LQR House Inc.

1. NATURE OF OPERATIONS

LQR House Inc. (“LQR” or the “Company”) was incorporated on January 11, 2021, in the state of Delaware. On February 3, 2023, the Company changed its state of incorporation to the State of Nevada by merging into LQR House Inc., a Nevada corporation. On March 2, 2026, the Company reincorporated in the State of Delaware through a statutory conversion.

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. The CWS Platform was acquired in November 2023 from a related party. See Note 11 - Related Party Transactions.

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 December 31, 2025, all joint venture agreements were terminated in March 2026 and all amounts previously funded were returned to the Company in full. See Note 7 — Investment in Joint Ventures.

Reverse Stock Split

On April 21, 2025, the Company effected a 1-for-35 reverse stock split (the “Reverse Stock Split”) of its common stock, par value $0.0001 per share, pursuant to a Certificate of Change filed with the Secretary of State of the State of Nevada on April 16, 2025. In connection with the Reverse Stock Split, the number of authorized shares of common stock was reduced to 10,000,000. All share and per share amounts for all periods presented in these consolidated financial statements and accompanying notes have been retroactively adjusted to reflect the Reverse Stock Split.

On June 2, 2025, the Company increased the number of authorized shares of common stock from 10,000,000 to 350,000,000 shares, par value $0.0001 per share, pursuant to a Certificate of Amendment filed with the Secretary of State of Nevada. The increase was approved by the Company’s stockholders at the Annual Meeting of Stockholders held on May 30, 2025.

2. GOING CONCERN

The accompanying 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 net losses of $25,522,618 for the year ended December 31, 2025. Net cash used in operating activities was $33,817,140 for the year ended December 31, 2025. As of December 31, 2025, the Company had an accumulated deficit of $67,829,421.

Management Plans

Subsequent to December 31, 2025, the Company entered into a new at-the-market Sales Agreement with A.G.P./Alliance Global Partners, dated March 11, 2026, under which the Company may offer and sell shares of common stock having an aggregate offering price of up to $50,273,610, subject to market conditions and applicable securities law limitations. In addition, on March 2, 2026, the Company’s stockholders approved an increase in the number of authorized shares of common stock from 350,000,000 to 1,500,000,000, providing additional capacity to support future equity financing.

In addition, the management terminate the joint venture agreements, distribution and marketing service agreements, the Company have received back the fund’s total of $21,773,000 from April 9 to 13, 2026.

Based on the above factors, the management believe that the Company will be able to generate sufficient positive cash flows from the continued operations and obtain additional funding in order to enable the Company to meet the operating requirements and to pay their debts as and when they fall due. As such, the management has a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future and determined that it is appropriate for the consolidated financial statements of the Company to be prepared on going concern basis in the next 12 months from the date of issuance of consolidated financial statements.

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.

Principles of Consolidation

The 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.

A subsidiary is an entity in which the Company holds a controlling financial interest, which is generally evidenced by direct or indirect ownership of a majority of the outstanding voting shares or the power to govern the financial and operating policies of the entity in accordance with ASC 810,Consolidation.

Subsidiaries are consolidated from the date on which control is obtained and are deconsolidated from the date on which control ceases. The results of operations of subsidiaries are included in the consolidated statements of operations from the effective date of acquisition or formation.

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.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, the valuation of cost method investments, 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. In accordance with ASC 250,Accounting Changes and Error Corrections, changes in accounting estimates are recognized prospectively in the period of change and, if applicable, future periods. 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 $250,000. At times, the Company maintains balances in excess of the federally insured limits.

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.

Furthermore, the Company relies and expects to continue to rely on a small number of vendors. The loss of one of these vendors may have a negative short-term impact on the Company’s operations. However, the Company believes there are acceptable substitute vendors that can be utilized longer term.

Cash and Cash Equivalents

Cash and cash equivalents represent cash at bank and online payment platform which are unrestricted as to withdrawal and use, and which have original maturities of three months or less.

Marketable Securities

During the year ended December 31, 2024, the Company held investments in marketable securities which were classified as trading securities and carried at fair value. These investments had a readily determinable fair value and were recognized as Level 1 financial instruments within the fair value hierarchy. The Company did not hold any marketable securities as of December 31, 2025 or during the year then ended.

Investments

The Company holds two categories of long-term investments: cost method investments in equity securities without readily determinable fair values, and investments in joint ventures accounted for under ASC 323.

Cost Method Investments

In accordance with ASC 321-10-35-2, equity investments without readily determinable fair values over which the Company does not exercise significant influence are carried at cost, less any impairment. The Company reviews such investments at each reporting period for indicators of impairment. If events or changes in circumstances indicate that the carrying value of an investment may not be recoverable, the Company assesses whether the decline in value is other than temporary. If such a determination is made, the carrying value is written down to estimated fair value with the resulting loss recognized in the consolidated statements of operations. As of December 31, 2025, all cost method investments held by the Company had been fully impaired

Investments in Joint Ventures

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 20% ownership interest in each joint venture entity, the Company has determined that significant influence does not exist. This conclusion is supported by the express terms of each joint venture agreement, which explicitly prohibit YHC from appointing directors or officers of, or participating in the day-to-day management or operations of, any joint venture entity. As the presumption of significant influence has been rebutted, the equity method of accounting has not been applied, and the investments are carried at cost. Dividends or distributions received are recognized as income when declared. The Company reviews its investments for indicators of impairment at each reporting period. If the carrying value of an investment exceeds its estimated fair value and the decline is not expected to recover, the carrying value is written down to fair value with the resulting loss recognized in the consolidated statements of operations.

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:

The Company’s property and equipment consists of a motor vehicle with an estimated useful life offive years.

Expenditure for maintenance and repairs, which do no 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:

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 year ended December 31, 2025.

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 December 31, 2025 and 2024, the Company recorded an allowance for credit losses of $67,948 andnil, respectively. For the years ended December 31, 2025 and 2024, the Company has recorded bad debt expense of $64,530 andnil, respectively.

Intangible Assets

An intangible asset is recognized when it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the cost of the asset can be measured reliably. Intangible assets are initially recognized at cost, less any accumulated amortization and any impairment losses. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates.

The Company’s domain names are considered to have indefinite useful lives. Costs to renew domain names are expensed as incurred.

During the year ended December 31, 2025, the Company determined that its domain name intangible asset was fully impaired and recorded an impairment charge of $10,000. As of December 31, 2025, the Company had no intangible assets remaining on the consolidated balance sheet.

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 years ended December 31, 2025 and 2024.

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 December 31, 2025, the Company had deferred offering costs of $203,950 relating to the registration of securities of SWOL Holdings Inc., a wholly-owned subsidiary of the Company, in connection with its Form S-1 registration statement. As of December 31, 2024, the Company hadno deferred offering costs.* *

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 years ended December 31, 2025 and 2024:

As of December 31, 2025 and 2024, the Company had contract liabilities of $10,628 andnil, respectively, representing advance payments received from customers for goods or services not yet delivered. The Company expects to recognize the balance outstanding as of December 31, 2025, as revenue within the next twelve months as the related performance obligations are satisfied.

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.

Revenue Recognition

In accordance with FASB ASC 606,Revenue from Contracts with Customers¸ the Company determines revenue recognition through the following steps:

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 606-10-50-20.

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.

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 606-10-50-20.

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 606-10-50-20.

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-

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.

Disaggregation of Revenue

The following is a summary of the disaggregation of revenue for the years ended December 31, 2025 and 2024:

The following table presents the timing of recognition of revenue for the years ended December 31, 2025 and 2024:

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.

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

Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the year. Diluted net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, adjusted for the potentially dilutive effect of outstanding equity awards and other convertible instruments. Potentially dilutive securities are excluded from the computation of diluted net loss per share when their inclusion would be anti-dilutive. As the Company incurred a net loss for each of the years ended December 31, 2025 and 2024, all potentially dilutive securities are anti-dilutive and diluted net loss per share is the same as basic net loss per share for both periods presented.

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 thechief 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.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740,Income Taxes, using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based on temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates expected to be in effect in the years in which those temporary differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company records a valuation allowance against deferred tax assets to the extent it is more likely than not that some or all of the deferred tax assets will not be realized based on available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, and the history of operating losses.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the relevant taxing authority based on the technical merits of the position. The tax benefit recognized is measured as the largest amount of benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. Interest and penalties related to uncertain tax positions, if any, are recognized as a component of income tax expense.

The Company adopted ASU 2023-09,Improvements to Income Tax Disclosures, for the fiscal year ended December 31, 2025. ASU 2023-09 requires enhanced disclosures in the rate reconciliation and additional disaggregation of income taxes paid. The adoption of ASU 2023-09 affected disclosures only and did not have an impact on the Company’s consolidated financial statements.

Recently 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.

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 consisted of the following as of December 31, 2025 and 2024:

Depreciation expense for the years ended December 31, 2025 and 2024 was $28,378 andnil, respectively.

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 $10,000.

In connection with the Company’s purchase of the Domain Name, on November 1, 2023, the Company entered into a product handling agreement (“Product Handling Agreement”) with KBROS LLC (“KBROS”). Pursuant to the Product Handling Agreement:

Commencing as of the Effective Date of this Agreement, Product Handler shall provide to the Company the following services relating to the purchase and delivery (“Handling”) of spirits and other beverage products (referred to herein as “Product” and the “Products”) purchased by customers of the Company through or in relation to websites associated with the Domain:

Under Regulation S-X 3-05, management determined that the CWS Platform acquisition constituted a business combination as the revenue producing activity (e-commerce sales) was expected to be similar both pre and post-domain name acquisition. As such, the Company recorded an intangible asset of $10,000 for the purchase price consideration of the domain name.

Management assessed the fair value of the Domain Name and CWS Platform in determining to allocate the $10,000 to the domain name. In making such determination, management considered the related party nature of the transaction, the current environment for direct-to-consumer alcoholic beverage companies and the related competition in which they operate, and the fact that the initial and continued operation of the CWS platform is completely dependent on the relationship between the Company, our CEO and a minority shareholder, who co-owned SSquared and operates KBROS, LLC (“KBROS”, or “Product Handler”), the Company’s contracted product handler. Without such relationship, which can be terminated in certain circumstances, the underlying CWS Platform would be unable to operate as intended until a suitable alterative product handler would be identified. Therefore, no fair value in excess of the consideration provided was considered.

The Company has consolidated the results of operations of the CWS Platform since November 1, 2023. During the year ended December 31, 2025, the Company determined that the CWS Platform intangible asset was fully impaired. The Company recorded an impairment charge of $10,000, which is included in impairment of investments in the consolidated statements of operations for the year ended December 31, 2025.

6. INVESTMENTS, AT COST

The Company held minority equity interests in Cannon Estate Winery Ltd. and DRNK Beverage Corp. (subsequently renamed Chase Mocktails Ltd.), both accounted for under the cost method as the Company does not exercise significant influence over either investee. During the year ended December 31, 2025, both investments were fully impaired and written off.

Cannon Estate Winery Ltd.

On May 19, 2024, the Company acquired approximately 9.99% of the common shares of Cannon Estate Winery Ltd., a British Columbia corporation (“Cannon”), pursuant to a Share Exchange Agreement with a majority shareholder and director of Cannon. The Company issued 750,000 shares of its common stock in exchange for 113,085 common shares of Cannon. The investment was recorded at $817,500, representing the fair value of the 750,000 shares issued based on a per share price of $1.09 on the acquisition date.

During the year ended December 31, 2025, the Company recognized an impairment charge of $817,500 on its investment in Cannon. The impairment was triggered by deterioration in Cannon’s financial performance, reduced prospects for recovery of carrying value.

Chase Mocktails Ltd (f/k/a DRNK Beverage Corp.)

On June 7, 2024, the Company consummated an acquisition of approximately 8.58% of common shares of DRNK Beverage Corp. (“DRNK”) which became Chase Mocktails Ltd., pursuant to a Subscription Agreement (“DRNK Agreement”). Pursuant to the Agreement, the Company subscribed for and purchased from DRNK 1,920,000 common shares of DRNK at a price of $2.50 per share for an aggregate amount of $4,800,000. Upon the closing of the DRNK Agreement, the Company reclassified $4,800,000 which was held as a deposit in escrow to investments on the consolidated balance sheet.

As of December 31, 2024, the Company recognized an impairment expense of $4,500,000 related to its investment with DRNK. The impairment reflects the difference between the carrying value and the fair value of investment, as determined by the market conditions.

During the year ended December 31, 2025, the Company recognized an additional impairment charge of $300,000. The total cumulative impairment recognized on this investment is $4,800,000.

7. INVESTMENT IN JOINT VENTURES

In December 31, 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 20% minority ownership interest and has no rights to appoint directors or officers of, or participate in the day-to-day management or operations of, any joint venture entity. The majority partner in each joint venture retains full operational control. None of the co-venturers is a related party of the Company.

The following table summarizes the key terms of each arrangement as of December 31, 2025:

The Company evaluated its investments under ASC 323,Investments — Equity Method and Joint Ventures. Although YHC holds a 20% ownership interest in each joint venture entity, the Company has determined that significant influence does not exist over the three formed joint venture entities, as the express terms of each joint venture agreement explicitly prohibit YHC from appointing directors or officers of, or participating in the day-to-day management or operations of, any joint venture entity. As the presumption of significant influence has been rebutted, the equity method of accounting has not been applied, and the investments are carried at cost.

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 $24,000,000 total commitment, $18,494,000 had been funded as of December 31, 2025, comprising $14,670,000 funded to the three formed joint venture entities and $3,824,000 advanced to Sequoia Equity Group Inc. pending formation of the Middle East joint venture entity.

No income or loss from the joint ventures was recognized during the year ended December 31, 2025, as the investments are carried at cost and no dividends or distributions were declared by any joint venture entity during the period. No impairment indicators were identified with respect to any joint venture investment as of December 31, 2025, based on the early stage of operations and the contractual put right providing for full recovery of the funded investment amount from each respective co-venturer.

In April 2026, all four agreements were terminated and all amounts previously funded, aggregating $18,494,000, were returned to YHC in full. Following the terminations, the Company has no remaining joint venture commitments or obligations.

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 $529,000 for market access, brand development, and distribution services within the Asian market, excluding the Company’s SWOL Tequila product line. The amount has been recorded as a prepaid distribution and marketing cost and will be recognized as expense over the period in which services are rendered. As of December 31, 2025, no amortization has been recorded pending commencement of service under the arrangement.

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, including selling through its network of distributors to wholesale and retail accounts such as bars, hotels, restaurants, and other licensed outlets, excluding the Company’s SWOL Tequila product line. Under the arrangement, products are distributed on a consignment basis, with title retained by the Company until sold, and the distributor remits proceeds to the Company on a cost plus 20% basis (FOB Mexico), payable in quarterly installments. The total fee paid by the Company for market access, promotional services, and distribution rights under the agreement is $2,750,000, which has been recorded as a prepaid distribution and marketing cost and will be recognized as expense commensurate with the performance of services. As of December 31, 2025, no amortization has been recorded pending commencement of services under the arrangement.

In April 2026, both arrangements were terminated and all amounts previously paid, aggregating $3,279,000, were returned to the Company in full. As a result, the Company does not anticipate recording any expense or loss in connection with these arrangements.

9. ACCRUED AND OTHER PAYABLES

Accrued and other payables consist of the following:

From October to December 2024, the Company entered into bonus and retention agreements reflect to retain key talent and incentivize critical personnel, including executives, directors, other related entities (See Note 11) and vendors. These were designed to ensure continuity in leadership, governance and support the Company’s long-term goals with key consultants and vendors, even though the Company is not currently profitable.

As of December 31, 2024, $6,484,729 were accrued and unpaid. During the year ended December 31, 2025, the Company paid approximately $5,755,025 of these previously accrued balances. The remaining balance of $729,704 remains accrued as of December 31, 2025, of which $715,975 relates to related parties and $13,729 pertains to other parties. Subsequent to December 31, 2025, the Company entered into an offset arrangement pursuant to which the outstanding accounts receivable, related party balance of $232,283 owed by Country Wine & Spirits, Inc. was offset against the accrued retention and settlement payments due to Kbros LLC of $675,975. The President of CWS is also the 100% owner of KBROS, the Company's contracted Product Handler, and accordingly CWS and KBROS are treated as affiliated related parties. The offset resulted in a net reduction of both balances by $232,283 with no cash exchanged.

10. STOCKHOLDERS’ EQUITY* *

Reverse Stock Split

On April 16, 2025, the Company filed a Certificate of Change to its Articles of Incorporation with the Secretary of State of the State of Nevada to effect a 1-for-35 reverse stock split (the “Reverse Stock Split”) of its common stock, par value $0.0001 per share, which became effective on April 21, 2025. Pursuant to the Reverse Stock Split, every 35 shares of the Company’s issued and outstanding common stock were automatically converted into one share of common stock. No fractional shares were issued; fractional amounts were rounded up to the nearest whole share at the individual stockholder level. The par value per share remained unchanged at $0.0001. All share and per share amounts in these consolidated financial statements have been retroactively adjusted to reflect the Reverse Stock Split for all periods presented.

Increase in Authorized Shares

On June 2, 2025, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of Nevada to increase the number of authorized shares of common stock from 10,000,000 to 350,000,000 shares, par value $0.0001 per share. The increase was approved by the Company’s stockholders at the Annual Meeting of Stockholders held on May 30, 2025.

2025 Stock Transactions

During the year ended December 31, 2025, the Company issued 13,434,601 shares of common stock pursuant to its at-the-market offering program under the At The Market Offering Agreement dated September 13, 2024 with H.C. Wainwright & Co., LLC, for aggregate net proceeds of $43,199,134.

Exercise of Warrants

During the year ended December 31, 2025, the Company issued 210,463 shares of common stock upon the cash exercise of outstanding warrants for aggregate gross proceeds of $4,051,415. As of December 31, 2025, no warrants remain outstanding.

Registered Direct Offering

On December 17, 2025, the Company entered into securities purchase agreements with certain investors and certain directors, officers, and employees of the Company for the purchase and sale of 7,249,972 shares of common stock at a price of $0.90 per share in a registered direct offering, for aggregate gross proceeds of approximately $6,524,975. The offering closed on December 19, 2025. Pursuant to a Placement Agency Agreement, A.G.P./Alliance Global Partners acted as sole placement agent and received a cash fee equal to 5.0% of gross proceeds. Net proceeds to the Company after placement agent fees were approximately $6,078,701. The shares were offered pursuant to the Company’s Registration Statement on Form S-3 (Registration No. 333-282118).

Separation Agreements

On January 2, 2025, the Company issued 3,334 shares of common stock to Avraham Ben-Tzvi in recognition of his service as a director. The shares were valued at $51.80 per share based on the grant-date fair value, for total non-cash compensation of $172,678, recognized as general and administrative expense during the year ended December 31, 2025.

On April 2, 2025, in connection with the resignation of David Lazar as President and as a member of the Board of Directors, the Company issued 2,857 shares of common stock pursuant to a Separation Agreement, which also provided for a cash payment of $415,000. The expense associated with the issuance of these shares of $111,000 was fully recognized during the year ended December 31, 2024. No additional expense related to this agreement was recognized during the year ended December 31, 2025. The shares are subject to a one-year lock-up agreement.

Consultant Agreement

On June 3, 2025, the Company issued 33,000 shares of common stock pursuant to an Advisory Services Agreement with a third party for capital markets and investor relations advisory services. The shares were valued at $1.44 per share based on the agreement date, resulting in total non-cash compensation expense of $47,520, recognized as general and administrative expense during the year ended December 31, 2025.

2024 Stock Transactions

Common Stock Issued for Investment

In May 2024, the Company issued 21,429 shares of common stock pursuant to the Cannon Agreement for a fair value of $817,500, representing 113,085 common shares of Cannon Estate Winery Ltd. See Note 6 - Investments, at Cost.

Securities Purchase Agreements

On October 15, 2024, the Company entered into a Securities Purchase Agreement with David E. Lazar, pursuant to which the Company issued 31,481 shares of common stock at a price of $19 per share for gross proceeds of $606,000.

In December 2024, the Company issued 124,364 shares of common stock to several accredited investors at a price of $19 per share andfive-year warrants to purchase an aggregate of 311,688 shares of common stock at the exercise price of $19 per share (the “Warrant”) pursuant to the Securities Purchase Agreement (“Lazar Purchase Agreement”), dated October 15, 2024 by and between the Company and David E. Lazar. These investors obtained the rights to the issuance of such securities pursuant to the assignment of rights of a purchaser by David Lazar as provided for in the Lazar Purchase Agreement. The Company received net proceeds of $2,394,000 pursuant to the transaction.

In December 2024, the Company issued 18,183 share of common stock at a price of $19 per share to various investors pursuant to a Securities Purchase Agreement for aggregate gross proceeds of $350,020.

During the year ended December 31, 2024, the Company issued 42,445 share of common stock pursuant to its at-the-market offering program for net proceeds of $1,543,079.

Exercise of Warrants

In December 2024,59,366 share of common stock were issued pursuant 101,226 cashless exercise of outstanding warrants. As of December 31, 2024,210,462 warrants remained outstanding.

Repurchase of Common Stock

In January 2024, the Company purchased 5,447 share of common stock for $547,415, which is recorded as treasury stock in the accompanying consolidated balance sheets and statements of stockholders’ equity.

Restricted Stock Units

In August 2023, the Company granted 893 restricted stock units, the Director RSU’s, which were to vest in eight equal quarterly installments commencing on October 1, 2023. On August 30, 2023, the Board authorized deferring the vesting of the Director RSUs until such date that the 2021 Plan is amended, which occurred on December 19, 2024, at which time vesting resumed. The 2023 Director RSUs had a grant-date fair value of $6,266,533.

In December 2024, the Company granted 5,714 restricted stock units to four newly elected independent directors 1,429 RSUs each (the “2024 Director RSUs”), vesting in eight equal quarterly installments commencing in the first quarter of 2025, subject to continued service. The 2024 Director RSUs had a grant-date fair value of $55.65 per unit, for an aggregate grant-date fair value of $318,000.

The following table summarizes RSU activity for the years ended December 31, 2025 and 2024:

Stock-based compensation expense recognized in connection with RSU vesting was $1,712,769 and $2,533,256 for the years ended December 31, 2025 and 2024, respectively, recorded within general and administrative expenses in the consolidated statements of operations. As of December 31, 2025, all restricted stock units have been fully vested or forfeited and there isno unrecognized compensation cost remaining.

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 with 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 which KBROS provides product procurement, order fulfillment, and regulatory compliance services in connection with the CWS Platform. Under the agreement, KBROS is entitled to a monthly fee of $40,000 plus reimbursement of shipping and handling fees incurred in fulfilling customer orders, and a bonus upon reaching certain revenue milestones. The Company incurred product handling fees of $40,000 and $480,000 to KBROS for the years ended December 31, 2025 and 2024, respectively, recorded within cost of revenue in the consolidated statements of operations. In addition, for the years ended December 31, 2025 and 2024, the Company paid $100,000 and 200,000, respectively, in incentive compensation, which is included in sales and marketing expenses in the consolidated statements of operations.

In October, 2024, the Company entered into a settlement and release agreement with KBROS, and its controlling stockholder, for an aggregate amount equal to $4,100,000, which is included in general and administrative expenses in the consolidated statements of operations. As of December 31, 2025 and December 31, 2024, $675,975 and $3,600,000, respectively, remained unpaid and were included in accrued and other payables, related party on the consolidated balance sheet.

See Note 15 for funding commitment with KBROS.

Country Wine & Spirits, Inc. (“CWS”)

CWS operates six brick and mortar locations for the sale of beer, wine, spirits and create value in retail locations throughout Southern California and specializes in logistics of shipping and helping brands reach customers. To date CWS has distributed all of the alcohol ordered by customers through the CWS Platform, via our Product Handler agreement with KBROS. The President of CWS is also the 100% owner of KBROS, the Product Handler.

As of December 31, 2025, the Company had gross accounts receivable, related party with CWS of $300,231, against which the Company recorded an allowance for credit losses of $67,948, resulting in a net carrying value of $232,283, included in accounts receivable, related party on the consolidated balance sheet. As of December 31, 2024, accounts receivable, related party with CWS was $149,510 with no allowance recorded. Subsequent to December 31, 2025, the Company offset the outstanding receivable balance against regular payables due to KBROS, resulting in a net settlement of the amount owed.

Performance Bonus – Chief Executive Officer

During the years ended December 31, 2025 and 2024, the Company paid its Chief Executive Officer a performance bonus of $100,000 and $200,000 for achieving certain revenue levels through the CWS Platform, which is included under sales and marketing expense in the consolidated statements of operations.

Retention Agreements

In October 2024, the Company entered into a retention agreement with its Chief Financial Officer whereby a retention bonus of $550,000 was awarded for continued services. This amount was included in general and administrative expenses in the consolidated statements of operations for the year ended December 31, 2024. As of December 31, 2025 and 2024, $0 and $250,000, respectively, remained unpaid and is included within accrued and other payables, related party in the consolidated balance sheets.

In October 2024, the Company entered into a retention agreement with its Chief Executive Officer, and entities affiliated with the CEO, whereby a retention bonus of $850,000 was awarded for continued services. This amount was included in general and administrative expenses in the consolidated statements of operations for the year ended December 31, 2024. As of December 31, 2025 and 2024, $0 and $800,000, respectively, remained unpaid and is included within accrued and other payables, related party in the consolidated balance sheets.

In October 2024, the Company entered into a retention agreement with its Chief Marketing Officer, Jaclyn Hoffman, whereby a retention bonus of $285,000 was awarded for continued services. This amount was included in general and administrative expenses in the consolidated statements of operations for the year ended December 31, 2024. As of December 31, 2025 and 2024, $0 and $255,000, respectively, remained unpaid and is included within accrued and other payables, related party in the consolidated balance sheets.

In October 2024, the Company entered into a retention agreement with its director Alexandra Hoffman whereby a retention bonus of $600,000 was awarded for continued services. This amount was included in general and administrative expenses in the consolidated statements of operations for the year ended December 31, 2024. As of December 31, 2025 and 2024, $0 and $500,000, respectively, remained unpaid and was included within accrued and other payables, related party on the consolidated balance sheet.

During the year ended December 31, 2025 and 2024, the Company paid an aggregate of $0 and $120,000, respectively, to four former directors as per their respective settlement agreements.

Due to/from Related Parties

As of December 31, 2025, the Company had $6,713 due to related parties on the consolidated balance sheet, consisting of (i) $3,713 in Company business expenses charged to a credit card held by Sean Dollinger, the Company’s Chief Executive Officer, representing reimbursable business expenses; and (ii) $3,000 payable directly to Mr. Dollinger. As of December 31, 2024, there were no such amounts outstanding.

As of December 31, 2025, the Company had $2,364,450 due from related parties, consisting of $50,000 due from Sean Dollinger, the Company’s Chief Executive Officer, and $2,314,450 due from President and a member of the Board of Directors of the Company. As of December 31, 2024, there were no such amounts outstanding. These amounts are unsecured, non-interest bearing, and have no fixed repayment terms. On April 10, 2026, the amount was received by the Company.

Lease

The Company historically leased space, which is now month-to-month from South Doll Limited Partnership, an entity affiliated with the Company’s CEO. During the year ended December 31, 2024, as part of the retention and settlement agreements, the Company agreed to pay this entity $40,000, which is outstanding as on December 31, 2025 and 2024 and included in accrued and other payables, related party in the consolidate balance sheets.

SWOL Holdings Inc., a wholly owned subsidiary of the Company, entered into a commercial lease agreement with CapMinds, a related party, for office space at 6538 Collins Avenue, Suite 344, Miami Beach, Florida 33141, commencing March 15, 2025 and expiring March 31, 2030, at a monthly base rent of $1,200. CapMinds is an entity affiliated with Alexandra Hoffman, Secretary and Technical Writer of the Company and Chief Executive Officer of SWOL Holdings Inc.

The Company also maintains a mailing address in North Carolina at 5306 Six Forks Rd Ste 107 PMB1290 Raleigh, NC 27609, which is used for correspondence and administrative purposes.

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 asingle 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.

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 years ended December 31, 2025 and 2024. 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 March 15, 2025 and expires on March 31, 2030, with a term of approximately five years. Base rent is $1,200 per month, with all utilities and service charges borne by the landlord. The lease does not contain renewal options at a predetermined rate, variable lease payments, or residual value guarantees.

Upon commencement, the Company recognized a right-of-use asset and corresponding operating lease liability calculated using an incremental borrowing rate of 8.0% per annum. For the year ended December 31, 2025, the Company recognized lease expense of $10,800, included in general and administrative expenses in the consolidated statements of operations.

The following table summarizes the operating lease assets and liabilities as of December 31, 2025 and 2024:

A summary of lease expense recognized in the consolidated statement of operations is as follows:

The following is the summary of future minimum payments:

Subsequent to December 31, 2025, the commercial lease agreement became ineffective. As a result of the lease going ineffective, the related right-of-use asset of $51,651 and operating lease liability of $51,651 recognized on the consolidated balance sheet as of December 31, 2025 will be derecognized in the period in which the lease was determined to be ineffective.

14. INCOME TAXES

The Company accounts for income taxes under ASC 740,Income Taxes, using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Income Tax expense

The income tax expense consisted of the following for the years ended December 31, 2025 and 2024:

Effective Tax Rate Reconciliation

The following table reconciles the U.S. federal statutory income tax rate to the Company’s effective income tax rate:

Deferred Tax Assets

The significant components of the Company’s deferred tax assets as of December 31, 2025 and 2024 are as follows:

Net Operating Loss Carryforwards

As of December 31, 2025, the Company had U.S. federal net operating loss carryforwards of approximately $48.1 million. These NOL carryforwards were generated after December 31, 2017 and may be carried forward indefinitely. However, pursuant to the Tax Cuts and Jobs Act of 2017, the utilization of these NOL carryforwards is limited to 80% of taxable income in any given tax year. The Company’s NOL carryforwards may be subject to further annual limitations under Section 382 of the Internal Revenue Code in the event of certain ownership changes.

Valuation Allowance

The following table presents the activity in the Company’s valuation allowance for the years ended December 31, 2025 and 2024:

The Company has recorded a full valuation allowance against its net deferred tax assets as of December 31, 2025 and 2024. Management determined that it is more likely than not that the deferred tax assets will not be realized, based on the Company’s history of cumulative operating losses and the uncertainty regarding the generation of sufficient future taxable income.

Uncertain Tax Positions

The Company hadno unrecognized tax benefits as of December 31, 2025 and 2024, and does not anticipate any material changes in unrecognized tax benefits within the next twelve months. The Company’s policy is to recognize interest and penalties related to uncertain tax positions as a component of income tax expense. No interest or penalties were recognized during the years ended December 31, 2025 and 2024.

The Company files income tax returns in the U.S. federal jurisdiction, applicable U.S. state jurisdictions, and Hong Kong.

The Company has evaluated its income tax positions and has determined that it does not have any uncertain tax positions. The Company will recognize interest and penalties related to any uncertain tax positions through its income tax expense.

The Company is subject to taxation in the following jurisdictions:

United States — Federal and State: The Company is subject to U.S. federal corporate income tax at a statutory rate of 21% under the Tax Cuts and Jobs Act of 2017. The Company also determined that California state income tax applies, resulting in a combined blended effective rate of approximately 27.95%. Nevada, the Company’s state of incorporation through March 2, 2026, does not impose a state corporate income tax. Following reincorporation in Delaware on March 2, 2026, the Company may be subject to Delaware state income tax in future periods.

Hong Kong: YHC Online Limited, incorporated in Hong Kong in July 2025, is subject to Hong Kong profits tax at a rate of 8.25% on the first HKD 2,000,000 of assessable profits and 16.5% on profits above that threshold. YHC Online Limited did not generate any taxable income in Hong Kong during the year ended December 31, 2025.

The Company files income tax returns in the U.S. federal jurisdiction, applicable U.S. state jurisdictions, and Hong Kong. The Company is not presently subject to any income tax audit in any taxing jurisdiction. All tax years from 2021 remain open to examination by U.S. federal and applicable state tax authorities, and all periods since YHC Online Limited’s incorporation in July 2025 remain open to examination by Hong Kong tax authorities.

15. 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 $2,500,000 to enable the Product Handler to purchase inventory from Company-approved vendors (“Vendors”). The Company may, without notice to Product Handler, elect not to advance funding for any inventory sold by particular Vendors with respect to which the Company reasonably feels insecure. This Agreement concerns a funding commitment, and not the purchase of Products from Product Handler or Vendors.

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, captionedKingbird 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 $13,000,000 from the Nevada Defendants (as defined in the First Settlement Agreement), and customary provisions including no admission of liability and confidentiality.

The Second Settlement Agreement resolved the stockholder derivative claims brought on behalf of the Company against certain current and former officers and directors, 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 $13,000,000 as legal settlement expense in the consolidated statements of operations for the year ended December 31, 2025, presented as a separate line item within other expense to distinguish it from the Company’s ongoing operating results. As of December 31, 2025, the settlement obligation has been paid in full and no remaining liability is recorded on the consolidated balance sheet in connection with this matter.

16. SUBSEQUENT EVENTS

Reincorporation and Capital Structure Changes

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, and authorized the Board of Directors, at its discretion, to effect one or more reverse stock splits of the Company’s common stock at a ratio ranging from 1-for-40 to 1-for-800 at any time prior to February 23, 2028. As of the date of these financial statements, no reverse stock split has been effected.

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.

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 $18,494,000, comprising $14,670,000 funded to the three formed joint venture entities and $3,824,000 advanced to Sequoia Equity Group Inc., were returned to the Company in full. Following the terminations, the Company has no remaining joint venture commitments or obligations.

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.

SWOL Holdings Inc.- Form S-1 Registration Statement

On January 27, 2026, SWOL Holdings Inc., a wholly-owned subsidiary of the Company, filed a registration statement on Form S-1 with the SEC in connection with a proposed initial public offering of SWOL’s equity securities. As of the date of these financial statements, the registration statement has not been declared effective. There can be no assurance that the offering will be completed on the terms currently contemplated, or at all. The Company had $203,950 in deferred offering costs related to this registration statement recorded as of December 31, 2025, which will be reclassified to additional paid-in capital upon completion of the offering or expensed if the offering is abandoned.

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 $126,880,000. An initial payment of $28,080,000 in Tether (USDT) will be made no later than April 24, 2026 for 24% of the Target Company’s ordinary shares. The acquisition of a controlling stake in the Target Company is subject to required government regulatory approvals, after which the Company will complete the purchase of the remaining Target Company shares in one or more subsequent closings for an aggregate purchase price of $98,800,000.

The Target Company is a brokerage enabling clients internationally to buy and sell securities electronically and offering clients the ability to make stablecoin deposits for the trading of Hong Kong and U.S. equities. In addition to commercial considerations about revenue growth and market potential, the Company’s management believes that the Target Company will help to ensure the Company’s long-term financial stability and profitability.