What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-14 compared with 2024-08-14 · 146 added, 137 removed, 179 unchanged (61% of the section changed)

14 unchanged sentences

Business Overview

Our company, LQR House Inc., a Nevada corporation

(“LQR”, “LQR House”, or the “Company”), intends to become a prominent force in the wine and spirits

e-commerce, sector epitomized by its flagship alcohol marketplace, CWSpirits.com (“CWS Platform”).

This platform delivers

a diverse range of spirits, wines, and champagnes from esteemed retail partners like Country Wine & Spirits.

Beyond its role in the

e-commerce sector, LQR is a marketing agency with a specialized focus on the alcohol industry.

We also intend to integrate the supply,

sales, and marketing facets of the alcoholic beverage space into one easy to use platform and become the one-stop-shop for everything

related to alcohol.

To date, our primary business includes the development of premium limited batch spirit brands and marketing internal

and external brands through our ownership of the CWS Platform, a U.S.-based e-commerce portal.

Additionally, we are in the process

of establishing an exclusive wine club.

We believe that the marketing and brand management services we provide to our wholly owned and

third-party clients will increase brand recognition thereof, and drive sales thereof through our e-commerce platform.

Our company, LQR House Inc., a Nevada

corporation (“LQR”, “LQR House”, or the “Company”), intends to become a prominent force in the

wine and spirits e-commerce, sector epitomized by its flagship alcohol marketplace, CWSpirits.com (“CWS Platform”).

platform delivers a diverse range of spirits, wines, and champagnes from esteemed retail partners like Country Wine & Spirits.

Beyond its role in the e-commerce sector, LQR is a marketing agency with a specialized focus on the alcohol industry.

We also intend

to integrate the supply, sales, and marketing facets of the alcoholic beverage space into one easy to use platform and become the

one-stop-shop for everything related to alcohol.

To date, our primary business includes the development of premium limited

batch spirit brands and marketing internal and external brands through our ownership of the CWS Platform, a U.S.-based

e-commerce portal.

Additionally, we are in the process of establishing an exclusive wine club.

We believe that the marketing

and brand management services we provide to our wholly owned and third-party clients will increase brand recognition thereof,

and drive sales thereof through our e-commerce platform.

In May 2024, we acquired a minority stake of common

shares of Cannon Estate Winery Ltd., a British Columbia corporation, an owner of Cannon Estate Winery.

In June 2024, we acquired a minority stake of common shares

of DRNK Beverage Corp., a British Columbia corporation, operating in the non-alcoholic and ready-to-drink beverage markets.

In June 2024, we acquired a minority stake of

common shares of DRNK Beverage Corp., a British Columbia corporation, operating in the non-alcoholic and ready-to-drink beverage markets.

The Services and Brands We Market

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consumers, wholesalers, and third-party alcohol brands:

SWOL Tequila is a limited-edition blend of tequila made in exclusive batches of up to

10,000 bottles which was originally owned by Dollinger Innovations and transferred over to us pursuant to the Tequila Asset Purchase Agreement.

Pursuant to the Tequila Asset Purchase Agreement, we purchased all of the right, title and interest in the trademarks SWOL and all associated

trade dress and intellectual property rights and all labels, logos and other branding bearing the SWOL marks or any mark substantially

similar to the same.

Tequila bearing the “SWOL” trademark is produced by Casa Cava de Oro S.A., an authentic tequila distillery

in Jalisco, Mexico, imported into the United States through Rilo Import & Export (“Rilo”) by Country Wine & Spirits

LLC (“CWS”) and sold to retail customers in the United States via the CWS Platform and in CWS’s physical locations.

SWOL Tequila is a limited-edition blend of tequila made in exclusive batches of up to 10,000 bottles which was originally owned by Dollinger Innovations and transferred over to us pursuant to the Tequila Asset Purchase Agreement.

Pursuant to the Tequila Asset Purchase Agreement, we purchased all of the right, title and interest in the trademarks SWOL and all associated trade dress and intellectual property rights and all labels, logos and other branding bearing the SWOL marks or any mark substantially similar to the same.

Tequila bearing the “SWOL” trademark is produced by Casa Cava de Oro S.A., an authentic tequila distillery in Jalisco, Mexico, imported into the United States through Rilo Import & Export (“Rilo”) by Country Wine & Spirits LLC (“CWS”) and sold to retail customers in the United States via the CWS Platform and in CWS’s physical locations.

Vault is the exclusive membership program for the CWS Platform, which is offered and managed by the Company.

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business include the following:

Collaborative

We intend to develop leading brands for up-and-coming companies and start-ups and align with

celebrities and influencers with significant followings to enhance their online marketing presence.

Collaborative Marketing.

We intend to develop leading brands for up-and-coming companies and start-ups and align with celebrities and influencers with significant followings to enhance their online marketing presence.

Expand Our Brand.

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Results of Operations

Comparison of Three Months Ended June 30,

2024 and June 30, 2023

Comparison of Three Months Ended September 30,

2024 and September 30, 2023

The following table sets forth key components

of our results of operations during the three months ended June 30, 2024 and June 30, 2023.

Three Months Ended

of our results of operations during the three months ended September 30, 2024 and September 30, 2023.

Three Months Ended September 30,

Revenue - services

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Loss from operations

Other income:

Other income (expense):

Interest expense

Realized gain/(loss) on securities

Dividend income

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$ (5,541,228 )

For the three months ended June 30,

For the three months ended September 30,

2024 and 2023, service revenues were $30,918 and $101,414, respectively.

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was emphasized on the CWS Platform.

For the three months ended June 30, 2024, product

revenues were $517,937 compared to $47,787 in the similar 2023 period.

The increase was due to $512,748 in revenues generated from the

CWS Platform after the acquisition in November 2023.

For the three months ended September 30, 2024,

product revenues were $593,546 compared to $69,097 in the similar 2023 period.

The increase was due to $575,115 in revenues generated

from the CWS Platform after the acquisition in November 2023.

Cost of Revenue and Gross Profit (Loss)

For the three months ended

June 30, 2024 and 2023, service cost of revenues were $69,023 and $95,830, respectively.

Cost of service revenues decreased by

$26,807 in 2024 due to decrease in service revenue in the second quarter.

In 2023, cost of revenues included amortization of the

marketing license, which was impaired as of December 31, 2023.

For the three months ended September 30,

2024 and 2023, service cost of revenues were $45,870 and $97,504, respectively.

Cost of service revenues decreased by $51,634 in 2024,

due to decrease in service revenue in the third quarter.

In 2023, cost of revenues included amortization of the marketing license, which

was impaired as of December 31, 2023.

Product cost of revenues was $640,645 and $65,388

during the three months ended June 30, 2024 and 2023.

The increase was due to product and shipping costs associated with the CWS Platform

acquisition in November 2023.

Gross profit (loss) was ($152,190) and $55,061 for the three months

ended June 30, 2024 and 2023.

The Company has incurred gross losses in 2024 as it transitions its strategies from marketing to the CWS

Management is exploring various strategies, including customer acquisition and new partnerships, to increase volume in order

to achieve better gross margins in 2024.

during the three months ended September 30, 2024 and 2023.

The increase was due to product and shipping costs associated with the CWS

Platform acquisition in November 2023.

Gross profit (loss) was ($62,051) and $7,619 for

the three months ended September 30, 2024 and 2023.

The Company has incurred gross losses in 2024 as it transitions its strategies from

marketing to the CWS Platform.

Management is exploring various strategies, including customer acquisition and new partnerships, to increase

volume in order to achieve better gross margins in 2024.

General and Administrative

For the three months ended June 30, 2024 and 2023, general and

administrative expenses were $1,357,395 and $3,559,688, respectively.

General and administrative expenses decreased by $2,202,293.

2023, t he Company recorded $3,000,000 in non-cash stock-based compensation expense due to the issuance of common shares for services.

During the three months ended June 30, 2024 the Company recorded $720,842 in non-cash stock based compensation expense due to vesting

of restricted stock units.

For the three months ended September 30,

2024 and 2023, general and administrative expenses were $1,522,785 and $4,803,821, respectively.

General and administrative expenses decreased

by $3,281,036.

In 2023, t he Company recorded $2,552,500 in non-cash stock-based compensation

expense due to the issuance of common shares for services.

During the three months ended September 30, 2024 the Company recorded $720,842

in non-cash stock-based compensation expense due to vesting of restricted stock units.

Sales and Marketing

For the three months ended June 30, 2024 and 2023, sales and marketing

expenses were $764,807 and $51,864 respectively.

The increase of $712,943 was primarily due to advertising and marketing and investor

relation campaigns beginning in late 2023 and continuing in the second quarter of 2024.

During the three months ended June 30, 2024 bonus

expenses were recorded $200,000 under sales and marketing.

Net loss for the three months ended June

For the three months ended September 30,

2024 and 2023, sales and marketing expenses were $1,919,125 and $574,026 respectively.

The increase of $1,345,099 was primarily due to

advertising and marketing and investor relation campaigns beginning in late 2023 and continuing in the third quarter of 2024.

three months ended September 30, 2024 bonus expenses were recorded $200,000 under sales and marketing.

Net loss for the three months ended September

30, 2024 and 2023 was $3,363,380 and $5,541,228, respectively.

Comparison of Six Months Ended June 30,

Comparison of Nine Months Ended September 30,

2024 and 2023

The following table sets forth key components

of our results of operations during the six months ended June 30, 2024 and June 30, 2023.

Six Months Ended

of our results of operations during the nine months ended September 30, 2024 and September 30, 2023.

Nine Months Ended September 30,

Revenue - services

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Loss from operations

Other income:

Other income (expense):

Interest expense

Realized gain/(loss) on securities

Dividend income

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$ (9,419,793 )

For the six months ended June 30, 2024 and 2023, service revenues

were $83,771 and $293,798 respectively.

Service revenues are earned as we contract with third-party alcoholic beverage brands to

utilize access to the CWS Platform, as well as vault memberships.

Service revenues decreased by $210,027 as more focus was emphasized

on the CWS Platform.

For the six months ended June 30, 2024 product

For the nine months ended September 30,

2024 and 2023, service revenues were $114,689 and $395,212 respectively.

Service revenues are earned as we contract with third-party alcoholic

beverage brands to utilize access to the CWS Platform, as well as vault memberships.

Service revenues decreased by $280,523 as more focus

was emphasized on the CWS Platform.

For the nine months ended September 30, 2024 product

revenues were $1,548,786 compared to $116,884 in the similar 2023 period.

The increase was due to $948,431 in revenues generated from the

CWS Platform after the acquisition in November 2023.

The increase was due to $1,523,546 in revenues generated from

the CWS Platform after the acquisition in November 2023.

Cost of Revenue and Gross Profit (Loss)

For the six months ended June 30, 2024

For the nine months ended September 30, 2024

and 2023, service cost of revenues were $152,101 and $296,331 respectively.

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Product cost of revenues related was $1,805,112

and $40,131 during the six months ended June 30, 2024 and 2023 The increase was due to product and shipping costs associated with the

CWS Platform acquisition in November 2023.

and $105,519 during the nine months ended September 30, 2024 and 2023 The increase was due to product and shipping costs associated with

the CWS Platform acquisition in November 2023.

Gross profit (loss) was ($293,738) and $110,246

for the six months ended June 30, 2024 and 2023.

The Company has incurred gross losses in 2024 as it transitions its strategies from marketing

contracts to product revenues via the CWS Platform.

Management is exploring various strategies to increase customer acquisition, including

an emphasis in organic search optimization to achieve higher revenue volumes.

The Company is continuing to explore new partnerships for

added revenue sources and is working towards reducing its product cost of revenues.

for the nine months ended September 30, 2024 and 2023.

The Company has incurred gross losses in 2024 as it transitions its strategies

from marketing contracts to product revenues via the CWS Platform.

Management is exploring various strategies to increase customer acquisition,

including an emphasis in organic search optimization to achieve higher revenue volumes.

The Company is continuing to explore new partnerships

for added revenue sources and is working towards reducing its product cost of revenues.

General and Administrative

the six months ended June 30, 2024 and 2023, general and administrative expenses were $2,963,856 and $3,881,005 respectively.

For the nine months ended September 30, 2024 and

2023, general and administrative expenses were $4,486,641 and $8,684,826 respectively.

General and administrative expenses decreased by

In 2023, t he

Company recorded $3,000,000 in non-cash stock-based compensation expense due to the issuance of common shares for services.

months ended June 30, 2024 the Company recorded $1,441,684 in non-cash stock-based compensation expense due to vesting of restricted stock

In 2023, the Company recorded $5,552,500 in non-cash stock-based compensation expense due to the issuance of common shares

for services.

During nine months ended September 30, 2024 the Company recorded $2,162,527 in non-cash stock-based compensation expense

due to vesting of restricted stock units.

Sales and Marketing

For the six months ended June 30, 2024

For the nine months ended September 30,

2024 and 2023, sales and marketing expenses were $3,470,348 and $674,213 respectively.

The increase of $1,451,035 was primarily due to advertising

and marketing and investor relation campaigns beginning in late 2023 and continuing throughout 2024.

Net loss for the six months ended June 30,

The increase of $2,796,135 was primarily due to

advertising and marketing and investor relation campaigns beginning in late 2023 and continuing throughout 2024.

During the nine months

ended September 30, 2024 bonus expenses were recorded $400,000 under sales and marketing.

Net loss for the nine months ended September

30, 2024 and 2023 was $8,000,066 and $9,419,793, respectively.

Liquidity and Capital Resources

As of June 30, 2024

As of September 30,

2024 and December 31, 2023, we had cash and cash equivalents of $247,913 and $7,064,348 respectively.

As of June 30, 2024, we also had $4,015,742

in marketable securities.

To date, we have financed our operations primarily through issuances of common stock and sales of our products

and services.

The accompanying unaudited condensed consolidated

financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of

liabilities in the normal course of business.

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 and 892,464

for the six months ended June 30, 2024 and 2023.

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 to continue as a

going concern until it reaches profitability is dependent upon its ability to generate cash from operating activities and to raise additional

capital to fund operations.

Management is exploring various strategies, including customer acquisition and new partnerships, to increase

volume in order to achieve better gross margins and profitability.

The Company continues to seek investment and acquisition opportunities

which will help achieve its strategies.

Management plans to raise additional capital to fund operations through debt and/or equity financings.

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 financial condition

but also our ability to execute our business plan.

No assurance can be given that the Company will be successful in these efforts.

unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company may not be able to obtain financing on acceptable terms, or at all.

As of September 30, 2024, we also

had $3,439,467 in marketable securities.

To date, we have financed our operations primarily through issuances of common stock and sales

of our products and services.

The accompanying unaudited

condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets

and the satisfaction of liabilities in the normal course of business.

The Company has not generated profits since inception, has sustained

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

to continue as a going concern until it reaches profitability is dependent upon its ability to generate cash from operating activities

and to raise additional capital to fund operations.

Management is exploring various strategies, including customer acquisition and new

partnerships, to increase volume in order to achieve better gross margins and profitability.

The Company continues to seek investment

and acquisition opportunities which will help achieve its strategies.

Management plans to raise

additional capital to fund operations through debt and/or equity financings.

Our failure to raise additional

capital could have a negative impact on not only our financial condition but also our ability to execute our business plan.

can be given that the Company will be successful in these efforts.

The unaudited condensed consolidated financial statements do not include

any adjustments that might result from the outcome of this uncertainty.

The Company may not be able to obtain financing on acceptable

terms, or at all.

Cash Flow Activities

The following table presents selected captions

from our condensed statement of cash flows for the six months ended June 30, 2024 and 2023:

Six Month Ended

from our condensed statement of cash flows for the nine months ended September 30, 2024 and 2023:

Nine Months Ended

September 30,

Net cash used in operating activities

$ (3,565,293 )

$ (4,568,848 )

Net cash provided by (used in) investing activities

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Net cash used in operating activities for the

six months ended June 30, 2024 was $2,548,366, primarily due to our net loss of $4,636,685 partially offset by non-cash charges

nine months ended September 30, 2024 was $3,565,293, primarily due to our net loss of $8,000,066 partially offset by non-cash charges

of $2,081,286 and changes in our operating assets and liabilities of $2,353,487.

Net cash used in operating activities for the

six months ended June 30, 2023 was $892,464, primarily due to our net loss of $3,878,565 partially offset by non-cash charges of $3,125,000

and changes in our operating assets and liabilities of $138,899.

Net Cash Provided by (Used in) Investing Activities

nine months ended September 30, 2023 was $4,568,848, primarily due to our net loss of $9,419,793 partially offset by non-cash charges

of $5,828,378 and changes in our operating assets and liabilities of $977,433.

Net Cash Provided by (Used in) Investing Activities

for the six months ended June 30, 2024 and 2023 were ($3,345,742) and $187,426, respectively.

In 2024, the Company invested $4,015,742

in mutual fund investments, and received $670,000 back from an investment it was no longer pursuing.

In 2023, the Company had repayments

Net cash provided by (used in) investing

activities for the nine months ended September 30, 2024 and 2023 were ($2,688,227) and $137,426, respectively.

In 2024, the Company

purchased marketable securities of $7,727,850, and sold securities of $4,369,623.

The Company also received $670,000 back from

an investment it was no longer pursuing.

In 2023, the Company had repayments from CWS.

Net Cash Provided By (Used in) Financing Activities

Net cash provided by (used in) financing activities

for the six months ended June 30, 2024 and 2023 was ($547,415) and $797,530 respectively.

for the nine months ended September 30, 2024 and 2023 was ($562,915) and $6,287,692 respectively.

In 2024, the Company repurchased shares

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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 2. Management’s Discussion and Analysis