What changed in this filing

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Item 1. Financial Statements

2025-05-13 compared with 2024-11-14 · 376 added, 334 removed, 366 unchanged (66% of the section changed)

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CONDENSED CONSOLDIATED BALANCE SHEETS

September 30,

Current assets:

Cash and cash equivalents

Marketable securities, at fair value

Accounts receivable

Accounts receivable, related party

Advances to related party

Subscription receivable

Deposits in escrow

Prepaid expenses

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Intangible assets, net

Right of use asset

LIABILITIES AND STOCKHOLDERS’ EQUITY

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Accrued expenses

Right of use liability, current portion

Accrued expenses, related party

Total current liabilities

Right of use liability

Total liabilities

Commitments and contingencies (Note 9)

Stockholders’ equity:

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

Common stock, $ 0.0001 par value, 10,000,000 shares authorized, 1,066,798 and 1,061,351 shares issued and outstanding as of March 31, 2025 and 435,788 and 430,341 shares issued and outstanding as of December 31, 2024, respectively

Additional paid-in capital

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Three Months Ended

Nine Months Ended

September 30,

Revenue - services

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( 2,472,373 )

( 8,250,727 )

( 9,248,793 )

Other income (expense):

Interest expense

Realized gain/(loss) on securities

Dividend income

Total other income

Total other income (expense)

Provision for income taxes

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$ ( 2,427,392 )

$ ( 8,000,066 )

$ ( 9,419,793 )

Weighted average common shares outstanding - basic and diluted

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Additional Paid-In

Total Shareholder’s

Balances at December 31, 2022

$ ( 3,804,901 )

Recapitalization

Balances at March 31, 2023

( 4,126,975 )

Issuance of common stock pursuant to private placement

Issuance of common stock for services

Repurchase of shares

( 3,556,491 )

Balances at June 30, 2023

$ ( 7,683,466 )

Issuance of common stock pursuant to IPO

Offering costs

( 1,255,843 )

Conversion of note payable into common stock

Issuance of common stock for services

Buyback of common shares

Vesting of restricted stock units

( 5,541,228 )

Balances at September 30, 2023

$ ( 13,224,694 )

Total Stockholders’

Balances at December 31, 2023

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$ ( 547,415 )

Corrective issuance from stock dividend

Vesting of restricted stock units

Common stock issued per investment in equity security

$ ( 21,980,017 )

Balances at December 31, 2024

$ ( 547,415 )

Balances at June 30, 2024

$ ( 42,306,803 )

Issuance of common stock pursuant to public offerings

Offering costs

$ ( 517,961 )

Vesting of restricted stock units

Issuance of common stock pursuant to directors agreements

Issuance of common stock pursuant to ATM agreement

Exercise of warrants

Effect of stock split

( 2,389,650 )

Balances at September 30, 2024

Balances at March 31, 2025

$ ( 547,415 )

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

$ ( 8,000,066 )

$ ( 9,419,793 )

Adjustments to reconcile net loss to net cash used in operating activities:

Stock based compensation

Vesting of restricted stock units

Gain on sale of marketable securities

Issuance of common stock for services

Changes in operating assets and liabilities:

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Prepaid expenses

( 1,296,422 )

Accounts payable

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Accrued expenses

Right of use liability, net

Accrued expenses, related party

Net cash used in operating activities

( 3,565,293 )

( 4,568,848 )

Cash flows from investing activities:

Purchases of marketable securities

Sales of marketable securities

Net repayments from related party

Return of deposits in escrow

Net cash provided by (used in) investing activities

( 2,688,227 )

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from note payable

Issuance of common stock and pursuant to private placement

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

Repurchase and buyback of shares

Offering costs

Issuance of common stock pursuant to exercise of warrants

Issuance of common stock pursuant to ATM agreement

Repurchase and buyback of common stock

Net cash provided by (used in) financing activities

Net change in cash and cash equivalents

( 6,816,435 )

Cash and cash equivalents at beginning of period

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Supplemental disclosure of non-cash financing activities:

Common stock issued per investment in equity security

Reclassification of deposit in escrow to investment in equity

Conversion of note payable and accrued interest into common stock

Subscription receivable

Issuance of common stock for accrued expenses

See the accompanying notes to the unaudited condensed

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LQR HOUSE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

UNAUDITED CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

NATURE OF OPERATIONS

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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.

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.

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.

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.

Reverse Stock Split

On April 16, 2025, the Company filed a Certificate of Change to its Articles of Incorporation with the Secretary of

State of the State of Nevada to effect a 1-for-35 reverse stock split (the “Reverse Split”) of its common stock, par value

$ 0.0001 per share.

The Reverse Split became effective on April 21, 2025.

In connection with Reverse Split, the Company amended its Articles

of Incorporation to reduce the number of authorized shares of common stock to 10,000,000 .

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 reverse stock split

GOING CONCERN

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to continue as a going concern within one year after the date that the unaudited condensed consolidated financial statements are issued.

The accompanying unaudited

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

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

The Company has not generated profits since inception, has sustained

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

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

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

for the foreseeable future.

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

The accompanying unaudited condensed consolidated financial statements

have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal

course of business.

The Company sustained net losses of $ 2,389,650 and $ 2,427,392 for the three months ended March 31, 2025 and 2024,

and has negative cash flows from operations of $ 6,619,373 and $ 1,374,040 for the three months ended March 31, 2025 and March 31, 2024,

respectively.

The Company requires additional capital to operate and expects losses to continue for the foreseeable future.

These factors

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

The Company’s ability

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equity financings.

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.

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.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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Unaudited Interim Financial Information

The unaudited condensed

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

GAAP for interim financial

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

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

been condensed or omitted pursuant to such rules and regulations.

The unaudited interim financial statements have been prepared on a

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

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

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

The financial data and the other information disclosed in these

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

Unaudited interim results are not

necessarily indicative of the results for the full fiscal year.

The unaudited condensed consolidated

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

GAAP for interim financial information, within

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

Certain information and disclosures

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

GAAP have been condensed or omitted pursuant to

such rules and regulations.

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

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

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

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

periods are unaudited.

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

The accompanying unaudited

interim condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements

and the notes thereto for the year ended December 31, 2023 included in the Form 10-K filed with the SEC on April 1, 2024.

and the notes thereto for the year ended December 31, 2024 included in the Form 10-K filed with the SEC on March 31, 2025.

Use of Estimates

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

Under Accounting

Standards Codification (“ASC”) No.

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

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

Investments, at Cost

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

As of September 30, 2024,

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

value below their respective carrying values.

As of March 31, 2025, the

Company’s investment in DRNK Beverage Corp continues to be recorded at its impaired carrying value of $ 300,000 , after reflecting

an impairment expense of $ 4,500,000 recognized as of December 31, 2024.

That impairment was triggered by company-specific information

and the investee’s performance relative to expectations, as well as general market challenges.

No additional impairments or observable

price changes were identified during the three months ended March 31, 2025.

The Company continues to monitor the situation and will assess

the need for any further adjustments in future periods.

Fair Value Measurements

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

The carrying values of

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

maturity of these instruments.

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

due to its short-term maturity.

There were no transfers between

Level 1, Level 2, or Level 3 fair value classifications during the three months ended March 31, 2025.

Available-for-sale investments

are classified as Level 1, as they are valued based on quoted prices in active markets for identical instruments.

The carrying values of the

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

of these instruments.

The Company believes the carrying amount of its advances to related parties approximate fair value due to its short-term

The Company’s investments

are accounted for under the cost method.

See above and Note 6.

See above and Note 5 to our unaudited condensed consolidated financial statements.

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.

Impairment of Long-Lived

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

The Company follows ASC 850, Related Party Disclosures , for the identification of related parties and disclosure

of related party transactions.

Revenue Recognition

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The Company wholly owns SWOL

Tequila, a tequila made in limited batches from a third-party producer located in Mexico.

The Company facilitates all efforts to get the

product delivered to CWS for retail distribution in the United States, including advancing costs for production, shipping and other importing

and delivery charges.

The Company is entitled to payment of cost plus an additional 20 % on each bottle of SWOL Tequila sold to CWS.

Revenue is recognized at the point in which the products are delivered to CWS, when LQR has fulfilled its performance obligation.

to certain restrictions on the delivery and custodianship of alcoholic beverage, CWS is required to take ownership of the product at time

of delivery, and there is no recourse or right of return.

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

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

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 is the exclusive membership

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

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

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

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

Upon the acquisition of the CWS Platform, the Company

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

The Company records a reserve for chargebacks and cancellations at the

time of the transaction based on historical experience.

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

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

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Three Months Ended

Nine Months Ended

September 30,

Disaggregation of Revenues

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Cost of revenue consists

of all direct costs attributable to performing marketing services and the Company’s product sales.

Cost of revenue includes product

costs, packaging, shipping and other importing and delivery charges, as well as affiliate payouts and contracted marketing services.

of revenue also includes customer service personnel and amortization of the Company’s marketing license asset in 2023.

of all direct costs attributable to sales and performing marketing services.

Cost of revenue includes product costs, packaging, shipping

and other importing and delivery charges, as well as 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.

Sales and marketing costs primarily consist of

advertising, promotional expenses and marketing consulting and advisory services.

Sales and marketing costs also include sales commissions.

For the three months ended March 31, 2025 and 2024, Advertising costs were approximately $ 206,000 and $ 167,000 , respectively.

Stock-Based Compensation

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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

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

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.

Net Loss per Share

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their inclusion would be anti-dilutive.

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

As all potentially dilutive securities are anti-dilutive as of March 31, 2025 and 2024, diluted

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

Potentially dilutive items

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

outstanding as of March 31, 2025 include the Company’s outstanding restricted stock units (See Note 7).

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 other recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial

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.

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House Acquisition Corp.

(the “Buyer”), a subsidiary of the Company, and SSquared Spirits LLC (the “Seller”, or

“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”, 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 .

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

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

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

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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

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”,

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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

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:

Nine Months Ended

September 30,

( 9,685,986 )

Net loss per common share

Prepaid Expenses

The Company determined it

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

As such, the Company recognized

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

The amount was included in sales

and marketing expenses in the consolidated statements of operations.

Deposits in Escrow

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.

INVESTMENTS, AT COST

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

The Company recorded an

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

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

not exert significant influence.

DRNK Beverage Corp.

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.

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

Chase Mocktails Ltd

(f/k/a DRNK Beverage Corp.)

On June 7, 2024, the Company

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

The Company accounted for

the investment in DRNK under the cost method as it owns 8.58 % of DRNK’s common shares and does not exert significant influence.

STOCKHOLDERS’ EQUITY

On February 13, 2024, the

Company filed a Certificate of Amendment to the Articles of Incorporation of the Company with the Secretary of State of the State of Nevada

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

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

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

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

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

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

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

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

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.

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.

In May 2024, the Company

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

During the quarter ended

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

which were received in October 2024.

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

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

installments commencing on October 1, 2023.

On August 21, 2023, Jay Dhaliwal was added to the Board and was granted 500 Director

RSUs 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.

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 of March 31, 2025, the

investment continues to be carried at its impaired value of $ 300,000 .

No further impairment indicators or observable price changes were

identified during the three-month period ended March 31, 2025.

The Company continues to monitor this investment and will assess the need

for any future adjustments as conditions warrant.

ACCRUED EXPENSES

Accrued expenses consist

of the followings:

Accrued retention and settlement payments

Accrued professional and other fees

Taxes payable

Other accrued

Total accrued expenses

Accrued retention and settlement payments, related parties

Total accrued expenses, related parties

As of December 31, 2024, the Company had accrued

expenses totaling $ 6,484,729 related to various settlement, bonus, and retention agreements executed between October and December 2024.

During the three months ended March 31, 2025, the Company paid approximately $ 4,687,000 of these previously accrued balances.

The remaining

balance of approximately $ 1,797,000 remains accrued as of March 31, 2025, and is expected to be settled in future periods.

STOCKHOLDERS’ EQUITY (DEFICIT)

Amendment to Articles of Incorporation or

April 16, 2025, the Company filed a Certificate of Change to its Articles of Incorporation with the Secretary of State of the State of

Nevada to effect a 1-for-35 reverse stock split (the “Reverse Split”) of its common stock, par value $ 0.0001 per share.

Reverse Split became effective on April 21, 2025.

to the Reverse Split, every 35 shares of the Company’s authorized, issued and outstanding common stock were automatically converted

into one share of common stock.

No fractional shares were issued as a result of the Reverse Split;

instead, fractional shares were rounded

up to the nearest whole share at the individual stockholder level.

As a result of the Reverse

Split, the par value per share remained unchanged.

All share and per share amounts in these financial statements have been retroactively

adjusted to reflect the Reverse Split for all periods presented, unless otherwise indicated.

In connection with Reverse

Split, the Company amended its Articles of Incorporation to reduce the number of authorized shares of common stock to 10,000,000 .

2025 Stock Transactions

During the three months ended

March 31, 2025, the Company issued 413,520 shares of common stock (on a post-reverse split basis) pursuant to an at-the-market public

offering for net proceeds of $ 5,178,821 .

Of the total proceeds, $ 108,054 was received in April 2025.

As of March 31, 2025, the Company recorded

a subscription receivable in respect of this issuance.

Issuance of shares in pursuance of director’s

On October 15, 2024, the Company entered into

a Director Agreement with Avraham Ben-Tzvi, a then-member of the Board of Directors.

Ben-Tzvi ceased to serve on the Board effective

December 19, 2024.

In recognition of his service, the Company issued 3,334 shares of its common stock, par value $ 0.0001 per share (on

a post-reverse split basis), to Mr.

Ben-Tzvi on January 2, 2025.

On January 28, 2025, Mr.

Ben-Tzvi entered into a Lock-Up Agreement with

the Company in connection with the share issuance, under which he agreed not to transfer, sell, pledge, or otherwise dispose of the shares

for a period of twelve (12) months.

The Lock-Up Agreement also prohibits hedging transactions, registration demands, and deposit of the

shares into depositary facilities during the lock-up period.

The Company has instructed its transfer agent to enforce applicable restrictions.

For the three months ended March 31, 2025, the Company recognized $ 172,679 of stock-based compensation expense related to this issuance.

The fair value of the shares was measured as of the grant date, January 2, 2025, in accordance with ASC 718, Compensation – Stock

Compensation .

On April 2, 2025, David Lazar resigned as President

and as a member of the Company’s Board of Directors, effective the same date (the “Separation Date”).

In connection

with his resignation, the Company entered into a Separation Agreement with Mr.

Lazar, pursuant to which the Company agreed to pay $ 415,000

in cash and issue 2,857 shares of the Company’s common stock, par value $ 0.0001 per share (on a post-split basis), as consideration

for the covenants and agreements set forth therein.

As of December 31, 2024, the Company recorded a total expense of $ 526,000 related

to this agreement, consisting of $ 415,000 in accrued cash compensation and $ 111,000 in non-cash stock-based compensation, based on the

fair value of the Shares as of the measurement date.

The shares were issued on April 2, 2025, and are subject to a Lock-up Agreement under

Lazar has agreed not to transfer, sell, pledge, or otherwise dispose of the shares for a period of one year from the date of

The expense associated with the issuance of the Shares was fully recognized in the year ended December 31, 2024.

No additional

expense related to this agreement was recognized during the three months ended March 31, 2025.

During the three months ended March 31, 2025, the Company issued 210,463

shares of common stock (on a post-reverse split basis) upon the exercise of warrants, resulting in aggregate gross proceeds of $ 4,051,415 .

Restricted Stock Units

In August 2023, the Company granted 893 restricted

stock units (the Director RSU’s) on post-split basis, which were to vest in eight equal quarterly installments commencing on October

On August 30, 2023, the Board authorized deferring the vesting of the Director RSUs until such date that the 2021 Plan is amended.

The amendment to the plan was approved on December 19, 2024 and vesting resumed thereafter.

In December, 2024, the Company granted 1,429 restricted

stock units (the 2024 Director RSU’s) on post-split basis to each four newly elected independent director, for a total of 5,716

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

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

As of September 30, 2024 and December

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

The Company recorded stock-based compensation

expense of $ 695,509 in the statements of operations for the three months ended March 31, 2025.

Total unrecognized compensation cost related

to non-vested restricted common stock amounted to $ 1,257,881 as of March 31, 2025, which is expected to be recognized over weighted average

remaining vesting period of 1.67years.

As of March 31, 2025, 5,188 RSUs remained unvested.

The following table summarizes RSU activity for the three months ended

March 31, 2025:

Restricted Stock Units

Number of shares

Weighted Average Fair Value

Unvested as of December 31, 2024

Unvested as of March 31, 2025

In January 2024, the Company purchased a total of 5,447 shares

of the Company’s common stock (on post-split basis) for $ 547,415 , which was recorded as treasury

stock on the balance sheet and statement of stockholders’ equity.

As of March 31, 2025, no warrants remain outstanding.

RELATED PARTY TRANSACTIONS

5 unchanged sentences

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

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

See Note 4 for the CWS Platform acquisition from SSquared.

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

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

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

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

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

marketing expenses in the consolidated statements of operations.

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, for the three month ended

March 31, 2025 and 2024, the Company incurred $ 40,000 through January 2025 and $ 120,000 , respectively, to KBROS, which is included in

cost of revenue in the consolidated statements of operations.

During the three months ended March 31, 2025, the Company paid $ 100,000 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.

As of December 31, 2024, $ 3,000,000 remained

unpaid and was included as accrued expenses on the consolidated balance sheet.

Of this amount, $ 1,800,000 was paid during the three

months ended March 31, 2025 and $ 1,200,000 remained unpaid as of March 31, 2025.

See Note 9 for funding commitment

6 unchanged sentences

KBROS, the Product Handler.

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

party with CWS pertaining to product revenues.

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

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

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

$ 7,340 remained unpaid and outstanding from CWS.

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

House Illinois

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

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

Payable, Related Party

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

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

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

certain revenue levels through the CWS Platform.

of March 31, 2025 and December 31, 2024, the Company had $ 149,510 , in accounts receivable, related party with CWS pertaining to product

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

of March 31, 2025 and December 31, 2024, the Company had accounts payable of $ 28,411 and $ 21,175 , respectively, with related parties,

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

the three months ended March 31, 2025, the Company paid its Chief Executive Officer and KABROS a performance bonus of $ 100,000 each.

Company historically leased space from a related party entity, which is now month-to-month.

COMMITMENTS AND CONTINGENCIES

In February 2023, the Company

entered into a lease agreement for office space in Miami, Florida.

The agreement matures in February 2025 and requires monthly payments

The Company adopted ASC 842 on January 1, 2022 and recognized a right of use asset and liability of $ 19,007 using

a discount rate of 8.0 %.

As of September 30, 2024,

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

Funding Commitment Agreement

1 unchanged sentence

Company entered into a Funding Commitment Agreement with KBROS, the Product Handler pursuant to the Product Handling Agreement as defined

Pursuant to this agreement, the Company commits 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”).

Company may, without notice to Product Handler, elect not to advance funding for any inventory sold by particular Vendors with respect

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.

1 unchanged sentence

Handler or Vendors.

For further details regarding

the settlement agreement, see Note 8.

Contingencies

5 unchanged sentences

SUBSEQUENT EVENTS

On October 15, 2024,

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

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

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

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

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

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

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

The closing of the transaction

shall take place in two stages.

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

in exchange for 1,101,818 Shares.

On the final closing date,

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

The final closing is subject to

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

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

The final closing is required to occur the business

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

The Company agreed in

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

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

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

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

The Warrant to be issued

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

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

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

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

In the Purchase Agreement,

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

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

to solicit such approvals.

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

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

the Warrant shall be deleted.

On October 14, 2024, Jay

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

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

to the Company’s operations, policies or practices.

On October 15, 2024, prior

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

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

On October 15, 2024, prior

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

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

The initial term as director for Messrs.

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

At the time of the election, none of the new

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

The Board has determined that Mr.

Ben-Tzvi qualifies as an “independent

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

Exchange Act of 1934, as amended.

The Board appointed Mr.

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

Reverse Stock Split

On April 16, 2025, the Company

filed a Certificate of Change to the Articles of Incorporation with the Secretary of State of the State of Nevada that provides for a 1-for-35 reverse stock split of its shares of common stock, par value

$ 0.0001 per share that became effective at 12:01 a.m.

on April 21, 2025.

Supplementary distribution agreement

On April 1, 2025, the Company

entered into a Supplementary Distribution Agreement (the “Supplementary Distribution Agreement”) with Of The Earth Distribution

Corp., a Canadian corporation (the “Distributor”), pursuant to which the Company granted to Distributor the exclusive right

to distribute, market, and sell SWOL Tequila products within Thailand and Greece until June 28, 2029.

The Supplementary Distribution Agreement

also amends Supplier Agreement between the Company and the Distributor, dated June 28, 2024, by providing the Distributor exclusive distribution

rights to sell SWOL Tequila in all of Canada without any territorial limitations.

The Supplementary Distribution Agreement does not impose

any minimum purchase requirements.

Change in Independent Registered Public Accounting

On April 23, 2025, the Board

of Directors and Audit Committee of the Company accepted the resignation of dbbmckennon “Former Auditor”) as the Company’s

independent registered public accounting firm, effective immediately.

The Former Auditor’s reports on the Company’s consolidated

financial statements for the fiscal years ended December 31, 2024 and 2023 did not contain an adverse opinion or a disclaimer of opinion,

nor were they qualified or modified as to uncertainty, audit scope, or accounting principles, except for an explanatory paragraph relating

to substantial doubt about the Company’s ability to continue as a going concern and an emphasis of matter paragraph.

During the fiscal years ended

December 31, 2024 and 2023, and through the date of resignation, there were no disagreements with the Former Auditor on any matter of

accounting principles or practices, financial statement disclosure, or auditing scope or procedures that, if not resolved to the satisfaction

of the Former Auditor, would have caused it to make reference to the subject matter of the disagreement in connection with its reports.

There were no reportable events, as defined in Item 304(a)(1)(v) of Regulation S-K, except for the material weaknesses in internal control

over financial reporting previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Also on April 23, 2025, the

Company engaged Enrome LLP (“New Auditor”) as its independent registered public accounting firm for the fiscal year ending

December 31, 2025.

During the two most recent fiscal years and through the date of engagement, neither the Company nor anyone on its behalf

consulted with Enrome LLP regarding the application of accounting principles to a specific transaction or the type of audit opinion that

might be rendered on the Company’s financial statements.

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

What changed 10-Q

Item 1. Financial Statements