What changed in this filing

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Item 1. Financial Statements

2025-11-14 compared with 2025-08-12 · 354 added, 331 removed, 477 unchanged (59% of the section changed)

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CONDENSED CONSOLDIATED BALANCE SHEETS

September 30,

Current assets:

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Accounts receivable, related party

Due from related party

Prepaid expenses

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Intangible assets, net

Prepaid joint venture agreements

Prepaid investments

LIABILITIES AND STOCKHOLDERS’ EQUITY

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Accounts payable, related party

Due to related party

Accrued expenses

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Stockholders’ equity:

Common stock, $ 0.0001 par value, 350,000,000 shares authorized, 3,048,195 and 3,042,748 shares issued and outstanding as of June 30, 2025 and 435,788 and 430,341 shares issued and outstanding as of December 31, 2024, respectively

Common stock, $ 0.0001 par value, 350,000,000 shares authorized, 14,121,684 and 14,116,237 shares issued and outstanding as of September 30, 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

Six Months Ended

Nine Months Ended

September 30,

Revenue - services

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Loss from operations

( 2,203,782 )

( 2,274,392 )

( 4,603,638 )

( 4,746,765 )

Other income (expense):

Realized gain/(loss) on securities

Legal settlement expense

Dividend income

Total other income (expense)

Provision for income taxes

$ ( 2,202,382 )

$ ( 2,209,293 )

$ ( 4,592,032 )

$ ( 4,636,685 )

Weighted average common shares outstanding - basic and diluted

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$ ( 24,189,310 )

Issuance of common stock pursuant to public offerings

Offering costs

Vesting of restricted stock units

( 3,363,380 )

Balances at September 30, 2024

$ ( 547,415 )

$ ( 27,552,690 )

Balances at December 31, 2024

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$ ( 46,898,835 )

See the accompanying notes to the unaudited condensed

consolidated financial statements

Issuance of common stock pursuant to ATM

Vesting of restricted stock units

( 16,828,913 )

Balances at September 30, 2025

$ ( 547,415 )

$ ( 63,727,748 )

See the accompanying notes to the unaudited condensed consolidated financial statements

LQR HOUSE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

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Stock based compensation

Gain on sale of marketable securities

Vesting of restricted stock units

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Prepaid expenses

Due from related party

Accounts payable

Accounts payable, related party

Due to related party

Accrued expenses

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Cash flows from investing activities:

Prepaid joint venture agreements

Prepaid investments

( 23,081,064 )

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( 7,727,850 )

Sales of marketable securities

Return of deposits in escrow

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Issuance of common stock pursuant to ATM

Offering costs

Repurchase and buyback of common stock

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Common stock issued per investment in equity security

Subscription receivable

Deposit in escrow used for investment in equity security

See the accompanying notes to the unaudited condensed

consolidated financial statements

See the accompanying notes to the unaudited condensed consolidated financial statements

LQR HOUSE INC.

UNAUDITED CONDENSED CONSOLIDATED NOTES TO FINANCIAL

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

NATURE OF OPERATIONS

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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 .

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 Company’s Chief

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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

unaudited condensed consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect

the reverse stock split

Amendment to Articles

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The Company has not generated

profits since inception and has sustained net losses of $ 4,592,032 and $ 4,636,685 for the six months ended June 30, 2025 and 2024, respectively.

profits since inception and has sustained net losses of $ 21,420,945 and $ 8,000,066 for the nine months ended September 30, 2025 and 2024,

respectively.

The Company also incurred negative cash flows from operations for the same periods.

The Company expects to continue to generate operating

losses for the foreseeable future.

The accompanying unaudited consolidated financial statements do not include any adjustments as a result

of this uncertainty.

Through the date the financial

statements were available to be issued, the Company has been primarily financed through the issuance of capital stock.

In the event that

the Company cannot generate sufficient revenue to sustain its operations, the Company will need to reduce expenses, or obtain financing

through the sale of debt and/or equity securities, which it has done.

The issuance of additional equity would result in dilution to existing

shareholders.

If the Company is unable to obtain additional funds when they are needed or if such funds cannot be obtained on terms acceptable

to the Company, the Company would be unable to execute upon the business plan or pay costs and expenses as they are incurred, which would

have a material, adverse effect on the business, financial condition and results of operations.

While the Company has several potential

sources of cash including the ability to initiate an at-the-market (“ATM”) offering under its current shelf registration statement,

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

The Company expects to continue to generate

operating losses for the foreseeable future.

The accompanying unaudited condensed consolidated financial statements do not include any

adjustments as a result of this uncertainty.

Through to the date the unaudited

condensed consolidated financial statements were available to be issued, the Company has been primarily financed through the issuance

of capital stock.

In the event that the Company cannot generate sufficient revenue to sustain its operations, the Company will need to

reduce expenses, or obtain financing through the sale of debt and/or equity securities, which it has done.

The issuance of additional

equity would result in dilution to existing shareholders.

If the Company is unable to obtain additional funds when they are needed or

if such funds cannot be obtained on terms acceptable to the Company, the Company would be unable to execute upon the business plan or

pay costs and expenses as they are incurred, which would have a material, adverse effect on the business, financial condition and results

of operations.

While the Company has several potential sources of cash, including the ability to initiate future equity or debt financings,

its prior an at-the-market (“ATM”) offering program with H.C.

Wainwright & Co., LLC expired pursuant to its terms,

and there can be no assurance that the Company will be successful in obtaining additional financing on acceptable terms.

Management’s Plans

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raised $ 4,051,415 through exercise of warrants, which were converted into shares of common stock.

As of August 12, 2025, the

date these unaudited condensed consolidated financial statements were issued, the Company had cash and cash equivalents of $ 4,566,936

as of June 30, 2025.

In addition, the Company received net proceeds of approximately $ 26,000,000 from its ATM offering in July 2025.

believes these funds will be sufficient to meet the Company’s operating and capital expenditure requirements for at least 12 months

from the date of issuance of these financial statements.

Throughout the next twelve

months, the Company intends to fund its operations from the funds raised through the July 2025 offering.

To further support its operations

and growth, the Company may also pursue additional capital through public or private equity offerings, debt financing, or other strategic

funding sources, including continued use of ATM equity offerings.

Based on the current state

of operations, the July 2025 ATM offering, the additional capital sources available to the Company, and the cash on hand at August 12,

2025, the Company believes that the substantial doubt about the Company’s ability to continue as a going concern has been alleviated.

Management believes that the Company has sufficient capital to meet its financial obligations for the next 12 months as of the date

of these financial statements.

There can be no assurance as to the availability or terms upon which

such financing and capital might be available in the future.

If the Company is unable to secure additional funding, it may be forced to

curtail or suspend its business plans.

During the nine months ended

September 30, 2025, the Company received net proceeds of $ 43,201,415 from the issuance of 13,434,601 shares under its at-the-market (“ATM”)

equity offering program.

As of September 30, 2025, the Company held cash and cash equivalents of $ 10,039,230 .

Management believes that

funds will be sufficient to meet the Company’s operating and capital expenditure requirements for at least 12 months from the date

of issuance of these unaudited condensed consolidated financial statements.

The Company’s ATM offering program with H.C.

& Co, LLC, expired pursuant to its terms in September 2025, and no additional sales will be made under the program.

Based on the current operational

outlook, the availability of additional potential capital sources, and existing cash on hand available as of September 30, 2025, the Company

believes that the substantial doubt about the Company’s ability to continue as a going concern has been alleviated.

Management believes

that the Company has sufficient capital to meet its financial obligations for the next 12 months as of the date of these unaudited

condensed consolidated financial statements.

However, there can be no

assurance as to the availability or terms upon which such financing and capital might be available in the future.

If the Company is unable

to secure additional funding, it may be forced to curtail or suspend its business plans.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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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.

These unaudited condensed

consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, LQR House Acquisition Corp.

inter-company transactions and balances have been eliminated on consolidation.

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.

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 sheet.

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

related to the six-month periods are unaudited.

The unaudited condensed consolidated

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 condensed consolidated 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 unaudited condensed consolidated financial statements

related to the nine-month periods are unaudited.

Unaudited interim results are not necessarily indicative of the results for the full

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, 2024 included in the Form 10-K filed with the SEC on March 31, 2025.

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, 2024 included in the Form 10-K filed with the SEC on March 31, 2025.

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.

unaudited condensed consolidated 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 unaudited

condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period.

estimates and assumptions reflected in these unaudited condensed consolidated 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.

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cash with a major financial institution located in the United States of America which it believes to be credit worthy.

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.

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

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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

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

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Investment at cost

In accordance with FASB

ASC Subtopic 321-10-35-2, 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 June 30, 2025, the

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

In accordance with FASB ASC

Subtopic 321-10-35-2, 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.

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

As of September 30, 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.

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of the carrying value of the investment.

No additional impairments were identified during the six months ended June 30, 2025.

continues to monitor the situation and will assess the need for any further adjustments in future periods.

No additional impairments were identified during the nine months ended September 30, 2025.

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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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:

1—Quoted prices in active markets for identical assets or liabilities.

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.

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.

There were no transfers

between Level 1, Level 2, or Level 3 fair value classifications during the six months ended June 30, 2025.

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.

There were no transfers between

Level 1, Level 2, or Level 3 fair value classifications during the nine months ended September 30, 2025.

The carrying values of the

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are accounted at cost, less impairment.

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

See above and Note 5 to the 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.

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

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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.

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

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

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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;

of the transaction price to the performance obligations in the contract;

of revenue when or as the performance obligations are satisfied.

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;

Recognition of revenue when or as the performance obligations are satisfied.

Revenue is recognized when

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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 product and subscription-based membership

The Company derives its revenue

from marketing services, sales via the CWS Platform, distribution of its SWOL Tequila product and subscription-based membership revenue.

Revenue is reported net of discounts.

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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.

Additionally, the Company enters into minimum

guaranteed purchase commitments with its vendor that require the Company to pay for shortfalls in minimum purchases.

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.

recognized at the point in time when products are delivered to the end customer, when LQR has fulfilled its performance obligation, net

The Company is solely responsible

for any risk of loss of the end customer and paying to replenish the loss order.

Additionally, the Company enters into minimum guaranteed

purchase commitments with its vendor that require the Company to pay for shortfalls in minimum purchases.

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.

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 fixed premium 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.

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 fixed premium 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 is the exclusive membership

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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.

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 three and six months ended June 30, 2025 and 2024:

of the disaggregation of revenue for the three and nine months ended September 30, 2025 and 2024:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Disaggregation of Revenues

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include sales commissions.

For the three and six months ended June 30, 2025, advertising costs totaled $ 80,676 and $ 487,529 , respectively,

For the three and nine months ended September 30, 2025, advertising costs totaled $ 358,711 and $ 846,240 , respectively,

compared to $ 1,919,125 and $ 3,470,348 for the same period in 2024.

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is accounted for in accordance with ASC Topic 718-10, Compensation-Stock Compensation (“ASC 718-10”).

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 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

The Company classifies equity-based

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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.

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

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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 June 30, 2025 and 2024, diluted

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 September 30, 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 June 30, 2025

Potentially dilutive items outstanding as of September 30, 2025

include the Company’s outstanding restricted stock units (See Note 8).

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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.

that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying unaudited condensed

consolidated financial statements.

As new accounting pronouncements are issued, the Company will adopt those that are applicable under

the circumstances.

ACQUISITION OF CWS PLATFORM

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of the Company through or in relation to websites associated with the Domain:

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”);

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;

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,

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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.

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.

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.

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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.

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

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In determining the impairment, management

used a market approach using projected revenue information obtained from DRNK and market multiples for companies in similar industry

As of June 30, 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 six-month period ended June 30, 2025.

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

for any future adjustments as conditions warrant.

PREPAID JOINT VENTURE AGREEMENTS

As of June 30, 2025, the

Company had recorded $ 8,166,988 in prepaid joint venture agreements related to payments made in anticipation of entering into joint venture

The agreements will represent a strategic collaboration with TikTok.

Under the proposed agreements, the Company’s newly

formed subsidiary, YHC Online Ltd., has signed a Multi-Channel Network (MCN) agency services contracts to develop, manage, and monetize

creator-led content on the TikTok platform.

The Company expects that

in addition to direct monetization through TikTok, the collaboration will enable broader cross-platform campaign execution across TikTok,

Meta, and Google to create a foundation for a vertically integrated digital marketing operation that will support the Company's future

growth initiatives.

As of June 30, 2025, the

agreements had not been finalized.

Accordingly, the Company classified these amounts as prepaid joint venture agreements on the consolidated

balance sheet.

Management expects these agreements to be executed and operationalized in subsequent periods, at which time the prepayments

will be reclassified to the appropriate investment and accounted for in accordance with ASC 323.

used a market approach using projected revenue information obtained from DRNK and market multiples for companies in similar industry segments.

As of September 30, 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 nine-month period ended September 30, 2025.

The Company continues to monitor this investment and will assess

the need for any future adjustments as conditions warrant.

PREPAID INVESTMENTS

The Company is in discussions

with parties regarding potential investments to expand the Company’s operations and growth.

When finalized, the Company

anticipates that it would develop and sign Multi-Channel Network (MCN) agency services contracts with MCN partners and expect to work

through MCN partners on TikTok to expand creator and audience engagement.

As a result, as of September

30, 2025, the Company had recorded $ 23,081,064 of prepaid investments.

Management expects these

discussions and agreements to be finalized, executed and operationalized in the fourth quarter of 2025, at which time the prepayments

will be reclassified to the appropriate investment and accounted for in accordance with ASC 321, 323 or 805.

ACCRUED EXPENSES

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of the following:

September 30,

Accrued retention and settlement payments

Accrued professional and other fees

Legal settlement expense

Taxes payable

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As of December 31,

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 six months ended June 30, 2025, the Company paid approximately $ 5,292,600 of these previously accrued

The remaining balance of $ 678,392 remains accrued as of June 30, 2025, and is expected to be settled in future periods.

2024, the Company had unpaid accrued expenses totaling $ 6,484,729 related to various settlements, bonus, and retention agreements executed

between October and December 2024.

During the nine months ended September 30, 2025, the Company paid approximately $ 5,805,025 of these

previously accrued balances.

The remaining balance of $ 679,704 remains accrued as of September 30, 2025, of which $ 665,975 relates to

related parties and $ 13,729 pertains to other parties.

The Company expects to settle these outstanding amounts in future periods.

STOCKHOLDERS’ EQUITY (DEFICIT)

Amendment to Articles of Incorporation

On June 2, 2025, the Company

further filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of Nevada to increase the number

of authorized shares of common stock from 10,000,000 to 350,000,000 shares, par value $ 0.0001 per share.

The increase was approved by

the Company’s stockholders at the Annual Meeting held on May 30, 2025.

Amendment to Articles of Incorporation or

On May 30, 2025, the Company’s stockholders approved a proposal

to increase the Company’s authorized shares of common stock from 10,000,000 to 350,000,000 shares, par value $ 0.0001 per share.

On June 2, 2025, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of Nevada,

and the increase in authorized shares became effective June 2, 2025.

On April 16, 2025, the Company

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on April 21, 2025.

Pursuant 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.

Pursuant 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.

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.

All share and per share amounts in these unaudited condensed consolidated financial

statements have been retroactively adjusted to reflect the Reverse Split for all periods presented, unless otherwise indicated.

2025 Stock Transactions

During the six months ended

June 30, 2025, the Company issued 2,361,112 shares of common stock (on a post-reverse split basis) pursuant to an at-the-market public

offering for net proceeds of $ 11,559,068 .

During the nine months ended

September 30, 2025, the Company issued 13,434,601 shares of common stock (on a post-reverse split basis) pursuant to an at-the-market

public offering for net proceeds of $ 43,201,415 .

Issuance of shares in pursuance of director’s

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or $ 51.80 per share, based on the post-split share count.

The full amount was recognized as a general and administrative expense in the

consolidated statement of operations for the six months ended June 30, 2025.

The total amount was recognized as general and administrative expense in the

Company’s consolidated statements of operations for the three and nine months ended September 30, 2025, in the amounts of $ 0 and

$ 172,679 , respectively.

On April 2, 2025, David Lazar

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No additional

expense related to this agreement was recognized during the six months ended June 30, 2025.

expense related to this agreement was recognized during the nine months ended September 30, 2025.

Issuance of shares in pursuance of consultant’s

On June 3, 2025, the

Company entered into an Advisory Services Agreement with a third party to provide capital markets and investor relations advisory

In connection with this agreement, the Company issued 33,000 shares of its common stock as consideration for services.

These shares were valued at a fair value of $ 1.44 per share based on the agreement date, resulting in a total non-cash expense of

This amount was recorded in the consolidated statement of operations for the three and six months ended June 30, 2025,

under general and administrative expenses.

During the six months ended

June 30, 2025, the Company issued 210,463 shares of common stock (on a post-reverse split basis) upon the exercise of warrants, resulting

On June 3, 2025, the Company

entered into an Advisory Services Agreement with a third party to provide capital markets and investor relations advisory services.

connection with this agreement, the Company issued 33,000 shares of its common stock as consideration for services.

These shares were

valued at a fair value of $ 1.44 per share based on the agreement date, resulting in a total non-cash expense of $ 47,520 .

The total amount

was recognized as general and administrative expense in the Company’s consolidated statements of operations for the three and nine

months ended September 30, 2025, in the amounts of $ 0 and $ 47,520 , respectively.

During the nine months ended

September 30, 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 .

As of June 30, 2025, no warrants remain outstanding.

As of September 30, 2025, no warrants remain outstanding.

Restricted Stock Units

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The Company recorded stock-based

compensation expense of $ 695,508 and $ 1,360,205 in the statements of operations for the three and six months ended June 30, 2025, respectively.

As of June 30, 2025, total unrecognized compensation cost related to unvested RSUs was $ 546,242 , which is expected to be recognized over

a weighted-average remaining vesting period of approximately 1.44 years.

As of June 30, 2025, 4,374 RSUs remained unvested, net of 9

RSUs forfeited upon the resignation of a board member on May 30, 2025.

compensation expense of $ 352,563 and $ 1,712,768 in the statements of operations for the three and nine months ended September 30, 2025,

respectively, related to vesting of restricted stock units.

As of September 30, 2025, total unrecognized compensation cost related to

unvested RSUs was $ 193,679 , which is expected to be recognized over a weighted-average remaining vesting period of approximately 1.22

As of September 30, 2025, 3,568 RSUs remained unvested, net of 9 RSUs forfeited upon the resignation of a board member on May 30,

The following table summarizes

RSU activity for the six months ended June 30, 2025:

RSU activity for the nine months ended September 30, 2025:

Restricted Stock Units

Unvested as of December 31, 2024

Unvested as of June 30, 2025

Unvested as of September 30, 2025

RELATED PARTY TRANSACTIONS

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certain revenue milestones.

For the three and six months ended June 30, 2025, the Company incurred $ 0 and $ 40,000 , respectively, in handling

fees under this agreement, which were included in cost of revenue in the consolidated statements of operations.

For the three and six

months ended June 30, 2024, the Company incurred $ 120,000 and $ 240,000 , respectively, also included in cost of revenue.

Pursuant to Product Handing Agreement, the Company incurred $ 0 and $ 40,000 to KBROS for the three and nine

months ended September 30, 2025, respectively, which was included in cost of revenue in the consolidated statements of operations.

the three and nine months ended September 30, 2024, the Company incurred $ 120,000 and $ 360,000 , respectively, also included in cost of

In addition, during the

three and six months ended June 30, 2025, the Company paid $ 0 and $ 100,000 , respectively, in incentive compensation to KBROS, which was

recorded in sales and marketing expenses.

During the same period for the three and six months ended June 30, 2024, the Company recorded

$ 100,000 in incentive compensation, under sales and marketing expenses.

three and nine months ended September 30, 2025, the Company paid $ 0 and $ 100,000 , respectively, in incentive compensation to KBROS, which

was recorded in sales and marketing expenses.

During the same period for the three and nine months ended September 30, 2024, the Company

recorded $ 100,000 and $ 200,000 , respectively, in incentive compensation, under sales and marketing expenses.

In October, 2024, the Company

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which was included in general and administrative expenses in the consolidated statements of operations for the year ended December 31,

As of June 30, 2025 and December 31, 2024, $ 678,392 and $ 3,600,000 , respectively, respectively, remained unpaid and were included

in accrued expenses on the consolidated balance sheet.

See Note 10 for funding

commitment with KBROS.

As of September 30, 2025 and December 31, 2024, $ 296,711 and $ 3,600,000 , respectively, remained unpaid and were included in

accrued expenses, related party on the consolidated balance sheet.

Country Wine & Spirits,

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

As of June 30, 2025 and

December 31, 2024, the Company had $ 300,231 , in accounts receivable, related party with CWS pertaining to product revenues.

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 June 30, 2025 and

December 31, 2024, the Company had accounts payable of $ 57,511 and $ 21,175 , respectively, with related parties, including KBROS, the

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

the three and six months ended June 30, 2025, the Company paid its Chief Executive Officer and KBROS a performance bonus of $ 0 and $ 100,000

each, respectively.

For the three and six months ended June 30, 2024, the Company paid $ 0 and $ 100,000 each, respectively.

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 September 30, 2025

and December 31, 2024, the Company had $ 300,231 , in accounts receivable, related party with CWS pertaining to product revenues.

event that CWS fails to repay the trade receivables, the Company believes it can offset the outstanding receivables against regular payables

and accrued payouts due to KBROS.

Payable, Related Party

As of September 30, 2025

and December 31, 2024, the Company had accounts payable of $ 65,151 and $ 21,175 , respectively, with related parties, including KBROS,

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

the three and nine months ended September 30, 2025, the Company paid its Chief Executive Officer and KBROS a performance bonus of $ 0

and $ 100,000 each, respectively.

For the three and nine months ended September 30, 2024, the Company paid $ 100,000 and $ 200,000 each,

respectively.

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

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the settlement agreement, see Note 9.

Contingencies

Settled Legal Matter

On or about July 11, 2025,

1 unchanged sentence

in an action before the Eight Judicial District, Clark County, Nevada titled Kingbird Ventures, LLC (“Kingbird”) v.

Sean Dollinger,

Dollinger, et al.

The complaint alleges, among other things, breach of fiduciary duties, violations of the Nevada Revised Statutes

78.650, 78.630, 207.400 90.570 and 32.010, alter ego liability, civil conspiracy (the “Complaint”).

The Complaint seeks, among other

things, damages in an unspecified amount, a declaratory judgment, a temporary restraining order and preliminary injunction freezing

the Company’s assets, the assets of the Company’s Chief Executive Officer, Sean Dollinger, the assets of any of the other

defendants controlled by Sean Dollinger and others, injunctive relief to prevent any further material corporate decisions by the Company, for the

court to restrain the Company, its directors, officers and stockholders from making any significant changes to the Company’s

governance or capital structures to further entrench the Company’s Chief Executive Officer.

The Complaint was filed by Kingbird

Ventures, LLC, recent stockholder of the Company, on July 11, 2025, The Company intends on vigorously defending the litigation.

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.

The Complaint seeks,

among other things, damages in an unspecified amount, a declaratory judgment, a temporary restraining order and preliminary injunction

freezing the Company’s assets, the assets of the Company’s Chief Executive Officer, Sean Dollinger, the assets of any of

the other defendants controlled by Sean Dollinger and others, injunctive relief to prevent any further material corporate decisions by

the Company, for the court to restrain the Company, its directors, officers and stockholders from making any significant

changes to the Company’s governance or capital structures to further entrench the Company’s Chief Executive Officer.

On September 22, 2025, the

Company entered into two settlement agreements with Kingbird Ventures and other parties named therein (the “Settlement Agreements”)

to resolve matters related to this litigation.

The First Settlement Agreement resolved the direct claims asserted by Kingbird Ventures

against the Company and other defendants and provides for (i) dismissal of all such direct claims with prejudice, (ii) mutual releases

among the parties, (iii) a cash payment obligation of $ 13,000,000 from the Nevada Defendants (as defined in the First Settlement

Agreement), and (iv) customary provisions, including no admission of liability and confidentiality.

The Second Settlement Agreement

resolved the stockholder derivative claims brought on behalf of the Company against certain current and former officers and directors.

The Second Settlement Agreement provides for (i) dismissal of the derivative action with prejudice, subject to court approval, (ii) mutual

releases among the parties, and (iii) customary provisions, including no admission of liability, cooperation undertakings, and confidentiality.

Pursuant to the Settlement

Agreements, a total payment of $ 7,500,000 has been made in September 2025, and as of September 30, 2025, a remaining balance of $ 5,500,000

is recorded under accrued expenses on the Company’s unaudited condensed balance sheet.

The entire settlement amount of $ 13,000,000

has been recognized as a legal settlement expense within “Other expense” in the statement of operations for the quarter ended

September 30, 2025.

The settlement represents a non-recurring, non-operational charge and is presented within “Other expense”

to distinguish it from the Company’s ongoing business operations.

As of the date of issuance

of these unaudited condensed consolidated financial statements, management believes that no additional material loss contingency exists

in connection with this matter.

The Company may be subject to pending legal proceedings and regulatory actions in the ordinary course

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.

SUBSEQUENT EVENTS

At-the-Market Offering

Subsequent to June 30, 2025, the Company issued an aggregate of 7,329,889

shares of common stock pursuant to its at-the-market offering agreement (the “ATM Agreement”) with H.C.

Wainwright & Co.,

LLC, as sales agent.

In July 2025, the Company received net proceeds of approximately $ 26 million from such sales.

The Company intends

to use the proceeds for working capital, general corporate purposes, and to support ongoing strategic initiatives.

On August 6, 2025, the Company appointed Yilin

Lu as its President.

In connection with this appointment, Mr.

Lu was replaced on the Compensation Committee and the Nominating Committee

by Hong Chun Yeung, effective the same day.

On October 15, 2025, Dr.

Jing Lu resigned from

the Company’s Board of Directors and all associated committees.

The resignation was not due to any disagreement with the Company,

its management, or operations.

On October 20, 2025, the Board appointed Mr.

Kah Loong Randy Yeo as a new independent director.

was also designated as Chair of the Nominating and Corporate Governance Committee and as a member of the Audit and Compensation Committees.

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