LQR House Inc. 10-K

ITEM 1. 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 core business includes e-commerce sales in the United States through CWSpirits.com, growing our in-house tequila brand SWOL Tequila, and developing marketing strategies for external brands. These strategies include banner ads on our site, targeted email campaigns, and influencer marketing, all designed to drive product awareness and sales. Additionally, we are in the process of establishing an exclusive wine club. Our Organization Our company was incorporated in the State of Delaware on January 11, 2021, under the name LQR House Inc. On February 3, 2023, we changed our state of incorporation to the State of Nevada by merging into LQR House Inc., a Nevada corporation. The Company owns and operates CWS Platform through its wholly owned subsidiary, LQR House Acquisition Corp. In May 2024, we acquired a minority stake of common shares of Cannon Estate Winery Ltd. (“Cannon”), a British Columbia corporation, an owner of Cannon Estate Winery. Pursuant to the Share Exchange Agreement between the Company and Cannon, Cannon transferred and delivered to the Company 113,085 of the Common Shares of Cannon held of record and beneficially by Cannon and in exchange the Company issued and delivered to Cannon 750,000 shares of the Company’s common stock (“common stock”). Cannon Estate Winery located at 30523 Burgess Ave. in the Mount Lehman area of Abbotsford, British Columbia. The estate boasts 20 acres under vine, with 16 varietals planted across 23 plots, including Chardonnay, Muscat, Petite Milo, Pinot Noir, and Gamay Noir. According to its management, Cannon Estate Winery has become a local gem, recently expanding to include a lounge for hosting both locals, and wine enthusiasts from across the globe. While LQR House and Cannon Estate Winery operate in different areas of the alcohol industry, the Company believes that the synergy between them promises mutual benefits that will propel both entities to new heights. LQR House works on leveraging its expertise to enhance Cannon’s online presence, extending its reach across borders to the USA and captivating the attention of CWSpirits.com clientele. Cannon Estate Winery, with its established relationships with distributors and retail outlets nationwide, aims to expand LQR House’s brands and marketing clients throughout Canada. In June 2024, we acquired a minority stake of common shares of DRNK Beverage Corp. (“DRNK”), a British Columbia corporation, operating in the non-alcoholic and ready-to-drink beverage markets (which became Chase Mocktails Ltd). LQR House’s investment in DRNK marked its strategic entry into both the non-alcoholic (NA) and ready-to-drink (RTD) beverage markets, two rapidly growing sectors within the beverage industry. Recent Developments In February 2024, the Board of Directors of the Company (the “Board of Directors” or the “Board”) 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. As a result of the stock dividend, a 3:2 stock split was effected. On September 13, 2024, the Company entered into an at-the-market offering agreement (“ATM Agreement”) with H.C. Wainwright & Co., LLC, as sales agent (“HCW”), relating to the sale of common stock. During the year ended December 31, 2024, the Company issued an aggregate of 1,485,575 shares of common stock pursuant to such ATM Agreement for net proceeds of $1,543,079. The Company paid the sales agent compensation with respect to sale of such shares in the amount of $48,018. On October 15, 2024, the Company entered into a Securities Purchase Agreement (the “Lazar Purchase Agreement”) with David E. Lazar (“Lazar”), pursuant to which Lazar agreed to purchase in aggregate 5,454,545 shares of our common stock and a five-year warrant (the “Lazar Warrant” or if divided and issued to more than one holder, the “Lazar Warrants”) to purchase up to 10,909,090 shares of our common stock at an exercise price of $0.55 per share for $3,000,000 in two separate tranches (the “Lazar Transaction”). Pursuant to the terms of the Lazar Purchase Agreement we closed the first tranche on October 16, 2024, by issuing to Lazar 1,101,818 shares of common stock (which represented approximately 19.99% of our outstanding stock on October 15, 2024) at a price of $0.55 per share for proceeds of $606,000. Pursuant to the terms of the Lazar Purchase Agreement, the closing of the second tranche was subject to stockholder approval (“Stockholder Approval”) of (i) the issuance of the remaining 4,352,545 issuable under the Lazar Purchase Agreement and (ii) the issuance of the Lazar Warrant and the exercise thereof. We obtained Stockholder Approval on December 19, 2024 and closed the second tranche. Pursuant to the terms of the Lazar Purchase Agreement, Lazar assigned his remaining rights and obligations under the Lazar Purchase Agreement to 18 investors (the “Lazar Assignees”). On December 30, 2024, the Company issued 4,352,727 shares of common stock and the Lazar Warrant to the Lazar Assignees for $2,394,000. On December 30, 2024, the Company issued 2,077,800 shares of common stock pursuant to the cashless exercise of several Lazar Warrants. All of the remaining Lazar Warrants were exercised by the Lazar Assignees in January 2025 and the Company issued 7,366,209 shares of common stock. As a result of the Lazar transaction, David Lazar was appointed our President and a Director on our Board and Yilin Lu, Hong Chun Yeung, Lijun Chen and Jing Lu were appointed as Directors on our Board. On December 16, 2024, the Company changed its ticker symbol on NASDAQ from “LQR” to “YHC”. 1 On December 19, 2024, immediately after the Annual Meeting, James Huber and Gary Herman resigned from the Board of Directors, effective immediately. On December 30, 2024, the Company entered into a Securities Purchase Agreement (“December Purchase Agreement”) with various investors, pursuant to which the Company issued 636,400 shares of common stock at a price of $0.55 per share for aggregate gross proceeds of $350,020. Our Business LQR House owns 100% of CWS Platform, an online marketplace offering a comprehensive range of alcohol-related products to customers across the United States, while presently not extending its services to Canada and Mexico. We acquired the CWS Platform from Ssquared Spirits, LLC (“Ssquared”) on November 1, 2023, pursuant to the Domain Name Transfer Agreement (the “Domain Name Transfer Agreement”), which ensures that we have permanent control over all aspects of the CWS Platform, notwithstanding the term or any other provisions of the Marketing Agreement described below. Our company places a significant emphasis on direct-to-consumer marketing, leveraging various channels such as social media, email campaigns, and both paid and organic digital strategies. Additionally, LQR House has cultivated its own network of influencers, effectively positioning brands in front of a dedicated audience and boasting a proven track record of increasing sales on CWSpirits.com. Effective November 1, 2023, LQR House secured full control of the CWS Platform through the Domain Name Transfer Agreement, ensuring perpetual oversight independent of previous contractual terms. Ssquared, previously responsible for product management and platform maintenance, has transitioned these duties to us. Pursuant to the Management Agreement (as defined below), KBROS, LLC (“KBROS”) is responsible for the fulfillment, and distribution of all products sold on the CWS Platform. On November 1, 2023, the Company entered into the Product Handling Agreement (the “Product Handling Agreement”) and the Funding Commitment Agreement (the “Funding Commitment Agreement” and collectively with the Product Handling Agreement, the “Management Agreement”) with KBROS. Under the Product Handling Agreement, KBROS provides the Company with the following services relating to the purchase and delivery of spirits and other beverage products purchased by customers of the Company through or in relation to websites associated with the CWS Platform: ● purchase of products to be delivered to customers of the Company, delivery of such products, and related receipt of returns of products and delivery of replacements of the products from time to time, necessary for the operation of the business by the Company, pursuant to orders for the products by the Company’s customers generated as the result of sales, promotion and marketing of the products through the CWS Platform; and ● procurement and maintenance of all certificates, licenses, authorizations and registrations required to import, possess, promote, sell, distribute and receive payment for the products and compliance with all laws, rules and regulations applicable thereto and to the operation of the CWS Platform and conduct of sales and processing of the products, as reasonably deemed necessary by the Company. Under the Funding Commitment Agreement, the Company commits to providing annual funding to KBROS from time to time in the minimum amount of $2,500,000 to enable KBROS to purchase inventory from Company-approved vendors. The Company may, without notice to KBROS, elect not to advance funding for any inventory sold by any particular vendor with respect to which the Company reasonably feels insecure. The Funding Commitment Agreement concerns a funding commitment, and not the purchase of products from KBROS or vendors. 2 LQR also has a key partnership with Country Wine & Spirits, Inc. (“CWS”). Pursuant to an Exclusive Marketing Agreement (the “Marketing Agreement”) dated April 1, 2021 among CWS, Ssquared and us, Ssquared and CWS granted us the exclusive right, until April 1, 2031, to promote and market spirits, other beverage products and related products including but not limited to branded merchandise, apparel, glassware and the like through the CWS Platform for sale to customers with billing and shipping addresses within Canada, Mexico and the United States. At this time, CWS Platform does not service customers in Canada and Mexico. Prior to our acquisition of CWS Platform in November 2023, the Marketing Agreement also provided us with the sole right to manage and make decisions with regard to user-facing content on the CWS Platform, including the placement and removal of products and the creation and management of promotional initiatives. Upon acquisition of the CWS Platform, this Exclusive Marketing Agreement was effectively cancelled. LQR House is responsible for all digital marketing of products offered on the CWS Platform, including social media marketing and cooperation with their influencer network. Ssquared, KBROS, and CWS are responsible for product management on the CWS Platform and ensuring that there is always inventory available on the site and the site is always live and accessible to its customers. On March 19, 2021, we purchased the SWOL brand of tequila from Dollinger Innovations Inc., Dollinger Holdings LLC and Sean Dollinger pursuant to an Asset Purchase Agreement (the “Tequila Asset Purchase Agreement”). SWOL is manufactured at our request in Mexico by a local manufacturer who we contract with. We also contract with Rilo Import & Export (“Rilo”) who we engage to import SWOL from Mexico to CWS in the United States. CWS pays us for its orders of SWOL, and we pay a portion of such amounts to the local manufacturer to produce SWOL and to Rilo to import SWOL. However, it is important to note that we do not engage in the sale of alcoholic products in the United States or the distribution of any alcoholic products anywhere. In accordance with the Tequila Asset Purchase Agreement, the Company became an assignee to that certain Shared Responsibility and Bonding Agreement dated March 19, 2021, between Leticia Hermosillo Ravelero (“Producer”) and Dollinger Innovations Inc., (the “Shared Responsibility and Bonding Agreement”). In connection with this assignment, on July 7, 2023, the Company, Dollinger Innovations Inc. and the Producer signed a ratification of the agreement of assignment of rights of the Shared Responsibility and Bonding Agreement, which required registration with the Mexican Institute of Industrial Property. As of March 31, 2025, such registration was completed and the Company has rights to enforce its authorization for the denomination of origin and trademark rights. Pursuant to the Shared Responsibility and Bonding Agreement, the Producer produces and supplies to LQR House an alcoholic beverage “Tequila made 100% of agave” labeled “SWOL” and LQR House facilitates the distribution of this product in collaboration with Rilo. The Producer manufactures exclusively for Dollinger Innovations Inc. “Tequila Anejo” and “Tequila 100% De Agave”. The Shared Responsibility and Bonding Agreement as between the original parties, the Producer, and Dollinger Innovations Inc., became effective on August 6, 2021, which is the date of its registration with the Mexican Institute of Industrial Property. The cost and amount of each batch of tequila produced will be determined in advance of the production of each batch by agreement between Producer and the Company. The agreement prohibits distribution and marketing of the product supplied by the Producer in bulk. The Shared Responsibility and Bonding Agreement will terminate on August 6, 2026, unless terminated prior to that date by joint agreement with at least 30 days advance written notice. On June 30, 2023, pursuant to an assignment agreement, Dollinger Innovations Inc., Dollinger Holdings LLC, and Sean Dollinger assigned their rights as distributor under the Packaging of Origin Co-Responsibility Agreement dated July 6, 2020 (the “Packaging of Origin Co-Responsibility Agreement”) to the Company. Subsequent to that on July 11, 2023, the Producer and LQR House signed a Bottled at Origin Joint Responsibility Agreement (the “Bottled at Origin Joint Responsibility Agreement”), which required registration with the Mexican institute of Industrial Property. As of March 31, 2025, such registration was completed and the Company has rights to enforce its authorization for the denomination of origin and trademark rights. Under that agreement, the Producer supplies to the Company, bottled at origin product that strictly complies with the “Official Tequila Standard” (as defined in the agreement) and allows the Company to use the word “Tequila” or “Tequila 100% Agave” on the SWOL brand. The Producer also supplies exclusively to the Company Tequila Anejo and tequila flavored in accordance with the orders submitted by the Company. In its turn, the Company agrees to use the “Tequila Denomination of Origin” and to distribute the product of the same name, supplied by the Producer exclusively in containers bearing the SWOL trademark, used to distinguish and identify the alcoholic beverage called “TEQUILA”. The agreement came into force on the date when it is registered by the Mexican Institute of Industrial Property and is entered for indefinite term. The agreement can be terminated by mutual agreement of the parties. The agreement will also automatically be terminated in case of failure by either party to comply with the “Official Tequila Standard” as that will result in the suspension or cancellation of the export certificates issued by the regulatory Counsil of Tequila, A.C. Both agreements require that the tequila supplied by the Producer comply with the Mexican Official Tequila Standard. LQR House has made a significant move in the realm of e-commerce with its acquisition of the CWS Platform, an online platform in the wine and spirits industry in the USA. With this purchase, LQR House gained full ownership of one of the most established websites in the field, boasting a dedicated customer base of over 125,000. Leveraging their expertise in website management, design, development, email marketing, and SEO, LQR House worked on enhancing sales on the platform, offering a diverse array of products including new releases, limited editions, celebrity-affiliated brands, cocktail content, and gift options. This acquisition marked a departure from previous marketing arrangements with Country Wine & Spirits, providing LQR House with direct control over the platform’s operations and facilitating improved access for both marketing clients and alcohol suppliers. Notably, product handling, packaging, and shipping for purchases made on the CWS Platform remains the responsibility of KBROS, the owner of Country Wine and Spirits’ brick-and-mortar locations. LQR House’s acquisition of the CWS Platform signified a strategic move towards bolstering its presence in the online alcohol retail market, offering consumers across the nation an enhanced shopping experience. In June 2024, we entered into a supplier agreement with Of The Earth Distribution Corp. providing them with exclusive rights to sell SWOL Tequila in several provinces of Canada, including Quebec, Ontario, Prince Edward Island, Nova Scotia, Newfoundland, and New Brunswick. In the fourth quarter of 2024, SWOL Tequila, a premium brand fully owned by LQR House, successfully completed a rigorous product analysis by the Liquor Control Board of Ontario (LCBO), clearing the way for distribution across Ontario under the LCBO’s regulatory oversight. This approval marked the Company’s entry into the Canadian market, starting with a purchase order from Of The Earth Distribution Corp. 3 Country Wine & Spirits, Inc. CWS was formed in 2003 to buy and acquire distressed brick and mortar retail locations for the sale of beer, wine, spirits and create value in retail locations throughout Southern California and grew to 10 locations by 2013. In 2013 CWS found a demand for online shipping of alcohol and started to focus more on e-commerce with the assistance of our Chief Executive Officer, Sean Dollinger and Dollinger Innovations. With their help, CWS began online alcohol sales and built the business into a sizable alcohol e-commerce company. Today CWS has 6 brick and mortar locations and specializes in logistics of shipping and helping brands reach customers. CWS’s average brick and mortar store is 3000-5000 square feet in prestigious neighborhoods and offer brands that customers have a hard time sourcing. To date CWS has distributed all of the alcohol ordered by customers through the CWS Platform. KBROS, LLC KBROS was founded in 2013 and is an asset management company that specializes in managing e-commerce platforms and real estate and sourcing of logistic companies. The President of CWS, Shawn Kattoula, is also the 100% owner of KBROS. Our Business Model Since our inception in January 2021, we have put our business model to the test and believe it is our path towards future success. First, we create marketing content on the CWS Platform for our brands and the brands of our marketing services clients. Second, when consumers purchase products on the CWS Platform like tequila with our SWOL brand, a subscription to Vault (or to the Soleil Vino wine club, which we may launch in future), or the products of our marketing service clients, CWS will perform the distribution services related to the sale of those products. Simultaneously, Ssquared will manage the backend e-commerce operations related to the CWS Platform. Our company is the only authorized advertiser on the CWS Platform and derive significant revenue from all sales made to our marketing partners via the CWS Platform and subscriptions offered through the CWS Platform. Moreover, we derive significant revenue from the sale of alcohol that bears our SWOL trademark. The objective of these activities is to generate recurring monthly revenue through subscriptions and product placements. We believe that our business model will result in multiple, highly sustainable revenue sources and an opportunity to capitalize on the growth in demand for liquor in the United States. To date, sales of alcoholic beverages have been generated through our exclusive arrangement with CWS, who sells these products. This includes third-party brands hiring the Company to market their alcoholic beverage products, subscriptions through our membership programs, and the product sale of tequila branded with our trademark, “SWOL,” bearing application number 2345291 and registration number 2141431 (registered in Mexico). We intend to further diversify our revenue streams and anticipate that the diversity of our revenue streams will continue to grow as our internal brands gain market recognition and penetration, our marketing services abilities become well known, and our subscription services become popular. Our Historical Performance The Company’s independent registered public accounting firm has expressed substantial doubt as to the Company’s ability to continue as a going concern. During the years ended December 31, 2024 and 2023, we had net losses of $22,754,178 and $15,747,724, respectively. The Company has raised funds from the IPO and an additional $16.6 million from its public offerings in October and November 2023. During the year ended December 31, 2024, the Company received net proceeds of $1,543,079 from the sale of an aggregate of 1,485,575 shares of common stock pursuant to an at-the-market public offering. In addition, the Company received gross proceeds of $350,020 from the sale of securities pursuant to the December Purchase Agreement, and gross proceeds of $3,000,000 from the sale of securities pursuant to Lazar Purchase Agreement. However, the Company expects that its cash and cash equivalents as of the date of this Annual Report on Form 10-K may not be sufficient to fund its operating expenses and potential acquisition plans for at least one year. The Company’s ability to continue as a going concern for the next twelve months is dependent upon its ability to generate sufficient cash flows from operations to meet its obligations, which it has not been able to accomplish to date, or to obtain additional capital financing to support current negative cash flow trends. No assurance can be given that the Company will be successful in these efforts. For further discussion, see “ Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Going Concern ”. 4 Industry Overview We plan to address market demand by aligning with key industry trends and by utilizing strategic relationships to source, brand, finance and distribute products. Specifically, we focus on tequila, wine, and other specialty products by utilizing e-commerce and technology to drive sales. The market for alcohol includes beverages such as spirits, wines, and beer. Our focus is on the United States market. The alcoholic beverages market is expected to grow by around 37% by 2028 to over 2.1 trillion U.S. dollars in value from 2022’s value of 1.53 trillion dollars. The United States represents one of the largest global markets for all alcoholic beverage category sales (Statista, Alcoholic Drinks — Market Size , November 2024). This demonstrates a considerable amount of consumption and a large and stable market that is continuing to evolve. Spirits and wine accounted for approximately 50.6% of total consumption as of January 2023 (Statista, Alcoholic Drinks — Revenue — United States , January 2023). Moreover, we believe e-commerce is increasingly becoming a driver of demand for at-home consumption of alcoholic products, driven in part by the recent pandemic. Due to this shift, people who used to go to a bar or a restaurant to consume alcohol are now buying products increasingly online or even going to the manufacturer directly where the law permits, and we believe that this trend will continue even as the impact of the pandemic begins to lessen. We also believe that this demonstrates great potential for continued market expansion and the relevance of e-commerce platforms for alcohol. In particular, the United States has shown a strong uptrend in the purchase of alcohol online, as set forth in the chart below (Vaimo, Martin Hjalm, Alcohol Ecommerce: Trends, Strategies, and Markets in 2023 , January 2023). Total global online retail sales are expected to reach $8.148 trillion in 2026. Digital retail sales increased 17.1% between 2020 and 2021, largely due to the COVID-19 pandemic. Growth slowed to 9.7% the following year. Between now and 2026, online retail sales are expected to record a 9.26% CAGR. By 2026, they could make up 24% of total global retail sales (Emarketer, Ethan Cramer-Flood, Worldwide Ecommerce Forecast Update 2022 , July 2022). In addition to sustained demand for the largest product categories (beer, wine and spirits) and increased prominence of e-commerce, the demand for quality and novel products continues to increase as well (Forbes, Joseph Micallef, The Top Ten Trends Shaping The Adult Beverage Market In 2021 , January 2021). Within this market, the consumption of products is increasing due to several market trends, including the demand for new categories of beverages, such as specialty spirits, flavored wines and sparkling wines, and premixed carbonated drinks. A survey of 1,600 adult U.S. consumers by PwC Consumer Segment Survey sets forth this trend with 54% of those buying alcoholic beverages responding, “I am buying new brands even when my usual brands are available” (PwC, M&A breathes new life into brand portfolios for spirits companies , 2021) as opposed to only 47% of those buying non-alcoholic beverages. The market is also being impacted by health-conscious trends, as evidenced by the growing demand for functional, low-alcohol, and alcohol-free beverages as well as organic and sustainable options. Customers now find it simpler to buy alcoholic beverages online thanks to the market’s additional transformation brought about by the e-commerce boom. Consumer tastes are also still influenced by social and cultural trends, such as the rising appeal of cocktail culture and experience drinking. The United States continues to be a vital market for producers of alcoholic beverages despite obstacles. Customers are also more willing to try novel and inventive alcoholic beverages, which encourages more experimentation with ingredients, flavors, and brewing and distilling methods. (Research and Markets, Alcoholic Beverages Market Trends and Forecast Report 2025-2033: Revenues to Grow by Nearly $1 Trillion, March 2025). If recent trends continue, the year ahead should continue to see “ready-to-drink” alcoholic beverages (“RTDs”) grow faster than any other segment of the spirits category. It has outpaced all other segments by wide growth rates for several years running. One of the key trends to watch in 2025 is a continued shift to more premium spirits-based RTDs. According to the Distilled Spirits Council of the U.S. (DISCUS), canned cocktails have grown faster than any other spirit segment — 35.8% by revenue from 2021-2022. Spirits have a lot of room to grow in RTDs, as they only comprise 13% of the market, compared to 86% malt-based and only a sliver, 1%, wine-based. The second fastest-growing spirits category has been agave, mainly tequila and mezcal, which grew by 17.2% from 2021-2022. In 2025, the vast number of tequila fans are expected to continue to branch out into other agave-based or related beverages like sotol and raicilla (Crafted, What’s Shaping Bev-Alc in 2025? Key Trends to Watch , February 2025). 5 Market Trends According to the recent IWSR research (IWSR, Five Key Trends Shifting the Beverage Alcohol Market in 2025 , February 2025), after persistent inflation, geopolitical tensions and varying levels of consumer confidence characterized 2024, the next 12 months will be marked by continued economic uncertainty, but also a number of promising growth opportunities. In IWSR article, Emily Neill, Chief Operating Officer Research and Operations of IWSR, says that “the drinks industry faces a subdued but opportunity-rich environment in 2025. Channel shifts offer a note of optimism, with the on-premise showing nascent growth in some key markets, and digital platforms wielding a growing influence on both online and offline purchasing decisions. As these key trends shape the beverage alcohol landscape in 2025, they start to frame some key growth segments and markets for the industry. Navigating these will require growth opportunities to be assessed on a market, category and price-tier basis, with a more nuanced approach than was previously needed.” We believe the following trends will continue to shape the alcoholic beverage market (IWSR, Five Key Trends Shifting the Beverage Alcohol Market in 2025 , February 2025; Auguste Escoffier School of Culinary Arts, 2025 Alcohol and Beverage Trends: Key Statistics on What’s Pouring in Bars and Homes, January 2025): ● The rise of casual consumption. According to Richard Halstead, Chief Operating Officer Consumer Insights and Custom Analytics of IWSR, “the shift from formal, high-profile drinking occasions to more casual and spontaneous settings is transforming the beverage alcohol landscape – especially for categories such as rosé wine, Prosecco, bitters and spirit aperitifs. Changing social norms, economic constraints and a preference for relaxed, versatile beverages are driving this shift.” In the US, Prosecco and RTDs are proving popular at brunches, barbecues and informal gatherings, replacing more expensive options such as Champagne. ● Channel shifts impacting purchasing decisions. Digital platforms are now playing a pivotal role in driving offline sales, with more consumers turning to online research to guide their in-store purchases. According to IWSR research, 63% of online alcohol buyers conduct extensive research before making a purchase – a trend increasingly echoed by offline shoppers. ● Ready-to-Drink Beverages. RTDs are one of the fastest growing segments in the industry—and, that trend is likely to continue. Increasingly, higher end RTD cocktails are entering the market, giving people the opportunity to try high quality products without going to a bar or studying mixology. ● Agave-Based Spirits. In recent years, Americans’ appetite for these Mexican spirits has proven to be nearly insatiable. In 2023 tequila overtook whiskey to become the second-most consumed spirit by value in the U.S.—and in 2024, tequila outsold vodka in the U.S. bars. One industry review found that 54% of bars said tequila outperformed all other liquors last year, and 64% of bars are planning to offer more tequila (and other agave spirits) compared to other liquors in the year to come. ● Premiumization. In recent years the alcohol industry has seen a trend toward premiumization—the consumer habit of spending more on fewer purchases of higher quality products. This concept goes hand in hand with the trend of consumers drinking less; if people are drinking less, and on fewer occasions, they may be willing to spend more when they do decide to imbibe. Young people seem more inclined to premium habits than older groups. According to a report from Curren Goodden Associates (CGA), 54% of 18-34-year-olds are likely to choose a premium drink versus 35% of those over 55. Similarly, a survey conducted by Bacardi in 2023 found that 41% of U.S. consumers between the ages of 21 and 44 planned to “seek more premium spirits” in 2024. We anticipate all these market trends will positively impact our business and present an opportunity to continue expanding. Specifically, we align with market trends by focusing our marketing and distribution efforts online, and we expect to bring new and exciting premium products to market across categories. In addition, we generate online promotional activities around holidays and life events, while always being mindful of ethically sourcing products for distribution. 6 The Services and Brands The CWS Platform is an American online retailer specializing in selling alcohol products, striving to become the most trusted and convenient destination for online alcohol purchases. Combining the personalized service of a neighborhood alcohol shop with the efficiency of e-commerce, we offer a wide selection of products, including our exclusive brand, SWOL Tequila, all at competitive prices with fast shipping and around-the-clock convenience. At the heart of our brand is a commitment to exceptional customer service, driving us to continuously innovate our operations for an enhanced shopping experience. From user-friendly website navigation and a top-rated mobile app to detailed order tracking and personalized product recommendations, we are revolutionizing the online alcohol shopping experience, ensuring customer satisfaction remains paramount in all our endeavors. We provide marketing services with respect to the following products and services. Marketing these brands constitutes the core elements of our business model and allow us to serve every type of customer in the alcohol industry, including individual consumers, wholesalers, and third-party alcohol brands: SWOL Tequila is a limited-edition blend of Añejo Tequila made in exclusive batches of up to 10,000 bottles and represents the first installment under our “SWOL” trademarked alcohol branding. Through our partnership with CWS, we market Tequila bearing the “SWOL” trademark, which we call “SWOL Tequila,” on the CWS Platform, which distributes SWOL Tequila throughout the United States. SWOL Tequila is produced by Casa Cava de Oro S.A., an authentic tequila distillery in Jalisco, Mexico, sold by LQR House to CWS before it is imported from Mexico into the United States, and is imported into the United States by Rilo in cooperation with CWS. All marketing and branding for SWOL Tequila is led by our marketing team, who has led the way on all branding efforts from conceptualizing the bottle shape and size, to overseeing the design of the labels. We also work with the producers in Mexico on all product development, including the original SWOL Añejo and the additions of Peach and Cristalino. When product testing was initiated for the label with the trademark SWOL on it, which we call “SWOL,” a campaign was created around a “Mystery Tequila” where CWS’s network of influencers promoted SWOL without showing the bottle or label. We believe that this marketing tactic generated customer excitement for the product and led to an increase in anticipation for its reveal. Since then, we have seen continuous growth in SWOL customer interest and have taken steps to expand the product line to match that interest. With each product, we focus on creating unique labels, each with the signature SWOL sew-on patch, which accompanies each hand-numbered bottle. The patch can be peeled off and sewn onto clothing or accessories. We believe that our focus on our brand identity and product innovation will allow us to continue generating consumer interest and hype for each addition to the product line bearing the SWOL trademark. Moreover, SWOL has been developed to align with current consumer preferences and trends within the market. Essentially, we generate SWOL products that maintain the high-quality ingredients from the Tequila region of Mexico and combine that tradition of quality with new and exciting flavors. CWS Platform is offering the following products bearing the SWOL trademark at competitive price points: ● SWOL Añejo Tequila is an extremely limited-edition tequila that is bottled in glass blown flasks inscribed with a unique ID number and adorned with our patch that displays a unique label specific to the Añejo Tequila line. Each bottle contains a tequila produced using artisanal Mexican and modern techniques that impart each drink with a smoky, rich, sweet flavor. The SWOL Añejo Tequila is currently priced at $89.99 (MRSP). 7 ● SWOL Peach Tequila is an amber, dark coppery tequila that is bottled in glass blown flasks inscribed with a unique ID number and adorned with our patch that displays a unique label specific to the Peach Tequila line. The production imparts an authentic tequila taste with notes of peach, toasted nuts and oak. Through market analysis and sales data, our peach products are often in high demand, and we expect this trend to continue. The SWOL Peach Tequila is currently priced at $79.99 (MRSP). ● SWOL Cristalino Tequila is a crystalline tequila bottled glass blown flasks, inscribed with a unique ID number and adorned with our patch that displays a unique label specific to the Cristalino Tequila line. The tequila displays light blue crystalline flashes and production imparts an authentic tequila taste with notes of fruity oak, toasted nuts and light spice. The SWOL Cristalino Tequila is currently priced at $79.99 (MRSP). Vault is an exclusive membership program for CWS Platform customers. Through the CWS Platform, users can sign up for this exclusive membership where they will have access to all products available through CWS combined with special membership benefits including: (i) 10% off all products site wide, including sale items; (ii) exclusive access to redeem loyalty points to use for further discounts on purchases; (iii) free ground shipping (2-5 business days) on orders over $100 (limited to three shipping addresses, not valid for corporate orders); (iv) access to special promotional offers; and (v) free mystery vault gifts. The monthly membership costs customers $19.95 and requires an initial 6-month start-up commitment. The objective is to create a loyal customer base that provides us with recurring monthly subscription revenue. Vault also provides us with the means to provide customers with special discounts to marketing partner brands, which we make solely available to Vault members. We market this membership program on the CWS Platform. Soleil Vino will be a wine subscription service that is marketed on the CWS Platform and will offer a selection of vintage and limited production wines. Through the CWS Platform, users will sign up for this exclusive membership where they will have access to curated selections of wine from around the world. With Soleil Vino, we intend to create a premium wine subscription service on the market with the highest quality, and diverse selections of wine offerings, which we refer to as our Wine Club. We expect our Wine Club to have three membership options based on different wine quality and price. Within each membership, our customers will select whether they want to receive two or four bottles each month, and whether they want white wine only, red wine only, or a variety box. Members will also get access to a members-only dashboard, where they can access informational blogs written by in-house wine experts. They will also receive monthly newsletters with additional information, and various discounts for other products on the CWS Platform. Membership fees for Soleil Vino will be charged monthly and can be cancelled at any time after the initial three months of subscription service. We are responsible for launching the Wine Club through a series of ads, social and email campaigns, and all exclusive content and wine selection for members will be handled by in-house wine experts. We will market the Wine Club on the CWS Platform and are entitled to all the revenue from the subscriptions. The Wine Club is expected to have three subscription membership options based on different wine quality, price, and quantity. The following table is representative of the Soleil Vino membership options, that we intend to list on the CWS Platform: Membership Option Select Membership Classic Membership Premier Membership Description This package features, popular, value priced wines and consumer favorites. This membership will feature quality vintage wine from well-known producers. This membership includes hand-picked bottles of wine from award winning wineries Fee for 2 bottles per month $45.00/month $55.00/month $75.00/month Fee for 4 bottles per month $85.00/month $105.00/month $145.00/month 8 LQR House Marketing is a marketing service in which we utilize our marketing expertise to help our wholly owned brands and third-party clients market their products to consumers. For example, by engaging LQR House for its marketing services, our clients gain the ability to advertise and sell their brand on the CWS Platform. We generally charge a monthly fee for our marketing services and often enter into multi-month programs with clients. Monthly program costs generally range from $3,000 to $10,000 depending on the program options selected by the client. Our services also include the creation of a creative marketing campaign strategy, and the development of promotional materials. Key features of the marketing offering include: ● Leveraging multiple advertising campaigns to bring affordability to advertising methods such as influencer marketing, incentive-based sales, or product placement advertising. ● Combining multiple campaigns into one media buy. ● Leveraging specific assets available to LQR House such as the CWS Platform and email distribution list. ● Advertising with targeted banners. ● Leveraging LQR House online campaigns. ● Creating branding and product placement campaigns that elevate a brand’s reach to targeted demographics. ● Creating a brand around an influencer’s following and reach to leverage viewership and monetize their growth. Central to the business model, we offer access to an exclusive network of industry influencers or brand ambassadors. Engaging with us provides clients with the opportunity to select a tailored list of influencers to promote their brand to an ideal target market. LQR House currently has relationships with 460 influencers, which is a significant differentiator and underscores the uniqueness of our company as a marketing platform. Influencers are provided with a commission based on the number of products they sell and drive traffic to the CWS Platform. The more an influencer generates in sales for a brand, the more the influencer makes in commissions. This directly aligns the objectives of the brand, influencer and LQR House. Key elements of a typical influencer program may include: ● Best efforts to maximize posts per months by various influencers. ● Monthly posts will include content from an influencer list with a cumulative following of at least 1.5 million followers. For example, a typical influencer mix would be as follows: (i) 2-3 Major Influencers, influencers with more than 500,000 followers, (ii) 3-5 Top-Tier Influencers, influencers with more than 100,000 followers, (iii) 5-10 Micro Influencers, influencers with 10,000 to 100,000 followers, and (iv) 3-5 Beginner Influencers, influencers with less than 10,000 followers. ● Posts presented on multiple social media platforms, including cross posting where the same video or content may be shared several times to capture many different audiences, targeting social media platforms such as Facebook and Facebook Reels, Instagram and Instagram Reels, YouTube and YouTube Shorts, Pinterest and Pinterest Idea Pins, X, Khal Media, Clapper, LinkedIn, Reddit, Twitch, Tumblr, etc. ● 1-2 email blasts per month from the influencer featuring the brand. ● Placement of brand on the main sliding banner on the CWS Platform homepage or mobile app, in the category page and Spirits dropdown of the website, and in our holiday gift guide. Within 5 days of the end of the month, we generate a summary report of the influencer program which includes the following types of data: (i) the total sales of product on the CWS Platform with basic customer location data, (ii) a list of posts per influencers with links to content across platforms, and (iii) a description of product placements on the CWS Platform. 9 Our Relationships with Third-Party Alcohol Brands To date, we have engaged with various brands to bring their products to our customer base. We have engaged with brands including, but not limited to Loca Loka, Pinaq, Don Ramon, Soda Jerk, and Full Bore Whiskey to market and sell their products on the CWS Platform. Our clients generally include newer alcohol brands that produce small batches and craft spirits. Many customers return for additional marketing programs after the initial engagement and elect to enter multiple month arrangements. Our Competition and Competitive Strengths The market for online sales and promotions of alcohol is competitive. This includes large online retailers such as Amazon, specialty e-commerce sites and direct sales from producers. These companies are often larger than us, and have considerable financial, technical and human capital resources. However, we believe that we have the following competitive strengths that will allow us to capitalize on the growing alcoholic beverage industry and alcohol e-commerce: ● Targeted marketing. We believe that our branding style, and the branding services we provide to our clients, allow us to market directly to the millennial market demographic. We believe we accomplish this marketing through our ad campaigns and marketing materials that have a sleek and modern look and feel. By implementing this targeted approach, in our view, we provide a unique and modern customer experience that helps us capture a key market in the alcoholic beverage industry. Our search engine optimization, or SEO, has been developed over many years. In our view, it provides customers with premium placement opportunities they often cannot source anywhere else. ● Extensive influencer network. We believe that our team has created one of the most extensive influencer relationship lists within the alcohol industry for small batch and exclusive brands. We have around 460 influencer relationships that differentiate us from many other online marketing channels available to brands. ● Extensive e-commerce and marketing expertise. Our team has decades of experience combined in e-commerce and implementing online strategies to maximize the benefit of marketing campaigns. This includes online promotional campaigns that drive sales of products. ● Working with highly differentiated brands. We vet the external brands we promote to ensure that all of the products we market align with our own brand and strategy. We believe our vetting process allows us to maximize the value we provide to our clients, while also allowing us to provide consumers with exclusive options not available from larger distributors. ● Strategic relationships. We believe we have developed and solidified relationships with multiple groups that can deliver value to external brand customers. This includes marketing, import, storage and retail/wholesale distribution relationships. In addition to online competition, we face competition from other emerging products, as the market can be characterized as highly fragmented with many new brands coming to the market. We believe we differentiate our wholly-owned brands in several ways: ● Development of products that are not generally available in the market. We focus our product development on flavors and variations of products that are not generally available on the market. This differentiation aligns with current market trends and results in alignment with modern consumer preference for new and exciting brand products that expand the profile of legacy products. For example, SWOL Peach Tequila. ● Setting competitive price points. We believe we have set a competitive price point, which aligns with the uniqueness and quality of the products offered by the Company. This price point is important in the context of differentiating legacy or generic products in the industry. This comes from years of experience within the industry and significant data points about comparable products within the market that we and our partners collected. ● Focus on quality. We believe all our products are sourced from the highest quality producers, and we vet our producers by visiting locations to verify quality and control procedures. ● Labelling and marketing promotions. We believe that we have crafted unique labelling which aligns with our branding. Our labelling includes a removable patch that can be affixed to other items. This serves as continued marketing for our products, as the patch remains after the bottle has been consumed. 10 Our Growth Strategies Marketing We have developed three primary methods for facilitating deals through our marketing division: ● Channel Partners/Influencers. Our most successful service to date is the ability for liquor brands to have their products displayed by a social media influencer team via product placement, promotion and usage in advertorial collaborations. These influencers are often approached by new brands independently, which are then referred to us. We built up our own group (network) of influencers from scratch (bartenders, alcohol personalities, restaurateurs, social media personalities, alcohol representatives). These influencers have a direct line to qualified customers who are looking to buy products that they recommend. After signing a marketing client, we send their products to our influencers who then create client specific content that directs their followers to the CWS website to buy the product. The influencers are only paid a percentage of sales. ● Direct Inbound Lead Generation. Due to the surge in demand for marketing companies that specialize in liquor and alcohol promotion, we have been contacted by an influx of new brands and medium-sized companies that are looking to scale via resources and available services. This is also being driven based on past successes with brands that refer their industry relationships to LQR House. For example, when we first launched the program, we contracted with four to five clients on a monthly basis. Since then, we have had at least 5-8 clients utilizing our marketing services on a monthly basis. As we continue to grow our operations and increase our service offerings, we intend to increase inbound marketing via Google Ads, social media promotion and search engine optimization to ensure new leads flowing in. ● Liquor Brand Development. Through our exclusive marketing agreements with external brands, we are developing a reputation as a premium marketer and advertiser for liquor brands, and one that offers efficient and cost-effective services. Brands that are looking to establish themselves often find the Company through web properties of those lines, such as swoltequila.com. We believe that by continuing to develop leading brands for up-and-coming companies and, by aligning with celebrities and influencers with significant followings, we will continue to offer quality work-product that will attract start-ups looking to establish an online marketing presence. Moreover, we believe that we are developing a portfolio of successful marketing campaigns that will positively influence our word-of-mouth and referral lead generation and overall reputation in the industry. Brands We intend to continue expanding and developing our existing brands, like those associated with our SWOL trademark, in two ways. First, we plan to purchase larger amounts of SWOL products, which will allow us to sell to more customers and increase our brand recognition at a quicker rate. Second, we plan on increasing the marketing presence for SWOL and launching our Wine Club. Moreover, we will continue developing new flavors, like SWOL Cristalino and SWOL Peach, that align us with current market trends and evolving consumer preferences. Acquisitions We intend to pursue opportunistic acquisitions of the following types of companies involved in the alcoholic beverage industry, or companies that could be beneficial if integrated into our current business model: ● Existing Brands. We intend to target up-and-coming unique alcohol brands with initial market penetration and the potential to expand with additional marketing and distribution expertise. Our focus will be on the spirits, wine and specialty mixed drink segments of the market. One potential source of acquisitions would include approaching existing marketing clients to gauge their interest in becoming a majority owned subsidiary of our company. 11 ● Technologies. We will also seek to acquire applications, analytics and distribution tools that can be utilized to complement our existing operations. Our technology acquisitions will focus on platforms that we believe will gain additional market insights and advertising opportunities for internal and external brands that we are developing, or plan to develop in the future. ● Distribution Licenses and Physical Storage Locations. We intend to target companies with importation licenses and storage facilities that will allow us to physically import and store our brands and our clients’ brands. We expect to utilize a formal acquisition process for the identification and analysis of targets in the context of strategic alignment to our business objectives, approaching targets for solicitation of interest in a transaction, completing financial, legal and technical due diligence, and negotiating the terms of a transaction and related legal documentation. The core objective of this process is to scale our revenue and earnings and complement our existing operational activities. Members of our management team have completed significant financial transactions over the course of their careers, and have experience working with corporate issuers, investment and merchant banks, and law firms, and we believe that our management’s experience will help us achieve our business goals. As of the date of this Annual Report on Form 10-K, we do not have any acquisitions in progress, nor have we identified any potential acquisitions. Intellectual Property We consider intellectual property to be important to the operation of our business, and critical to driving growth in our commercial revenue. We acquired trademarks pursuant to the Asset Purchase Agreement in connection with SWOL between LQR House as the Buyer and Dollinger Innovations Inc., Dollinger Holdings LLC, and Sean Dollinger as the Sellers dated as of March 19, 2021 and pursuant to the Asset Purchase Agreement in connection with Soleil Vino among LQR House as the Buyer and Dollinger Holdings LLC as the Sellers dated as of May 31, 2021. We consider our intellectual property to be a key business asset and therefore have rights to use and market the following portfolio of intellectual property: SWOL Intellectual Property ● Trademarks: SWOL and Design and all associated intellectual property rights, which are registered in Mexico only (application number 2345291, registration number 2141431). ● All labels, logos and other branding bearing the SWOL and Design marks or any mark substantially similar to the same. Soleil Vino Intellectual Property ● Trademarks for Soleil Vino and all associated trade dress and intellectual property rights (which are not currently registered by us). ● All labels, logos and other branding bearing the Soleil Vino marks or any mark substantially similar to the same. ● Domain name http://www.soleilvino.com , and all related digital and social media content including but not limited to influencer networks, and all related content, and all related sales channels. 12 Enforcement of our trademark rights is important in maintaining the value of each of our brands. While it would be cost-prohibitive to act in all instances, our aim is to consistently reduce trademark infringements by carrying out coordinated, cost-effective enforcement actions following investigation of suspected trademark infringements. Enforcement action takes a variety of forms, such as working with authorities to seize counterfeit goods and stopping the activities of unauthorized sellers to taking direct legal action against infringers, for example, by issuing cease and desist letters. In relation to materials for which copyright protection is available, our current practice is generally to secure copyright ownership where possible and appropriate. Human Capital As of March 31, 2025, we have 4 employees, and 3 independent contractors. Our independent contractors include third-party service providers who staff our organization and supplement our teams as needed. None of our personnel are represented by labor unions, and we believe that we have an excellent relationship with everyone who works with us. We operate the Company under remote-first principles. Seasonality Seasonality has some impact on our business via the levels at which customers engage with our products and brand. For example, we have traditionally seen lower total sales in the post-holiday and winter months. Our marketing strategies, which may be informed by these seasonal trends, will also impact our quarterly results of operations. These trends may cause our cash requirements to vary from quarter to quarter depending on the variability in the volume and timing of sales. We believe that these seasonal trends have affected and will continue to affect our quarterly results. 13 Government Regulation The Alcohol Industry A complex multi-jurisdictional regime governs alcoholic beverage manufacturing, distribution, sales, and marketing in the United States. The alcoholic beverages industry in which we operate is subject to extensive regulation by the Alcohol and Tobacco Tax and Trade Bureau (and other federal agencies), each state’s liquor authority, and potentially local authorities depending on location. These regulations and laws dictate such matters as licensing requirements, production, importation, ownership restrictions, trade, and pricing practices, permitted distribution channels, delivery, and prohibitions on sales to minors, permitted, and required labeling, and advertising and relations with wholesalers and retailers. These laws, regulations and licensing requirements may, and sometimes are, interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other legal mandates or with the Company’s business practices. Further, these laws, rules, regulations, and interpretations are constantly changing because of litigation, legislation, and agency priorities, and could result in increased regulation. The Company’s actual or asserted non-compliance with any such law, regulation or requirement could expose us to investigations, claims, litigation, injunctive proceedings and other criminal or civil proceedings by private parties and regulatory authorities, as well as license suspension, license revocation, substantial fines, and negative publicity, any of which could adversely affect our results of operations, financial condition, and business. The Internet We are subject to several laws and regulations that affect companies conducting business on the Internet, many of which are still evolving and could be interpreted in ways that could harm our business. The way existing laws and regulations will be applied to the Internet and how they will relate to our business are often unclear. For example, we often cannot be certain how existing laws will apply in the e-commerce and online context, including with respect to such topics as privacy, defamation, pricing, credit card fraud, advertising, taxation, sweepstakes, promotions, content regulation, quality of products and services, and intellectual property ownership and infringement. Numerous laws and regulatory schemes have been adopted at the national and state level in the United States, and in some cases internationally, that have a direct impact on our business and operations. For example: The Credit Card Accountability Responsibility and Disclosure Act of 2009, or CARD Act, and similar laws and regulations adopted by several states regulate credit card and gift certificate use fairness, including expiration dates and fees. Our business also requires that we comply with payment card industry data security and other standards. We are subject to payment card association operating rules, certification requirements, and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, or if our data security systems are breached or compromised, we may be liable for card issuing banks’ costs, subject to fines and higher transaction fees, and lose our ability to accept credit and debit card payments from our customers, process electronic funds transfers, or facilitate other types of online payments, and our business and results of operations could be adversely affected. 14 The Digital Millennium Copyright Act (DMCA) provides relief for claims of circumvention of copyright protected technologies and includes a safe harbor intended to reduce the liability of online service providers for hosting, listing, or linking to third-party content that infringes copyrights of others. The California Consumer Privacy Act (CCPA), which went into effect on January 1, 2020, provides consumers the right to know what personal data companies collect, how it is used, and the right to access, delete, and opt out of the sale of their personal information to third parties. It also expands the definition of personal information and gives consumers increased privacy rights and protections for that information. The CCPA also includes special requirements for California consumers under the age of 16. In addition, the European Union and United Kingdom have adopted the General Data Protection Regulation (GDPR), which likewise impose significant data protection obligations on enterprises, including limitations on data uses and constraints on certain uses of sensitive data. Effective January 1, 2023, we became subject to the California Privacy Rights Act, which expands upon the consumer data use restrictions, penalties and enforcement provisions under the California Consumer Privacy Act, and Virginia’s Consumer Data Protection Act, another comprehensive data privacy law. Effective July 1, 2023, we became subject to the Colorado Privacy Act and Connecticut’s An Act Concerning Personal Data Privacy and Online Monitoring, which are also comprehensive consumer privacy laws. Effective December 31, 2023, we became subject to the Utah Consumer Privacy Act, regarding business handling of consumers’ personal data.