What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-13 compared with 2024-11-14 · 145 added, 178 removed, 147 unchanged (69% of the section changed)

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The following discussion

and analysis is intended as a review of significant factors affecting our financial condition and results of operations for the periods

and analysis are intended as a review of significant factors affecting our financial condition and results of operations for the periods

The discussion should be read in conjunction with our unaudited condensed consolidated financial statements and the related

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Securities and Exchange Commission (the “Commission”, or the “SEC”)

on April 1, 2024.

on March 31, 2025.

In addition to historical information, the following Management’s Discussion and Analysis of Financial Condition

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Business Overview

Our company, LQR House Inc., a Nevada

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

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

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

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

We also intend

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

one-stop-shop for everything related to alcohol.

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

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

e-commerce portal.

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

We believe that the marketing

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

and drive sales thereof through our e-commerce platform.

Our company, LQR House Inc.

(the “Company”),

intends to become the full-service digital marketing and brand development face of the alcoholic beverage space.

We also intend to

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

everything related to alcohol.

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

internal and external brands through our ownership of the CWS Platform.

Additionally, we are in the process of establishing an exclusive

We believe that the marketing and brand management services we provide to our wholly owned and third-party clients will

increase brand recognition thereof, and drive sales thereof through our e-commerce platform partner.

In May 2024, we acquired a minority stake of common

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In June 2024, we acquired a minority stake of

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

common shares of DRNK Beverage Corp., a British Columbia corporation (which became Chase Mocktails Ltd.), operating in the non-alcoholic

and ready-to-drink beverage markets.

As of December 31, 2024, the Company has recorded an impairment based on its evaluation of the investee.

Refer to Note 5 to our unaudited condensed consolidated financial statements for further disclosure.

Recent Developments

On September 13, 2024, the Company entered into an at-the-market offering

agreement (“ATM Agreement”) with H.C.

Wainwright & Co., LLC, as sales agent (“HCW”), relating to the sale

of common stock.

During the first quarter of 2025 ended March 31, 2025, the Company issued an aggregate of 413,520 shares of

common stock pursuant to such ATM Agreement for net proceeds of $5,178,821.

The Company paid the sales agent compensation with respect

to the sale of such shares in the amount of $161,608.

On April 1, 2025, we 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.

On April 2, 2025, David Lazar resigned as President

and as member of our Board of Directors (the “Board”), effective immediately.

In connection with such resignation, the Company issued Mr.

Lazar 2,857 shares of common stock (on post-split basis), in accordance with

his separation agreement with the Company.

On April 16, 2025, the Board approved and recommended

for stockholder approval at the 2025 Annual Meeting of Stockholders, the proposal to adopt a Certificate of Amendment to our Articles

of Incorporation (the “Certificate of Amendment”), to increase the number of authorized shares of common stock of the Company

from 10,000,000 shares to 350,000,000 shares, each share of common stock having a par value of $0.0001.

The Board also set the date for

the Company’s 2025 Annual Meeting of Stockholders for May 30, 2025.

The Certificate of Amendment will become effective upon stockholder

On April 21, 2025, the Company effected a one-for-thirty-five

reverse stock split of its issued, outstanding and authorized common stock (the “Reverse Stock Split”).

The Reverse Stock

Split became effective at 12:01 a.m.

Eastern Time on April 21, 2025, and our common stock began trading on a post-split basis

on April 21, 2025.

No fractional shares were issued in connection with the Reverse Stock Split and fractional amounts were rounded up

to the next highest whole number at the participant level.

On April 23, 2025, the Audit Committee of the

Board accepted the resignation of dbbmckennon and approved the engagement of Enrome LLP as our independent registered public accounting

firm for the fiscal year ending December 31, 2025, effective immediately.

The Services and Brands We Market

The CWS Platform is an American online

retailer specializing in alcohol products, striving to become the most trusted and convenient destination for online alcohol purchases.

Combining the personalized service of a neighborhood alcohol shop with the efficiency of e-commerce, we offer a wide selection of products,

including our exclusive brand, SWOL Tequila, all at competitive prices with fast shipping and around-the-clock convenience.

of our brand is a commitment to exceptional customer service, driving us to continuously innovate our operations for an enhanced shopping

From user-friendly website navigation and a top-rated mobile app to detailed order tracking and personalized product recommendations,

we are revolutionizing the online alcohol shopping experience, ensuring customer satisfaction remains paramount in all our endeavors.

LQR House is an American online retailer of alcohol

CWS Platform is an American online retailer specializing in selling alcohol products, striving to become the most trusted and

convenient destination for online alcohol purchases.

Combining the personalized service of a neighborhood alcohol shop with the efficiency

of e-commerce, we offer a wide selection of products, including our exclusive brand, SWOL Tequila, all at competitive prices with fast

shipping and around-the-clock convenience.

At the heart of our brand is a commitment to exceptional customer service, driving us to continuously

innovate our operations for an enhanced shopping experience.

From user-friendly website navigation and a top-rated mobile app to detailed

order tracking and personalized product recommendations, we are revolutionizing the online alcohol shopping experience, ensuring customer

satisfaction remains paramount in all our endeavors.

The following products and services constitute

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our ability to leverage technology and use and develop efficient processes;

our ability to attract and maintain a network of influencers with a relevant audience;

our ability to attract and retain talented employees and contractors;

ability to attract and maintain a network of influencers with a relevant audience;

ability to attract and retain talented employees and contractors;

● market conditions and our market position.

to make profitable investments in complimentary business.

Our Growth Strategies

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Results of Operations

Comparison of Three Months Ended September 30,

2024 and September 30, 2023

Comparison of Three Months Ended March 31,

2025 and March 31, 2024

The following table sets forth key components

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

Three Months Ended September 30,

of our results of operations during the three months ended March 31, 2025 and March 31, 2024.

Three Months Ended

Revenue - services

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Other income (expense):

Interest expense

Realized gain/(loss) on securities

Dividend income

Total other income

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$ (2,427,392 )

For the three months ended September 30,

For the three months ended March 31, 2025

and 2024, service revenues were $77,356 and $43,791, respectively.

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

Service revenues decreased by $70,496 as more focus

was emphasized on the CWS Platform.

For the three months ended September 30, 2024,

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

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

from the CWS Platform after the acquisition in November 2023.

Service revenues increased by $33,565 primarily driven

by a higher volume of marketing services provided.

For the three months ended March 31, 2025, product

revenues were $351,984 compared to $437,303 in the similar 2024 period.

The decrease by $85,319 compared to 2024 was primarily attributable

to a decrease in sales volume through the CWS Platform during the quarter.

The reduction in revenue reflects lower customer traffic and

order activity on cwsspirits.com, which the Company believes was driven by seasonal fluctuations and less promotional activity compared

to the prior year period.

Cost of Revenue and Gross Profit (Loss)

For the three months ended September 30,

For the three months ended March 31,

2025 and 2024, service cost of revenues were $1,400 and $37,208, respectively.

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

due to decrease in service revenue in the third quarter.

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

was impaired as of December 31, 2023.

Cost of service revenues decreased by $35,808 in 2025 due

to our ability to support marketing campaigns via dedicated personnel and ceased certain digital ad costs to support campaigns.

Product cost of revenues was $397,782 and $523,383

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

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

Platform acquisition in November 2023.

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

the three months ended September 30, 2024 and 2023.

during the three months ended March 31, 2025 and 2024.

The decrease was primarily due to the decline in product revenue during the period,

resulting from lower sales volume on the CWS Platform.

Gross profit (loss) was $30,158 and ($79,497)

for the three months ended March 31, 2025 and 2024.

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

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General and Administrative

For the three months ended September 30,

For the three months ended March 31,

2025 and 2024, general and administrative expenses were $2,023,161 and $1,606,461, respectively.

General and administrative expenses decreased

by $3,281,036.

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

expense due to the issuance of common shares for services.

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

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

Sales and Marketing

For the three months ended September 30,

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

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

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

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

Net loss for the three months ended September

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

Comparison of Nine Months Ended September 30,

2024 and 2023

The following table sets forth key components

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

Nine Months Ended September 30,

Revenue - services

Revenue - product

Total revenues

Cost of revenue - services

Cost of revenue - product

Total cost of revenue

Gross profit (loss)

Operating expenses:

General and administrative

Sales and marketing

Total operating expenses

Loss from operations

Other income (expense):

Interest expense

Realized gain/(loss) on securities

Dividend income

Total other income

Provision for income taxes

$ (8,000,066 )

$ (9,419,793 )

For the nine months ended September 30,

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

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

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

Service revenues decreased by $280,523 as more focus

was emphasized on the CWS Platform.

For the nine months ended September 30, 2024 product

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

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

the CWS Platform after the acquisition in November 2023.

Cost of Revenue and Gross Profit (Loss)

For the nine months ended September 30, 2024

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

Cost of revenues services decreased by $144,230 in 2024, corresponding

to the decreased revenues.

In 2023, cost of revenues included amortization of the marketing license, which was impaired as of December

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

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

the CWS Platform acquisition in November 2023.

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

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

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

from marketing contracts to product revenues via the CWS Platform.

Management is exploring various strategies to increase customer acquisition,

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

The Company is continuing to explore new partnerships

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

General and Administrative

For the nine months ended September 30, 2024 and

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

General and administrative expenses decreased by

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

for services.

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

due to vesting of restricted stock units.

The increase was primarily attributable

to higher professional fees and personnel-related costs incurred during the current period.

In addition, the Company recognized approximately

$868,000 in non-cash stock-based compensation expense in 2025, compared to approximately $720,000 in the prior-year period.

Sales and Marketing

For the nine months ended September 30,

For the three months ended March 31,

2025 and 2024, sales and marketing expenses were $406,853 and $786,415 respectively.

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

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

During the nine months

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

Net loss for the nine months ended September

The decrease was primarily due to the absence of

website development costs in the current period.

In the first quarter of 2024, the Company recorded significant expenses related to a

website development agreement with X-Media entered into in October 2023, which was fully written off during 2024.

The absence of similar

charges in 2025 contributed to the decline in sales and marketing expenses.

Net loss for the three months ended March

31, 2025 and 2024 was $2,389,650 and $2,427,392, respectively.

Liquidity and Capital Resources

As of September 30,

As of March 31,

2025 and December 31, 2024, we had cash and cash equivalents of $7,889,597 and $5,386,789 respectively.

As of September 30, 2024, we also

had $3,439,467 in marketable securities.

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

of our products and services.

The accompanying unaudited

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

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

The Company has not generated profits since inception, has sustained

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

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

The Company requires additional capital to operate

and expects losses to continue for the foreseeable future.

These factors raise substantial doubts about the Company’s ability to

continue as a going concern.

The Company’s ability

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

To date, we have financed our

operations primarily through issuances of common stock and sales of our products and services.

During the three months

ended March 31, 2025, the Company raised an aggregate of $9,230,236 in net proceeds through issuance of commons stock.

The Company issued

413,520 shares of common stock pursuant to at-the-market offering agreement, dated September 13, 2024, between the Company and H.C.

& Co., LLC, for net proceeds of $5,178,821.

Additionally, the Company received net proceeds of $4,051,415 from the issuance of 210,463

shares of common stock pursuant to exercise of warrants.

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 $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 $6,619,374 for the three

months ended March 31, 2025.

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

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

The Company’s

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

and to raise additional capital to fund operations.

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and acquisition opportunities which will help achieve its strategies.

Management plans to raise

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

Our failure to raise additional

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

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

The unaudited condensed consolidated financial statements do not include

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

The Company may not be able to obtain financing on acceptable

terms, or at all.

The Company’s ability

to continue as a going concern for the next twelve months is dependent upon its ability to generate sufficient cash flows from operations

to meet its obligations, which it has not been able to accomplish to date, or to obtain additional capital 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.

Cash Flow Activities

The following table presents selected captions

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

Nine Months Ended

September 30,

from our condensed statement of cash flows for the three months ended March 31, 2025 and 2024:

Three Months Ended

Net cash used in operating activities

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$ (1,374,040 )

Net cash provided by (used in) investing activities

Net cash used in investing activities

$ (3,360,986 )

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Net cash used in operating activities for the

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

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

Net cash used in operating activities for the

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

three months ended March 31, 2025 was $6,619,373, primarily due to our net loss of $2,389,650 partially offset by non-cash charges

of $868,189 and changes in our operating assets and liabilities of $5,097,912.

Net Cash Provided by (Used in) Investing Activities

Net cash provided by (used in) investing

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

In 2024, the Company

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

The Company also received $670,000 back from

an investment it was no longer pursuing.

In 2023, the Company had repayments from CWS.

Net Cash Used in Investing Activities

Net cash used in investing activities for the

three months ended March 31, 2025 and 2024 were $0 and $3,360,986, respectively.

In 2024, the Company invested $4,030,986 in mutual fund

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

Net Cash Provided By (Used in) Financing Activities

Net cash provided by (used in) financing activities

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

In 2024, the Company repurchased shares

of common stock.

In 2023, the Company received $5,449,156 in proceeds from share issuances.

for the three months ended March 31, 2025 and 2024 was $9,122,181 and ($547,515) respectively.

In 2025, the Company received $4,051,415

from exercise of warrants and $5,070,767 from issuance of shares pursuant to ATM Agreement.

In 2024, the Company paid $547,515 for repurchase

Contractual Obligations and Related Party Transactions

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis