Hedging. Based on this assessment, management determined that the Preferred Stock and warrants meet the criteria for equity classification. Specifically, the instruments are not mandatorily redeemable, do not embody obligations to repurchase the Company’s shares by transferring assets, and do not require settlement in a variable number of shares with a monetary value that is fixed, tied to a variable other than the Company’s own stock, or indexed to something other than the Company’s stock. The warrants are indexed solely to the Company’s common stock and meet the scope exception under ASC 815-10-15. Accordingly, the Preferred Stock and related warrants have been classified as components of stockholders’ equity in the accompanying condensed consolidated financial statements.

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

Dividends

Conversion into Common Stock

Note 5 – Stockholders’ Equity, continued

Redemption – at the sole discretion of the Company.

Seniority

In May - October 2025, the Company issued 1,050 shares of Series A-1 Preferred Stock in exchange for approximately $1,050,000, of which 150 shares were issued during July 2025 in exchange for $150,000. Series A-1 shares are convertible into common stock, subject to shareholder approval. Investors of A-1 Shares also received 262,500 1-year A Warrants exercisable into common stock at 80% of 5-day VWAP, and 262,500 5-year B Warrants exercisable into common stock at $4.00.

In June 2025, the Company issued 1,000 shares of Preferred A Stock to Robert Nistico, Director, a related party. Preferred A is super voting preferred, not convertible into common stock. Mr. Nistico is the sole holder of Preferred A.

In June 2025, the Company exchanged previously issued convertible notes, $10,580,336 of principal and $2,090,105 interest for 126,710 shares of Preferred Stock B, eliminating $7,699,596 of current liabilities and $2,070,712 of long-term liabilities. These liabilities were previously carried net of unamortized discounts. Debt agreements were amended to be exchanged for Preferred B. The Series B shares are convertible into common stock, subject to shareholder approval. The note discount on the date of conversion was 1,843,519, The loss on extinguishment of debt was $5,560,482 recorded in accordance with ASC 470. The fair market value of the Preferred Stock B utilized in the computation of the loss on extinguishment was $16,387,404.

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 $1,000 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 acquisition of the water rights was recorded at a cost of $20 million, which is the fair value of the Series C preferred shares issued as consideration for the acquisition of the water rights. The Series C shares are convertible into common stock, subject to shareholder approval.

During August 2025,1,535 shares of Preferred-B were converted into 113,295 shares of common stock.

Stock Plan

2020 Plan adjusted for the 1 for 40 reverse split.

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 152,383 as of September 30, 2025.

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. In October 2023, the shareholders voted to increase the number of shares issuable under the Plan to 7.5%. At January 1, 2024 and 2025, the number of shares issuable under the 2020 plan increased by 83,119 and 125,238 shares, respectively.

Note 5 – Stockholders’ Equity, continued

The following is a summary of the Company’s stock option activity:

The fair value of stock options granted in 2025 has been measured at $90,531 using the Black-Scholes option pricing model with the following assumptions: exercise price $6.0, expected life 10 years, expected volatility 254%, expected dividends 0%, risk free rate 4.00%.

During the three-month period ended September 30, 2025 and September 30, 2024, the Company did not grant any options to employees under the 2020 plan. During the nine-month period ended September 30, 2025 and September 30, 2024, stock-based compensation was recorded $250,027 and $112,125 respectively. The remaining unamortized stock-based compensation as of September 30,2025 was $201,822.

On July 31, 2025, the Board of Directors approved the issuance of 5,150,000 warrants to directors, officers, and employees with an exercise price of $0.80 per share and a ten-year term. The awards included grants to directors, the President, the Chief Financial Officer, and certain employees, with vesting terms consistent with the award agreements. All warrants are fully vested except those issued to directors and the former Chief Executive Officer, whose 750,000-warrant award remains subject to performance and continued service vesting conditions. For the three months ended September 30, 2025, the Company recorded stock-based compensation expense of $7,549,543, measured using the Black-Scholes option pricing model with the following assumptions: exercise price $0.80, expected life 5 years, expected volatility 254%, expected dividends 0%, risk free rate 4.37%.

Common Stock Issuable, Liability to Issue Stock and Shareholder Advances

The shareholder advances in the amount of $0.2 million were exchanged to 2,444 shares of Preferred Stock B in June 2025.

Note 6 –Related Parties

During the normal course of business, the Company incurred expenses related to services provided by the former CEO or Company expenses paid by the former 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 $2,183,504 at September 30, 2025 and $1,995,950 at December 31, 2024.

Note 6 – Related Parties, continued

On April 2024, the Company also entered into a Merchant Cash Advance 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 Cobalt Funding Solutions (the “Lender”). The Loan and Security Agreement provided a loan of $815,000, with the gross and interest amount of $326,028 with the Lender (the “Credit Facility”). There was $372,335 outstanding under this agreement as of September 30, 2025.

On September 2024 and November 2024 the Company also entered into a Merchant Cash Advance 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 with Timeless Funding LLC (the “Lender”). The Loan and Security Agreement provided a loan of $325,000 and $340,000, with the gross and interest amount of $172,250 and $173,400 respectively with the Lender (the “Credit Facility”). There was $497,188 and $311,713 respectively outstanding under this agreement as of September 30, 2025.

There were related party advances from our Director, Robert Nistico, in the amount of approximately $0.4 million outstanding as of September 30, 2025 and approximately $0.4 million as of December 31, 2024. Mr. Nistico has asserted that interest is owed on these advances; however, the Company and Mr. Nistico have not yet reached agreement on the applicable interest rate or the amount of any interest that may be due, and the balances noted above do not include any interest.

In June 2025, the Company issued 1,000 shares of Preferred A Stock to Robert Nistico, Director, a related party. Preferred A is super voting preferred, not convertible into common stock. Mr. Nistico is the sole holder of Preferred A

In September 2025, the Board of Directors approved the prepayment of approximately $146,000 representing ninety (90) days of compensation for the Company’s Chief Financial Officer and Controller, authorized by unanimous written consent of independent directors. Following the Chief Financial Officer’s resignation, the unearned portion of the prepayment was offset against the CFO’s accrued and unused vacation balance, resulting in a remaining net amount of approximately $8,000 payable to the CFO. The remaining prepaid balance is reflected in “Prepaid Expenses” as of September 30, 2025.

On July 31, 2025 as subsequently modified, the Company’s Board of Directors granted 750,000 five-year Warrants to each director, exercisable at $0.80 per share. In addition, our President received a grant of 750,000 Warrants and our Chief Financial Officer received a grant of 1,000,000 Warrants with identical terms. We also granted certain employees a total of 400,000 Warrants with identical terms other than vesting. All warrants are fully vested except those granted to our Directors and Former Chief Executive Officer, Robert Nistico. Mr. Nistico’s 750,000 will vest only upon achievement of defined performance and continued service objectives.

Note 7 –Investment in Salt Tequila USA, LLC

The Company has a marketing and distribution agreement with SALT Tequila USA, LLC (“SALT”) for the manufacturing of our Tequila product line in Mexico.

The Company has a 22.5% percentage ownership interest in SALT, this investment is carried at cost less impairment, the investment does not have a readily determinable fair value. The Company has the right to increase our ownership to 37.5%.

SALT Tequila was not produced or sold by the company during the quarter. It’s unlikely the Company will continue selling SALT in the future.

Note 8 –Leases

The Company has various operating lease agreements primarily related to real estate and office. The Company’s real estate leases represent a majority of the lease liability. Lease payments are mainly fixed. Any variable lease payments, including utilities, common area maintenance are expensed during the period incurred. Variable lease costs were immaterial for the quarter ended September 30, 2025 and 2024. 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.

Note 8 –Leases, continued

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 $207,526 and $273,631 during the period ended September 30, 2025 and 2024, respectively.

The following table sets forth the maturities of our operating lease liabilities and reconciles the respective undiscounted payments to the operating lease liabilities in the consolidated balance sheet at September 30, 2025

The table below presents lease-related terms and discount rates at September 30, 2025:

Note 9 –Segment Reporting

The Company has two reportable segments: (1) the manufacture and distribution of non-alcoholic and alcoholic brand beverages, and (2) the e-commerce sale of beverages. These segments are managed separately and each segment’s major customers have different characteristics. Segment Reporting is evaluated by our Chief Executive Officer and Chief Financial Officer.

Note: The Copa di Vino business is included in our Splash Beverage segment.

Note 9 – Segment Reporting, continued

**Note 10 –Commitment and Contingencies **

The Company is a party to certain 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 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. As disclosed in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 30, 2025, on July 28, 2025, the Company received two letters from the NYSE Regulation confirming that the Company has regained compliance with the continued listing standards of the NYSE American LLC (“NYSE American”).

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 11 –Subsequent Events

In October 2025, the Company issued 250 shares of Series A-1 Preferred Stock in exchange for $250,000. The October issuance is convertible into 62,500 – 200,000 shares of common stock. Investors of A-1 Shares also received 62,500 1-year A Warrants exercisable into common stock at 80% of 5-day VWAP, and 62,500 5-year B Warrants exercisable into common stock at $4.00. All outstanding A-1 shares (1,050) are convertible into 262,500 – 840,000 shares of common stock.

On October 31, 2025, the Company held its Annual Meeting of Stockholders. At the meeting, stockholders elected Robert Nistico, Frederick William Caple, Thomas Fore, and Justin Yorke to serve as directors until the next annual meeting and until their successors are duly elected and qualified. Stockholders also ratified the appointment of Rose, Snyder & Jacobs LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2025; approved, in accordance with NYSE American Company Guide Section 713, the issuance of shares of common stock in excess of 19.99% of the Company’s outstanding common stock pursuant to outstanding convertible preferred stock, warrants, and convertible promissory notes; approved, in accordance with Section 713, the issuance of shares of common stock pursuant to the September 19, 2025 Securities Purchase Agreement with C/M Capital Master Fund, LP (the “ELOC Agreement”); and approved the Company’s 2025 Equity Incentive Plan. The proposal to increase the Company’s authorized common stock to 400,000,000 shares was adjourned on October and November 14, 2025 and will be considered at the adjourned meeting scheduled for December 10, 2025. Stockholders also approved the potential adjournment of the meeting to permit additional proxy solicitation if necessary. Accordingly, Items 1 through 5 and Item 7 were approved, and Item 6 was adjourned for further consideration.

On October 31, 2025, the Chief Executive Officer, Robert Nistico, provided notice of resignation, effective November 14, 2025. Mr. Nistico will continue to serve as a Director.

On November 10, 2025, the Chief Financial Officer provided notice of resignation, effective November 30, 2025.

On November 12, 2025, the Company borrowed $500,000 from two accredited investors and issued senior promissory notes with a combined original principal amount of $588,235.30, reflecting a 15% original issue discount. The notes mature on February 12, 2026, accrue interest at 6% starting 30 days after issuance, and include customary default provisions. The notes also permit the holders, at their discretion, to apply outstanding principal, accrued interest, and any Company securities they hold as consideration for participation in future equity, equity-linked, or debt financings.