Form 10-Q LQR House Inc. For: Mar 31
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
For the transition period from ____________ to ____________
Commission file number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| 5306 Six Forks Rd Ste 107 PMB1290 | ||
| Raleigh, NC 27609 | ||
| (Address of principal executive offices) (Zip Code) | (Address of principal executive offices) (Zip Code) |
(Address of principal executive offices, including zip code)
Tel:
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and emerging growth company in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by check mark if this registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 15, 2026, the Company had
LQR HOUSE INC.
FORM 10-Q
TABLE OF CONTENTS
i
IMPLICATIONS OF BEING AN EMERGING GROWTH COMPANY
As a company with less than $1.235 billion in revenue during our most recently completed fiscal year, we qualify as an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act,”) as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As an emerging growth company, we may take advantage of specified reduced disclosure and other exemptions from requirements that are otherwise applicable to public companies that are not emerging growth companies. These provisions include:
| ● | Reduced disclosure about our executive compensation arrangements; |
| ● | Exemptions from non-binding shareholder advisory votes on executive compensation or golden parachute; and |
| ● | Exemption from auditor attestation requirement in the assessment of our internal control over financial reporting. |
We will remain an emerging growth company until the earliest of (i) the last day of the year in which we have total annual gross revenue of $1.235 billion or more; (ii) the last day of the year following the fifth anniversary of the first sale of the common equity securities pursuant to an effective registration under the Securities Act; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission.
In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.
ii
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LQR HOUSE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| As of | As of | |||||||
| March 31, | December 31, | |||||||
| 2026 | 2025 | |||||||
| ASSETS | (Unaudited) | (Audited) | ||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Accounts receivable, related party | ||||||||
| Advance for investment in joint venture | ||||||||
| Advance payment to distributor | ||||||||
| Prepaid expenses | ||||||||
| Due from related party | ||||||||
| Security deposit | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Right- of- use asset | ||||||||
| Deferred offering costs | ||||||||
| Investment in joint ventures | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued and other payables | ||||||||
| Accrued and other payables, related party | ||||||||
| Contract liabilities | ||||||||
| Due to related party | ||||||||
| Lease liability | ||||||||
| Total current liabilities | ||||||||
| Lease liability, non-current | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 14) | ||||||||
| Stockholders’ equity: | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Treasury stock, at cost ( | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See the accompanying notes to the unaudited condensed consolidated financial statements
1
LQR HOUSE INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2026 | 2025 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenue - services | $ | $ | ||||||
| Revenue - product | ||||||||
| Total revenues | ||||||||
| Cost of revenue - services | ||||||||
| Cost of revenue - product | ||||||||
| Total cost of revenue | ||||||||
| Gross (loss) profit | ( | ) | ||||||
| Operating expenses: | ||||||||
| General and administrative | ||||||||
| Sales and marketing | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Other income | ||||||||
| Total other income | ||||||||
| Income tax expense | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Weighted average common shares outstanding - basic and diluted | ||||||||
| Net loss per common share - basic and diluted | $ | ( | ) | $ | ( | ) | ||
See the accompanying notes to the unaudited condensed consolidated financial statements
2
LQR HOUSE INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
| Common Stock | Treasury Stock | Additional Paid-In | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balances at December 31, 2024 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Vesting of restricted stock units | - | |||||||||||||||||||||||||||
| Issuance of common stock pursuant to directors agreement | - | |||||||||||||||||||||||||||
| Issuance of common stock pursuant to ATM | - | |||||||||||||||||||||||||||
| Exercise of warrants | - | |||||||||||||||||||||||||||
| Effect of stock split | - | |||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balances at March 31, 2025 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||
| Balances at December 31, 2025 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balances at March 31, 2026 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||
See the accompanying notes to the unaudited condensed consolidated financial statements
3
LQR HOUSE INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2026 | 2025 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock based compensation | ||||||||
| Depreciation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Due to/from related party | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accounts payable, related party | ||||||||
| Accrued and other payables | ( | ) | ||||||
| Accrued and other payables, related party | ( | ) | ( | ) | ||||
| Contract liabilities | ||||||||
| Lease liability, net | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Payment of deferred offering cost | ( | ) | ||||||
| Issuance of common stock pursuant to exercise of warrants | ||||||||
| Issuance of common stock pursuant to ATM offering | ||||||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| Net change in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
| Supplemental disclosure of non-cash flow information: | ||||||||
| Issuance of common stock for accrued expenses | $ | $ | ||||||
| Subscription receivable | $ | $ | ||||||
See the accompanying notes to the unaudited condensed consolidated financial statements
4
LQR HOUSE INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
LQR House Inc. (“LQR” or the “Company”) was incorporated on
The Company operates in the beverage alcohol industry, owning specialty brands, providing marketing and distribution services. Through its wholly owned subsidiary LQR House Acquisition Corp., the Company operates CWSpirits.com (the “CWS Platform”), an e-commerce marketplace for spirits, wines, and champagnes serving customers throughout the United States through partnerships with licensed retail partners, including Country Wine & Spirits.
Through its wholly owned subsidiary SWOL Holdings Inc., incorporated in the State of Nevada on January 22, 2025, the Company develops and markets SWOL Tequila, a proprietary tequila brand. The Company also provides digital marketing services to alcohol industry brands.
Through its wholly-owned subsidiary YHC Online Limited, incorporated in Hong Kong in July 2025, the Company entered into joint venture agreements in December 2025 to cooperate in the creation and monetization of multi-channel network (“MCN”) content for digital platforms. Subsequent to March 31, 2026, all joint venture agreements were terminated and all amounts previously funded were returned to the Company in full. See Note 7 — Investment in Joint Ventures and Note 15 — Subsequent Events.
Reincorporation and Increase in Authorized Shares
On March 2, 2026, the Company’s stockholders approved the reincorporation of the Company from the State of Nevada to the State of Delaware, which was effected on the same date. In connection with the special meeting, stockholders also approved an increase in the number of authorized shares of common stock from
2. GOING CONCERN
The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has incurred net losses since inception, including a net loss of $
5
Management Plans
Subsequent to March 31, 2026, the Company received aggregate proceeds of $
On April 11, 2026, the Company entered into a share purchase agreement to acquire Fusion Five Continents Securities Limited (the “Target Company”), a New Zealand regulated brokerage enabling clients internationally to buy and sell securities electronically and to make stablecoin deposits for the trading of Hong Kong and United States equities, for total consideration of $
On March 11, 2026, the Company entered into a sales agreement with A.G.P./Alliance Global Partners, pursuant to which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $
Based on the above factors, management believes that the Company’s current cash position, together with the proceeds received subsequent to March 31, 2026 and the availability of its at-the-market equity facility, will be sufficient to fund the Company’s operations and minimum obligations for at least the next 12 months from the date these unaudited condensed consolidated financial statements are available to be issued.
Notwithstanding the above, there can be no assurance that the Company will successfully complete the proposed acquisition of Fusion Five Continents Securities Limited, obtain the required regulatory approvals, raise sufficient additional capital to fund subsequent acquisition closings, or achieve profitability from its operations. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“GAAP”). The Company’s fiscal year end is December 31.
The Company is an emerging growth company as the term is used in The Jumpstart Our Business Startups Act and has elected to comply with certain reduced public company reporting requirements; however, the Company may adopt accounting standards based on the effective dates for public entities when early adoption is permitted.
Unaudited Interim Financial Information
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 sheet. The financial data and the other information disclosed in these notes to the unaudited condensed consolidated financial statements related to the three-month periods are unaudited. Unaudited interim results are not necessarily indicative of the results for the full fiscal year.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2025 included in the Form 10-K filed with the SEC on April 15, 2026.
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of LQR House Inc. and its wholly-owned subsidiaries, LQR House Acquisition Corp., SWOL Holdings Inc., and YHC Online Limited. All intercompany transactions, balances, revenues, and expenses between the Company and its subsidiaries have been eliminated in consolidation. The Company does not have any variable interest entities or non-controlling interests.
6
Use of Estimates
The preparation of the Company’s 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. Significant estimates and assumptions reflected in these unaudited condensed consolidated financial statements include, but are not limited to, the allowance for credit losses on accounts receivable, the valuation allowance against deferred tax assets, stock-based compensation, and the fair value of equity instruments issued in connection with financing transactions. Actual results could differ materially from those estimates.
Concentrations of Credit Risk
The Company maintains its cash with a major financial institution located in the United States of America which it believes to be credit worthy. Balances are insured by the Federal Deposit Insurance Corporation up to $
Concentrations
The Company’s ability to derive revenue is reliant on its relationship with KBROS, LLC (“KBROS”) who currently handles product for the CWS Platform and fulfills the products sold by clientele using our marketing services. The discontinuance of such relationship or termination of the CWS Platform agreements would have a material negative impact on the Company’s operations.
Cash and Cash Equivalents
Cash and cash equivalents represent cash at bank and online payment platforms which are unrestricted as to withdrawal and use, and which have original maturities of three months or less.
Investments
The Company evaluated its investments in joint ventures under ASC 323, Investments — Equity Method and Joint Ventures. Although YHC Online Limited, a wholly-owned subsidiary of the Company, holds a
Property and Equipment
Property and equipment, net are stated at cost less accumulated depreciation and impairment, if any, and depreciated on a straight-line basis over the estimated useful lives of the assets. Cost represents the purchase price of the asset and other costs incurred to bring the asset into its intended use. Depreciation expenses are included in general and administrative expenses. Land is not depreciated since it has an indefinite useful life. Estimated useful lives are as follows:
7
The Company’s property and equipment consists of a motor vehicle with an estimated useful life of years.
Expenditure for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expenses as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the consolidated statements of operations.
Fair Value Measurements
The Company follows ASC 820, Fair Value Measurement, which defines fair value 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 classified and disclosed in one of the following three levels of the fair value hierarchy:
Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
Level 3—Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
The carrying values of the Company’s cash and cash equivalents, accounts receivable, due from/to related party, accounts payable, and accrued and other payables approximate their fair values due to the short-term nature of these instruments.
The Company’s cost method investments in equity securities are carried at cost, less impairment, and are not measured at fair value on a recurring basis. See Note 6.
The Company’s investments in joint ventures are carried at cost following rebuttal of the significant influence presumption under ASC 323, and are not measured at fair value on a recurring basis. See Note 7.
There were no transfers between Level 1, Level 2, or Level 3 fair value classifications during the three months ended March 31, 2026.
8
Accounts Receivable
Accounts receivable are recorded at the gross billing amount less an allowance for any uncollectible accounts due from the customers. Accounts receivable do not bear interest.
Since January 1, 2024, the Company adopted Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), using the modified retrospective transition method. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. Upon adoption, the Company changed the impairment model to utilize a forward-looking current expected credit losses (CECL) model in place of the incurred loss methodology for financial instruments measured at amortized cost and receivables resulting from the application of ASC 606, including contract assets.
The Company maintains an allowance for credit losses and records the allowance for credit losses as an offset to accounts receivable and the estimated credit losses charged to the allowance is classified as “General and administrative expenses” in the unaudited condensed consolidated statements of comprehensive income. The Group assesses collectability by reviewing accounts receivable on aging schedules because the accounts receivable were primarily consisted of receivables arising from provision of marketing services, product sales, CWS platform and vault. In determining the amount of the allowance for credit losses, the Company considers historical collectability based on past due status, the age of the balances, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect the Company’s ability to collect from customers. Delinquent account balances are written-off against the allowance for expected credit loss after management has determined that the likelihood of collection is not probable.
As of March 31, 2026 and December 31, 2025, the Company recorded an allowance for credit losses of $
Impairment of Long-Lived Assets
For long-lived assets the Company evaluates for impairment whenever events or changes indicate that the carrying amount of an asset may no longer be recoverable. The Company assesses the recoverability of the long-lived assets by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to receive from use of the assets and their eventual disposition. Such assets are considered to be impaired if the sum of the expected undiscounted cash flows is less than the carrying amount of the assets. The impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. The Company tests impairment of long-lived assets at the reporting unit level when impairment indicator appeared and recognizes impairment in the event at the carrying value exceeds the fair value of each reporting unit.
No impairment charge of long-lived assets was recorded for the three months ended March 31, 2026 and 2025.
9
Deferred Offering Costs
The Company complies with the requirements of FASB ASC 340-10-S99-1 with regards to offering costs. Prior to the completion of an offering, offering costs are capitalized. Upon completion of an offering, deferred offering costs are reclassified to additional paid-in capital as a reduction of the offering proceeds. If an offering is abandoned, the deferred offering costs are charged to expense in the period the offering is determined not to be completed.
As of March 31, 2026 and December 31, 2025, the Company had deferred offering costs of $
Contract Liabilities
The Company recognizes contract liabilities in accordance with ASC 606, Revenue from Contracts with Customers. A contract liability represents the Company’s obligation to transfer goods or services to a customer for which the Company has received consideration before the related performance obligation has been satisfied. Contract liabilities are recognized as revenue when the Company satisfies the related performance obligation. Due to the generally short-term duration of the relevant contracts, all performance obligations are satisfied within one year. Where transaction prices for marketing services, product sales, CWS platform and vault are received upfront from the customers, such receipts are recorded as contract liabilities and recognized as revenues either over the contract period or point in time upon service rendered.
The following table presents the activity in contract liabilities for the three months ended March 31, 2026 and 2025:
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2026 | 2025 | |||||||
| Balance, beginning of the period | $ | $ | ||||||
| Additions - consideration received in advance | ||||||||
| Revenue recognized | ( | ) | ||||||
| Balance, end of the period | $ | $ | ||||||
As of March 31, 2026 and December 31, 2025, the Company had contract liabilities of $
Related Parties
The Company follows ASC 850, Related Party Disclosures, for the identification and disclosure of related party transactions. Related parties include principal owners, management, members of their immediate families, affiliates, and other parties that can significantly influence the management or operating policies of the Company, or that can be significantly influenced by the Company. All material transactions with related parties are disclosed in the accompanying notes to the consolidated financial statements, with the exception of compensation arrangements that are established through the Company’s standard employment and compensation practices.
10
Revenue Recognition
In accordance with FASB ASC 606, Revenue from Contracts with Customers¸ the Company determines revenue recognition through the following steps:
| ● | Identification of a contract with a customer; |
| ● | Identification of the performance obligations in the contract; |
| ● | Determination of the transaction price; |
| ● | Allocation of the transaction price to the performance obligations in the contract; and |
| ● | Recognition of revenue when or as the performance obligations are satisfied. |
Revenue is recognized when performance obligations are satisfied through the transfer of control of promised goods to the Company’s customers in an amount that reflects the consideration expected to be received in exchange for transferring goods or services to customers. Control transfers once a customer has the ability to direct the use of, and obtain substantially all of the benefits from, the product. This includes the transfer of legal title, physical possession, the risks and rewards of ownership, and customer acceptance.
The Company derives its revenue from marketing services, sales via the CWS Platform, distribution of its SWOL Tequila and subscription-based membership revenue. Revenue is reported net of discounts.
Marketing Services
The Company provides integrated marketing services to third-party alcoholic beverage brands through its CWS Platform, including campaign strategy development, creation of promotional materials, and digital advertising execution over a defined campaign period, generally ranging from one to three months. In applying ASC 606-10-25-14, the Company has concluded that each contract contains a single performance obligation, as the promised services are not separately identifiable within the context of the contract and are combined to deliver a single integrated marketing campaign. In accordance with ASC 606-10-25-19, the Company determined that the individual services are not distinct, as they are highly interrelated and interdependent and do not provide benefit to the customer on a standalone basis. The services represent a series of distinct services that are substantially the same and have the same pattern of transfer.
Revenue is recognized over time in accordance with ASC 606-10-25-27, as the customer simultaneously receives and consumes the benefits of the services as they are performed. The Company measures progress using a time-elapsed output method over the campaign period. The Company has concluded that it acts as the principal under ASC 606-10-55-37A and 55-39, as it controls the services prior to transfer, maintains primary responsibility for fulfillment, and has discretion in directing third-party service providers. Accordingly, revenue is recognized on a gross basis. Revenue from marketing services is disaggregated and recognized over the campaign period, and contracts are generally short-term in nature; therefore, the Company does not disclose remaining performance obligations pursuant to the practical expedient in ASC 606-10-50-14(a).
CWS Platform
The Company sells wine and spirits directly to end customers through its CWSpirits.com platform. Each transaction contains a single performance obligation under ASC 606-10-25-14, consisting of delivery of the product to the customer. The Company determined that the product is distinct in accordance with ASC 606-10-25-19, as the customer can benefit from the product independently. Revenue is recognized at a point in time in accordance with ASC 606-10-25-30, when control transfers to the customer upon delivery.
11
The Company has concluded that it acts as the principal in these arrangements under ASC 606-10-55-37A and 55-39, as it establishes pricing, directs marketing activities, and bears financial inventory risk, including risk of loss. Accordingly, revenue is recognized on a gross basis. Revenue is disaggregated as e-commerce product revenue and recognized upon delivery, and the Company does not have material remaining performance obligations due to the short-term nature of transactions in accordance with ASC 606-10-50-14(a).
Product Sales
The Company generates wholesale revenue from the sale of SWOL Tequila, which is produced by a third-party manufacturer and delivered to CWS for retail distribution. Each arrangement contains a single performance obligation under ASC 606-10-25-14, consisting of delivery of the product to the customer. The Company determined that the product is distinct in accordance with ASC 606-10-25-19, as it can be consumed independently.
Revenue is recognized at a point in time in accordance with ASC 606-10-25-30, when control transfers upon delivery to the customer. The Company has concluded that it acts as the principal under ASC 606-10-55-37A and 55-39, as it controls the product prior to transfer, establishes pricing, and bears inventory and production risk. Accordingly, revenue is recognized on a gross basis. Revenue is disaggregated as wholesale product revenue and recognized upon delivery. Due to regulatory restrictions, ownership transfers upon delivery with no right of return. Remaining performance obligations are not material in accordance with ASC 606-10-50-14(a).
Vault
The Company offers a subscription-based membership program that provides customers with access to exclusive benefits, including discounts, free shipping, and promotional offers. Each subscription arrangement contains a single performance obligation under ASC 606-10-25-14, consisting of the provision of ongoing membership benefits over the subscription term. In accordance with ASC 606-10-25-19, the Company determined that the membership services are not distinct individually but represent a series of services that are substantially the same and provided continuously over the subscription period.
Revenue is recognized over time in accordance with ASC 606-10-25-27, as the customer simultaneously receives and consumes the benefits of the membership. Revenue is recognized on a straight-line basis over the subscription period. The Company has concluded that it acts as the principal under ASC 606-10-55-37A and 55-39, as it controls the membership program and establishes pricing. Accordingly, revenue is recognized on a gross basis. Prior to the acquisition of the CWS Platform, the Company acted as an agent and recognized net revenue. Revenue is disaggregated as subscription revenue and recognized over the subscription period. The Company records reserves for chargebacks and cancellations based on historical experience, and remaining performance obligations are not disclosed for contracts with an original expected duration of one year or less in accordance with ASC 606-10-50-14(a).
Principal vs. Agent Considerations
The Company evaluates whether it acts as a principal or an agent in each revenue arrangement in accordance with ASC 606-10-55-36 through 55-40, considering whether it controls the promised good or service before transfer to the customer, bears inventory risk, and has pricing discretion. Where the Company is the principal, revenue is recorded gross. Where the Company is the agent, revenue is recorded net. The Company has determined it acts as principal for CWS Platform transactions and SWOL Tequila sales and records revenue on a gross basis accordingly.
12
Disaggregation of Revenue
The following is a summary of the disaggregation of revenue for the three months ended March 31, 2026 and 2025:
| Three Months Ended | ||||||||
| March 31, | ||||||||
| Disaggregation of Revenues | 2026 | 2025 | ||||||
| CWS Platform | $ | $ | ||||||
| SWOL product sales | ||||||||
| Revenue - product | ||||||||
| Marketing | ||||||||
| Vault | ||||||||
| Revenue - services | ||||||||
| Total revenues | $ | $ | ||||||
The following table presents the timing of recognition of revenue for the three months ended March 31, 2026 and 2025:
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2026 | 2025 | |||||||
| Revenue recognized at a point in time | ||||||||
| CWS Platform | $ | $ | ||||||
| SWOL product sales | ||||||||
| Revenue - product | ||||||||
| Revenue recognized over time | ||||||||
| Marketing | ||||||||
| Vault | ||||||||
| Revenue - services | ||||||||
| Total revenues | $ | $ | ||||||
Cost of Revenue
Cost of revenue consists of all direct costs attributable to sales and performing marketing services. Cost of revenue includes product costs, packaging, shipping and other importing and delivery charges, as well as contracted marketing services. Cost of revenue also includes customer service personnel costs.
Sales and Marketing
Sales and marketing costs primarily consist of advertising, promotional expenses and marketing consulting and advisory services. Sales and marketing costs also include sales commissions.
Stock-Based Compensation
ASC 718-10 requires that share-based payment transactions with employees and non-employees, such as share options, be measured based on the grant-date fair value of the equity instrument issued and recognized as compensation expense over the requisite service period, with a corresponding addition to equity. Under this method, compensation cost related to employee share options or similar equity instruments is measured at the grant date based on the fair value of the award and is recognized over the period during which an employee is required to provide service in exchange for the award, which generally is the vesting period.
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Leases
The Company leases certain office space from third parties. Leases with an initial term of 12 months or less are not recorded on the balance sheet and lease expense is recognized on a straight-line basis over the lease term. For leases beginning in 2019 and later, at the inception of a contract management assesses whether the contract is, or contains, a lease. The assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the right to substantially all the economic benefit from the use of the asset throughout the period is obtained, and (3) whether the Company has the right to direct the use of the asset. At the inception of a lease, management allocates the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. The Company accounts for lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) separately from the non lease components (e.g., common-area maintenance costs).
Most leases include one or more options to renew, with renewal terms that can extend the lease term from one year or more. The exercise of lease renewal options is at the Company’s sole discretion. Renewal periods are included in the lease term only when renewal is reasonably certain, which is a high threshold and requires management to apply judgment to determine the appropriate lease term. The Company’s leases do not include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term. Certain lease agreements include rental payments adjusted periodically for inflation. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. All of the Company’s leases are classified as operating leases. The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a term of 12 months or less. The effect of short-term leases and initial direct costs on our right-of-use asset and lease liability was not material.
ASC 842 requires the Company to make certain assumptions and judgments in applying the guidance, including determining whether an arrangement includes a lease, determining the term of a lease when the contract has renewal or cancellation provisions, and determining the discount rate.
As the rate implicit in the lease is not usually available, the Company used an incremental borrowing rate based on the information available at the adoption date of ASC 842 in determining the present value of lease payments for existing leases. The Company will use information available at the lease commencement date to determine the discount rate for any new leases.
Net Loss per Share
Net earnings or loss per share is computed by dividing net income or loss by the weighted-average number of common shares outstanding during the period, excluding shares subject to redemption or forfeiture. The Company presents basic and diluted net loss per share. As all potentially dilutive securities are anti-dilutive as of March 31, 2026 and 2025, diluted net loss per share is the same as basic net loss per share for each period. The Company had dilutive instruments outstanding as of March 31, 2026.
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Segment Information
An operating segment is a component of the Company that engages in business activities from which it may earn revenue and incur expenses and is identified on the basis of the internal financial reports that are provided to and regularly reviewed by the Company’s chief operating decision maker in order to allocate resources and assess performance of the segment.
In accordance with ASC 280, Segment Reporting, operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (the “CODM”) in deciding how to allocate resources and in assessing performance. The Company’s revenue segments have similar economic characteristics, and they are managed as a single business unit. The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s CODM for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s CODM reviews results when making decisions about allocating resources and assessing performance of the Company. The Company has determined that there is only one reportable operating segment.
Recently Issued Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) — Improvements to Reportable Segment Disclosures, which requires enhanced disclosures about significant segment expenses and other segment items regularly provided to the chief operating decision maker, and expands interim disclosure requirements. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted ASU 2023-07 for the fiscal year ended December 31, 2024, on a retrospective basis. The adoption affected disclosures only and did not have a material impact on the Company’s consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) — Improvements to Income Tax Disclosures, which requires enhanced disclosures in the annual rate reconciliation, including specific categories of reconciling items, and disaggregation of income taxes paid by federal, state, and foreign jurisdictions. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted ASU 2023-09 for the fiscal year ended December 31, 2025. The adoption affected disclosures only and did not have a material impact on the Company’s consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40), which requires public entities to disclose, in the notes to the financial statements, specified information about certain costs and expenses included in expense line items on the face of the income statement. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2024-03 on its consolidated financial statements and disclosures.
In January 2025, the FASB issued ASU 2025-01, Income Statement — Reporting Comprehensive Income (Topic 220) — Clarifying the Effective Date, which clarifies the effective date of ASU 2024-03 for entities that do not have an issued interim financial statement before the issuance of ASU 2025-01. ASU 2025-01 is effective upon issuance. The adoption of ASU 2025-01 did not have a material impact on the Company’s consolidated financial statements.
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In March 2025, the FASB issued ASU No. 2025-04, Compensation — Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer, which clarifies the accounting for share-based payment awards granted to customers in connection with revenue arrangements, addressing the interaction between Topic 718 and Topic 606 with respect to measurement, classification, and recognition of such awards. ASU 2025-04 is effective for the Company for the fiscal year beginning January 1, 2026. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets: The ASU provides a practical expedient permitting entities to assume that conditions at the balance sheet date remain unchanged over the life of current accounts receivable and current contract assets when estimating expected credit losses. The guidance is effective for annual and interim reporting periods beginning after December 15, 2025, with early adoption permitted. The Company does not expect ASU 2025-05 to have a material impact on its consolidated financial statements.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements: The ASU requires entities to disclose events occurring since the end of the last annual reporting period that have a material impact on the entity. The amendments apply to all entities that present interim financial statements in accordance with GAAP. The guidance is effective for annual reporting periods beginning after December 15, 2027, and interim periods within those annual reporting periods, with early adoption permitted. The amendments may be applied either prospectively or retrospectively. The Company expects ASU 2025-11 to impact its disclosures only and does not expect it to affect its results of operations, financial condition or cash flows.
In December 2025, the FASB issued ASU 2025-12, Codification Improvements, which makes various non-substantive technical corrections and clarifications to the FASB Accounting Standards Codification. ASU 2025-12 is effective upon issuance. The Company does not expect the adoption of ASU 2025-12 to have a material impact on its consolidated financial statements.
4. PROPERTY AND EQUIPMENT, NET
Property and equipment, net consist of the following:
| As of | As of | |||||||
| March 31, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Motor vehicle | $ | $ | ||||||
| Less : Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation expense for the three months ended March 31, 2026 and 2025 was $
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5. ACQUISITION OF CWS PLATFORM
On November 1, 2023, LQR House Acquisition Corp. (the “Buyer”), a wholly owned subsidiary of the Company, and SSquared Spirits LLC (the “Seller”, “SSquared”) entered into a Domain Name Transfer Agreement (“Agreement”). Pursuant to the Agreement, the Seller irrevocably sold, assigned, transferred, and conveyed to the Buyer (a) all right, title, and interest in and to the domain name www.cwspirits.com (the “Domain Name”, “CWS Platform”), including its current registration and (b) any other rights (including, but not limited to, trademark rights associated with the Domain Name in any jurisdiction, all Internet traffic through the Domain Name and all Website Content (as defined in the Agreement) the Seller may have in the Domain Name, together with any goodwill associated therewith, in exchange for the payment by the Buyer of the purchase price of $
In connection with the Company’s purchase of the Domain Name, on November 1, 2023, the Company entered into a product handling agreement (“Product Handling Agreement”) with KBROS LLC (“KBROS”). Pursuant to the Product Handling Agreement, KBROS provides services relating to the purchase and delivery of spirits and other beverage products purchased by customers of the Company through websites associated with the Domain, including procurement and maintenance of all certificates, licenses, authorizations and registrations required to import, possess, promote, sell, distribute and receive payment for such products.
Under Regulation S-X 3-05, management determined that the CWS Platform acquisition constituted a business combination, and the Company recorded an intangible asset of $
During the year ended December 31, 2025, the Company determined that the CWS Platform intangible asset was fully impaired and recorded an impairment charge of $
6. INVESTMENTS, AT COST
The Company held minority equity interests in Cannon Estate Winery Ltd. and Chase Mocktails Ltd. (f/k/a DRNK Beverage Corp.), each accounted for under the cost method of accounting. As of March 31, 2026 and December 31, 2025, the carrying value of both investments was nil— following full impairment recognized during the years ended December 31, 2024 and 2025.
During the year ended December 31, 2025, the Company recognized impairment charges of $
7. INVESTMENT IN JOINT VENTURES
In December 2025, YHC Online Limited (“YHC”), a wholly-owned subsidiary of the Company, entered into four separate joint venture agreements with Bancroft Equity Limited, Emerald Wealth Inc., Meridian Financial Solutions Inc., and Sequoia Equity Group Inc., to cooperate in the creation of multi-channel network (“MCN”) content for digital platforms, including TikTok. Each joint venture is engaged in the creation and monetization of influencer-hosted content targeted at a specific geographic market. Under each agreement, YHC holds a
The following table summarizes the key terms of each arrangement as of December 31, 2025 and March 31, 2026:
| Co-Venturer | Jurisdiction | Target Market | JV Entity | Total Commitment | Funded | |||||||||
| Bancroft Equity Limited | $ | $ | ||||||||||||
| Emerald Wealth Inc. | ||||||||||||||
| Meridian Financial Solutions Inc. | ||||||||||||||
| Sequoia Equity Group Inc. | ||||||||||||||
| Total | $ | $ | ||||||||||||
| (1) |
The Company evaluated its investments under ASC 323, Investments — Equity Method and Joint Ventures. Although YHC holds a
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Each joint venture agreement provides YHC with a put right, exercisable at any time following the first anniversary of the respective agreement, pursuant to which YHC may require the co-venturer to repurchase YHC’s interest at a price equal to YHC’s total funded investment amount.
Of the aggregate $
No income or loss from the joint ventures was recognized during the three months ended March 31, 2026, as the investments are carried at cost and no dividends or distributions were declared by any joint venture entity during the period. impairment indicators were identified with respect to any joint venture investment as of March 31, 2026.
Subsequent to March 31, 2026, in April 2026, all four agreements were terminated and all amounts previously funded, aggregating $
8. ADVANCE PAYMENT TO DISTRIBUTOR
On March 25, 2025, the Company entered into a Distribution and Marketing Service Agreement with a Hong Kong entity pursuant to which the Company paid $
On April 1, 2025, the Company entered into a Distribution and Marketing Services Agreement with a Hong Kong entity pursuant to which the entity agreed to provide market access, promotional services, and distribution of the Company’s products and CWSpirits.com platform within the Asian market, excluding the Company’s SWOL Tequila product line. The total fee paid by the Company under the agreement is $
As of March 31, 2026, amortization had been recorded with respect to either arrangement, pending commencement of services.
In April 2026, both arrangements were terminated and all amounts previously paid, aggregating $
9. ACCRUED AND OTHER PAYABLES
Accrued and other payables consist of the following:
| As of | As of | |||||||
| March 31, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Accrued retention and settlement payments | $ | $ | ||||||
| Accrued consulting and other fees | ||||||||
| Taxes payable | ||||||||
| Accrued deferred offering costs | ||||||||
| Accrued compensation | ||||||||
| Accrued legal & professional fees | ||||||||
| Other accrued | ||||||||
| Total accrued and other payables | $ | $ | ||||||
| Other accrued expenses, related party | ||||||||
| Accrued retention and settlement payments, related parties | ||||||||
| Total accrued and other payables, related parties | $ | $ | ||||||
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10. STOCKHOLDERS’ EQUITY
Reincorporation and Increase in Authorized Shares
On March 2, 2026, the Company’s stockholders approved the reincorporation of the Company from the State of Nevada to the State of Delaware, which was effected on the same date. In connection with the special meeting, stockholders also approved an increase in the number of authorized shares of common stock from
2026 Stock Transactions
During the three months ended March 31, 2026, the Company did not issue any shares of common stock.
2025 Stock Transactions
During the three months ended March 31, 2025, the Company issued
During the three months ended March 31, 2025, the Company issued
Restricted Stock Units
As of December 31, 2025, all restricted stock units had been fully vested or forfeited and unrecognized compensation cost remained. No RSU activity occurred during the three months ended March 31, 2026. Stock-based compensation expense related to restricted stock units was $
11. RELATED PARTY TRANSACTIONS
KBROS and Ssquared Spirits LLC
The Company’s founder and Chief Executive Officer, who is a stockholder and member of the Board of Directors, has an economic interest in Ssquared Spirits LLC, the seller of the CWS Platform acquisition. The spouse of the Company’s former Chief Executive Officer and director is the President and controlling stockholder of KBROS, the managing member and director of Ssquared Spirits LLC, and a minority shareholder of the Company. See Note 5 for the CWS Platform acquisition from SSquared.
KBROS serves as the Company’s Product Handler pursuant to a Product Handling Agreement. Under the agreement, KBROS is entitled to a monthly fee of $
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In October 2024, the Company entered into a settlement and release agreement with KBROS and its controlling stockholder for an aggregate amount of $
See Note 14 for funding commitment with KBROS.
Country Wine & Spirits, Inc. (“CWS”)
CWS operates six brick-and-mortar locations for the sale of beer, wine, and spirits and specializes in logistics of shipping. To date, CWS has distributed all of the alcohol ordered by customers through the CWS Platform, via the Company’s Product Handler agreement with KBROS. The President of CWS is also the
As of March 31, 2026 and December 31, 2025, accounts receivable, related party, with CWS was $
Performance Bonus – Chief Executive Officer
During the three months ended March 31, 2026 and 2025, the Company paid its Chief Executive Office a performance bonus of nil and $
Due to/from Related Parties
As of March 31, 2026, the Company had $
As of March 31, 2026, there were amounts due to related parties. As of December 31, 2025, the Company had $
Lease
The Company historically leased space, which is now month-to-month, from South Doll Limited Partnership, an entity affiliated with the Company’s Chief Executive Officer. Pursuant to retention and settlement agreements entered into during the year ended December 31, 2024, the Company agreed to pay $
During the three months ended March 31, 2026, SWOL Holdings Inc., a wholly owned subsidiary of the Company, terminated its commercial lease agreement with CapMinds for office space located at 6538 Collins Avenue, Suite 344, Miami Beach, Florida 33141. CapMinds is an entity affiliated with Alexandra Hoffman, Secretary and Technical Writer of the Company and Chief Executive Officer of SWOL Holdings Inc. The lease had commenced March 15, 2025 at a monthly base rent of $
12. SEGMENT AND GEOGRAPHIC INFORMATION
The Company determines its operating segments in accordance with ASC 280, Segment Reporting, based on the information reviewed by the Chief Operating Decision Maker (“CODM”), who is the Company’s Chief Executive Officer. The CODM reviews financial performance and allocates resources on the basis of consolidated net loss as presented in the consolidated statements of operations. Accordingly, the Company has determined that it operates as a reportable segment in the beverage alcohol e-commerce and marketing industry. The financial information for this single segment is presented in the consolidated financial statements and accompanying notes contained herein.
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Geographic Information
The Company’s revenues are generated primarily in the United States. The Company’s subsidiary, YHC Online Limited, is incorporated and operates in Hong Kong; however, it did not generate revenue during the three months ended March 31, 2026 and 2025. Accordingly, substantially all revenues are attributable to the United States.
13. LEASES
SWOL Lease
In March 2025, SWOL Holdings Inc., a wholly-owned subsidiary of the Company, entered into a commercial lease agreement with CapMinds, a related party, for office space located at 6538 Collins Ave, Suite 344, Miami Beach, Florida, which also serves as the Company’s principal executive offices. CapMinds is an entity affiliated with Alexandra Hoffman, CEO of SWOL Holdings. See Note 11 - Related Party Transactions. The lease commenced on
During the three months ended March 31, 2026, the commercial lease agreement was terminated and determined to be ineffective. Accordingly, the Company derecognized the related right-of-use asset of $
14. COMMITMENTS AND CONTINGENCIES
Funding Commitment Agreement
On November 1, 2023, the Company entered into a Funding Commitment Agreement with KBROS, the Product Handler pursuant to the Product Handling Agreement as defined in Note 5. Pursuant to this agreement, the Company committed to provide annual funding to the Product Handler from time to time in the minimum amount of $
For further details regarding the settlement agreement, see Note 11.
Legal Proceedings — Kingbird Ventures, LLC
On July 11, 2025, the Company, along with several of its current and former officers and directors and other parties, was named as a defendant in an action filed in the Eighth Judicial District Court, Clark County, Nevada, captioned Kingbird Ventures, LLC v. Sean Dollinger, et al. The complaint alleged, among other things, breach of fiduciary duties, violations of Nevada Revised Statutes Sections 78.650, 78.630, 207.400, 90.570, and 32.010, alter ego liability, and civil conspiracy. The complaint sought, among other things, unspecified monetary damages, a declaratory judgment, injunctive relief to freeze the assets of the Company and certain other defendants, and relief to prevent material corporate decisions by the Company.
On September 22, 2025, the Company entered into two settlement agreements with Kingbird Ventures and the other parties named therein to resolve all matters related to the litigation.
The First Settlement Agreement resolved the direct claims asserted by Kingbird Ventures against the Company and other defendants, providing for the dismissal of all direct claims with prejudice, mutual releases among the parties, a cash payment obligation of $
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The Second Settlement Agreement resolved the stockholder derivative claims brought on behalf of the Company against certain current and former officers and directors, providing for the dismissal of the derivative action with prejudice, subject to court approval, mutual releases among the parties, and customary provisions including no admission of liability, cooperation undertakings, and confidentiality.
The Company recognized the full settlement amount of $
15. SUBSEQUENT EVENTS
The Company has evaluated subsequent events through May 15, 2026, the date these unaudited condensed consolidated financial statements were available to be issued, and identified the following matters requiring disclosure.
Termination of Joint Venture Agreements
In April 2026, all four joint venture agreements entered into in December 2025 by YHC Online Limited with Bancroft Equity Limited, Emerald Wealth Inc., Meridian Financial Solutions Inc., and Sequoia Equity Group Inc. were terminated. In connection with the terminations, all amounts previously funded under the agreements, aggregating $
Termination of Distribution and Marketing Service Agreements
In April 2026, both distribution and marketing service agreements entered into during 2025 with two Hong Kong entities were terminated. In connection with the terminations, all amounts previously paid under the agreements, aggregating $
Repayment of Amounts Due from Related Party
On April 10, 2026, the Company received $
Fusion Five Continents Securities Limited Share Purchase Agreement
On April 11, 2026, the Company entered into a share purchase agreement with Fusion Five Continents Securities Limited, a New Zealand limited company (the “Target Company”), and with the Target Company’s controlling shareholder, pursuant to which the Company agreed to acquire all of the issued and outstanding shares of the Target Company in multiple closings, at a total consideration of $
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PART I — FINANCIAL INFORMATION
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis are intended as a review of significant factors affecting our financial condition and results of operations for the periods indicated. The discussion should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and the other information included in our Annual Report on Form 10-K, filed with the SEC on April 15, 2026. In addition to historical information, the following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly from those anticipated in these forward-looking statements as a result of certain factors discussed herein and any other periodic reports filed and to be filed with the SEC.
Business Overview
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.
Through our wholly owned subsidiary SWOL Holdings Inc., we develop and market SWOL Tequila. Through our wholly owned subsidiary YHC Online Limited, we entered into joint venture agreements in December 2025 to cooperate in the creation and monetization of multi-channel network content for digital platforms; subsequent to March 31, 2026, all such joint venture agreements were terminated. See Note 7 — Investment in Joint Ventures and Note 15 — Subsequent Events.
Recent Developments
Reincorporation in Delaware and Increase in Authorized Shares
On March 2, 2026, the Company’s stockholders approved the reincorporation of the Company from the State of Nevada to the State of Delaware, which was effected on the same date. In connection with the special meeting, stockholders also approved an increase in the number of authorized shares of common stock from 350,000,000 to 1,500,000,000 shares, par value $0.0001 per share.
At-the-Market Offering
On March 11, 2026, the Company entered into a sales agreement with A.G.P./Alliance Global Partners, pursuant to which the Company may sell shares of its common stock having an aggregate offering price of up to $50,273,610 from time to time in at-the-market transactions. The sales agent is entitled to a commission of 3.0% of gross proceeds per share sold. No shares had been sold under the agreement as of March 31, 2026.
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Termination of Joint Venture Agreements
In April 2026, all four joint venture agreements entered into in December 2025 by YHC Online Limited were terminated. In connection with the terminations, all amounts previously funded, aggregating $18,494,000, were returned to the Company in full.
Termination of Distribution and Marketing Service Agreements
In April 2026, both distribution and marketing service agreements entered into during 2025 with two Hong Kong entities were terminated. In connection with the terminations, all amounts previously paid under the agreements, aggregating $3,279,000, were returned to the Company in full.
Fusion Five Continents Securities Limited Share Purchase Agreement
On April 11, 2026, the Company entered into a share purchase agreement with Fusion Five Continents Securities Limited, a New Zealand limited company, and with its controlling shareholder, pursuant to which the Company agreed to acquire all of the issued and outstanding shares of the company in multiple closings, at a total consideration of $126,880,000, payable in Tether (USDT). The initial tranche, representing 24% of the outstanding shares, closed on April 11, 2026 for $28,080,000. The remaining 76% of outstanding shares are to be acquired at a second closing for $98,800,000, subject to receipt of required regulatory approvals. The Company expects to require additional financing to fund the second tranche consideration of $98,800,000. Failure to secure adequate financing could delay or prevent the consummation of the second closing. The acquisition, if fully consummated, would represent a significant use of capital, and the Company’s ability to meet its other operational and liquidity needs during the interim period will depend on its ability to raise additional funds.
Results of Operations
Comparison of Three Months Ended March 31, 2026 and March 31, 2025
The following table sets forth key components of our results of operations during the three months ended March 31, 2026 and 2025.
| Three Months Ended | ||||||||||||||||
| March 31, | ||||||||||||||||
| 2026 | 2025 | Var. $ | Var. % | |||||||||||||
| Revenue - services | $ | 12,572 | $ | 77,356 | $ | (64,784 | ) | -84 | % | |||||||
| Revenue - product | 210,111 | 351,984 | (141,873 | ) | -40 | % | ||||||||||
| Total revenues | 222,683 | 429,340 | (206,657 | ) | -48 | % | ||||||||||
| Cost of revenue - services | 13,553 | 1,400 | 12,153 | 868 | % | |||||||||||
| Cost of revenue - product | 231,366 | 397,782 | (166,416 | ) | -42 | % | ||||||||||
| Total cost of revenue | 244,919 | 399,182 | (154,263 | ) | -39 | % | ||||||||||
| Gross (loss) profit | (22,236 | ) | 30,158 | (52,394 | ) | -174 | % | |||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | 2,780,900 | 2,023,161 | 757,739 | 37 | % | |||||||||||
| Sales and marketing | 105,000 | 406,853 | (301,853 | ) | -74 | % | ||||||||||
| Total operating expenses | 2,885,900 | 2,430,014 | 455,886 | 19 | % | |||||||||||
| Loss from operations | (2,908,136 | ) | (2,399,856 | ) | (508,280 | ) | 21 | % | ||||||||
| Other income (expense): | ||||||||||||||||
| Other income | 1,993,167 | 10,206 | 1,982,961 | 19429 | % | |||||||||||
| Total other income | 1,993,167 | 10,206 | 1,982,961 | 19429 | % | |||||||||||
| Income tax expense | - | - | - | |||||||||||||
| Net loss | $ | (914,969 | ) | $ | (2,389,650 | ) | $ | 1,474,681 | -62 | % | ||||||
Revenue
Service revenues were $12,572 for the three months ended March 31, 2026, compared to $77,356 for the three months ended March 31, 2025, a decrease of $64,784, or approximately 84%. The decrease was primarily attributable to a significant reduction in marketing service engagements through the CWS Platform and lower Vault membership subscription revenue during the period as the Company continued to realign its service offerings.
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Product revenues were $210,111 for the three months ended March 31, 2026, compared to $351,984 for the three months ended March 31, 2025, a decrease of $141,873, or approximately 40%. The decline reflects continued lower customer traffic and order activity through the CWS Platform, consistent with management’s strategic decision to reduce customer acquisition spending and focus on profitability with the existing customer base rather than pursuing top-line growth.
Cost of Revenue and Gross Profit (Loss)
For the three months ended March 31, 2026 and 2025, service cost of revenues were $13,553 and $1,400, respectively. The increase reflects a fixed cost retainer that commenced in July 2025, which has no corresponding expense in the 2025 period. The increase in service cost of revenue, combined with the significant decline in service revenues, resulted in a service gross loss of $981 in the 2026 period compared to service gross profit of $75,956 in the 2025 period.
Product cost of revenues was $231,366 and $397,782 during the three months ended March 31, 2026 and 2025, respectively. The decrease of $166,416, or approximately 42%, was primarily due to the decline in product revenue during the period, resulting from lower sales volume on the CWS Platform.
Gross loss was $22,236 for the three months ended March 31, 2026, compared to gross profit of $30,158 for the same period in 2025. The decrease was primarily attributable to the decline in service revenues and the increase in service cost of revenue described above, partially offset by the improvement in product gross loss.
General and Administrative
General and administrative expenses increased $757,739, or 37%, to $2,780,900 in the 2026 period from $2,023,161 in the 2025 period. The increase was primarily due to $1,150,000 of charges recorded, comprising $1,050,000 of indemnification payments and $100,000 of related legal obligations, with no comparable amounts in the 2025 period.
Sales and Marketing
Sales and marketing expenses were $105,000 for the three months ended March 31, 2026, compared to $406,853 for the three months ended March 31, 2025, a decrease of $301,853, or approximately 74%. The decrease was primarily attributable to reduced advertising and promotional expenditures as the Company continued to execute its strategy of minimizing marketing spend.
Other Income
Other income for the three months ended March 31, 2026 was $1,993,167, compared to $10,206 in the same period in 2025, increased of $1,982,961 primarily due to $1,944,603 of proceeds received under the Company’s directors and officers insurance policy, with no comparable amounts in the 2025 period.
Net Loss
Net loss for the three months ended March 31, 2026 was $914,969, compared to $2,389,650 for the three months ended March 31, 2025, an improvement of $1,474,681, or approximately 62%. The improvement was primarily due to $1,944,603 of insurance proceeds received, partially offset by $1,050,000 of indemnity-related charges included in general and administrative expenses and the decrease in gross profit discussed above.
Liquidity and Capital Resources
As of March 31, 2026 and December 31, 2025, we had cash and cash equivalents of $4,444,975 and $5,975,408, respectively. To date, we have financed our operations primarily through issuances of common stock and sales of our products and services.
These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The indicators include: (i) net losses incurred since inception, including a net loss of $914.969 for the three months ended March 31, 2026; (ii) an accumulated deficit of $68,744,390 as of March 31, 2026; and (iii) net cash used in operating activities of $1,450,433 for the three months ended March 31, 2026. Management is actively monitoring its liquidity position and evaluating various strategies to address these conditions. See Note 2 — Going Concern.
To fund future operations, the Company intends to pursue one or more of the following: additional equity or debt financings, proceeds from its at-the-market offering program, strategic partnerships, or other capital raising transactions. However, there can be no assurance that any such financing will be available on terms acceptable to the Company, or at all. If adequate capital cannot be secured, the Company may be required to curtail operations or take other measures to conserve cash.
During the three months ended March 31, 2026, the Company did not raise any capital through issuances of common stock. Subsequent to March 31, 2026, the Company received aggregate proceeds of $21,773,000 from April 9, 2026 to April 13, 2026 in connection with the termination of its joint venture agreements and distribution and marketing service agreements. See note 15 — Subsequent Events.
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On March 11, 2026, the Company entered into a sales agreement with A.G.P./Alliance Global Partners, pursuant to which the Company may sell shares of its common stock having an aggregate offering price of up to $50,273,610 from time to time in at-the-market transactions. As of March 31, 2026, no shares had been sold under the agreement.
The following table presents selected captions from our consolidated statement of cash flows for the three months ended March 31, 2026 and 2025:
Cash Flows
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2026 | 2025 | |||||||
| Net cash used in operating activities | $ | (1,450,433 | ) | $ | (6,619,373 | ) | ||
Net cash (used in) provided by financing activities | $ | (80,000 | ) | $ | 9,122,181 | |||
| Net change in cash and cash equivalents | $ | (1,530,433 | ) | $ | 2,502,808 | |||
Net Cash Used in Operating Activities
Net cash used in operating activities for the three months ended March 31, 2026 was $1,450,433, compared to $6,619,373 for the three months ended March 31, 2025, a decrease in cash used of $5,168,940, or approximately 78%. The significant reduction was primarily attributable to the non-recurrence of $4,116,608 in cash payments made during Q1 2025 to settle accrued and other payables to related parties, representing retention, bonus, and settlement obligations that had been accrued in prior periods, with no comparable outflows arising during the three months ended March 31, 2026.
The primary driver of cash used in operating activities during the three months ended March 31, 2026 was the net loss of $914,969, reflecting the Company’s continued investment in its operations and corporate infrastructure. Non-cash items included depreciation of $17,027 relating to the Company’s fixed assets. No stock-based compensation was recognized during the three months ended March 31, 2026, compared to $868,189 during the three months ended March 31, 2025, as all restricted stock units had been fully vested or forfeited as of December 31, 2025.
The most significant working capital movements during the three months ended March 31, 2026 were as follows:
Due to/from related party decreased by $494,478, reflecting net advances made to or payments received from related parties during the period.
Accrued and other payables increased by $86,975, driven by legal, audit, and consulting fees accrued during the quarter in connection with the Company’s SEC reporting obligations and ongoing corporate activities, which remained outstanding as of March 31, 2026.
Accrued and other payables — related party decreased by $191,372, reflecting cash payments made during the quarter to settle outstanding obligations to related parties that had been accrued in prior periods.
Accounts payable increased by $58,945, reflecting the timing of vendor invoice settlements remaining outstanding as of March 31, 2026.
Net Cash (Used in) Provided by Financing Activities
For the three months ended March 31, 2026, cash used in financing activities totaled $80,000, attributable to deferred offering costs related to the SWOL IPO. During the three months ended March 31, 2025, net cash provided by financing activities was $9,122,181, consisting of $4,051,415 from the exercise of outstanding warrants and $5,070,767 from the issuance of common stock pursuant to the Company’s at-the-market offering program.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies and Estimates
The preparation of our unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements. There have been no material changes to our critical accounting policies and estimates from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms promulgated by the U.S. Securities and Exchange Commission (the “SEC”), and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Because of the inherent limitations to the effectiveness of any system of disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that all control issues and instances of fraud, if any, with a company have been prevented or detected on a timely basis. Even disclosure controls and procedures determined to be effective can only provide reasonable assurance that their objectives are achieved.
As of March 31, 2026, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) pursuant to Rule 13a-15 of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are ineffective at the reasonable assurance level.
Our size has prevented us from being able to employ sufficient resources to enable us to have an adequate level of supervision and segregation. Therefore, it is difficult to effectively segregate accounting duties which comprises a material weakness in internal controls. We also lack effective board oversight and formal accounting controls for the timely and accurate closing of financial information.
To the extent reasonably possible given our limited resources, we intend to take measures to cure the aforementioned weaknesses, including, but not limited to, increasing the capacity of our qualified financial personnel to ensure that accounting policies and procedures are consistent across the organization and that we have adequate control over our Exchange Act reporting disclosures.
Management’s Report on Internal Controls over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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Management utilized the criteria established in the Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) to conduct an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2026. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have identified a material weakness due to lack of segregation of duties and have therefore concluded that our internal controls over financial reporting are not effective at the reasonable assurance level due to the existence of the following material weaknesses:
Segregation of Duties. Our size has prevented us from being able to employ sufficient resources to enable an adequate level of supervision and segregation of duties. It is therefore difficult to effectively segregate accounting duties, which constitutes a material weakness in internal controls.
Insufficient Accounting and Financial Reporting Personnel. The Company lacks sufficient financial reporting and accounting personnel with appropriate knowledge of U.S. generally accepted accounting principles (“U.S. GAAP”) and SEC reporting requirements. This deficiency has resulted in errors and adjustments identified during the audit process for the year ended December 31, 2025, and increases the risk that material misstatements in the consolidated financial statements would not be prevented or detected on a timely basis.
A material weakness is a deficiency, or combination of deficiencies, in our internal controls over financial reporting such that there is a reasonable possibility that a material misstatement of our consolidated financial statements would not be prevented or detected on a timely basis.
The Company is implementing measures designed to improve its internal control over financial reporting and remediate the identified material weaknesses, including the following:
| ● | Increasing the capacity of qualified financial personnel to ensure that accounting policies and procedures are consistent across the organization and that we have adequate controls over our Exchange Act reporting disclosures. |
| ● | Providing more regular training on an ongoing basis to our accounting personnel covering a broad range of U.S. GAAP and SEC financial reporting topics. |
| ● | Implementing enhanced review procedures over the financial statement close process and disclosures to reduce the risk of misstatement. |
There can be no assurance that these measures will be sufficient to remediate the identified material weaknesses or prevent future material weaknesses from arising.
As an emerging growth company, management’s assessment of internal control over financial reporting was not subject to attestation by our independent registered public accounting firm.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control procedures over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the three months ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. See Note 14 — Commitments and Contingencies to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information.
ITEM 1A. RISK FACTORS
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.
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.
ITEM 5. OTHER INFORMATION
On August 15, 2024, the Company received a subpoena from the SEC, as referenced in the SEC’s letter dated August 15, 2024. The subpoena requests the production of documents beginning on that date. The Company is cooperating with the investigation and has produced, and will continue to produce, documents that it believes are responsive to the SEC’s requests. The SEC has not notified the Company of the substantive reasons for the SEC’s action. The SEC’s action does not constitute formal litigation; however, it is believed that the investigation is nearing the end of the SEC’s initial stage of review. It is too early to determine whether the SEC intends to commence any enforcement action relating to the Company or any person affiliated with the Company. No assurance can be given regarding the outcome of the investigation or its potential impact on the Company..
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ITEM 6. EXHIBITS
| * | Filed herewith. |
| ** | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| LQR HOUSE INC. | ||
| Date: May 15, 2026 | By: | /s/ Sean Dollinger |
| Sean Dollinger | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: May 15, 2026 | By: | /s/ Kumar Abhishek |
| Kumar Abhishek | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |
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ATTACHMENTS / EXHIBITS