LQR House Inc. 10-Q

ITEM 1A. RISK FACTORS Except as set forth below, there have been no material changes from the risk factors disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025. We may not realize the anticipated benefits of the Fusion Five acquisition, and the integration of Fusion Five’s operations may be difficult, costly, or disruptive. The acquisition of Fusion Five represents our entry into the financial services and securities brokerage industry, which is substantially different from our historical beverage alcohol operations. Successfully integrating Fusion Five’s operations, personnel, regulatory compliance functions, and financial reporting systems requires, and may continue to require, significant management attention and resources. We may encounter unforeseen difficulties, including differences in business practices, regulatory environments, and accounting systems between our historical operations and those of Fusion Five. Any failure to successfully integrate Fusion Five could adversely affect our business, financial condition, and results of operations. We may be unable to complete the remaining closings of the Fusion Five acquisition, which are subject to regulatory approvals and our ability to obtain additional financing. We have acquired an aggregate of 54% of Fusion Five’s issued and outstanding shares to date. The purchase of the remaining 46%, for an aggregate purchase price of $59,800,000, remains subject to the receipt of required regulatory approvals and our ability to secure additional financing. There can be no assurance that such approvals will be obtained or that adequate financing will be available on acceptable terms, or at all. Failure to complete the remaining closings could adversely affect our strategic plans, our investment in Fusion Five and our relationship with Fusion Five’s other shareholders. Our use of digital assets, including USDT, to fund a substantial portion of the Fusion Five acquisition, and Fusion Five’s use of digital assets in connection with its client-related operations, expose us to risks associated with stablecoins and digital asset markets. A substantial portion of the consideration paid for the Fusion Five acquisition was paid in USDT, a U.S. dollar-denominated stablecoin, and Fusion Five holds certain digital assets on behalf of its clients in USDT. Stablecoins are subject to risks relating to the issuer’s ability to maintain adequate reserves and honor redemptions, regulatory uncertainty regarding their treatment under U.S. and foreign law, cybersecurity and custodial risks associated with digital asset wallets and third-party trust companies, and the risk that a stablecoin may lose its peg to the U.S. dollar. The materialization of any of these risks could adversely affect the value of our digital assets, our liquidity and our ability to complete the remaining Fusion Five closings. Fusion Five depends on a single third-party execution broker, and a disruption to that relationship could adversely affect Fusion Five’s operations. Substantially all of Fusion Five’s client securities transactions are executed through a single third-party execution broker. Fusion Five does not itself hold a securities dealing license in each of the jurisdictions where its clients trade. A termination or disruption of this relationship, or a deterioration in the execution broker’s financial condition or regulatory standing, could impair Fusion Five’s ability to provide trading services to its clients and adversely affect our financial services segment. Fusion Five’s operations subject us to New Zealand regulatory requirements and foreign currency risk. Fusion Five is registered as a financial service provider in New Zealand and is subject to regulatory oversight that differs from the regulatory environment applicable to our historical U.S. operations. Changes in New Zealand financial services laws or regulation, or Fusion Five’s failure to maintain its registration or comply with applicable legal and regulatory requirements, could adversely affect our financial services segment. In addition, Fusion Five’s functional currency is the New Zealand dollar, and fluctuations in the NZD/USD exchange rate may affect the U.S. dollar value of Fusion Five’s assets, liabilities, and results of operations as reported in our consolidated financial statements. We have incurred substantial indebtedness in connection with the Fusion Five acquisition, which could adversely affect our financial condition. We issued $40,000,000 aggregate principal amount of promissory notes to fund a portion of the Fusion Five acquisition, which bear interest at 6.0% per annum and mature on May 20, 2028. Our ability to service this indebtedness depends on our future operating performance and financial condition, which are subject to prevailing economic conditions and other factors, many of which are beyond our control. Our failure to make required payments under the notes when due could result in an event of default, which could have a material adverse effect on our business, financial condition and results of operations. 39 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. MINE SAFETY DISCLOSURES Not applicable.