What changed in this filing

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Item 1. Financial Statements

2024-11-14 compared with 2024-08-14 · 250 added, 169 removed, 450 unchanged (48% of the section changed)

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CONDENSED CONSOLDIATED BALANCE SHEETS

September 30,

Current assets:

Cash and cash equivalents

Marketable securities, at fair value

Accounts receivable

Accounts receivable, related party

Advances to related party

Subscription receivable

Deposits in escrow

Prepaid expenses

Marketable securities, at fair value

Total current assets

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Total liabilities

Commitments and contingencies

Commitments and contingencies (Note 9)

Stockholders’ equity:

Common stock, $ 0.0001 par value, 350,000,000 shares authorized, 5,581,855 and 5,391,227 shares issued and outstanding as of June 30, 2024 and 4,829,438 shares issued and outstanding as of December 31, 2023

Common stock, $ 0.0001 par value, 350,000,000 shares authorized, 5,704,015 and 5,513,387 shares issued and outstanding as of September 30, 2024 and 4,829,438 shares issued and outstanding as of December 31, 2023, respectively

Additional paid-in capital

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Revenue - services

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( 9,248,793 )

Other income:

Other income (expense):

Interest expense

Realized gain/(loss) on securities

Dividend income

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Treasury Stock

Stockholders’

Additional Paid-In

Total Shareholder’s

Balances at December 31, 2022

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$ ( 7,683,466 )

Issuance of common stock pursuant to IPO

Offering costs

( 1,255,843 )

Conversion of note payable into common stock

Issuance of common stock for services

Buyback of common shares

Vesting of restricted stock units

( 5,541,228 )

Balances at September 30, 2023

$ ( 13,224,694 )

Balances at December 31, 2023

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( 24,189,310 )

Issuance of common stock pursuant to public offerings

Offering costs

Vesting of restricted stock units

( 3,363,380 )

Balances at September 30, 2024

$ ( 547,415 )

$ ( 27,552,690 )

See the accompanying notes to the unaudited condensed

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

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Vesting of restricted stock units

Gain on sale of marketable securities

Issuance of common stock for services

Changes in operating assets and liabilities:

Accounts receivable

Accounts receivable, related party

Prepaid expenses

( 1,296,422 )

Accounts payable

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( 3,565,293 )

Cash flows from investing activities:

Net purchases of marketable securities

( 4,568,848 )

Cash flows from investing activities:

Purchases of marketable securities

Sales of marketable securities

Net repayments from related party

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Cash flows from financing activities:

Repurchase of common stock

Deferred offering costs

Proceeds from note payable

Issuance of common stock and pursuant to private placement

Subscription liability

Issuance of common stock and pursuant to IPO, net of offering costs

Repurchase and buyback of shares

Offering costs

Net cash provided by (used in) financing activities

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Common stock issued per investment in equity security

Deposit in escrow used for investment in equity security

Reclassification of deposit in escrow to investment in equity

Conversion of note payable and accrued interest into common stock

Subscription receivable

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The Company has not generated profits since inception, has sustained

net losses of $ 4,636,685 and $ 3,878,565 for the six months ended June 30, 2024 and 2023, and has negative cash flows from operations of

$ 2,548,366 for the six months ended June 30, 2024.

The Company requires additional capital to operate and expects losses

to continue for the foreseeable future.

These factors raise substantial doubts about the Company’s ability to continue as a going

net losses of $ 8,000,066 and $ 9,419,793 for the nine months ended September 30, 2024 and 2023, and has negative cash flows from operations

of $ 3,565,293 for the nine months ended September 30, 2024.

The Company requires additional capital to operate and expects losses to continue

for the foreseeable future.

These factors raise substantial doubts about the Company’s ability to continue as a going concern.

The Company’s ability

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equity financings.

The Company has raised funds from the initial public offering in August 2023 and an additional $ 16.6 million from

its public offerings in October and November 2023.

Our failure to raise additional capital could have a negative impact on not only our

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Unaudited Interim Financial Information

The unaudited condensed consolidated

interim financial statements and related notes have been prepared in accordance with U.S.

GAAP for interim financial information, within

the rules and regulations of the United States Securities and Exchange Commission (the “SEC”).

Certain information and disclosures

normally included in the annual financial statements prepared in accordance with U.S.

GAAP have been condensed or omitted pursuant to

such rules and regulations.

The unaudited interim financial statements have been prepared on a basis consistent with the audited financial

statements and in the opinion of management, reflect all adjustments, consisting of only normal recurring adjustments, necessary for the

fair presentation of the results for the interim periods presented and of the financial condition as of the date of the interim balance

The financial data and the other information disclosed in these notes to the interim financial statements related to the six-month

periods are unaudited.

Unaudited interim results are not necessarily indicative of the results for the full fiscal year.

The unaudited condensed

consolidated interim financial statements and related notes have been prepared in accordance with U.S.

GAAP for interim financial

information, within the rules and regulations of the United States Securities and Exchange Commission (the “SEC”).

Certain information and disclosures normally included in the annual financial statements prepared in accordance with U.S.

been condensed or omitted pursuant to such rules and regulations.

The unaudited interim financial statements have been prepared on a

basis consistent with the audited financial statements and in the opinion of management, reflect all adjustments, consisting of only

normal recurring adjustments, necessary for the fair presentation of the results for the interim periods presented and of the

financial condition as of the date of the interim balance sheet.

The financial data and the other information disclosed in these

notes to the interim financial statements related to the nine month periods are unaudited.

Unaudited interim results are not

necessarily indicative of the results for the full fiscal year.

The accompanying unaudited

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Use of Estimates

The preparation of the Company’s financial statements in conformity

with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure

of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during

the reporting period.

Significant estimates and assumptions reflected in these financial statements include, but are not limited to the

cost method investments and stock-based compensation.

The Company bases its estimates on historical experience, known trends and other

market-specific or other relevant factors that it believes to be reasonable under the circumstances.

On an ongoing basis, management evaluates

its estimates when there are changes in circumstances, facts and experience.

Changes in estimates are recorded in the period in which

they become known.

The preparation of the Company’s

financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of

assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported

amounts of revenues and expenses during the reporting period.

Significant estimates and assumptions reflected in these financial statements

include, but are not limited to the cost method investments and stock-based compensation.

The Company bases its estimates on historical

experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances.

On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience.

Changes in estimates

are recorded in the period in which they become known.

Actual results could differ from those estimates.

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The Company’s ability

to derive revenue is reliant on its relationship with KBROS, LLC (“KBROS”) who currently handles product for the CWS Platform and fulfills the products

sold by clientele using our marketing services.

The discontinuance of such relationship or termination of the CWS Platform agreements

would have a material negative impact on the Company’s operations.

to derive revenue is reliant on its relationship with KBROS, LLC (“KBROS”) who currently handles product for the CWS Platform

and fulfills the products sold by clientele using our marketing services.

The discontinuance of such relationship or termination of the

CWS Platform agreements would have a material negative impact on the Company’s operations.

Furthermore, the Company

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The investments have a readily determinable

fair value and as such, are recognized as a Level 1 instrument.

fair value and as such, are recognized as Level 1 financial instruments.

Under Accounting

Standards Codification (“ASC”) No.

321 and Accounting Standards Update (“ASU”) 2016-01, equity securities

are measured at fair value and any changes in fair value are recorded to earnings.

Investments, at Cost

In accordance with FASB ASC Subtopic 321-10-35-2, Investments

– Others – Cost Method Investments , investments where the Company does not have a significant influence are accounted

The Company reviews all material investments on an annual basis to determine whether a significant event or change in circumstances

has occurred that may have an adverse effect on the fair value of the investment.

In the event the fair value of the investment declines

below the cost basis, the Company records an impairment.

As of June 30, 2024, the

Company determined that its investments were accounted using the cost method, and there were no other-than-temporary declines in fair

In accordance with FASB ASC

Subtopic 321-10-35-2, Investments – Others – Cost Method Investments , investments where the Company does not have

a significant influence are accounted for at cost.

The Company reviews all material investments on an annual basis to determine whether

a significant event or change in circumstances has occurred that may have an adverse effect on the fair value of the investment.

event the fair value of the investment declines below the cost basis, the Company records an impairment.

As of September 30, 2024,

the Company determined that its investments were accounted using the cost method, and there were no other-than-temporary declines in fair

value below their respective carrying values.

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Level 3—Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The carrying values of the Company’s accounts receivable, accounts

payable, and accrued expenses approximate their fair values due to the short maturity of these instruments.

The Company believes the carrying

amount of its advances to related parties approximate fair value due to its short-term maturity.

The carrying values of

the Company’s accounts receivable, accounts payable, and accrued liabilities approximate their fair values due to the short

maturity of these instruments.

The Company believes the carrying amount of its advances to related parties approximate fair value

due to its short-term maturity.

The Company’s investments

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Marketing campaigns generally range from one to three months.

Cwsspirits.com is an e-commerce platform that sells wine and spirits.

The Company is responsible for contracting with CWS and customers to fulfill orders made through the website.

The Company, though not

legally able to own alcohol inventory, does take on financial inventory risk.

The Company is solely responsible for any risk of loss of

the end customer and paying to replenish the loss order.

Additionally, the Company enters into minimum guaranteed purchase commitments

with its vendor that require the Company to pay for shortfalls in minimum purchases.

The Company establishes the price and selection of

products to be sold on the CWS Platform, and directs all marketing activities pertaining to the Platform.

As such, the Company is the

primary obligor for transactions with customers on the CWS Platform and records gross revenue.

Revenue is recognized at the point in time

when products are shipped to the end customer, when LQR has fulfilled its performance obligation, net of returns.

Cwsspirits.com is an e-commerce

platform that sells wine and spirits.

The Company is responsible for contracting with CWS and customers to fulfill orders through the

The Company, though not legally able to own alcohol inventory, does take on financial inventory risk.

The Company is solely responsible

for any risk of loss of the end customer and paying to replenish the loss order.

Additionally, the Company enters into minimum guaranteed

purchase commitments with its vendor that require the Company to pay for shortfalls in minimum purchases.

The Company establishes the

price and selection of products to be sold on the CWS Platform, and directs all marketing activities pertaining to the Platform.

the Company is the primary obligor for transactions with customers on the CWS Platform and records gross revenue.

Revenue is recognized

at the point in time when products are delivered to the end customer, when LQR has fulfilled its performance obligation, net of returns.

Product Sales

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The Company records gross revenue as it’s the primary obligor in the transaction.

Vault is the exclusive membership program for CWS Platform customers.

Through the CWS Platform, users can sign up for membership where they will have access to all products available through the CWS Platform

combined with special membership benefits including discounted products, free shipping and promotional offers.

Prior to the acquisition

of the CWS Platform, the Company marketed this membership program on the CWS Platform and was entitled to 50 % of the revenue from

the subscriptions as the agent of the transaction.

Upon the acquisition of the CWS Platform, the Company records gross revenue as it is

the principal in the transaction.

The Company records a reserve for chargebacks and cancellations at the time of the transaction based

on historical experience.

Vault is the exclusive membership

program for CWS Platform customers.

Through the CWS Platform, users can sign up for membership where they will have access to all products

available through the CWS Platform combined with special membership benefits including discounted products, free shipping and promotional

Prior to the acquisition of the CWS Platform, the Company marketed this membership program on the CWS Platform and was entitled

to 50 % of the revenue from the subscriptions as the agent of the transaction.

Upon the acquisition of the CWS Platform, the Company

records gross revenue as it is the principal in the transaction.

The Company records a reserve for chargebacks and cancellations at the

time of the transaction based on historical experience.

Disaggregation of Revenue

The following is a summary

of the disaggregation of revenue for the three and six months ended June 30, 2024 and 2023:

of the disaggregation of revenue for the three and nine months ended September 30, 2024 and 2023:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Disaggregation of Revenues

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recognizes compensation expense for those awards over the requisite service period, which is generally the vesting period of the respective

The Company classifies equity-based compensation expense in its statement of operations in the same manner in which the award recipient’s payroll or contractor

costs are classified or in which the award recipient’s service payments are classified.

The Company classifies equity-based

compensation expense in its statement of operations in the same manner in which the award recipient’s payroll or contractor costs

are classified or in which the award recipient’s service payments are classified.

Net Loss per Share

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their inclusion would be anti-dilutive.

As all potentially dilutive securities are anti-dilutive as of June 30, 2024 and 2023, diluted

As all potentially dilutive securities are anti-dilutive as of September 30, 2024 and 2023, diluted

net loss per share is the same as basic net loss per share for each year.

Potentially dilutive items

outstanding as of June 30, 2024 include the Company’s outstanding restricted stock units (See Note 7).

outstanding as of September 30, 2024 include the Company’s outstanding restricted stock units (See Note 7).

Recently Issued and

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Under Regulation S-X 3-05,

3-05, management determined that the CWS Platform acquisition constituted a business combination as the revenue producing activity

(e-commerce sales) is expected to be similar both pre and post-domain name acquisition.

As such, the Company recorded an

intangible asset of $ 10,000 for the purchase price consideration of the domain name.

management determined that the CWS Platform acquisition constituted a business combination as the revenue producing activity (e-commerce

sales) is expected to be similar both pre and post-domain name acquisition.

As such, the Company recorded an intangible asset of $ 10,000

for the purchase price consideration of the domain name.

Management assessed the fair

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estimated and potential cost savings or other operating efficiencies that could result from the acquisition:

Nine Months Ended

September 30,

( 9,685,986 )

Net loss per common share

Prepaid Expenses

The Company determined it

was no longer pursuing the website development services as per its October 2023 agreement with X-Media.

As such, the Company recognized

an expense of $ 1,250,000 as of September 30, 2024, representing the remaining unamortized prepaid amount.

The amount was included in sales

and marketing expenses in the consolidated statements of operations.

Deposits in Escrow

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INVESTMENTS, AT COST

The Company’s investments at cost includes a minority stake in

the common shares of Cannon Estate Winery Ltd and DRNK Beverage Corp.

These investments are primarily held for strategic purposes.

The Company’s investments

at cost includes a minority stake in the common shares of Cannon Estate Winery Ltd and DRNK Beverage Corp.

These investments are primarily

held for strategic purposes.

Cannon Estate Winery

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750,000 shares of the Company’s common stock.

The Company recorded an investment

of $ 817,500 , which is the fair value of the 750,000 shares issued to Cannon at a fair value per share of $ 1.09 on May 19.

accounted for the investment in Cannon under the cost method as it owns 9.99 % of Cannon’s common shares and does not exert significant

The Company recorded an

investment of $ 817,500 , which is the fair value of the 750,000 shares issued to Cannon at a fair value per share of $ 1.09 on May 19,

The Company accounted for the investment in Cannon under the cost method as it owns 9.99 % of Cannon’s common shares and does

not exert significant influence.

DRNK Beverage Corp.

On June 7, 2024, the Company consummated an acquisition of approximately

8.58 % of common shares of DRNK Beverage Corp.

(“DRNK”) pursuant to a Subscription Agreement (“DRNK Agreement”).

Pursuant to the Agreement, the Company subscribed for and purchased from DRNK 1,920,000 common shares of DRNK at a price of USD$ 2.50 per

share for an aggregate amount of $ 4,800,000 .

Upon the closing of the DRNK Agreement, the Company converted $ 4,800,000 which was held as

a deposit in escrow to investments in equity securities on the consolidated balance sheet.

On June 7, 2024, the Company

consummated an acquisition of approximately 8.58 % of common shares of DRNK Beverage Corp.

(“DRNK”) pursuant to a Subscription

Agreement (“DRNK Agreement”).

Pursuant to the Agreement, the Company subscribed for and purchased from DRNK 1,920,000 common

shares of DRNK at a price of $ 2.50 per share for an aggregate amount of $ 4,800,000 .

Upon the closing of the DRNK Agreement, the Company

reclassified $ 4,800,000 which was held as a deposit in escrow to investments on the consolidated balance sheet.

The Company accounted for

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increasing its authorized shares to 350,000,000 shares of common stock.

February 2024, the Board of Directors declared a 50 % stock dividend for distribution to all of the Company’s shareholders of

record at the close of business on February 12, 2024.

February 2024, the Board of Directors declared a 50 % stock dividend for distribution to all of the Company’s shareholders

of record at the close of business on February 12, 2024.

On March 1, 2024, 1,609,817 shares were issued per the dividend.

result of the stock dividend, a 3:2 stock split was effected.

Accordingly, all share and per share amounts for all periods presented

in the accompanying financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect the stock split.

As a result of the stock dividend, a 3:2 stock adjustment was effected similar to a forward stock split.

Accordingly, all share and per share amounts for all periods presented in the accompanying financial statements and notes thereto

have been adjusted retroactively, where applicable, to reflect the stock dividend.

September 1, 2023, the board of directors of the Company authorized a share buyback program for up to 20 % of the Company’s

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issued 750,000 shares of common stock pursuant to the Cannon Agreement for a fair value of $ 817,500 .

During the quarter ended

September 30, 2024, the Company issued 122,160 shares of common stock pursuant to an at-the-market public offering for proceeds of $ 70,194 ,

which were received in October 2024.

As of September 30, 2024, the Company recognized a subscription receivable pertaining to this issuance.

August 2023 the Company granted 31,250 restricted stock units (the Director RSU’s) which were to vest in eight equal quarterly

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The RSUs had a grant-date fair value of $ 6,266,533 .

During the three and six months ended June 30, 2024, the Company recognized stock-based compensation expense of $ 720,842 and $ 1,441,684

During the three and nine months ended September 30, 2024, the Company recognized stock-based compensation expense of $ 720,842 and $ 2,162,527

which is included in general and administrative expenses in the consolidated statement of operations.

As of June 30, 2024 and December

As of September 30, 2024 and December

31, 2023, there were 29,250 Director RSUs outstanding after cancellations.

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and Ssquared Spirits LLC

Company’s founder and Chief Executive Officer, who is a stockholder and member of the board of directors has an economic interest

in Ssquared Spirits LLC, the seller of the CWS Platform acquisition.

The spouse of the Company’s former Chief Executive Officer

and director, is the President and controlling stockholder of KBROS, the managing member and director of Ssquared Spirits LLC, and a minority

shareholder with the Company.

The Company’s founder

and Chief Executive Officer, who is a stockholder and member of the board of directors has an economic interest in Ssquared Spirits LLC,

the seller of the CWS Platform acquisition.

The spouse of the Company’s former Chief Executive Officer and director, is the President

and controlling stockholder of KBROS, the managing member and director of Ssquared Spirits LLC, and a minority shareholder with the Company.

In 2022, the former Chief Executive Officer resigned from the Company.

See Note 4 for the CWS Platform acquisition

from Squared.

KBROS acts as the Company’s Product Handler, whereby they are entitled to compensation of $ 40,000 per month plus reimbursement

for shipping and handling fees incurred by them for orders fulfilled through the CWS Platform, and bonus for reaching certain revenue

Pursuant to the Product Handling Agreement, the Company incurred $ 120,000 and $ 240,000 , respectively, to KBROS for the three

and six months ended June 30, 2024, which is included in cost of revenue in the consolidated statements of operations.

the three and six months ended June 30, 2024, the Company paid $ 100,000 in

incentive compensation, which is included in sales and marketing expenses in the consolidated statements of operations.

the year ended December 2023, the Company paid certain costs pertaining to alcoholic products on behalf of CWS in order finance the purchase

of brand product for which the Company was promoting through marketing services.

As of both June 30, 2024 and December 31, 2023,

$ 7,340 remained unpaid and outstanding from CWS.

The advances are non-interest bearing, unsecured and due on demand.

See Note 9 for funding commitment with KBROS.

See Note 4 for the CWS Platform acquisition from SSquared.

acts as the Company’s Product Handler, whereby they are entitled to compensation of $ 40,000 per month plus reimbursement for

shipping and handling fees incurred by them for orders fulfilled through the CWS Platform, and bonus for reaching certain revenue milestones.

Pursuant to the Product Handling Agreement, the Company incurred $ 120,000 and $ 360,000 , respectively, to KBROS for the three and

nine months ended September 30, 2024, which is included in cost of revenue in the consolidated statements of operations.

the nine months ended September 30, 2024, the Company paid $ 200,000 in incentive compensation, which is included in sales and

marketing expenses in the consolidated statements of operations.

See Note 9 for funding commitment

Wine & Spirits, Inc.

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KBROS, the Product Handler.

As of June 30, 2024 and December 31, 2023, the Company had $ 166,753

and $ 172,493 , respectively, in accounts receivable, related party with CWS pertaining to product revenues.

of September 30, 2024 and December 31, 2023, the Company had $ 182,156 and $ 172,493 , respectively, in accounts receivable, related

party with CWS pertaining to product revenues.

the year ended December 2023, the Company paid certain costs pertaining to alcoholic products on behalf of CWS in order finance the purchase

of brand product for which the Company was promoting through marketing services.

As of both June 30, 2024 and December 31, 2023,

As of both September 30, 2024 and December 31, 2023,

$ 7,340 remained unpaid and outstanding from CWS.

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the year ended December 31, 2023, the Company paid $ 170,000 to a contractor for assistance in completion of the food hall bar owned

by a related party under common management with the Company’s CEO, Veg House Illinois, Inc., which stand outstanding as on June

by a related party under common management with the Company’s CEO, Veg House Illinois, Inc., which stand outstanding as on September

Payable, Related Party

of June 30, 2024 and December 31, 2023, the Company had accounts payable of $ 0 and $ 58,589 , respectively, with related parties,

including KBROS, the Company’s founder and Chief Executive Officer, and officers and directors.

During the six months ended June 30, 2024, the Company paid its Chief

Executive Officer a performance bonus of $ 100,000 for achieving certain revenue levels through the CWS Platform.

of September 30, 2024 and December 31, 2023, the Company had accounts payable of $ 0 and $ 58,589 , respectively, with related parties, including

KBROS, the Company’s founder and Chief Executive Officer, and officers and directors.

the nine months ended September 30, 2024, the Company paid its Chief Executive Officer a performance bonus of $ 200,000 for achieving

certain revenue levels through the CWS Platform.

COMMITMENTS AND CONTINGENCIES

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a discount rate of 8.0 %.

As of June 30, 2024, the

outstanding right of use liability was $ 5,021 .

As of September 30, 2024,

the outstanding right of use liability was $ 2,534 .

Funding Commitment Agreement

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SUBSEQUENT EVENTS

On August 12, 2024, the Company

received a letter from the Nasdaq Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) therein stating that

for the 30 consecutive business days period between June 28, 2024 through August 9, 2024, the common stock of the Company had not maintained

a minimum closing bid price of $ 1.00 per share required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing

Rule 5550(a)(2) (the “Bid Price Rule”).

Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company was provided an initial

period of 180 calendar days, or until February 10, 2025 (the “Compliance Period”), to regain compliance with the Bid Price

If the Company does not regain

compliance with the Bid Price Rule by February 10, 2025, the Company may be eligible for an additional 180-day period to regain compliance.

To qualify, the Company would be required to meet the continued listing requirement for market value of publicly held shares and all other

initial listing standards for The Nasdaq Capital Market, with the exception of the Bid Price Rule, and would need to provide written notice

of its intention to cure the bid price deficiency during the second compliance period, by effecting a reverse stock split, if necessary.

If the Company cannot regain

compliance during the Compliance Period or any subsequently granted compliance period, the common stock of the Company will be subject

to delisting.

At that time, the Company may appeal the delisting determination to a Nasdaq hearings panel.

The notice from Nasdaq has no

immediate effect on the listing of the Company’s common stock and its common stock will continue to be listed on The Nasdaq Capital

Market under the symbol “LQR”.

The Company is currently evaluating its options for regaining compliance.

There can be no assurance

that the Company will regain compliance with the Bid Price Rule or maintain compliance with any of the other Nasdaq continued listing

requirements.

On October 15, 2024,

the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with David E.

(“Lazar”), pursuant to which he will acquire 5,454,545 shares (the “Shares”) of common stock, of the

Company at a price of $ 0.55 per share for aggregate gross proceeds of $ 3.0 million (the “Purchase Price”), and a five-year warrant to acquire up to 10,909,090 shares of common stock at the exercise

price of $ 0.55 per share (the “Warrant”).

Pursuant to the terms of the Purchase Agreement, all of the proceeds from sale of the Shares and Warrants are

required to be used to pay the Company’s obligations under a number of settlement agreements with operating partners, venders,

certain employees, consultants and officers and directors of the Company.

The closing of the transaction

shall take place in two stages.

On October 16, 2024, Lazar paid $ 606,000 at the first closing of the transactions under the Purchase Agreement

in exchange for 1,101,818 Shares.

On the final closing date,

Lazar will pay the Company $ 2,394,000 in exchange for 4,352,727 shares of Common Stock and the Warrant.

The final closing is subject to

the satisfaction of certain closing conditions described in the Purchase Agreement, including stockholder approval of the Purchase Agreement,

the Warrant and transactions related thereto (“Stockholder Approval”).

The final closing is required to occur the business

day after the Stockholder Approval has been obtained by the Company.

The Company agreed in

the Purchase Agreement not to issue any additional shares of common stock or securities convertible into common stock for a period

of 180 days from the date of the final closing without the consent of Lazar.

The Company also agreed in the Purchase Agreement not to effect any variable rate

transaction, including an at-the-market offering, until April 15, 2025.

The Warrant to be issued

by the Company on the final closing date will contain anti-dilution provisions, pursuant to which if on or after the date of issuance

of the Warrant and prior to April 15, 2025, the Company issues any shares of Common Stock or Common Stock equivalents at a price that

is less than the current exercise price of the Warrant, subject to certain exceptions set forth in the Warrant, the exercise price of

the Warrant will be reduced to the New Issuance Price (as defined below).

In the Purchase Agreement,

the Company is required to call a meeting of stockholders no later than December 16, 2024 for purposes of obtaining Stockholder Approval.

In the event such actions are not approved at such meeting, then the Company must call four subsequent meetings every 70 days in order

to solicit such approvals.

If such approvals are not obtained at the fourth meeting, the Company shall issue Lazar the Warrant with an

adjusted exercise equal to the Minimum Price as defined under Nasdaq Rule 5635(d)(1)(A) plus $ 0.25 and the anti-dilution provisions of

the Warrant shall be deleted.

On October 14, 2024, Jay

Dhaliwal informed the Board of Directors of the Company (the “Board”) of his resignation as a member of the Board effective

Dhaliwal’s resignation as a director was not the result of any disagreement with the Company on any matter relating

to the Company’s operations, policies or practices.

On October 15, 2024, prior

to the transactions contemplated by the Purchase Agreement, the current members of the Board appointed David Lazar to serve as the President

of the Company effective October 15, 2024 until his earlier resignation or removal.

On October 15, 2024, prior

to the transactions contemplated by the Purchase Agreement, the current members of the Board approved an increase in the size of the Board

and appointed David Lazar and Avraham Ben-Tzvi to the Board effective as of October 15, 2024.

The initial term as director for Messrs.

Ben-Tzvi and Lazar will expire at the Company’s 2024 annual meeting of stockholders.

At the time of the election, none of the new

directors were appointed to any committees of the Board of Directors.

The Board has determined that Mr.

Ben-Tzvi qualifies as an “independent

director” as defined under Nasdaq Rule 5605(a)(2) and satisfies the independent requirements of Rule 10A-3(b)(1) of the Securities

Exchange Act of 1934, as amended.

The Board appointed Mr.

Lazar as the President of the Company, and thereby does not deem him independent.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements