LQR House Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures that are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms promulgated by the U.S. Securities and Exchange Commission (the “SEC”), and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Because of the inherent limitations to the effectiveness of any system of disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that all control issues and instances of fraud, if any, with a company have been prevented or detected on a timely basis. Even disclosure controls and procedures determined to be effective can only provide reasonable assurance that their objectives are achieved. 47 As of December 31, 2024, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) pursuant to Rule 13a-15 of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are ineffective at the reasonable assurance level. Our size has prevented us from being able to employ sufficient resources to enable us to have an adequate level of supervision and segregation. Therefore, it is difficult to effectively segregate accounting duties which comprises a material weakness in internal controls. We also lack effective board oversight and formal accounting controls for the timely and accurate closing of financial information. To the extent reasonably possible given our limited resources, we intend to take measures to cure the aforementioned weaknesses, including, but not limited to, increasing the capacity of our qualified financial personnel to ensure that accounting policies and procedures are consistent across the organization and that we have adequate control over our Exchange Act reporting disclosures. Management’s Report on Internal Controls over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management utilized the criteria established in the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) to conduct an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2024. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have identified a material weakness due to lack of segregation of duties and have therefore concluded that our internal controls over financial reporting are not effective at the reasonable assurance level. A material weakness is a deficiency, or combination of deficiencies, in our internal controls over financial reporting such that there is a reasonable possibility that a material misstatement of our consolidated financial statements would not be prevented or detected on a timely basis. Our size has prevented us from being able to employ sufficient resources to enable us to have an adequate level of supervision and segregation of duties. Therefore, it is difficult to effectively segregate accounting duties which comprises a material weakness in internal controls. To the extent reasonably possible given our limited resources, we intend to take measures to cure the aforementioned weaknesses, including, but not limited to, increasing the capacity of our qualified financial personnel to ensure that accounting policies and procedures are consistent across the organization and that we have adequate controls over our Exchange Act reporting disclosures. As an emerging growth company, management’s assessment of internal control over financial reporting was not subject to attestation by our independent registered public accounting firm. Changes in Internal Control over Financial Reporting There have been no changes in our internal control procedures over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during our year ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION Not applicable . ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. 48 Part III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table and biographical summaries set forth information, including principal occupation and business experience about our directors and executive officers as of March 31, 2025: Name Age Position Sean Dollinger 45 Chief Executive Officer and Director Kumar Abhishek 48 Chief Financial Officer Jaclyn Hoffman 35 Chief Marketing Officer Alexandra Hoffman 36 Director and Technical Writer David Lazar 34 President and Director James O’Brien 39 Director Yilin Lu 43 Director Hong Chun Yeung 41 Director Lijun Chen 57 Director, Chairman of the Board Jing Lu 60 Director Sean Dollinger has served as our Chief Executive Officer and as a member of our Board since January 2023, and he founded our company in January 2021. Mr. Dollinger has also been on the board of directors of Veg House Holdings Inc. since December 2022 and has served as its Chief Executive Officer from January 2023 to July 2023. Since December 2019 Mr. Dollinger has been involved in the founding and development of PlantX Life Inc. (CSE: VEGA), an exchange listed and public company in Canada. From June 2015 to February 2019, Mr. Dollinger acted as the Founder, Chief Executive Officer, and President of Lifeist Wellness Inc. (formerly Namaste Technologies Inc., or Namaste), a registered company under the Canadian securities laws that is a portfolio of wellness companies, where he oversaw the day-to-day operations of the company and its growth strategies. In October 2018, Mr. Dollinger became a part of a British Columbia Securities Commission compliance review of Namaste, a Canadian class action lawsuit, and a United States class action lawsuit, by way of his position as Chief Executive Officer and President of Namaste. For more information, see the risk factor in this Annual Report on Form 10-K that starts “ Our Chief Executive Officer and Director, Sean Dollinger, has been the subject of a compliance review that was initiated by the British Columbia Securities Commission, and has not formally been concluded. ” Mr. Dollinger has a wealth of experience in e-commerce, where he has had success across numerous different digital markets. We believe that Mr. Dollinger is qualified to serve on our Board due to his extensive operational experience, background in ecommerce, and international capital markets experience. Kumar Abhishek has served as our Chief Financial Officer since May 2023. Prior to joining our company as Chief Financial Officer, Mr. Abhishek was the owner and director of Boston Crest Private Limited, a knowledge processing output company located in India, where he simultaneously oversaw multiple companies’ financial and daily operations and was responsible for managing a team of 10+ accountants who assisted controllers and auditors in ensuring the financial success of each company. Through his work at Boston Crest, Mr. Abhisek has served as the director of finance and operations at PlantX Life Inc., a publicly listed company in Canada, since January 2020. Through his work at Boston Crest, Mr. Abhishek also served as our director of finance and operations from January 2021 to May 2023,. Moreover, at Aspen Communications Pvt LTD, another knowledge processing output company in India, he served as director of finance and operations at Lifeist Wellness Inc. (formerly Namaste Technologies Inc.) from November 2015 to October 2020. Mr. Abhishek holds a Bachelor of Computer Applications degree from Ranchi University, Ranchi, Jharkhand, India. 49 Jaclyn Hoffman has served as the Chief Marketing Officer for LQR House since January 2021, where she oversees internal design projects, as well as design projects for partnering brands. She is also responsible for brand development, brand communication, and digital campaigns. Since October 2021, Jaclyn has worked as the Creative Director at PlantX Life Inc, where she oversees all creative projects for PlantX and its subsidiaries. This role includes working closely with teams of graphic designers, copywriters, web developers, and email marketing specialists to support the overall marketing strategy with creative content. From November 2019 until September 2021, Ms. Hoffman worked as a Web Design and Development Manager for Falcon Marketing, LLC, a marketing and search engine optimization agency, where she worked with graphic designers and web developers to create optimized websites for a wide range of clients. From October 2018 to November 2019, Ms. Hoffman worked as a Branding Consultant for Joyva Corp, a specialty candy company founded in 1907, where she helped modernize the brand’s identity. From September 2016 to August 2018, Ms. Hoffman worked as a graphic designer for Lakeside Photoworks, a print, photo and signage shop in New Orleans, LA, where she was responsible for building the brand identity of several local businesses. Ms. Hoffman holds a Bachelor of Arts from McGill University in Montreal, QC, and an Associate in Graphic Design degree from Delgado Community College in New Orleans, LA. Alexandra Hoffman has served as a member of our Board since April 2023. From January 2021 to May 2023 Ms. Hoffman provided the Company with marketing and branding services. On May 1, 2023, Ms. Hoffman entered into an employment agreement with the Company as a Technical Writer. Since January to October 2023, she served as the Chief Marketing Officer of Veg House Holdings Inc. where she oversaw all marketing activities from branding to web design and messaging both print and digital. Since March 2023, Ms. Hoffman has serves as a member of the Board of Directors and since October 2023 as the Chief Executive Officer of Veg House Holdings Inc. Since April 2019, Ms. Hoffman has served as Chief Marketing Officer and Director at PlantX Life Inc. (CSE: VEGA), where she oversees all marketing activities, manages design & development teams, digital marketing teams, and PlantX Life’s overall branding and messaging for all of its subsidiaries. Additionally, between June 2018 and June 2023, Ms. Hoffman has served as a Director of Marketing and Technical Writer at Falcon Marketing LLC, a marketing and search engine optimization agency, where she oversees all marketing activities within the agency and is responsible for Falcon Marketing’s overall strategy as well as tailored strategies for its clients. From May 2017 to June 2018, Ms. Hoffman served as a technical Writer and Marketing Manager at Fabuwood Cabinetry Corporation, a kitchen cabinet fabrication company, where she managed a team of designers and developers, wrote strategic content for marketing manuals and search engine optimization. Ms. Hoffman holds a Bachelor of Commerce degree from Concordia University in Montreal, Quebec. We believe that Ms. Hoffman is qualified to serve on our Board due to her background in branding and product/platform positioning as well as her previous experience as a senior member of other public companies. David E. Lazar was appointed to serve as a member of our Board and the President of the Company in October 2024. Mr. Lazar has served as the Chief Executive Officer of Titan Pharmaceuticals Inc. listed on the Nasdaq (TTNP) since August 2022, where he also served as a director and board chairman from August 2022 until October 2023. On December 28, 2023, Mr. Lazar was appointed Chief Executive Officer and to the board of directors of Minim, Inc. (NASDAQ: MINM). Mr. Lazar has successfully served as a custodian to numerous public companies across a wide range of industries, including without limitation, C2E Energy, Inc. (OTCMKTS: OOGI), China Botanic Pharmaceutical Inc. (OTCMKTS: CBPI), One 4 Art Ltd., Romulus Corp., Moveix, Inc., Arax Holdings Corp. (OTCMKTS: ARAT), ESP Resources, Inc. (OTCMKTS: ESPIQ), Adorbs, Inc., Exobox Technologies Corp. (OTCMKTS: EXBX), Petrone Worldwide, Inc. (OTCMKTS: PFWIQ), Superbox, Inc. (OTCMKTS: SBOX), Sino Green Land Corp. (OTCMKTS: SGLA), SIPP International Industries, Inc. (OTCMKTS: SIPN), Cereplast, Inc. (OTCMKTS: CERPQ), Energy 1 Corp. (OTCMKTS: EGOC), ForU Holdings, Inc. (OTCMKTS: FORU), China Yanyuan Yuhui National Education Group, Inc. (OTCMKTS: YYYH), Pan Global Corp. (OTCMKTS: PGLO), Shengtang International, Inc. (OTCMKTS: SHNL), Alternaturals, Inc. (OTCMKTS: ANAS), USA Recycling Industries, Inc. (OTCMKTS: USRI), Tele Group Corp., Xenoics Holdings, Inc. (OTCMKTS: XNNHQ), Richland Resources International Group, Inc. (OTCMKTS: RIGG), AI Technology Group, Inc., Reliance Global Group, Inc. (NASDAQ: RELI), Melt, Inc., Ketdarina Corp., 3D MarkerJet, Inc. (OTCMKTS: MRJT), Lvpai Group Ltd., Gushen, Inc., FHT Future Technology Ltd., Inspired Builders, Inc., Houmu Holdings Ltd. (OTCMKTS: HOMU), Born, Inc. (OTCMKTS: BRRN), Changsheng International Group Ltd., Sollensys Corp. (OTCMKTS: SOLS), Guozi Zhongyu Capital Holdings Co. (OTCMKTS: GZCC) and Cang Bao Tian Xia International Art Trade Center, Inc. Mr. Lazar also served as the Interim CEO of Cyclacel Pharmaceuticals, Inc. (Nasdaq:CYCC) from January – March 2025. From 2017 Mr. Lazar serves as the CEO of Custodian Ventures LLC, a company focused on buying and reselling public companies via court ordered custodianships. We believe that Mr. Lazar is qualified to serve on our Board due to his extensive experience serving on the boards of other public companies. James O’Brien was appointed to serve as a member of our Board of Directors in August 2023. Mr. O’Brien is a Founder of Oakridge Law Professional Corporation (“Oakridge”), a boutique law firm based in Toronto, Ontario that specializes in M&A and Securities. Oakridge will officially open its doors January 6, 2025. Since October of 2024, Mr. O’Brien has operated Blackthorn Law Corporation, also specializing in M&A and Securities. From January 2019 to December 2023, Mr. O’Brien has been a partner at MLT Aikins LLP, one of Western Canada’s leading law firms, where he practices primarily in the areas of corporate and commercial law with a specific focus on mergers and acquisitions and corporate finance and securities. Before that, he joined MLT Aikins LLP as an associate attorney in 2012. Mr. O’Brien received his Bachelor of Laws degree from the University of Manitoba in 2010. He also received his Bachelor of Science degree from the University of Manitoba in 2007. Mr. O’Brien is admitted to practice law in Manitoba, Canada and has passed Levels 1 and 2 of the Chartered Financial Analyst programs. We believe that Mr. O’Brien is qualified to serve on our Board due to the combination of his extensive legal and finance background. 50 Yilin Lu has served as the member of our Board of Directors since December 2024. Since June 2023, Mr. Lu has served as the Founder and CEO of Senchi Morgan Capital Market and Senchi Morgan Asset Management, broker dealers and asset management firms. Mr. Lu started his investment banking career at Goldman Sachs in 2006. He joined China International Capital Corporation (CICC) later and was named the responsible offer of CICC US Securities (Hong Kong) Ltd in 2011. He also held positions as managing director with Cantor Fitzgerald Capital Markets in Hong Kong, Which he left to set up his own investment bank in 2016. From July 2018 to June 2023, Mr. Lu served as a Founder and the CEO of Cheung On Securities Limited, a broker dealer and asset management firm. He has over 15 years of experience in equity investment and trading. Mr. Lu is a Chartered Financial Analyst (CFA) and a Financial Risk Manager (FRM). We believe that Mr. Lu is qualified to serve on our Board due to his experience in portfolio management, investment analysis, financial analysis and reporting as well as financial advisory services. Hong Chun Yeung has served as the member of our Board of Directors since December 2024. Hong Chun Yeung has been serving as a Director of Zhonghui Anda CPA, a CPA firm, specializing in audit and assurance, starting August 2014. Prior to that, he had worked in international firm RSM Hong Kong for over five years. He has around 13-year experience in auditing and business consultation. He has extensive experience in providing audit and assurance service, M&A advisory service and pre-listing advisory service to listed and pre-listing companies operating in a variety of industries including manufacturing, mining, logistics, engineering, etc. Mr. Hong Chun Yeung holds a Bachelor of Business Administration degree in Accounting from Hong Kong Baptist University. He is a practicing member of the Hong Kong Institute of Certified Public Accountant. We believe that Mr. Hong Chun Yeung is qualified to serve on our Board due to his accounting experience as well as experience in providing advisory services to listed company. Lijun Chen has served as a Chairman of our Board of Directors since December 2024. Mr. Lijun Chen is a dedicated leader with a rich background in various sectors. Mr. Chen graduated from the Central University of Finance and Economics with a Bachelor’s degree in Industrial Economics in 1989. He began his career at Shijiazhuang Changlu Trading Company, where he worked diligently as the Head of the Import and Export Trade Department and later as General Manager, contributing to the company’s operations in coal trading and daily necessities, from October 1989 to May 2004. In 2004, Mr. Chen co-founded Fuli Real Estate Development Co. Ltd., where he served as Executive Director until May 2014. His efforts in this role helped shape the company’s growth in the real estate market through thoughtful development and sales strategies. Following this, he founded Hebei Jiujiukang Biotechnology Development Co. Ltd. in 2014, focusing on biotechnology research and pharmaceutical production, where Mr. Chen served until July 2018. Since August 2018, Mr. Chen has been serving as the Chairman of Shenzhen Yihu Tea Technology Innovation Group Co. Ltd., where he is involved in e-commerce and technology promotion. His journey reflects a commitment to learning and adapting across different industries, and he remains grateful for the opportunities to contribute to each organization he has been part of. We believe that Mr. Chen is qualified to serve on our Board of Directors due to his extensive experience in various sectors. Jing Lu has served as a member of our Board of Directors since December 2024. From April 2023, Dr. Lu serves as Chief Financial Officer of Bowen Acquisition Corporation, a Nasdaq-listed SPAC company. From August 2024, Dr. Lu also serves as an independent director of Autozi Internet Technology (Global) Ltd, auto-parts e-commerce company listed on Nasdaq. From February 2021 to April 2024, she served as Chief Financial Officer of Keyarch Acquisition Corporation, also a Nasdaq-listed SPAC company, which went successfully from independent IPO in 2022 to De-SPAC IPO in 2024. Before that, from September 2019 to February 2021, Dr. Lu served as Chief Investment Officer of the New Hope Fertility Center in New York, sourcing and managing PE investments, bank loans and government PPP loans. Dr. Lu also served as a Managing Director and then Chief Operating Officer of China Bridge Capital International Inc., a PE/VC investment advisory company specialized in innovative technologies from 2017 to 2019 and from March 2021 to January 2022. Prior to that, Dr. Lu was President of ACE AV Consulting Inc. from 2005 to 2017. Dr. Lu was an Executive Director at CIBC World Markets in 2001 working on corporate securities. Between 1998 and 2001, Dr. Lu worked at the Federal Reserve Bank of New York as a bank regulator and supervisor. Before moving to New York, Dr. Lu was a professor of economics at York University in Canada for four years, specializing her teaching and research in Macroeconomics, Institutional Economics, and Econometrics. Dr. Lu received a Ph.D. and M.A. in Economics from Western University in Canada, a Graduate Certificate in Economics from the People’s University in China, and a B.A in World Economy from Fudan University in China. We believe that Dr. Lu is qualified to serve on our Board of Directors due to her extensive experience in the financial service industry. Family Relationships Alexandra Hoffman, a member of our Board of Directors and a Technical Writer for the Company, and Jaclyn Hoffman, our Chief Marketing Officer, are sisters. 51 Involvement in Certain Legal Proceedings To the best of our knowledge, none of our directors or executive officers has, during the past ten years: ● been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences); ● had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; ● been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; ● been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; ● been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or ● been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. Corporate Governance The Board’s Role in Risk Oversight The Board of Directors oversees that the assets of our company are properly safeguarded, that the appropriate financial and other controls are maintained, and that our business is conducted wisely and in compliance with applicable laws and regulations and proper governance. Included in these responsibilities is the Board’s oversight of the various risks facing our company. In this regard, our Board seeks to understand and oversee critical business risks. Our Board does not view risk in isolation. Risks are considered in virtually every business decision and as part of our business strategy. Our Board recognizes that it is neither possible nor prudent to eliminate all risk. Indeed, purposeful and appropriate risk-taking is essential for our company to be competitive on a global basis and to achieve its objectives. 52 While the Board oversees risk management, company management is charged with managing risk. Management communicates routinely with the Board and individual directors on the significant risks identified and how they are being managed. Directors are free to, and indeed often do, communicate directly with senior management. Our Board administers its risk oversight function as a whole by making risk oversight a matter of collective consideration. Much of this work has been delegated to committees, which will meet regularly and report back to the full Board. The audit committee oversees risks related to our financial statements, the financial reporting process, accounting and legal matters, the compensation committee evaluates the risks and rewards associated with our compensation philosophy and programs, and the nominating and corporate governance committee evaluates risk associated with management decisions and strategic direction. Independent Directors Nasdaq’s rules generally require that a majority of an issuer’s board of directors consist of independent directors. Our Board of Directors consists of eight (8) directors, five (5) of whom are independent within the meaning of Nasdaq’s rules. Sean Dollinger, David Lazar, and Alexandra Hoffman are not independent within the meaning of Nasdaq’s rules. Committees of the Board of Directors Our Board has established an audit committee, a compensation committee, and a nominating and corporate governance committee, each with its own charter approved by the Board. The committee charters have been filed as exhibits to this Annual Report on the Form 10-K. Each committee’s charter is available on our website at www.lqrhouse.com . In addition, our Board of Directors may, from time to time, designate one or more additional committees, which shall have the duties and powers granted to it by our Board of Directors. Audit Committee James O’Brien, Jing Lu and Lijun Chen, each of whom satisfies the “independence” requirements of Rule 10A-3 under the Exchange Act and Nasdaq’s rules serve on our audit committee with James O’Brien serving as the chairman. Our Board has determined that James O’Brien qualifies as an “audit committee financial expert.” The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company. The audit committee is responsible for, among other things: (i) retaining and overseeing our independent accountants; (ii) assisting the Board in its oversight of the integrity of our financial statements, the qualifications, independence and performance of our independent auditors and our compliance with legal and regulatory requirements; (iii) reviewing and approving the plan and scope of the internal and external audit; (iv) pre-approving any audit and non-audit services provided by our independent auditors; (v) approving the fees to be paid to our independent auditors; (vi) reviewing with our chief executive officer and principal financial officer and independent auditors the adequacy and effectiveness of our internal controls; (vii) reviewing hedging transactions; and (viii) reviewing and assessing annually the audit committee’s performance and the adequacy of its charter. 53 Compensation Committee James O’Brien, and Jing Lu, each of whom satisfies the “independence” requirements of Rule 10C-1 under the Exchange Act and Nasdaq’s rules serve on our compensation committee, with James O’Brien serving as the chairman. The members of the compensation committee are also “outside directors” as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code, and “non-employee directors” within the meaning of Section 16 of the Exchange Act. The compensation committee assists the Board in reviewing and approving the compensation structure, including all forms of compensation relating to our directors and executive officers. The compensation committee is responsible for, among other things: (i) reviewing and approving the remuneration of our executive officers; (ii) making recommendations to the Board regarding the compensation of our independent directors; (iii) making recommendations to the Board regarding equity-based and incentive compensation plans, policies and programs; and (iv) reviewing and assessing annually the compensation committee’s performance and the adequacy of its charter. Nominating and Corporate Governance Committee James O’Brien, Lijun Chen, and Jing Lu, each of whom satisfies the “independence” requirements of Nasdaq’s rules, serve on our nominating and corporate governance committee, with Jing Lu, serving as the chairman. The nominating and corporate governance committee assists the Board of Directors in selecting individuals qualified to become our directors and in determining the composition of the Board and its committees. The nominating and corporate governance committee is responsible for, among other things: (i) identifying and evaluating individuals qualified to become members of the Board by reviewing nominees for election to the Board submitted by stockholders and recommending to the Board director nominees for each annual meeting of stockholders and for election to fill any vacancies on the Board; (ii) advising the Board with respect to Board organization, desired qualifications of Board members, the membership, function, operation, structure and composition of committees (including any committee authority to delegate to subcommittees), and self-evaluation and policies; (iii) advising on matters relating to corporate governance and monitoring developments in the law and practice of corporate governance; (iv) overseeing compliance with our code of ethics; and (v) approving any related party transactions. The nominating and corporate governance committee’s methods for identifying candidates for election to our Board of Directors (other than those proposed by our stockholders, as discussed below) include the solicitation of ideas for possible candidates from a number of sources — members of our Board of Directors, our executives, individuals personally known to the members of our Board of Directors, and other research. The nominating and corporate governance committee may also, from time-to-time, retain one or more third-party search firms to identify suitable candidates. In making director recommendations, the nominating and corporate governance committee may consider some or all of the following factors: (i) the candidate’s judgment, skill, experience with other organizations of comparable purpose, complexity and size, and subject to similar legal restrictions and oversight; (ii) the interplay of the candidate’s experience with the experience of other Board members; (iii) the extent to which the candidate would be a desirable addition to the Board and any committee thereof; (iv) whether or not the person has any relationships that might impair his or her independence; and (v) the candidate’s ability to contribute to the effective management of our company, taking into account the needs of our company and such factors as the individual’s experience, perspective, skills and knowledge of the industry in which we operate. 54 Code of Ethics We have adopted a code of ethics that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer. Such code of ethics addresses, among other things, honesty and ethical conduct, conflicts of interest, compliance with laws, regulations and policies, including disclosure requirements under the federal securities laws, and reporting of violations of the code. A copy of the code of ethics has been filed as an exhibit to this Annual Report on Form 10-K. It is also available on our website at www.lqrhouse.com . We are required to disclose any amendment to, or waiver from, a provision of our code of ethics applicable to our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions. We intend to use our website as a method of disseminating this disclosure as well as by SEC filings, as permitted or required by applicable SEC rules. Any such disclosure will be posted to our website within four (4) business days following the date of any such amendment to, or waiver from, a provision of our code of ethics. Clawback Policy On November 29, 2023, the Board of Directors adopted the LQR House Inc. Clawback Policy for the recovery of erroneously awarded incentive-based compensation (the “Clawback Policy”), with an effective date of November 29, 2023, in order to comply with Section 10D of the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”), Rule 10D-1 of the Exchange Act (“Rule 10D-1”), and the listing rules adopted by The Nasdaq Stock Market, LLC (collectively, the “Final Clawback Rules”). The Board was designated as the administrator of the Clawback Policy. The Clawback Policy provides for the mandatory recovery of erroneously awarded incentive-based compensation from current and former executive officers as defined in Rule 10D-1 (“Covered Officers”) of the Company in the event that the Company is required to prepare an accounting restatement, in accordance with the Final Clawback Rules. The recovery of such compensation applies regardless of whether a Covered Officer engaged in misconduct or otherwise caused or contributed to the requirement of an accounting restatement. Under the Clawback Policy, the Company may recoup from the Covered Officers erroneously awarded incentive-based compensation received within a lookback period of the three completed fiscal years preceding the date on which the Company is required to prepare an accounting restatement. Insider Trading Policy In March 2024, we adopted an insider trading policy governing the purchase, sale, and/or other dispositions of our securities by our directors, officers, and employees, to promote compliance with insider trading laws, rules and regulations, and applicable Nasdaq listing standards applicable to us. Our insider trading policy, among other things, prohibits our directors, officers, and employees from holding our securities in a margin account or pledging our securities as collateral for a loan. In addition, our insider trading policy prohibits employees, officers, and directors from engaging in put or call options, short selling, or similar hedging activities involving our stock. Delinquent Section 16(a) Reports Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers and persons who own more than 10% of our outstanding shares of common stock (“Ten Percent Holders”) to file with the SEC reports of their share ownership and changes in their share ownership of our common stock. Directors, executive officers and Ten Percent Holders are also required to furnish us with copies of all ownership reports they file with the SEC. To our knowledge, based solely on a review of the copies of such reports furnished to us, the following directors, executive officers and Ten Percent Holders did not comply with all Section 16(a) filing requirements as of March 31, 2025: (i) Ms. Alexandra Hoffman filed her form 4 regarding four (4) transactions as of November 26, 2024, late in 2024. 55 ITEM 11. EXECUTIVE COMPENSATION Summary Compensation Table The following summary compensation table provides information concerning all cash and non-cash compensation that have been or will be awarded to, earned by or paid during our fiscal year ended December 31, 2024 and December 31, 2023 to our Chief Executive Officer (principal executive officer), our Chief Financial Officer, and our Chief Marketing Officer. We refer to these individuals as our “named executive officers” (“NEO”). Name and Principal Position Year Salary ($) Bonus ($) Stock Awards ($) Option Awards ($) All Other Compensation ($) Total ($) Sean Dollinger, 2024 586,700 200,000 - - 850,000 (1) 1,636,700 Chief Executive Officer 2023 337,572 100,000 5,000,100 (3) - - 5,437,672 Kumar Abhishek, 2024 73,271 - - - 550,000 (2) 623,271 Chief Financial Officer 2023 88,600 25,000 - - 113,600 Jaclyn Hoffman, 2024 99 ,600 - - - 285,000 (4) 384,600 Chief Marketing Officer 2023 64,100 - - - 64,100 (1) In October 2024, the Company entered into a retention agreement with its Chief Executive Officer, and entities affiliated with the CEO, whereby a retention bonus of $850,000 was awarded for continued services. As of December 31, 2024, $800,000 remained unpaid and has been paid in January 2025. (2) In October 2024, the Company entered into a retention agreement with its Chief Financial Officer whereby a retention bonus of $550,000 was awarded for continued services. As of December 31, 2024, $250,000 remained unpaid and has been paid in 2025. (3) Represents the grant-date fair value of 25,000 restricted stock units issued to Mr. Dollinger in 2023. (4) In October 2024, the Company entered into a retention agreement with its Chief Marketing Officer whereby a retention bonus of $285,000 was awarded for continued services. As of December 31, 2024, $255,000 remained unpaid. Of this amount, $100,000 was paid in January 2025, and $155,000 remains unpaid. Employment Agreements We have executed the following employment agreements and consulting agreements with our NEOs. The material terms of each of those arrangements are summarized below. The summaries are not complete description of all provisions of the employment arrangements and are qualified in their entirety by reference to the written employment arrangements, each filed as an exhibit to this Annual Report on Form 10-K. Sean Dollinger Under our employment agreement dated March 29, 2023, as amended on November 1, 2023, with our Chief Executive Officer, Sean Dollinger, effective as of the date of the consummation of the Company’s IPO, we agreed that, for a 1-year term renewed automatically, unless terminated earlier in accordance with its terms, we will pay Mr. Dollinger an annual base salary (the “Base Salary”) of $540,000. Mr. Dollinger will also be entitled to the following types of bonuses: (i) an annual incentive bonus as determined by the Board of Directors within thirty (30) days of the filing of the Company’s annual reports with the U.S. Securities and Exchange Commission (the “SEC”); and 56 (ii) a monthly performance bonuses (the “Bonuses”), payable on or before the fifteenth (15th) day of the calendar month immediately following the calendar month with respect to which the amount of the performance bonus is determined, commencing with the calendar month ending on November 30, 2023, in an amount equal to One Hundred Thousand Dollars ($100,000.00) for each One Million Dollars ($1,000,000.00) oft gross revenue generated through sales made on or through the website associated with the domain name www.cwspirits.com (or any successor website)(“Website Revenue”) for such calendar month; provided, that, within fifteen (15) days of the filing of each of the Company’s quarterly reports with the SEC, the amount of such bonuses for the months during the applicable fiscal quarter shall be adjusted, upwards or downwards, as the case may be, based on the Website Revenue for the applicable quarter as reported by the Company in its quarterly filing with the SEC for such quarter. Any such downwards adjustment shall require Mr. Dollinger to pay the amount of such downwards adjustment to the Company within ten (10) days of the determination of such adjustment. Any such upwards adjustment shall require the Company to pay the amount of such upwards adjustment to Mr. Dollinger within ten (10) days of the determination of such adjustment. Notwithstanding the foregoing, in no event shall the total amount of the Bonuses paid to the Executive in any one fiscal year exceed Five Million Dollars ($5,000,000.00). The Company provides standard indemnification and directors’ and officers’ insurance in addition to the ability to participate in standard employee benefits, such as health, medical, dental and visions insurance. Mr. Dollinger can be terminated without cause and upon death or disability. Mr. Dollinger is also subject to certain confidentiality and non-competition provisions. If Mr. Dollinger’s employment agreement is terminated by the Company without cause, all compensation payable to Mr. Dollinger shall cease as of the date of termination specified in the Company’s notice and the Company shall pay Mr. Dollinger, the following sums: (i) the Base Salary on the date of termination specified in the Company’s notice (the “Termination Date”) for the shorter of (x) six months and (y) the remainder of the term of the employment agreement (the “Term”) (the applicable period being referred to as the “Severance Period”), payable in monthly installments; (ii) benefits under group health and life insurance plans in which Mr. Dollinger participated prior to termination through the Severance Period; (iii) all previously earned, accrued, and unpaid benefits from the Company and its employee benefit plans, including any such benefits under the Company’s pension, disability, and life insurance plans, policies, and programs; and (iv) so long as the Company has achieved its budgeted EBITDA level for the period commencing with the end of the Company’s immediately previous fiscal year through the Termination Date, an amount equal to the product of the bonus paid to Mr. Dollinger in respect of the immediately preceding fiscal year times the quotient obtained by dividing (x) the number of full calendar months occurring since the end of the immediately previous fiscal year through the Termination Date, by (y) 12. If, prior to the date on which the Company’s obligations to pay Mr. Dollinger the Base Salary on the Termination Date cease, Mr. Dollinger certain covenants as listed in his employment agreement, then the Company shall have no obligation to make any of the payments that remain payable by the Company in the form of Base Salary or benefits on or after the date of such violation. The payment of severance may be conditioned by the Company on the delivery by Mr. Dollinger of a release of any and all claims that Mr. Dollinger may have against the Company. If the Employment Agreement is terminated by the Company for cause, death or disability, Mr. Dollinger (or his estate or representative as applicable) shall not receive the Base Salary but will receive all other sums. Kumar Abhishek Under our employment agreement dated May 1, 2023 with our Chief Financial Officer, Kumar Abhishek, effective as of May 1, 2023, we agreed that, for a 1-year term renewed automatically, unless terminated earlier in accordance with its terms, we will pay Mr. Abhishek an annual base salary (the “Base Salary”) of $72,000, which will increase by no less than 5% on each anniversary of his employment. Mr. Abhishek will be eligible to receive an annual incentive bonus as determined by the Board of Directors within thirty (30) days of filing of the Company’s annual reports. Mr. Abhishek is entitled to 3 weeks of paid vacation for the first year of his employment and 4 weeks of paid vacation for the second and third years of his employment. The Company also provides standard indemnification and directors’ and officers’ insurance in addition to the ability to participate in standard employee benefits, such as health, medical, dental and visions insurance. Mr. Abhishek can be terminated without cause and upon death or disability. Mr. Abhishek will also be entitled to certain severance payments if his employment is terminated with or without cause and on death or disability. Mr. Abhishek is also subject to certain confidentiality and non-competition provisions. Mr. Abhishek’s employment agreement with the Company is conditioned upon him working at least 35 hours per week as our Chief Financial Officer. If Mr. Abhishek’s employment agreement is terminated by the Company without cause, all compensation payable to Mr. Abhishek shall cease as of the date of termination specified in the Company’s notice and the Company shall pay Mr. Abhishek, the following sums: (i) the Base Salary on the date of termination specified in the Company’s notice (the “Termination Date”) for the shorter of (x) six months and (y) the remainder of the term of the employment agreement (the “Term”) (the applicable period being referred to as the “Severance Period”), payable in monthly installments; (ii) benefits under group health and life insurance plans in which Mr. Abhishek participated prior to termination through the Severance Period; (iii) all previously earned, accrued, and unpaid benefits from the Company and its employee benefit plans, including any such benefits under the Company’s pension, disability, and life insurance plans, policies, and programs; and (iv) so long as the Company has achieved its budgeted EBITDA level for the period commencing with the end of the Company’s immediately previous fiscal year through the Termination Date, an amount equal to the product of the bonus paid to Mr. Abhishek in respect of the immediately preceding fiscal year times the quotient obtained by dividing (x) the number of full calendar months occurring since the end of the immediately previous fiscal year through the Termination Date, by (y) 12. If, prior to the date on which the Company’s obligations to pay Mr. Abhishek the Base Salary on the Termination Date cease, Mr. Abhishek certain covenants as listed in his Employment Agreement, then the Company shall have no obligation to make any of the payments that remain payable by the Company in the form of Base Salary or benefits on or after the date of such violation. The payment of severance may be conditioned by the Company on the delivery by Mr. Abhishek of a release of any and all claims that Mr. Abhishek may have against the Company. 57 If the employment agreement is terminated by the Company for cause, death or disability, Mr. Abhishek (or his estate or representative as applicable) shall not receive the Base Salary but will receive all other sums. Jaclyn Hoffman Under our employment agreement dated May 1, 2023 with our Chief Marketing Officer, Jaclyn Hoffman effective as of May 1, 2023, we agreed that, for a 1-year term renewed automatically, unless terminated earlier in accordance with its terms, we will pay Ms. Hoffman an annual base salary (the “Base Salary”) of $63,000, which will increase by no less than 5% on each anniversary of her employment. Ms. Hoffman will be eligible to receive an annual incentive bonus as determined by the Board of Directors within thirty (30) days of filing of the Company’s annual reports. Ms. Hoffman is entitled to 3 weeks of paid vacation for the first year of her employment and 4 weeks of paid vacation for the second and third years of her employment. The Company also provides standard indemnification and directors’ and officers’ insurance in addition to the ability to participate in standard employee benefits, such as health, medical, dental and visions insurance. Ms. Hoffman can be terminated without cause and upon death or disability. Ms. Hoffman will also be entitled to certain severance payments if her employment is terminated with or without cause and on death or disability. Ms. Hoffman is also subject to certain confidentiality and non-competition provisions. If Ms. Hoffman’s employment agreement is terminated by the Company without cause, all compensation payable to Ms. Hoffman shall cease as of the date of termination specified in the Company’s notice (the “Termination Date”) and the Company shall pay Ms. Hoffman, the following sums: (i) the Base Salary on the Termination Date for the shorter of (x) six months and (y) the remainder of the term of the employment agreement (the “Term”) (the applicable period being referred to as the “Severance Period”), payable in monthly installments; (ii) benefits under group health and life insurance plans in which Ms. Hoffman participated prior to termination through the Severance Period; (iii) all previously earned, accrued, and unpaid benefits from the Company and its employee benefit plans, including any such benefits under the Company’s pension, disability, and life insurance plans, policies, and programs; and (iv) so long as the Company has achieved its budgeted EBITDA level for the period commencing with the end of the Company’s immediately previous fiscal year through the Termination Date, an amount equal to the product of the bonus paid to Ms. Hoffman in respect of the immediately preceding fiscal year times the quotient obtained by dividing (x) the number of full calendar months occurring since the end of the immediately previous fiscal year through the Termination Date, by (y) 12. If, prior to the date on which the Company’s obligations to pay Ms. Hoffman the Base Salary on the Termination Date cease, Ms. Hoffman certain covenants as listed in her Employment Agreement, then the Company shall have no obligation to make any of the payments that remain payable by the Company in the form of Base Salary or benefits on or after the date of such violation. The payment of severance may be conditioned by the Company on the delivery by Ms. Hoffman of a release of any and all claims that Ms. Hoffman may have against the Company. If the employment agreement is terminated by the Company for cause, death or disability, Ms. Hoffman (or her estate or representative as applicable) shall not receive the Base Salary but will receive all other sums. Outstanding Equity Awards at Fiscal Year-End As of December 31, 2024, no NEO holds any options, however, Sean Dollinger, our CEO, has 25,000 restricted stock units (“RSU”), have a grant-date fair value of $5,000,100. No other NEO holds any RSUs. 58 Policies and Practices for Granting Certain Equity Awards Our policies and practices regarding the granting of equity awards are carefully designed to ensure compliance with applicable securities laws and to maintain the integrity of our executive compensation program. The Compensation Committee is responsible for the timing and terms of equity awards to executives and other eligible employees. The timing of equity award grants is determined with consideration to a variety of factors, including but not limited to, the achievement of pre-established performance targets, market conditions and internal milestones. The Company does not follow a predetermined schedule for the granting of equity awards; instead, each grant is considered on a case-by-case basis to align with the Company’s strategic objectives and to ensure the competitiveness of our compensation packages. In determining the timing and terms of an equity award, the Board or the Compensation Committee may consider material nonpublic information to ensure that such grants are made in compliance with applicable laws and regulations. The Board’s or the Compensation Committee’s procedures to prevent the improper use of material nonpublic information in connection with the granting of equity awards include oversight by legal counsel and, where appropriate, delaying the grant of equity awards until the public disclosure of such material nonpublic information. The Company is committed to maintaining transparency in its executive compensation practices and to making equity awards in a manner that is not influenced by the timing of the disclosure of material nonpublic information for the purpose of affecting the value of executive compensation. The Company regularly reviews its policies and practices related to equity awards to ensure they meet the evolving standards of corporate governance and continue to serve the best interests of the Company and its shareholders. Compensation Committee Interlocks and Insider Participation None of our executive officers serve as a member of the Compensation Committee of our Board of Directors (or other committee performing equivalent functions) of any entity that has one or more executive officers serving on our Board of Directors or Compensation Committee. Director Compensation The following summary Board compensation table provides information regarding the Board compensation paid during our fiscal year ended December 31, 2024 to our Board members. Only our independent directors received compensation for being directors during fiscal year 2024. Cash Equity Total Compensation Compensation Compensation James O’Brien $ 80,000 $ - $ 80,000 James Huber 60,000 - 60,000 Jay Dhaliwal 54,000 - 54,000 Gary Herman 39,000 - 39,000 Yilin Lu (1) - 79,500 79,500 Hong Chun Yeung (1) - 79,500 79,500 Lijun Chen (1) - 79,500 79,500 Jing Lu (1) - 79,500 79,500 $ 233,000 $ 318,000 $ 551,000 (1) In December 2024 Yilin Lu, Hong Chun Yeung, Lijun Chen and Jing Lu were appointed as directors of the Board. Each of them is entitled to receive annual cash fee of $36,000 to be paid in monthly installments. In addition, each of these directors shall also receive equity compensation in form of 50,000 RSUs vesting in eight (8) equal quarterly installments commencing in the first quarter of 2025. Equity compensation has a grant-date fair value of $79,500. 59 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table sets forth certain information, as of March 28, 2025 with respect to the holdings of (1) each person, or group of affiliated persons, who is the beneficial owner of more than 5% of Company voting stock, (2) each of our directors, (3) each executive officer, and (4) all of our current directors and executive officers as a group. We have determined beneficial ownership in accordance with the rules and regulations of the SEC. These rules generally provide that a person is the beneficial owner of securities if such person has or shares the power to vote or direct the voting thereof, or to dispose or direct the disposition thereof or has the right to acquire such powers within 60 days. Shares of common stock subject to options that are currently exercisable or exercisable within 60 days of March 28, 2025 are deemed to be outstanding and beneficially owned by the person holding the options. Shares issuable pursuant to stock options or warrants are deemed outstanding for computing the percentage ownership of the person holding such options or warrants, but are not deemed outstanding for computing the percentage ownership of any other person. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below will have sole voting and investment power with respect to all shares of common stock that they will beneficially own, subject to applicable community property laws. Our calculation of the number of shares and percentage of beneficial ownership is based on 36,400,709 shares of common stock outstanding as of March 28, 2025. Name and Address of Beneficial Owner (1) Title Number (2) Percent Officers and Directors Sean Dollinger (3) Chief Executive Officer and Director 95,993 * % Kumar Abhishek Chief Financial Officer 417 * % Jaclyn Hoffman Chief Marketing Officer 1,460 * % Alexandra Hoffman Director and Technical Writer 834 * % James O’Brien (4) Director 936 * % Yilin Lu (5) Director 6,250 % Hong Chun Yeung (6) Director 6,250 % Lijun Chen (7) Director 6,250 % Jing Lu (8) Director 6,250 % David Lazar Director - All Officers and Directors as a Group (total of 8 persons) 124,640 0.36 % 5% Beneficial Owners of a Class of Voting Stock * Less than 1% (1) Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o our Company, LQR House Inc., 6538 Collins Ave. Suite 344, Miami Beach, FL 33141. (2) Based on 36,400,709 shares of common stock outstanding as of March 28, 2025. (3) Consists of (i) 15,625 shares of common stock issued upon vesting of RSUs granted to Mr. Dollinger under the 2021 Plan and (ii) 3,125 RSUs scheduled to vest and convert into shares of common stock of the Company within 60 days of March 31, 2025. (4) Consists of (i) 780 shares of common stock issued upon vesting of RSUs granted to Mr. O’Brien under the 2021 Plan and (ii) 156 RSUs scheduled to vest and convert into shares of common stock of the Company within 60 days of March 31, 2025. (5) Consists of 6,250 RSUs, scheduled to vest and convert into shares of common stock of the Company within 60 days of March 31, 2025, in accordance with the terms of independent director agreement signed by the Company and the director on December 19, 2024. Pursuant to the agreement Mr. Yilin Lu is entitled to receive equity compensation in form of 50,000 RSUs vesting in eight (8) equal quarterly installments commencing in first quarter of 2025. (6) Consists of 6,250 RSUs, scheduled to vest and convert into shares of common stock of the Company within 60 days of March 31, 2025, in accordance with the terms of independent director agreement signed by the Company and the director on December 19, 2024. Pursuant to the agreement Mr. Yeung is entitled to receive equity compensation in form of 50,000 RSUs vesting in eight (8) equal quarterly installments commencing in first quarter of 2025. (7) Consists of 6,250 RSUs, scheduled to vest and convert into shares of common stock of the Company within 60 days of March 31, 2025, in accordance with the terms of independent director agreement signed by the Company and the director on December 19, 2024.Pursuant to the agreement Mr. Chen is entitled to receive equity compensation in form of 50,000 RSUs vesting in eight (8) equal quarterly installments commencing in first quarter of 2025. (8) Consists of 6,250 RSUs, scheduled to vest and convert into shares of common stock of the Company within 60 days of March 31, 2025, in accordance with the terms of independent director agreement signed by the Company and the director on December 19, 2024.Pursuant to the agreement Dr. Jing Lu is entitled to receive equity compensation in form of 50,000 RSUs vesting in eight equal quarterly installments commencing in first quarter of 2025. 60 Equity Plan Information See Part II, Item 5 “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” of this Annual Report on Form 10-K. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Related Party Transactions Set forth below is a description of certain relationships and related person transactions since January 1, 2023, between us or our subsidiaries, and our directors, executive officers and holders of more than 5% of our voting securities that involve the lower of $120,000 or 1% of the average of total assets in the last two fiscal years. We believe that all of the following transactions were entered into with terms as favorable as could have been obtained from unaffiliated third parties. ● We, CWS, and Ssquared are parties to an Exclusive Marketing Agreement dated April 1, 2021. Pursuant to that agreement, CWS and Ssquared granted us exclusive marketing rights regarding any of CWS and Ssquared’s products. Pursuant to that agreement, Sean Dollinger, our Chief Executive Officer and Director, and 50% owner of Ssquared, received 33,333 shares of our common stock (8,334 shares of common stock on a post-split basis), and KBROS, LLC, the owner of CWS and 50% owner of Ssquared, received 133,333 shares of our common stock (33,333 shares of common stock on a post-split basis). ● Mr. Gregory Hoffman, a brother of Ms. Alexandra Hoffman, our director, entered into an advisor agreement with the Company on June 1, 2023, pursuant to which the Company issued to Mr. Hoffman 12,500 shares of common stock. ● We and 1226053 B.C. Ltd, our shareholder, are parties to a debt settlement agreement, dated September 27, 2023, pursuant to which the Company issued to 1226053 B.C. Ltd 19,130 shares of common stock. 1226053 B.C. Ltd is a legal entity owned and controlled by Mr. Avtar Dhaliwal, a brother of Mr. Jay Dhaliwal, a former Director on our Board. ● In August 2023, the Company entered into an independent contractor agreement with Catalyst LLC, for investor relations and advisory services with an entity for up to $1,000,000, for which the Company paid $500,000 through December 31, 2023. The contractor co-owns a company with the Company’s Chief Executive Officer, which is not controlled by LQR. Therefore, the contractor and his related entities are considered affiliates. ● On November 1, 2023, LQR House Acquisition Corp. (the “Buyer”), a wholly owned subsidiary of the Company, and Ssquared entered into a Domain Name Transfer Agreement pursuant to which, Ssquared sold to the Buyer all right, title, and interest in and to the domain name www.cwspirits.com and trademark rights associated with the domain name in any jurisdiction, all Internet traffic through the domain name and all website content, together with any goodwill associated therewith in exchange for the payment by the Buyer of the purchase price of $10,000. The Company’s Chief Executive Officer and Director, Sean Dollinger, owns 50% of the equity of Ssquared, and the other 50% is owned by a minority shareholder of the Company, who is considered a related party. ● On November 1, 2023, the Company entered into the Product Handling Agreement with KBROS. 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 milestones. 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, and a minority shareholder with the Company. ● On November 1, 2023, the Company entered into the Funding Commitment Agreement with KBROS. Pursuant to this agreement, the Company committed to provide annual funding to the Product Handler from time to time in the minimum amount of $2,500,000 to enable the Product Handler to purchase inventory from Company-approved vendors. 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, and a minority shareholder with the Company. 61 ● On October 15, 2024, we entered into a Securities Purchase Agreement with David E. Lazar, our President and Director, pursuant to which he acquired 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. ● In October 2024, the Company entered into a settlement and release agreement with KBROS, and its controlling stockholder, for an aggregate amount equal to $4,100,000. 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, and a minority shareholder with the Company. ● In October 2024, the Company entered into a retention agreement with its Chief Financial Officer whereby a retention bonus of $550,000 was awarded for continued services. ● In October 2024, the Company entered into a retention agreement with its Chief Executive Officer, and entities affiliated with the CEO, whereby a retention bonus of $850,000 was awarded for continued services. ● In October 2024, the Company entered into a retention agreement with its Chief Marketing Officer, Jaclyn Hoffman, whereby a retention bonus of $285,000 was awarded for continued services. ● In October 2024, the Company entered into a retention agreement with its Director, Alexandra Hoffman, whereby a retention bonus of $600,000 was awarded for continued services. ● In October 2024, the Company entered into a settlement agreement with South Doll LP, its former landlord, pursuant to which the Company agreed to pay this entity $40,000. Sean Dollinger our Chief Executive Officer and Director, owns an entity that acts as a general partner of South Doll LP. ● In October 2024, the Company entered into settlement agreement and general and mutual release with its independent director, James O’Brien, pursuant to which the Company settled outstanding liabilities amongst the parties in the amount of $30,000. ● In October 2024, the Company entered into settlement agreement and general and mutual release with each of the following former independent directors of the Company: James Huber and Jay Dhaliwal, pursuant to which the Company settled outstanding liabilities with each of the directors for a amount of $30,000. Independence of the Board of Directors Our Board of Directors has determined that a majority of the members of our Board of Directors, including Yilin Lu, Hong Chun Yeung, James O’Brian, Lijun Chen, and Ling Lu, are “independent” as that term is defined under applicable SEC rules and regulations. In addition, each of the members of each of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee are independent, as determined in accordance with the applicable independence requirements for such committee. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Audit and Non-Audit Fees dbb mckennon served as our independent registered public accounting firm to audit our books and accounts for the fiscal years ended December 31, 2024 and 2023. The table below presents the aggregate fees billed for professional services rendered by dbb mckennon for fiscal years 2024 and 2023. 2024 2023 Audit fees $ 167,247 $ 233,473 Audit-related fees Tax fee All other fees Total fees $ 167,247 $ 233,473 In the above tables, “audit fees” are fees billed for services provided related to the audit of our annual financial statements, quarterly reviews of our interim financial statements, and services normally provided by the independent accountant in connection with regulatory filings or engagements for those fiscal periods. “Audit-related fees” are fees not included in audit fees that are billed by the independent accountant for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements. “All other fees” are fees billed by the independent accountant for products and services not included in the foregoing categories. All audit fees are pre-approved by the audit committee. 62 PART IV ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES (a) Financial Statements and Financial Statement Schedules are set forth under Part II, Item 8 of this report. (b) Exhibits See the Exhibit Index immediately preceding the signature page of this Annual Report on Form 10-K. ITEM 16. Form 10-K Summary None. EXHIBIT INDEX Exhibit No. Description 2.1 Plan of Conversion of LQR House Inc., dated as of January 26, 2023 (incorporated by reference to Exhibit 2.1 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 3.1 Articles of Incorporation of LQR House Inc. filed on February 3, 2023 (incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 3.2 Certificate of Amendment to Articles of Incorporation of LQR House Inc. filed on March 29, 2023 (incorporated by reference to Exhibit 3.2 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 3.3 Certificate of Amendment to Articles of Incorporation of LQR House Inc. filed on June 5, 2023 (incorporated by reference to Exhibit 3.3 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 3.4 Certificate of Correction to the Certificate of Amendment to Articles of Incorporation filed on April 11, 2023(incorporated by reference to Exhibit 3.4 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 3.5 Certificate of Change Pursuant to NRS 78.209 of LQR House filed on November 28, 2023 (incorporated by reference to Exhibit 3.1 of the Company’s current report on the form 8-K filed with the SEC on December 1, 2023) 3.6 Amendment to Articles of Incorporation of LQR House Inc. filed on February 13, 2024 (incorporated by reference to Exhibit 3.8 of the Company’s Annual Report on Form 10-K filed with the SEC on April 1, 2024) 3.7 Bylaws of LQR House Inc. (incorporated by reference to Exhibit 3.5 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 3.8 First Amendment to the By-laws of the Company dated November 13, 2023 (incorporated by reference to Exhibit 3.1 of the Company’s quarterly report on the form 10-Q filed with the SEC on November 16, 2023) 4.1 Description of Registrant’s securities 4.2 Form of Warrant dated December 30, 2024 (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed with the SEC on January 3, 2025) 10.1 Packaging of Origin Co-Responsibility Agreement dated July 6, 2020, between Leticia Hermosillo Ravelero and Sean Dollinger (incorporated by reference to Exhibit 10.3 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 10.2 Shared Responsibility & Bonding Agreement dated March 19, 2021, between Leticia Hermosillo Ravelero and Dollinger Innovations Inc. (incorporated by reference to Exhibit 10.4 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 10.3 Exclusive License Agreement dated May 18, 2020 by and between Dollinger Holdings and Dollinger Innovations (incorporated by reference to Exhibit 10.5 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 10.4 Product Distribution Agreement, dated July 1, 2020, between Dollinger Holdings and Country Wine & Spirits Inc. (incorporated by reference to Exhibit 10.6 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 10.5 Asset Purchase Agreement, dated May 31, 2021, between LQR House Inc. and Dollinger Holdings LLC (incorporated by reference to Exhibit 10.7 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 10.6 Asset Purchase Agreement, dated March 19, 2021, among LQR House Inc. and Dollinger Innovations Inc., Dollinger Holdings LLC and Sean Dollinger (incorporated by reference to Exhibit 10.8 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 10.7 Exclusive Marketing Agreement, dated April 1, 2021, by and among Country Wine & Spirits, Inc., Ssquared Spirits, LLC, and LQR House, Inc. (incorporated by reference to Exhibit 10.9 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 63 10.8† Employment Agreement between LQR House Inc. and Sean Dollinger, dated March 29, 2023 (incorporated by reference to Exhibit 10.10 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 10.9† Employment Agreement between LQR House Inc. and Kumar Abhishek, dated May 1, 2023 (incorporated by reference to Exhibit 10.11 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 10.10† Employment Agreement between LQR House Inc. and Jaclyn Hoffman, dated May 1, 2023 (incorporated by reference to Exhibit 10.12 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 10.11† Employment Agreement between LQR House Inc. and Alexandra Hoffman, dated May 1, 2023 (incorporated by reference to Exhibit 10.13 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 10.12† Form of Independent Director Agreement between LQR House Inc. and each director nominee (incorporated by reference to Exhibit 10.14 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 10.13† Form of Non-Independent Director Agreement between LQR House Inc. and Non-Independent Director (incorporated by reference to Exhibit 10.15 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 10.14 Form of Director and Officer Indemnification Agreement between LQR House Inc. and each officer or director (incorporated by reference to Exhibit 10.16 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 10.15† LQR House Inc. 2021 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.17 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 10.16† Amendment No. 1 to the LQR House Inc. 2021 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.18 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 10.17† Amendment No. 2 to the LQR House Inc. 2021 Stock Option and Incentive Plan 10.18† Form of Incentive Stock Option Agreement (included in Exhibit 10.17) (incorporated by reference to Exhibit 10.19 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 10.19† Form of Non-Qualified Stock Option Agreement for Non-Employee Directors (included in Exhibit 10.17) (incorporated by reference to Exhibit 10.20 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 10.20† Form of Non-Qualified Stock Option Agreement for Company Employees (included in Exhibit 10.17) (incorporated by reference to Exhibit 10.21 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 10.21† Form of Non-Qualified Stock Option Agreement for Non-Employee Consultants (included in Exhibit 10.17) (incorporated by reference to Exhibit 10.22 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 10.22† Form of Restricted Stock Award Agreement (included in Exhibit 10.17) (incorporated by reference to Exhibit 10.23 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 10.23† Form of Restricted Stock Unit Award Agreement for Non-Employee Directors (included in Exhibit 10.17) (incorporated by reference to Exhibit 10.24 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 10.24† Form of Restricted Stock Unit Award Agreement for Company Employees (included in Exhibit 10.17) (incorporated by reference to Exhibit 10.25 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 64 10.25 Form of Advisor Agreement, dated June 1, 2023 (incorporated by reference to Exhibit 10.26 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 10.26 Commercial Lease Agreement (incorporated by reference to Exhibit 10.27 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 10.27 Ratification Assignment of the Bonding Agreement, dated July 7, 2023 (incorporated by reference to Exhibit 10.29 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of July 14, 2023). 10.28 Assignment Agreement of the Packaging of Origin and Co-Responsibility Agreement, dated June 30, 2023, between Dollinger Innovations Inc., Dollinger Holdings LLC, and LQR House Inc. (incorporated by reference to Exhibit 10.30 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of July 14, 2023). 10.29 Bottled at Origin Joint Responsibility Agreement, dated July 11, 2023 (incorporated by reference to Exhibit 10.31 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of July 14, 2023). 10.30 Writ obtained in connection with registering the Bottled at Origin Joint Responsibility Agreement with the Mexican Institute of Industrial property, dated July 13, 2023 (incorporated by reference to Exhibit 10.32 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of July 24, 2023). 10.31 Writ obtained in connection with registering the Shared Responsibility & Bonding Agreement with the Mexican Institute of Industrial property, dated July 12, 2023 (incorporated by reference to Exhibit 10.33 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of July 24, 2023). 10.32 Form of Independent Director Agreement between LQR House Inc. and Jay Dhaliwal (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K/A filed with the Commission on August 23, 2023). 10.33 Form of Independent Contractor Agreement 2023 (incorporated by reference to Exhibit 10.35 of the Company’s Registration Statement on Form S-1 (File No. 333-274903) filed with the SEC as of October 6, 2023). 10.34 10b-18 Repurchase Program (the “Program”) Letter of Engagement with Dominari Securities (incorporated by reference to Exhibit 10.1 of the Company’s quarterly report on the form 10-Q filed with the SEC on September 21, 2023) 10.35 Services Agreement, dated October 15, 2023, by and between X-Media Inc. and LQR House Inc. (incorporated by reference to Exhibit 10.1 of the Company’s current report on the form 8-K filed with the SEC on October 17, 2023) 10.36 Consulting Agreement between the Company and IR Agency LLC dated October 27, 2023 (incorporated by reference to Exhibit 10.1 of the Company’s current report on the form 8-K filed with the SEC on November 2, 2023) 10.37 Domain Name Transfer Agreement between LQR House Acquisition Corp. and SSquared Spirits LLC dated November 1, 2023 (incorporated by reference to Exhibit 10.1 of the Company’s current report on the form 8-K filed with the SEC on November 6, 2023) 10.38† Amendment to the Employment Agreement by and between the Company and Sean Dollinger dated November 1, 2023 (incorporated by reference to Exhibit 10.2 of the Company’s current report on the form 8-K filed with the SEC on November 6, 2023) 10.39 Form of Independent Contractor Agreement 2023 (incorporated by reference to Exhibit 10.35 of the Company’s Registration Statement on Form S-1 (File No. 333-274903) filed with the SEC as of October 6, 2023). 10.40 Services Agreement, dated October 15, 2023, by and between X-Media Inc. and LQR House Inc. (incorporated by reference to Exhibit 10.1 of the Company’s current report on the form 8-K filed with the SEC on October 17, 2023) 10.41 Consulting Agreement between the Company and IR Agency LLC dated October 27, 2023 (incorporated by reference to Exhibit 10.1 of the Company’s current report on the form 8-K filed with the SEC on November 2, 2023) 10.42 Product Handling Agreement by and between the Company and KBROS, LLC dated November 1, 2023 (incorporated by reference to Exhibit 10.55 of the Company’s Annual Report on Form 10-K filed with the SEC on April 1, 2024) 65 10.49 Funding Commitment Agreement by and between the Company and KBROS, LLC dated November 1, 2023 (incorporated by reference to Exhibit 10.56 of the Company’s Annual Report on Form 10-K filed with the SEC on April 1, 2024) 10.43 Form of the Share Exchange Agreement between the Company and the Seller dated May 19, 2024 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on May 23, 2024) 10.44 Form of the Subscription Agreement between the Company and DRNK dated June 7, 2024 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on June 13, 2024) 10.45 Form of Director Agreement by and between the Company and Avraham Ben Tzvi, dated October 15, 2024 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on October 18, 2024) 10.46 Form of Amendment No. 1 to Director Agreement by and between the Company and Avraham Ben Tzvi, dated October 17, 2024 (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on October 18, 2024) 10.47 Form of the Securities Purchase Agreement between the Company and David Lazar dated October 15, 2024 (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on October 18, 2024) 10.48 Form of a Warrant Agreement (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the SEC on October 18, 2024) 10.49 Form of Director Settlement Agreement (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed with the SEC on October 18, 2024) 10.50 Form of Settlement Agreement (incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed with the SEC on October 18, 2024) 10.51 Form of KBROS Settlement Agreement (incorporated by reference to Exhibit 10.7 of the Company’s Current Report on Form 8-K filed with the SEC on October 18, 2024) 10.52 Form of Independent Director Agreement, dated December 19, 2024 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on December 26, 2024) 10.53 Form of Purchase Agreement dated December 30, 2024 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on January 3, 2025) 10.54 Supplier Agreement between the Company and Of The Earth Distribution Corp., dated June 28, 2024. 14.1 Code of Ethics and Business Conduct (incorporated by reference to Exhibit 14.1 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 19.1 LQR House Inc. Insider Trading Policy, dated March 28, 2024 (incorporated by reference to Exhibit 19.1 of the Company’s Annual Report on Form 10-K filed with the SEC on April 1, 2024) 21.1 List of subsidiaries (incorporated by reference to Exhibit 21.1 of the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2024). 23.1 Consent of dbbmckennon 31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act 31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act 32.1# Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act 32.2# Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act 99.1 Audit Committee Charter (incorporated by reference to Exhibit 99.1 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 99.2 Compensation Committee Charter (incorporated by reference to Exhibit 99.2 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 99.3 Nominating and Corporate Governance Committee Charter (incorporated by reference to Exhibit 99.3 of the Company’s Registration Statement on Form S-1 (File No. 333-272660) filed with the SEC as of June 15, 2023). 97.1 LQR House Inc. Clawback Policy (incorporated by reference to Exhibit 97.1 of the Company’s Annual Report on Form 10-K filed with the SEC on April 1, 2024) 101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) † Executive compensation plan or arrangement. # Exhibits 32.1 and 32.2 are being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall such exhibits be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise specifically stated in such filing. 66 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LQR HOUSE INC. Dated: March 31, 2025 By: /s/ Sean Dollinger Sean Dollinger Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signatures Title Date /s/ Sean Dollinger Chief Executive Officer March 31, 2025 Sean Dollinger (Principal Executive Officer) /s/ Kumar Abhishek Chief Financial Officer March 31, 2025 Kumar Abhishek (Principal Financial and Accounting Officer) /s/ Alexandra Hoffman Director March 31, 2025 Alexandra Hoffman /s/ Yilin Lu Director March 31, 2025 Yilin Lu /s/ Hong Chun Yeung Director March 31, 2025 Hong Chun Yeung /s/ James O’Brien Director March 31, 2025 James O’Brien /s/ Lijun Chen Director March 31, 2025 Lijun Chen /s/ Jing Lu Director March 31, 2025 Jing Lu /s/ David Lazar Director March 31, 2025 David Lazar 67 LQR HOUSE, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 AND 2023 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID # 3501 ) F-2 CONSOLIDATED BALANCE SHEETS F-3 CONSOLIDATED STATEMENTS OF OPERATIONS F-4 CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY ( DEFICIT) F-5 CONSOLIDATED STATEMENTS OF CASH FLOWS F-6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders LQR House, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of LQR House, Inc., and subsidiary (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America Going Concern The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has sustained net losses and negative cash flow from operations and requires additional capital to operate, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Emphasis of Matter As discussed in Notes 7 and 9 to the financial statements, the Company entered into certain retention and settlement agreements, primarily with related parties. Management has disclosed the nature, terms and financial impact of these transactions. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ dbb mckennon We have served as the Company’s auditor since 2021 Newport Beach, California March 31, 2025 F- 2 PART I – FINANCIAL INFORMATION ITEM 1 – FINANCIAL STATEMENTS LQR House, Inc. Consolidated Balance Sheets December 31, 2024 2023 ASSETS Current assets: Cash and cash equivalents $ 5,386,789 $ 7,064,348 Accounts receivable 28,040 - Accounts receivable, related party 149,510 172,493 Advances to related party - 177,340 Deposits in escrow - 5,470,000 Prepaid expenses 240,729 2,189,955 Total current assets 5,805,068 15,074,136 Investments, at cost 1,117,500 - Intangible assets, net 10,000 10,000 Right of use asset - 8,402 Total assets $ 6,932,568 $ 15,092,538 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities: Accounts payable $ 530,643 $ 265,229 Accounts payable, related party 21,175 58,589 Accrued expenses 927,711 138,585 Accrued expenses, related party 5,971,000 - Right of use liability, current portion - 7,324 Total current liabilities 7,450,529 469,727 Right of use liability - 2,534 Total liabilities 7,450,529 472,261 Commitments and contingencies (Note 11) Stockholders’ equity (deficit): Common stock, $ 0.0001 par value, 350,000,000 shares authorized, 15,252,580 and 15,061,952 shares issued and outstanding as of December 31, 2024 and 4,829,438 shares issued and outstanding as of December 31, 2023, respectively 1,525 482 Additional paid-in capital 42,334,732 34,172,420 Treasury stock, at cost ( 190,628 shares) ( 547,415 ) - Accumulated deficit ( 42,306,803 ) ( 19,552,625 ) Total stockholders’ equity (deficit) ( 517,961 ) 14,620,277 Total liabilities and stockholders’ equity (deficit) $ 6,932,568 $ 15,092,538 See the accompanying notes to the audited financial statements. F- 3 LQR House, Inc. Consolidated Statements of Operations Year Ended December 31, 2024 2023 Revenue - services $ 117,965 $ 474,048 Revenue - product 2,383,695 646,574 Total revenues 2,501,660 1,120,622 Cost of revenue - services 178,851 351,823 Cost of revenue - product 2,635,984 563,775 Total cost of revenue 2,814,835 915,598 Gross profit (loss) ( 313,175 ) 205,024 Operating expenses: General and administrative 14,556,220 11,426,747 Sales and marketing 3,617,924 2,480,001 Impairment of intangible asset - 1,875,000 Total operating expenses 18,174,144 15,781,748 Loss from operations ( 18,487,319 ) ( 15,576,724 ) Other income (expense): Interest expense - ( 171,000 ) Impairment of investment ( 4,500,000 ) - Other income 227,467 - Gain on sale of marketable securities 5,674 - Total other income (expense) ( 4,266,859 ) ( 171,000 ) Provision for income taxes - - Net loss $ ( 22,754,178 ) $ ( 15,747,724 ) Weighted average common shares outstanding - basic and diluted 5,517,945 925,607 Net loss per common share - basic and diluted $ 4.12 $ ( 17.01 ) See the accompanying notes to the audited financial statements. F- 4 LQR House, Inc. CONSOLIDATED STATEMENTS STOCKHOLDERS’ EQUITY (DEFICIT) Common Stock Treasury Stock Additional Paid-In Accumulated Total Shareholder’s Equity Shares Amount Shares Amount Capital Deficit (Deficit) Balances at December 31, 2022 230,011 23 - $ - $ 5,844,519 $ ( 3,804,901 ) $ 2,039,641 Issuance of common stock pursuant to private placement 23,875 2 - - 954,998 - 955,000 Issuance of common stock for services 137,500 14 - - 5,552,486 - 5,552,500 Repurchase of shares ( 75,000 ) ( 8 ) - - ( 17,992 ) - ( 18,000 ) Issuance of common stock pursuant to IPO 28,750 3 - - 5,749,997 - 5,750,000 Conversion of note payable into common stock 63,766 6 - - 1,120,994 - 1,121,000 Issuance of common stock pursuant to public offerings 5,228,384 523 - - 18,049,477 - 18,050,000 Effect of stock split 57,222 6 - - ( 6 ) - - Vesting of restricted stock units - - - - 1,091,648 - 1,091,648 Offering costs - - - - ( 2,672,936 ) - ( 2,672,936 ) Cancellation of warrants - - - - ( 60,000 ) - ( 60,000 ) Repurchase of common stock - - ( 865,070 ) ( 1,440,852 ) - - ( 1,440,852 ) Retirement of shares ( 865,070 ) ( 87 ) 865,070 1,440,852 ( 1,440,765 ) - - Net loss - - - ( 15,747,724 ) ( 15,747,724 ) Balances at December 31, 2023 4,829,438 $ 482 - $ - $ 34,172,420 $ ( 19,552,625 ) $ 14,620,277 Vesting of restricted stock units 16,405 2 - - 2,533,254 - 2,533,256 Repurchase of common stock - - ( 190,628 ) ( 547,415 ) - - ( 547,415 ) Corrective issuance from stock dividend 2,417 - - - - - - Common stock issued for investment 750,000 75 - - 817,425 - 817,500 Issuance of common stock pursuant to public offerings 1,485,575 149 - - 1,542,930 - 1,543,079 Issuance of common stock pursuant to private placement 6,090,945 609 - - 3,349,411 - 3,350,020 Exercise of warrants 2,077,800 208 - - ( 208 ) - - Offering costs - - - - ( 80,500 ) - ( 80,500 ) Net loss - - - - - ( 22,754,178 ) ( 22,754,178 ) Balances at December 31, 2024 15,252,580 $ 1,525 ( 190,628 ) $ ( 547,415 ) $ 42,334,732 $ ( 42,306,803 ) $ ( 517,961 ) See the accompanying notes to the audited financial statements. F- 5 LQR House, Inc. CONOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 2024 2023 Cash flows from operating activities: Net loss $ ( 22,754,178 ) $ ( 15,747,724 ) Adjustments to reconcile net loss to net cash used in operating activities: Write off of advances to related party 177,340 - Amortization - 208,333 Impairment of investment 4,500,000 - Impairment of intangible asset - 1,875,000 Vesting of restricted stock units 2,533,256 1,091,648 Gain on sale of marketable securities ( 5,674 ) - Issuance of common stock for services - 5,552,500 Changes in operating assets and liabilities: Accounts receivable ( 28,040 ) - Accounts receivable, related party 22,983 52,199 Prepaid expenses 1,949,226 ( 2,189,955 ) Accounts payable 265,414 ( 22,228 ) Accounts payable, related party ( 37,414 ) ( 45,413 ) Accrued expenses 789,126 110,329 Accrued expenses, related party 5,971,000 - Right of use liability, net ( 1,456 ) 1,456 Net cash used in operating activities ( 6,618,417 ) ( 9,113,855 ) Cash flows from investing activities: Purchases of marketable securities ( 7,758,523 ) - Sales of marketable securities 7,764,197 - Acquisition of CWS Platform - ( 10,000 ) Net repayments from related party - 137,426 Deposits in escrow - ( 5,470,000 ) Return of deposits in escrow 670,000 - Net cash provided by (used in) investing activities 675,674 ( 5,342,574 ) Cash flows from financing activities: Proceeds from note payable - 950,000 Issuance of common stock and pursuant to private placement 3,350,020 955,000 Issuance of common stock and pursuant to IPO, net of offering costs - 4,507,228 Issuance of common stock and pursuant to public offerings, net of offering costs 1,543,079 16,619,836 Repurchase and buyback of common stock ( 547,415 ) ( 1,458,852 ) Cancellation of warrants - ( 60,000 ) Offering costs ( 80,500 ) - Net cash provided by financing activities 4,265,184 21,513,212 Net change in cash and cash equivalents ( 1,677,559 ) 7,056,783 Cash and cash equivalents at beginning of year 7,064,348 7,565 Cash and cash equivalents at end of year $ 5,386,789 $ 7,064,348 Supplemental disclosure of cash flow information: Cash paid for income taxes $ - $ - Cash paid for interest $ - $ - Supplemental disclosure of non-cash financing activities: Common stock issued for investment $ 817,500 $ - Reclassification of deposit in escrow to investment $ 4,800,000 $ - Conversion of note payable and accrued interest into common stock $ - $ 1,121,000 See the accompanying notes to the audited financial statements. F- 6 LQR House, Inc. NOTES TO CONSOLDATED FINANCIAL STATEMENTS 1. NATURE OF OPERATIONS LQR House Inc. (“LQR” or the “Company”) was incorporated on January 11, 2021, in the state of Delaware. On February 3, 2023, the Company changed its state of incorporation to the State of Nevada by merging into LQR House Inc., a Nevada corporation. The Company operates primarily in the beverage alcohol industry, owning specialty brands, providing marketing and distribution services. Country Wine & Spirits (“CWS”) Platform On November 1, 2023, LQR House Acquisition Corp. (the “Buyer”), a subsidiary of the Company, and SSquared Spirits LLC (the “Seller”) entered into a Domain Name Transfer Agreement (“Agreement”). Pursuant to the Agreement, the Seller irrevocably sold, assigned, transferred, and conveyed to the Buyer (a) all right, title, and interest in and to the domain name www.cwspirits.com (the “Domain Name”, or “CWS Platform”), including its current registration and (b) any other rights (including, but not limited to, trademark rights associated with the Domain Name in any jurisdiction, all Internet traffic through the Domain Name and all Website Content (as defined in the Agreement) the Seller may have in the Domain Name, together with any goodwill associated therewith in exchange for the payment by the Buyer of the purchase price of $ 10,000 . See Note 4. The Company’s Chief Executive Officer, Sean Dollinger, owns 50 % of the equity of the Seller, and the other 50 % is owned by a minority shareholder of the Company, who is considered a related party. A Special Committee of the Company’s Board of Directors consisting of all independent directors approved the terms of the Agreement on November 1, 2023. See Note 8. Stock Dividend in the Form of Stock Split In 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. As a 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. 2. GOING CONCERN The Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. The accompanying 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 sustained net losses of $ 22,754,178 and $ 15,747,724 during the years ended December 31, 2024 and 2023, respectively, and had cash used in operations of $ 6,618,417 during the year ended December 31, 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. See Note 12 for capital raised subsequent to December 31, 2024. 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 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. No assurance 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. F- 7 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“GAAP”). The Company’s fiscal year end is December 31. The Company is an emerging growth company as the term is used in The Jumpstart Our Business Startups Act and has elected to comply with certain reduced public company reporting requirements, however, the Company may adopt accounting standards based on the effective dates for public entities when early adoption is permitted. Principles of Consolidation These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, LQR House Acquisition Corp. All inter-company transactions and balances have been eliminated on consolidation. 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. Actual results could differ from those estimates. Concentrations of Credit Risk The Company maintains its cash with a major financial institution located in the United States of America which it believes to be credit worthy. Balances are insured by the Federal Deposit Insurance Corporation up to $ 250,000 . At times, the Company maintains balances in excess of the federally insured limits. Concentrations 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. Furthermore, the Company relies and expects to continue to rely on a small number of vendors. The loss of one of these vendors may have a negative short-term impact on the Company’s operations. However, the Company believes there are acceptable substitute vendors that can be utilized longer term. Cash and Cash Equivalents The Company considers all highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. F- 8 Marketable Securities The Company held investments in mutual funds. The investments were classified as available-for-sale and are held at fair value. The investments have a readily determinable fair value and as such, were recognized as Level 1 financial instruments. Investments, at Cost In accordance with FASB ASC Subtopic 321, 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. In the event the fair value of the investment declines below the cost basis, the Company records an impairment. As of December 31, 2024, the Company recognized an impairment expense of $ 4,500,000 related to its investment in DRNK Beverage Corp, which was recorded within other income (expense) in the consolidated statements of operations. This impairment was triggered by company specific information and progress of the investee against expectations. The impairment also reflects the ongoing challenges in the marketplace and the reduced prospects for recovery of the carrying value of the investment. The Company continues to monitor the situation and will assess the need for any further adjustments in future periods. See Note 6 for further detail. Fair Value Measurements Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable: ● Level 1—Quoted prices in active markets for identical assets or liabilities. ● Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. ● 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 and accounts payable 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 are accounted for under the cost method. See above and Note 6. Accounts Receivable Accounts receivable are derived from services and products delivered to customers and are stated at their net realizable value. Each month, the Company reviews its receivables on a customer-by-customer basis and evaluates whether an allowance for doubtful accounts is necessary based on any known or perceived collection issues. Any balances that are eventually deemed uncollectible are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Intangible Assets Intangible assets are amortized over the respective estimated lives on a straight-line basis, unless the lives are determined to be indefinite and reviewed for impairment whenever events or other changes in circumstances indicate that the carrying amount may not be recoverable. The Company owns domain names indefinitely. Costs to renew domains are expensed as incurred. F- 9 Impairment of Long-Lived Assets The Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell. Related Parties Related parties are any entities or individuals that, through employment, ownership or other means, possess the ability to direct or cause the direction of the management and policies of the Company. The Company discloses related party transactions that are outside of normal compensatory agreements, such as salaries. The Company follows ASC 850, Related Party Disclosures , for the identification of related parties and disclosure of related party transactions. Revenue Recognition In accordance with FASB ASC 606, Revenue from Contracts with Customers ¸ the Company determines revenue recognition through the following steps: ● Identification of a contract with a customer; ● Identification of the performance obligations in the contract; ● Determination of the transaction price; ● Allocation of the transaction price to the performance obligations in the contract; and ● Recognition of revenue when or as the performance obligations are satisfied. Revenue is recognized when performance obligations are satisfied through the transfer of control of promised goods to the Company’s customers in an amount that reflects the consideration expected to be received in exchange for transferring goods or services to customers. Control transfers once a customer has the ability to direct the use of, and obtain substantially all of the benefits from, the product. This includes the transfer of legal title, physical possession, the risks and rewards of ownership, and customer acceptance. The Company derives its revenue from marketing services, sales via the CWS Platform, distribution of its SWOL Tequila and subscription-based membership revenue. Revenue is reported net of discounts. Marketing Services The Company contracts with third-party alcoholic beverage brands to utilize access to the CWS Platform. The Company and the brands enter into a commercial relationship. The Company performs services such as creating a marketing campaign strategy, developing promotional materials and advertising promotional materials through the CWS Platform. Revenue is recognized over a period time, as the marketing services are being continually provided on a daily and monthly basis over the life of an agreed upon campaign. Marketing campaigns generally range from one to three months. F- 10 CWS Platform 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 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. 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 delivered to the end customer, when LQR has fulfilled its performance obligation, net of returns. Product Sales The Company wholly owns SWOL Tequila, a tequila produced in limited batches by a third-party manufacturer in Mexico. The Company handles all logistics to deliver the product to CWS for retail distribution in the United States, including advancing production, shipping, and other import-related expenses. Under historical agreements, the Company is entitled to receive payment for these costs, plus an additional 20 % for each bottle of SWOL Tequila sold via wholesale channels. Revenue is recognized when the product is delivered, fulfilling the Company’s performance obligation. Due to regulatory restrictions surrounding the delivery and custodianship of alcoholic beverages, CWS assumes ownership at the time of delivery, with no recourse or right of return. Vault 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 CWS 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. Disaggregation of Revenue The following is a summary of the disaggregation of revenue for the years ended December 31, 2024 and 2023: Year Ended December 31, Disaggregation of Revenues 2024 2023 CWS Platform $ 2,343,255 $ 528,450 SWOL product sales 40,440 118,124 Revenue - product 2,383,695 646,574 Marketing 73,455 442,662 Vault 44,510 31,386 Revenue - services 117,965 474,048 Total revenues $ 2,501,660 $ 1,120,622 Cost of Revenue Cost of revenue consists of all direct costs attributable to prost sales and performing marketing services. Cost of revenue includes product costs, packaging, shipping and other importing and delivery charges, as well contracted marketing services. Cost of revenue also includes customer service personnel and amortization of the Company’s marketing license asset in 2023. Sales and Marketing Sales and marketing costs primarily consist of advertising, promotional expenses and marketing consulting and advisory services. Sales and marketing costs also include sales commissions. Advertising costs were approximately $ 628,000 in 2024, and nominal in 2023. F- 11 Deferred Offering Costs The Company complies with the requirements of FASB ASC 340-10-S99-1 with regards to offering costs. Prior to the completion of an offering, offering costs are capitalized. The deferred offering costs are charged to additional paid-in capital or as a discount to debt, as applicable, upon the completion of an offering or to expense if the offering is not completed. As of December 31, 2024 and 2023, the Company has no deferred offering costs. Stock-Based Compensation Stock-based compensation is accounted for in accordance with ASC Topic 718-10, Compensation-Stock Compensation (“ASC 718-10”). The Company measures all equity-based awards granted to employees, independent contractors and advisors based on the fair value on the date of the grant and recognizes compensation expense for those awards over the requisite service period, which is generally the vesting period of the respective award. 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. Segment Information In accordance with ASC 280, Segment Reporting (“ASC 280”), we identify our operating segments according to how our business activities are managed and evaluated. ASC 280 establishes standards for companies to report financial statement information about operating segments, products, services, geographic areas, and major customers. Operating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by the Company’s chief operating decision maker (“CODM”), or group, in deciding how to allocate resources and assess performance. The CODM has been identified as the Chief Executive Officer, who reviews the operating results for the Company as a whole to make decisions about allocating resources and assessing financial performance. Accordingly, management has determined that the Company only has one operating and reportable segment. The key measures of segment profit or loss reviewed by our CODM are revenue and operating costs. These metrics are reviewed and monitored by the CODM to manage and forecast cash. The CODM also reviews operating costs to manage, maintain and enforce all contractual agreements to ensure costs are aligned with all agreements and budget. Income Taxes The Company uses the liability method of accounting for income taxes as set forth in ASC 740, Income Taxes. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. A valuation allowance is recorded when it is unlikely that the deferred tax assets will not be realized. We assess our income tax positions and record tax benefits for all years subject to examination based upon our evaluation of the facts, circumstances and information available at the reporting date. In accordance with ASC 740-10, for those tax positions where there is a greater than 50% likelihood that a tax benefit will be sustained, our policy will be to record the largest amount of tax benefit that is more likely than not to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit will be recognized in the financial statements. Net Loss per Share Net earnings or loss per share is computed by dividing net income or loss by the weighted-average number of common shares outstanding during the period, excluding shares subject to redemption or forfeiture. The Company presents basic and diluted net earnings or loss per share. Diluted net earnings or loss per share reflect the actual weighted average of common shares issued and outstanding during the period, adjusted for potentially dilutive securities outstanding. Potentially dilutive securities are excluded from the computation of the diluted net loss per share if their inclusion would be anti-dilutive. As all potentially dilutive securities are anti-dilutive as of December 31, 2024 and December 31, 2023, diluted net loss per share is the same as basic net loss per share. Potentially dilutive items outstanding as of December 31, 2024 include the Company’s outstanding restricted stock units and warrants to purchase common stock (See Note 8). Recently Issued and Adopted Accounting Pronouncements In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis, primarily disclosure of significant segment expense categories and amounts for each reportable segment. The new standard is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company adopted ASU 2023-07 in the annual financial statements for the year ended December 31, 2024, and for interim periods beginning in 2025. The adoption of ASU 2023-07 did not have a significant impact on the Company’s consolidated financial statements. Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances. F- 12 4. ACQUISITION OF CWS PLATFORM On November 1, 2023, LQR House Acquisition Corp. (the “Buyer”), a subsidiary of the Company, and SSquared Spirits LLC (the “Seller”, “SSquared”) entered into a Domain Name Transfer Agreement (“Agreement”). Pursuant to the Agreement, the Seller irrevocably sold, assigned, transferred, and conveyed to the Buyer (a) all right, title, and interest in and to the domain name www.cwspirits.com (the “Domain Name”, “CWS Platform”), including its current registration and (b) any other rights (including, but not limited to, trademark rights associated with the Domain Name in any jurisdiction, all Internet traffic through the Domain Name and all Website Content (as defined in the Agreement) the Seller may have in the Domain Name, together with any goodwill associated therewith in exchange for the payment by the Buyer of the purchase price of $ 10,000 . In connection with the Company’s purchase of the Domain Name, on November 1, 2023, the Company entered into a product handling agreement (“Product Handling Agreement”) with KBROS LLC (“KBROS”). Pursuant to the Product Handling Agreement: Commencing as of the Effective Date of this Agreement, Product Handler shall provide to the Company the following services relating to the purchase and delivery (“Handling”) of spirits and other beverage products (referred to herein as “Product” and the “Products”) purchased by customers of the Company through or in relation to websites associated with the Domain: - 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 Website (sale, promotion and marketing of the Products through the Website is collectively referred to herein as “Processing”); - 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 Website and conduct of sales and Processing of the Products, as reasonably deemed necessary by the Company; Under Regulation S-X 3-05, management determined that the CWS Platform acquisition constituted a business combination as the revenue producing activity (e-commerce sales) was 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 value of the Domain Name and CWS Platform in determining to allocate the $ 10,000 to the domain name. In making such determination, management considered the related party nature of the transaction, the current environment for direct-to-consumer alcoholic beverage companies and the related competition in which they operate, and the fact that the initial and continued operation of the CWS platform is completely dependent on the relationship between the Company, our CEO and a minority shareholder, who co-owned SSquared and operates KBROS, LLC (“KBROS”, or “Product Handler”), the Company’s contracted product handler. Without such relationship, which can be terminated in certain circumstances, the underlying CWS Platform would be unable to operate as intended until a suitable alterative product handler would be identified. Therefore, no fair value in excess of the consideration provided was considered. The Company has consolidated the results of operations of the CWS Platform since November 1, 2023. Unaudited Pro Forma Financial Information The following unaudited pro forma financial information presents the Company’s financial results as if the CWS Platform acquisition had occurred as of January 1, 2023. The unaudited pro forma financial information is not necessarily indicative of what the financial results actually would have been had the acquisitions been completed on this date. In addition, the unaudited pro forma financial information is not indicative of, nor does it purport to project, the Company’s future financial results. The pro forma information does not give effect to any estimated and potential cost savings or other operating efficiencies that could result from the acquisition: Year Ended December 31, 2023 Revenues $ 3,091,206 Net loss ( 16,037,213 ) Net loss per common share $ ( 17.33 ) F- 13 5. OTHER ASSETS 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 $ 1,350,000 as of December 31, 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 As of December 31, 2023, the Company had $ 5,470,000 in deposits held in escrow for potential investments. In the first quarter of 2024, the Company received $ 670,000 back from an investment it was no longer pursuing. The remaining $ 4,800,000 was transferred to an investment in the common stock of a third-party entity, DRNK Beverage Corp. which became Chase Mocktails Ltd. See below. 6. 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. Cannon Estate Winery Ltd. On May 19, 2024, the Company and a majority shareholder and a director (the “Seller”) of Cannon Estate Winery Ltd., a British Columbia corporation (“Cannon”) consummated an acquisition of approximately 9.99 % of common shares of Cannon by the Company pursuant to a Share Exchange Agreement (“Cannon Agreement”) between the Company and the Seller. Pursuant to the Cannon Agreement, the Seller transferred and delivered to the Company 113,085 of the common shares of Cannon (the “Cannon Shares”), and in exchange the Company issued and delivered to the Seller 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, 2024. 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. Chase Mocktails Ltd (f/k/a DRNK Beverage Corp.) On June 7, 2024, the Company consummated an acquisition of approximately 8.58 % of common shares of DRNK Beverage Corp. (“DRNK”) which became Chase Mocktails Ltd., 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. As of December 31, 2024, the Company recognized an impairment expense of $ 4,500,000 related to its investment in DRNK based on impairment indicators on DRNK’s financial performance and DRNK’s progress as compared to initial expectations. In determining the impairment, management used a market approach using projected revenue information obtained from DRNK and market multiples for companies in similar industry segments. As a result of this adjustment, the carrying value of the investment has been reduced to $ 300,000 , and the impairment charge of $ 4,500,000 has been recorded within other income (expense) in the consolidated statements of operations. F- 14 7. ACCRUED EXPENSES Accrued expenses consist of the following: December 31, 2024 2023 Accrued retention and settlement payments $ 513,729 $ - Accrued professional and other fees 62,450 - Taxes payable 263,087 93,585 Other accrued 88,445 45,000 Total accrued expenses $ 927,711 $ 138,585 Accrued retention and settlement payments, related parties 5,971,000 - Total accrued expenses, related parties $ 5,971,000 $ 183,585 From October to December 2024, the Company entered into several settlement, bonus and retention agreements, of which $ 6,484,729 were accrued and unpaid as of December 31, 2024. Through the issuance date of these financial statements, approximately $ 5,600,000 of the accrued balances have been paid. The following is a summary of the amounts incurred, paid and accrued with respect to the agreements noted above: Year Ended December 31, 2024 Retention and settlement expenses, related parties $ 7,071,000 Retention and settlement expenses 950,000 Total expenses (general and administrative) 8,021,000 Less: 2024 payments, related parties ( 1,100,000 ) Less: 2024 payments ( 436,271 ) Total payments in 2024 ( 1,536,271 ) Accrued retention and settlement payments, related parties 5,971,000 Accrued retention and settlement payments 513,729 Total accrued retention and settlement payments $ 6,484,729 The Company entered into bonus and retention agreements reflect to retain key talent and incentivize critical personnel, including executives, directors, other related entities (see Note 9) and vendors. These were designed to ensure continuity in leadership, governance and support the Company’s long-term goals with key consultants and vendors, even though the Company is not currently profitable F- 15 8. STOCKHOLDERS’ EQUITY (DEFICIT) Dual Class Share Structure On March 29, 2023, the Company amended its articles of incorporation to institute a dual class share structure consisting of Class A Common Stock, and Class B Common Stock, and any number of classes of preferred stock. Class A Common Stock was entitled to twenty (20) votes per share on proposals requiring or requesting stockholder approval, and Class B Common Stock was entitled to one (1) vote on any such matter. A share of Class A Common Stock could have been voluntarily converted into a share of Class B Common Stock. A transfer of a share of Class A Common Stock would have resulted in its automatic conversion into Common Stock upon such transfer, subject to certain exceptions, including that the transfer of shares of Class A Common Stock to another holder of Class A Common Stock would not have resulted in such automatic conversion. Class B Common Stock was not convertible. Other than as to voting and conversion rights, Class A Common Stock and Class B Common Stock had the same rights and preferences and ranked equally, shared ratably and were identical in all respects as to all matters. Due to this amendment, the Company’s authorized capital stock became 350,000,000 shares, consisting of: (i) 300,000,000 shares of common stock, par value $ 0.0001 per share, of which 20,000,000 shares were designated Class A Common Stock, $ 0.0001 par value per share, and 280,000,000 shares were designated as Class B Common Stock, $ 0.0001 par value per share; and (ii) 50,000,000 shares of preferred stock, $ 0.0001 par value per share. All 153,340 shares of common stock issued and outstanding at the time of the amendment became shares of Class B Common Stock. Single Common Stock Structure On June 5, 2023, the Company further amended its articles of incorporation to amend the share structure by (i) eliminating a dual class share structure consisting of the Class A Common Stock and Class B Common Stock and establishing a single common stock structure consisting of shares of common stock only, with 350,000,000 authorized shares being all designated as common stock with a par value of $ 0.0001 per share (the “Single Common Stock Structure”), entitled to one (1) vote per share; and by (ii) eliminating all authorized shares of preferred stock. All shares of Class B Common Stock issued and outstanding at the time of the amendment became shares of common stock. The accompanying financial statements reflect the single common stock structure in place as of December 31, 2024 and 2023. The Company filed on November 28, 2023 a Certificate of Change to the Articles of Incorporation of the Company with the Secretary of State of the State of Nevada (the “Certificate of Change”) that provides for a 1-for-60 reverse stock split (the “Split”) of its shares of common stock, par value $ 0.0001 per share (the “Common Stock”) that became effective on November 30, 2023. No fractional shares were issued in connection with the Split and fractional amounts were rounded up to one whole share. 2024 Stock Transactions In May 2024, the Company issued 750,000 shares of common stock pursuant to the Cannon Agreement for a fair value of $ 817,500 . See Note 6. On October 15, 2024, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with David E. Lazar (“Lazar”), pursuant to which the Company issued 1,101,818 shares of common stock at a price of $ 0.55 per share for proceeds of $ 606,000 . In December 2024, the Company issued 4,352,727 shares of common stock to several accredited investors at a price of $ 0.55 per share and five-year warrants to purchase an aggregate of 10,909,090 shares of common stock at the exercise price of $ 0.55 per share (the “Warrant”) pursuant to the Securities Purchase Agreement (“Lazar Purchase Agreement”), dated October 15, 2024 by and between the Company and David E. Lazar. These investors obtained the rights to the issuance of such securities pursuant to the assignment of rights of a purchaser by David Lazar as provided for in the Lazar Purchase Agreement. The Company received net proceeds of $ 2,394,000 pursuant to the transaction. In December 2024, the Company entered into a Securities 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 . In December 2024, the Company issued 2,077,800 shares of common stock pursuant to the cashless exercise of warrants. During the year ended December 31, 2024, the Company issued an aggregate of 1,485,575 shares of common stock pursuant to an at-the-market public offering for net proceeds of $ 1,543,079 . F- 16 As of December 31, 2024, the Company had 15,252,580 shares issued and 15,061,952 shares outstanding. 2023 Stock Transactions 2023 Private Placement From April to June 2023, the Company conducted a private placement of and entered into certain subscription agreements with several accredited investors. Pursuant to the agreements, the Company issued 23,875 shares of common stock at $ 60 per share for a total of $ 955,000 . Advisor and Consulting Agreements In June 2023, the Company entered into advisor agreements with certain advisors, pursuant to which the advisors will provide business and corporate advice in connection with the Offering to the Company. In consideration for the advisor’s services, the Company issued 12,500 shares of common stock to six individuals and entities, for an aggregate of 75,000 shares. The Company recorded an expense of $ 3,000,000 , or fair value of $ 40 per share, pertaining to these issuances, which is included in general and administrative expense in the statements of operations. The fair value was determined based on recent sales of stock under the 2023 Private Placement disclosure noted above. In August 2023, the board of directors approved the issuance of an aggregate total of 62,501 shares of the Company’s common stock under the LQR House Inc. Stock Option and Incentive Plan (“2021 Plan”) to certain consultants with whom the Company entered into independent contractor agreements, in consideration for their providing consulting services to the Company. The Company recognized stock-based compensation expense of $ 2,552,500 , or $ 40.80 per share based on the fair value of the Company’s common stock at the time of the agreements, for the year ended December 31, 2023. The amount was included in general and administrative expenses in the statements of operations. Initial Public Offering In the IPO, which closed on August 11, 2021, the Company issued and sold 28,750 shares of common stock, including the exercise of the over-allotment option, at a public offering price of $ 200 per share. Total gross proceeds to the Company from the IPO were $ 5.75 million. The aggregate net proceeds to the Company from the IPO were approximately $ 4.5 million after deducting underwriting discounts and commissions and total offering expenses. In connection to the IPO, the Company agreed to issue the underwriters five-year warrants to purchase an aggregate of 1,437 shares of the Company’s common stock with an exercise price of $ 200 per share. The warrants are immediately exercisable. Follow-On Public Offerings On October 16, 2023, the Company completed a subsequent closing of the public offering and issued 710,526 shares of common stock for gross proceeds of $ 5.4 million, or $ 7.60 per share. The Company received $ 4.9 million in net proceeds. In connection with the October follow-on offering, the Company issued to the underwriters five-year warrants to purchase an aggregate of 35,526 shares of the Company’s common stock with an exercise price of $ 7.60 per share. On November 13, 2023, the Company completed an additional closing of the public offering and issued 3,928,572 shares of common stock for gross proceeds of $ 11.0 million, or $ 2.80 per share. The Company received $ 5.3 million in net proceeds, as $ 4.8 million of the gross proceeds which were deposited in escrow for a potential investment. In connection with the November follow-on offering, the Company issued to the underwriters five-year warrants to purchase an aggregate of 196,428 shares of the Company’s common stock with an exercise price of $ 2.80 per share. On December 27, 2023, the underwriters exercised their over-allotment option from the November offering and the Company issued an additional 589,286 shares of common stock for gross proceeds of $ 1.65 million, or $ 2.80 per share. The Company received $ 1.56 million in net proceeds. Debt Settlement for Shares On September 27, 2023, the Company issued 63,766 shares of common stock as settlement for outstanding principal on notes of $ 950,000 and accrued interest of $ 171,000 (see Note 5). Cancellations Stock cancellations In June 2023, the Company entered into a Cancellation Agreement with four stockholders, who each owned 18,750 shares of common stock or an aggregate of 75,000 shares. The stockholders purchased these shares from the founder, Sean Dollinger, pursuant to a stock purchase agreement on January 12, 2023, between Mr. Dollinger and each of these four stockholders. The Company repurchased the shares for $ 18,000 . F- 17 Warrant cancellations On December 16, 2023, the Company cancelled all outstanding warrants issued to the underwriter for consideration of $ 60,000 . Share Buyback On September 1, 2023, the board of directors of the Company authorized a share buyback program for up to 20 % of the Company’s common stock and approved an agreement entered by and between the Company and Dominari Securities LLC (“Dominari”) on August 28, 2023 to effect the share buyback program. From September 8, 2023 through December 22, 2023, the Company confirmed the acquisition of 865,070 shares of common stock for a total of $ 1,440,852 , which was initially recorded as treasury stock on the balance sheet and statement of stockholders’ equity (deficit). On December 22, 2023, the 865,070 shares were sent to the Company’s transfer agent for retirement. In January 2024, the Company purchased a total of 190,628 shares of the Company’s common stock for $ 547,415 , which was recorded as treasury stock on the balance sheet and statement of stockholders’ equity (deficit). Warrants On December 30, 2024, the Company issued five-year warrants to several accredited investors to purchase an aggregate of 10,909,090 shares of common stock at the exercise price of $ 0.55 per share (the “Warrant Shares”). The warrants are immediately exercisable. These warrants can also be exercised, in whole or in part, by means of a “cashless exercise” in which the holder shall be entitled to receive the number of Warrant Shares equal to the quotient obtained by dividing a) the volume weighted-average price of the stock on the trading day preceding the exercise notice less the exercise price multiplied by the Warrant Shares by b) the volume weighted-average price. On December 30, 2024, 2,077,800 shares were issued pursuant to the immediate cashless exercise of the warrants. As of December 31, 2024, 7,366,209 warrants remained outstanding. Restricted Stock Units In August 2023, the Company granted 31,250 restricted stock units (the Director RSU’s) which were to vest in eight equal quarterly installments commencing on October 1, 2023. On August 30, 2023, the Board authorized deferring the vesting of the Director RSUs until such date that the 2021 Plan is amended. The RSUs had a grant-date fair value of $ 6,266,533 . During the year ended December 31, 2023, the Company recognized stock-based compensation expense of $ 1,091,648 , which is included in general and administrative expenses in the statement of operations. As of December 31, 2023, there were 29,250 Director RSUs outstanding after cancellations. On December 19, 2024, the Company granted 50,000 restricted stock units (the 2024 Director RSU’s) to each newly elected independent director (see Note 8) which shall vest in eight (8) equal quarterly installments commencing in the first quarter of 2025, provided that such directors remain in continuous service of the Company on such dates. The RSUs had a grant-date fair value of $ 318,000 . During the year ended December 31, 2024, 3,000 restricted stock units were forfeited following the resignation of three directors. During the year ended December 31, 2024, the Company recognized stock-based compensation expense of $ 2,533,256 in the statement of operations pertaining to the vesting of director RSUs. Total unrecognized compensation cost related to non-vested restricted stock units amounted to $ 1,953,482 as of December 31, 2024, which is expected to be recognized over approximately 2 years. As of December 31, 2024, 209,845 RSUs remained unvested. The following table summarizes RSU activity for the year ended December 31, 2024: Restricted Stock Units Number of shares Weighted Average Fair Value Unvested of December 31, 2023 29,250 $ 197.45 Granted 200,000 1.59 Vested ( 16,405 ) 200.00 Forfeited ( 3,000 ) 175.00 Unvested as of December 31, 2024 209,845 $ 10.90 F- 18 9. RELATED PARTY TRANSACTIONS KBROS and Ssquared Spirits LLC 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. See Note 4 for the CWS Platform acquisition from SSquared. 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 milestones. Pursuant to the Product Handling Agreement, the Company incurred $ 480,000 , to KBROS for the year ended December 31, 2024, which is included in cost of revenue in the consolidated statements of operations. During the year ended December 31, 2024, the Company paid $ 200,000 in incentive compensation, which is included in sales and marketing expenses in the consolidated statements of operations. In October, 2024, the Company entered into a settlement and release agreement with KBROS, and its controlling stockholder, for an aggregate amount equal to $ 4,100,000 , which is included in general and administrative expenses in the consolidated statements of operations. As of December 31, 2024, $ 3,600,000 remained unpaid and was included as accrued expenses on the consolidated balance sheet. Of this amount, $ 1,800,000 was paid in 2025 and $ 1,800,000 remained unpaid as of issuance date of these consolidated financial statements. See Note 11 for funding commitment with KBROS. Country Wine & Spirits, Inc. (“CWS”) CWS has 6 brick and mortar locations for the sale of beer, wine, spirits and create value in retail locations throughout Southern California and specializes in logistics of shipping and helping brands reach customers. To date CWS has distributed all of the alcohol ordered by customers through the CWS Platform, via our Product Handler agreement with KBROS. The President of CWS is also the 100 % owner of KBROS, the Product Handler. As of December 31, 2024 and 2023, the Company had $ 149,510 and $ 172,493 , respectively, in accounts receivable, related party with CWS pertaining to product revenues . In the event that CWS fails to repay the trade receivables, the Company believes it can offset the outstanding receivables against regular payables due to KBROS. Accounts Payable, Related Party As of December 31, 2024 and 2023, the Company had accounts payable of $ 21,175 and $ 58,589 , respectively, with related parties, including KBROS, the Company’s founder and Chief Executive Officer, and officers and directors. F- 19 Board of Directors In October 2024, Jay Dhaliwal resigned from the Board of Directors, and pursuant to his resignation 500 RSU’s were cancelled which were unvested at time of resignation. In December 2024, two directors, James Huber and Gary Herman resigned from the Board of Directors, and pursuant to their resignation unvested 1,250 RSU’s to each director, were cancelled. On December 19, 2024, after the Annual Meeting, the Board appointed Mr. Lijun Chen and Dr. Jing Lu to fill the vacancies on the Board resulting from the resignations of Mr. Huber and Mr. Herman, effective as of December 19, 2024. The initial terms as director for Mr. Chen and Dr. Lu will expire at the Company’s 2025 annual meeting of stockholders. Mr. Chen was also appointed to serve as the Chairman of the Board, a member of the Audit Committee of the Board and a member of the Nominating and Corporate Governance Committee of the Board. Dr. Lu was appointed to serve as a member of the Compensation Committee of the Board, a Chairperson of the Nominating and Corporate Governance Committee of the Board and a Member of the Audit Committee of the Board. On December 19, 2024 and immediately after the Annual Meeting, the Board appointed newly elected director James O’Brien to serve as Chairman of the Compensation Committee of the Board. In connection with such director appointments and the election of Mr. Yilin Lu and Mr. Hong Chun Yeung as directors of the Company on December 19, 2024, the Company entered into an independent director agreement with each of the newly elected and appointed directors: Mr. Yilin Lu, Mr. Hong Chun Yeung, Mr. Lijun Chen and Dr. Jing Lu (each, the “Director Agreement”). Pursuant to the Director Agreement, each of the abovementioned directors will be entitled to receive from the Company an annual cash fee of $ 36,000 , to be paid in monthly installments, for their services as a director of the Board. Each of these directors shall also receive equity compensation in the form of 50,000 restricted stock units (“RSUs”), vesting in eight (8) equal quarterly installments commencing in the first quarter of 2025, provided that such directors remain in continuous service of the Company on such dates. Performance Bonus During the year ended December 31, 2024, the Company paid its Chief Executive Officer and KBROS a performance bonus of $ 200,000 each for achieving certain revenue levels through the CWS Platform. Retention Agreements See Note 7 for a summary reconciliation of related and non-related party retention agreements. See below for a detailed description. In October 2024, the Company entered into a retention agreement with its Chief Financial Officer whereby a retention bonus of $ 550,000 was awarded for continued services. This amount was included in general and administrative expenses in the consolidated statements of operations. As of December 31, 2024, $ 250,000 remained unpaid and was included within accrued expenses, related party on the consolidated balance sheet, which has been paid as of the date of issuance of these consolidated financial statements. F- 20 In October 2024, the Company entered into a retention agreement with its Chief Executive Officer, and entities affiliated with the CEO, whereby a retention bonus of $ 850,000 was awarded for continued services. This amount was included in general and administrative expenses in the consolidated statements of operations. As of December 31, 2024, $ 800,000 remained unpaid and was included within accrued expenses, related party on the consolidated balance sheet, which has been paid in January 2025. In October 2024, the Company entered into a retention agreement with its Chief Marketing Officer, Jaclyn Hoffman, whereby a retention bonus of $ 285,000 was awarded for continued services. This amount was included in general and administrative expenses in the consolidated statements of operations. As of December 31, 2024, $ 255,000 remained unpaid and was included within accrued expenses, related party on the consolidated balance sheet. Of this amount, $ 100,000 was paid in January 2025, and $ 155,000 remained unpaid as of issuance date of these consolidated financial statements. In October 2024, the Company entered into a retention agreement with its director Alexandra Hoffman whereby a retention bonus of $ 600,000 was awarded for continued services. This amount was included in general and administrative expenses in the consolidated statements of operations. As of December 31, 2024, $ 500,000 remained unpaid and was included within accrued expenses, related party on the consolidated balance sheet. This amount was paid in January 2025. During the year ended December 31, 2024, the Company paid an aggregate of $ 120,000 to four former directors as per their respective settlement agreements. Lease The Company historically leased space from a related party entity, which is now month-to-month. As part of the retention and settlement agreements above, the Company agreed to pay this entity $ 40,000 . 10. INCOME TAXES For the years ended December 31, 2024 and 2023, the Company did not record a current or deferred income tax expense or benefit due to current and historical losses incurred by the Company. The Company’s losses before income taxes consist solely of losses from domestic operations. Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The following table presents the deferred tax assets and liabilities by source: December 31, 2024 2023 Deferred tax assets: Net operating loss carryforwards $ 7,213,981 $ 2,714,847 Valuation allowance ( 7,213,981 ) ( 2,714,847 ) Net deferred tax assets $ - $ - The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. The Company assessed the need for a valuation allowance against its net deferred tax assets and determined a full valuation allowance is required due, cumulative losses through December 31, 2024, and no history of generating taxable income. Therefore, valuation allowances of $ 7,213,981 and $ 2,714,847 , respectively, were recorded as of December 31, 2024 and 2023. Valuation allowance increased by $ 4,499,134 and $ 1,949,039 during the years ended December 31, 2024 and 2023, respectively. Deferred tax assets were calculated using the Company’s combined effective tax rate, which it estimated to be approximately 28.0 %. The effective rate is reduced to 0 % for 2024 and 2023 due to the full valuation allowance on its net deferred tax assets. The Company’s ability to utilize net operating loss carryforwards will depend on its ability to generate adequate future taxable income. At December 31, 2024 and 2023, the Company had net operating loss carryforwards available to offset future taxable income in the amounts of approximately $ 25,808,400 and $ 9,712,000 , respectively, which can be carried forward indefinitely. Certain changes in ownership can result in a limitation on the amount of net operating loss and tax credit carryovers that can be utilized each year. As of December 31, 2024, management has not determined the extent of any such limitations, if any. F- 21 The Company has evaluated its income tax positions and has determined that it does not have any uncertain tax positions. The Company will recognize interest and penalties related to any uncertain tax positions through its income tax expense. The Company is subject to taxation in the U.S. and various state jurisdictions. The Company is not presently subject to any income tax audit in any taxing jurisdiction, though all tax years from 2021 on remain open to examination. 11. COMMITMENTS AND CONTINGENCIES Funding Commitment Agreement On November 1, 2023, the Company entered into a Funding Commitment Agreement with KBROS, the Product Handler pursuant to the Product Handling Agreement as defined in Note 4. Pursuant to this agreement, the Company committed to provide annual funding to the Product Handler from time to time in the minimum amount of $ 2,500,000 to enable the Product Handler to purchase inventory from Company-approved vendors (“Vendors”). The Company may, without notice to Product Handler, elect not to advance funding for any inventory sold by particular Vendors with respect to which the Company reasonably feels insecure. This Agreement concerns a funding commitment, and not the purchase of Products from Product Handler or Vendors. For further details regarding the settlement agreement, see Note 9. Contingencies The Company may be subject to pending legal proceedings and regulatory actions in the ordinary course of business. The results of such proceedings cannot be predicted with certainty, but the Company does not anticipate that the final outcome, if any, arising out of any such matters will have a material adverse effect on its business, financial condition or results of operations. 12. SUBSEQUENT EVENTS Through the issuance date, the Company has issued common shares pursuant to the exercise of 7,366,209 warrants for proceeds of approximately $ 4,050,000 . Through the issuance date, the Company has issued 13,816,082 shares of common stock pursuant to its ATM Agreement for net proceeds of $ 5,014,022 . F- 22