LQR House (LQR) - 2025 Q2 - Quarterly Report

FORM 10-Q (Cover Page Information) This section details the company's Form 10-Q filing, stock market listing, registrant status, and outstanding shares - LQR House Inc. filed its Quarterly Report on Form 10-Q for the period ended June 30, 2025[1][2] - The company's common stock trades on The Nasdaq Stock Market LLC under the symbol YHC[3] Registrant Status | Status | Indication | |:---|:---| | Large accelerated filer | ☐ | | Accelerated filer | ☐ | | Non-accelerated filer | ☒ | | Smaller reporting company | ☒ | | Emerging growth company | ☒ | - As of August 12, 2025, the Company had 10,378,084 shares of common stock issued and outstanding[4] Implications of Being an Emerging Growth Company This section outlines the benefits and elections made by the company as an emerging growth company - LQR House Inc. qualifies as an 'emerging growth company' due to having less than $1.235 billion in revenue during its most recently completed fiscal year[9] - The company has elected to use the extended transition period for complying with new or revised accounting standards[10] - Benefits of emerging growth company status include reduced executive compensation disclosure, exemptions from non-binding shareholder advisory votes, and exemption from auditor attestation on internal control over financial reporting[11] PART I. FINANCIAL INFORMATION This part presents the company's unaudited financial statements and management's analysis of financial condition and operations ITEM 1. Financial Statements – Unaudited This section presents the unaudited condensed consolidated financial statements of LQR House Inc. for the periods ended June 30, 2025, and December 31, 2024 (balance sheet), and for the three and six months ended June 30, 2025 and 2024 (statements of operations, stockholders' equity, and cash flows). These statements are prepared in accordance with U.S. GAAP for interim financial information and include various notes detailing the company's operations, going concern status, significant accounting policies, acquisitions, investments, and related party transactions Unaudited Condensed Consolidated Balance Sheets This section presents the company's financial position at specific points in time, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheets (Unaudited) | ASSETS | June 30, 2025 | December 31, 2024 | |:---|:---|:---| | Cash and cash equivalents | $4,566,936 | $5,386,789 | | Accounts receivable | $69,708 | $28,040 | | Accounts receivable, related party | $300,231 | $149,510 | | Prepaid expenses | $125,572 | $240,729 | | Total current assets | $5,062,447 | $5,805,068 | | Investments, at cost | $1,117,500 | $1,117,500 | | Intangible assets, net | $10,000 | $10,000 | | Prepaid joint venture agreements | $8,166,988 | $- | | Total assets | $14,356,935 | $6,932,568 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Accounts payable | $1,040,736 | $530,643 | | Accounts payable, related party | $57,511 | $21,175 | | Due to related party | $3,000 | $- | | Accrued expenses | $385,402 | $927,711 | | Accrued expenses, related party | $678,392 | $5,971,000 | | Total current liabilities | $2,165,041 | $7,450,529 | | Total stockholders' equity (deficit) | $12,191,894 | $(517,961) | | Total liabilities and stockholders' equity | $14,356,935 | $6,932,568 | - Total assets increased significantly from $6.93 million at December 31, 2024, to $14.36 million at June 30, 2025, primarily driven by $8.17 million in prepaid joint venture agreements[13] - Stockholders' equity improved from a deficit of $(517,961) at December 31, 2024, to a positive $12.19 million at June 30, 2025, largely due to increased additional paid-in capital[13] Unaudited Condensed Consolidated Statements of Operations This section presents the company's financial performance over specific periods, detailing revenues, expenses, and net loss Condensed Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | |:---|:---|:---|:---|:---|\ | Revenue - services | $15,319 | $39,980 | $92,675 | $83,771 | | Revenue - product | $483,209 | $517,937 | $835,193 | $955,240 | | Total revenues | $498,528 | $557,917 | $927,868 | $1,039,011 | | Total cost of revenue | $414,022 | $710,107 | $813,204 | $1,270,698 | | Gross profit (loss) | $84,506 | $(152,190) | $114,664 | $(231,687) | | Total operating expenses | $2,288,288 | $2,122,202 | $4,718,302 | $4,515,078 | | Loss from operations | $(2,203,782) | $(2,274,392) | $(4,603,638) | $(4,746,765) | | Net loss | $(2,202,382) | $(2,209,293) | $(4,592,032) | $(4,636,685) | | Net loss per common share - basic and diluted | $(1.10) | $(15.49) | $(3.50) | $(33.69) | - The company achieved a gross profit of $84,506 for the three months ended June 30, 2025, a significant improvement from a gross loss of $(152,190) in the prior year period[14] - Net loss for the three months ended June 30, 2025, was $(2,202,382), a slight improvement from $(2,209,293) in the same period of 2024[14] - Net loss per common share significantly improved from $(15.49) to $(1.10) for the three months ended June 30, 2025, primarily due to an increase in weighted average common shares outstanding[14] Unaudited Condensed Consolidated Statements of Stockholders' Equity This section details changes in the company's equity over specific periods, including common stock and accumulated deficit Condensed Consolidated Statements of Stockholders' Equity (Unaudited) | Metric | Balances at Dec 31, 2024 | Balances at June 30, 2025 | |:---|:---|:---|\ | Common Stock (Shares) | 435,788 | 3,048,195 | | Common Stock (Amount) | $44 | $305 | | Additional Paid-In Capital | $42,336,213 | $59,637,839 | | Accumulated Deficit | $(42,306,803) | $(46,898,835) | | Total Shareholder's Equity (Deficit) | $(517,961) | $12,191,894 | - Total stockholders' equity shifted from a deficit of $(517,961) at December 31, 2024, to a positive $12,191,894 at June 30, 2025[15] - The increase in equity was primarily driven by significant issuances of common stock through ATM offerings ($11,559,068) and warrant exercises ($4,051,415), and vesting of restricted stock units[15] Unaudited Condensed Consolidated Statements of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Unaudited) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | |:---|:---|:---|\ | Net cash used in operating activities | $(8,263,348) | $(2,548,366) | | Net cash used in investing activities | $(8,166,988) | $(3,345,742) | | Net cash provided by (used in) financing activities | $15,610,483 | $(547,415) | | Net change in cash and cash equivalents | $(819,853) | $(6,441,523) | | Cash and cash equivalents at end of period | $4,566,936 | $622,825 | - Net cash used in operating activities increased significantly to $(8,263,348) for the six months ended June 30, 2025, compared to $(2,548,366) in the prior year, primarily due to a large decrease in accrued expenses, related party[16] - Net cash used in investing activities increased to $(8,166,988) in 2025, mainly due to $8,166,988 in prepaid joint venture agreements[16] - Net cash provided by financing activities was $15,610,483 in 2025, a substantial increase from cash used in financing activities of $(547,415) in 2024, driven by common stock issuances from warrant exercises and ATM offerings[16] Unaudited Condensed Consolidated Notes to Financial Statements This section provides detailed explanations and additional information supporting the unaudited condensed consolidated financial statements 1. Nature of Operations This section describes LQR House Inc.'s primary business activities and recent corporate actions - LQR House Inc. operates primarily in the beverage alcohol industry, owning specialty brands and providing marketing and distribution services[17] - The company acquired the domain name www.cwspirits.com (CWS Platform) on November 1, 2023, for $10,000 from SSquared Spirits LLC, a related party[18][19] - A 1-for-35 reverse stock split became effective on April 21, 2025, reducing authorized shares to 10,000,000, which was later increased to 350,000,000 on June 2, 2025[20][21] 2. Going Concern This section addresses the company's ability to continue operations and management's plans to mitigate financial risks - The company has sustained net losses of $4,592,032 and $4,636,685 for the six months ended June 30, 2025 and 2024, respectively, and expects continued operating losses[22] - Management believes that the substantial doubt about the company's ability to continue as a going concern has been alleviated due to cash and cash equivalents of $4,566,936 as of June 30, 2025, and net proceeds of approximately $26,000,000 from an ATM offering in July 2025[25][27] - The company intends to fund operations through the July 2025 ATM offering and may pursue additional capital through public or private equity offerings, debt financing, or other strategic funding sources[26] 3. Summary of Significant Accounting Policies This section outlines the key accounting principles and methods used in preparing the financial statements Basis of Presentation This section describes the framework and principles used for preparing the financial statements - Financial statements conform to U.S. GAAP, with a fiscal year end of December 31[29] - As an emerging growth company, LQR House Inc. has elected reduced public company reporting requirements but may adopt accounting standards based on public entity effective dates when early adoption is permitted[30] Principles of Consolidation This section explains which entities are included in the consolidated financial statements - Consolidated financial statements include the accounts of LQR House Inc. and its wholly-owned subsidiary, LQR House Acquisition Corp., with all inter-company transactions eliminated[31] Unaudited Interim Financial Information This section clarifies the nature and limitations of the interim financial statements - Interim financial statements are prepared in accordance with U.S. GAAP for interim information and SEC rules, with certain disclosures condensed or omitted[32] - Unaudited interim results are not necessarily indicative of full fiscal year results[32] Use of Estimates This section highlights the role of management's judgments and assumptions in financial reporting - Preparation of financial statements requires management to make estimates and assumptions, particularly for cost method investments and stock-based compensation[34] - Estimates are based on historical experience and market factors, with actual results potentially differing[34] Concentrations of Credit Risk This section addresses potential risks arising from concentrations in financial instruments - Cash is maintained with a major U.S. financial institution, with balances sometimes exceeding federally insured limits ($250,000)[35] Concentrations This section identifies significant dependencies that could impact the company's operations - The company's revenue generation is highly reliant on its relationship with KBROS, LLC, which handles product for the CWS Platform and fulfills products for marketing service clients[36] - Discontinuance of the KBROS relationship or CWS Platform agreements would have a material negative impact on operations[36] Cash and Cash Equivalents This section defines what constitutes cash and cash equivalents for financial reporting purposes - Highly liquid investments with maturities of three months or less at purchase date are considered cash equivalents[39] Investment at Cost This section describes the accounting treatment for investments where the company lacks significant influence - Investments where the company lacks significant influence are accounted for at cost and reviewed annually for impairment[40] - The investment in DRNK Beverage Corp. is carried at an impaired value of $300,000 as of June 30, 2025, after a $4,500,000 impairment recognized in 2024[41] Fair Value Measurements This section explains how fair value is determined and categorized for financial assets and liabilities - Fair value is defined as the exit price in an orderly transaction, classified into Level 1 (quoted active markets), Level 2 (observable inputs), or Level 3 (unobservable inputs)[42] - No transfers between fair value classifications occurred during the six months ended June 30, 2025[43] Accounts Receivable This section outlines the accounting policy for recognizing and managing accounts receivable - Accounts receivable are stated at net realizable value, with monthly reviews for doubtful accounts and write-offs for uncollectible balances[44] Intangible Assets This section describes the accounting treatment for intangible assets, including amortization and impairment - Intangible assets are amortized over their estimated lives or reviewed for impairment if indefinite; domain names are owned indefinitely and renewal costs are expensed[45] Impairment of Long-Lived Assets This section details the company's policy for assessing and recognizing impairment losses on long-lived assets - The company monitors events for potential impairment of long-lived assets, assessing recoverability through undiscounted expected future cash flows[46] Related Parties This section defines related parties and the disclosure requirements for transactions involving them - Related parties are entities or individuals with the ability to direct or cause the direction of company management and policies, with disclosures for non-compensatory transactions[47] Revenue Recognition This section describes the principles and methods used to recognize revenue from various sources - Revenue is recognized when performance obligations are satisfied through the transfer of control of promised goods or services to customers[48] - Revenue sources include marketing services (recognized over time), sales via the CWS Platform (gross revenue, recognized at delivery), SWOL Tequila product sales (recognized at delivery), and Vault membership subscriptions (gross revenue, with reserve for chargebacks)[49][50][51][52][53] Disaggregation of Revenue This section provides a breakdown of revenue by source for different reporting periods Disaggregation of Revenue | Revenue Source | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | |:---|:---|:---|:---|:---|\ | CWS Platform | $304,212 | $512,748 | $634,553 | $948,431 | | SWOL product sales | $178,997 | $5,189 | $200,640 | $6,809 | | Revenue - product | $483,209 | $517,937 | $835,193 | $955,240 | | Marketing | $10,500 | $24,624 | $72,902 | $54,975 | | Vault | $4,819 | $15,356 | $19,773 | $28,796 | | Revenue - services | $15,319 | $39,980 | $92,675 | $83,771 | | Total revenues | $498,528 | $557,917 | $927,868 | $1,039,011 | - Product revenue decreased by 7% for the three months and 13% for the six months ended June 30, 2025, primarily due to lower sales volume through the CWS Platform[56] - SWOL product sales saw a significant increase, from $5,189 to $178,997 for the three months and from $6,809 to $200,640 for the six months ended June 30, 2025[56] Cost of Revenue This section defines the components included in the cost of revenue for the company's operations - Cost of revenue includes direct costs such as product costs, packaging, shipping, importing charges, contracted marketing services, and customer service personnel[57] Sales and Marketing This section describes the types of expenses categorized as sales and marketing costs - Sales and marketing costs primarily consist of advertising, promotional expenses, marketing consulting, and sales commissions[58] - Advertising costs for the three and six months ended June 30, 2025, were $80,676 and $487,529, respectively, a significant decrease from $764,807 and $1,551,222 in the same periods of 2024[58] Stock-Based Compensation This section outlines the accounting treatment for stock options and other equity-based awards - Stock-based compensation is measured at fair value on the grant date and recognized as expense over the vesting period[59] Segment Information This section explains how the company identifies and reports its operating segments - The company has determined it has only one operating and reportable segment, as the CEO reviews operating results for the company as a whole[62][63] Net Loss per Share This section describes the calculation of basic and diluted net loss per common share - Net loss per share is computed by dividing net loss by the weighted-average common shares outstanding; diluted net loss per share is the same as basic due to anti-dilutive securities[65] Recently Issued and Adopted Accounting Pronouncements This section discusses the impact of new accounting standards on the company's financial statements - Management does not believe any recently issued, but not yet effective, accounting standards will have a material effect on the financial statements[66] 4. Acquisition of CWS Platform This section details the acquisition of the CWS Platform and its operational dependencies - On November 1, 2023, LQR House Acquisition Corp. acquired the domain name www.cwspirits.com (CWS Platform) from SSquared Spirits LLC for $10,000[67] - The acquisition was considered a business combination, and an intangible asset of $10,000 was recorded for the domain name[69] - The CWS Platform's operation is dependent on a product handling agreement with KBROS LLC, a related party, which can be terminated under certain circumstances[70] 5. Investments, at Cost This section describes the company's strategic investments and their valuation - The company holds minority stakes in Cannon Estate Winery Ltd. (9.99%) and DRNK Beverage Corp. (8.58%) for strategic purposes[73][74][76] - The investment in DRNK Beverage Corp. is carried at an impaired value of $300,000 as of June 30, 2025, following a $4,500,000 impairment recognized as of December 31, 2024[77][78] 6. Prepaid Joint Venture Agreements This section details the nature and purpose of the company's prepaid joint venture agreements - As of June 30, 2025, the company recorded $8,166,988 in prepaid joint venture agreements related to anticipated strategic collaboration with TikTok[79] - The proposed agreements involve a newly formed subsidiary, YHC Online Ltd., signing Multi-Channel Network (MCN) agency services contracts to develop, manage, and monetize creator-led content on TikTok[79] - These agreements are expected to be executed and operationalized in subsequent periods, supporting vertically integrated digital marketing operations[81] 7. Accrued Expenses This section provides a breakdown of the company's accrued liabilities Accrued Expenses | Accrued Expense Type | June 30, 2025 | December 31, 2024 | |:---|:---|:---|\ | Accrued retention and settlement payments | $53,729 | $513,729 | | Accrued professional and other fees | $96,770 | $62,450 | | Taxes payable | $213,337 | $263,087 | | Other accrued | $21,566 | $88,445 | | Total accrued expenses | $385,402 | $927,711 | | Accrued retention and settlement payments, related parties | $678,392 | $5,971,000 | | Total accrued expenses, related parties | $678,392 | $5,971,000 | - Total accrued expenses, related parties, significantly decreased from $5,971,000 at December 31, 2024, to $678,392 at June 30, 2025, due to approximately $5,292,600 in payments during the six months ended June 30, 2025[83] 8. Stockholders' Equity (Deficit) This section details changes in the company's capital structure and equity components - The number of authorized common shares was increased from 10,000,000 to 350,000,000 on June 2, 2025, following stockholder approval[84] - A 1-for-35 reverse stock split became effective on April 21, 2025, with all share and per share amounts retroactively adjusted[85][87] - During the six months ended June 30, 2025, the company issued 2,361,112 shares for $11,559,068 net proceeds via an ATM offering and 210,463 shares for $4,051,415 gross proceeds from warrant exercises[88][92] Restricted Stock Unit (RSU) Activity (Six Months Ended June 30, 2025) | Metric | Number of shares | Weighted Average Fair Value | |:---|:---|:---|\ | Unvested as of December 31, 2024 | 5,996 | $381.50 | | Granted | - | - | | Vested | (1,613) | $823 | | Forfeited | (9) | $7,000 | | Unvested as of June 30, 2025 | 4,374 | $198 | 9. Related Party Transactions This section describes significant transactions and relationships with related parties - The company has significant related party transactions with KBROS, LLC, which acts as the Product Handler for the CWS Platform, and SSquared Spirits LLC, the seller of the CWS Platform[98] - KBROS receives $40,000 per month plus shipping/handling reimbursements and bonuses; handling fees for the six months ended June 30, 2025, were $40,000, down from $240,000 in 2024[98] - Accrued expenses, related parties, included $678,392 as of June 30, 2025, and $3,600,000 as of December 31, 2024, related to a $4,100,000 settlement agreement with KBROS[100] - The company had $300,231 in accounts receivable, related party, with Country Wine & Spirits, Inc. (CWS) as of June 30, 2025[103] 10. Commitments and Contingencies This section outlines the company's significant future obligations and potential legal liabilities - The company committed to provide annual funding of at least $2,500,000 to KBROS, the Product Handler, to purchase inventory[107] - LQR House Inc. and several officers/directors were named as defendants in a lawsuit by Kingbird Ventures, LLC, alleging breach of fiduciary duties and seeking damages and injunctive relief; the company intends to vigorously defend the litigation[109] 11. Subsequent Events This section reports significant events that occurred after the reporting period but before the financial statements were issued - In July 2025, the company issued 7,329,889 shares of common stock through an at-the-market (ATM) offering, receiving net proceeds of approximately $26 million for working capital and strategic initiatives[111] - On August 6, 2025, Yilin Lu was appointed President, and Hong Chun Yeung replaced him on the Compensation and Nominating Committees[112] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on LQR House Inc.'s financial condition and operational results for the periods ended June 30, 2025, and 2024. It covers the company's business overview, recent developments, core services and brands, factors affecting financial performance, growth strategies, detailed results of operations, liquidity, capital resources, and critical accounting policies. The discussion highlights the company's focus on digital marketing and brand development in the alcoholic beverage space, recent equity raises, and efforts to improve gross margins despite overall revenue declines Business Overview This section provides an overview of LQR House Inc.'s business model, strategic focus, and key operations - LQR House Inc. aims to be a full-service digital marketing and brand development entity in the alcoholic beverage space, integrating supply, sales, and marketing[114] - Primary business includes developing premium limited batch spirit brands (e.g., SWOL Tequila) and marketing internal and external brands via the CWS Platform[114] - The company holds minority stakes in Cannon Estate Winery Ltd. and DRNK Beverage Corp. (now Chase Mocktails Ltd.) since May and June 2024, respectively[115] Recent Developments This section highlights significant events and changes that have occurred recently within the company - The company raised $6,380,248 in net proceeds from an ATM offering during Q2 2025 and an additional $26 million in gross proceeds in July 2025[117][118] - A 1-for-35 reverse stock split was effected on April 21, 2025, reducing authorized common stock to 10,000,000 shares, which was subsequently increased to 350,000,000 shares on June 2, 2025[121][123][124] - David Lazar resigned as President and Board member on April 2, 2025. Yilin Lu was appointed President on August 6, 2025[120][127] - The company was named as a defendant in a lawsuit by Kingbird Ventures, LLC, on July 11, 2025, alleging breach of fiduciary duties and seeking damages and injunctive relief[126] The Services and Brands We Market This section describes the company's core product and service offerings in the alcoholic beverage market - LQR House is an online retailer of alcohol products, with the CWS Platform serving as a key e-commerce channel for wine and spirits, including exclusive brand SWOL Tequila[128][129] - Key offerings include SWOL Tequila (limited-edition, produced in Mexico), Vault (exclusive CWS Platform membership with benefits), Soleil Vino (planned premium wine subscription service), and LQR House Marketing (marketing services for wholly-owned and third-party brands)[131] Principal Factors Affecting Our Financial Performance This section identifies the primary internal and external factors influencing the company's financial results - Financial performance is primarily affected by the ability to acquire/retain customers, offer competitive pricing, broaden product/service offerings, industry demand/competition, leverage technology, attract/maintain influencers, attract/retain talent, market conditions, and make profitable investments[130] Our Growth Strategies This section outlines the company's plans and initiatives for achieving future business expansion - Growth strategies include collaborative marketing with celebrities and influencers, expanding the existing SWOL brand by purchasing and selling larger amounts of SWOL products, and pursuing opportunistic acquisitions of alcohol brands with distribution licenses and storage[131][132] Results of Operations This section provides a detailed analysis of the company's financial performance over the reported periods Comparison of Three Months Ended June 30, 2025 and June 30, 2024 This section compares the company's financial performance for the three-month periods ended June 30, 2025 and 2024 Key Components of Results of Operations (Three Months Ended June 30) | Metric | 2025 | 2024 | Var. $ | Var. % | |:---|:---|:---|:---|:---|\ | Revenue - services | $15,319 | $39,980 | $(24,661) | -62% | | Revenue - product | $483,209 | $517,937 | $(34,728) | -7% | | Total revenues | $498,528 | $557,917 | $(59,389) | -11% | | Total cost of revenue | $414,022 | $710,107 | $(296,085) | -42% | | Gross profit (loss) | $84,506 | $(152,190) | $236,696 | -156% | | General and administrative | $2,207,612 | $1,357,395 | $850,217 | 63% | | Sales and marketing | $80,676 | $764,807 | $(684,131) | -89% | | Loss from operations | $(2,203,782) | $(2,274,392) | $70,610 | -3% | | Net loss | $(2,202,382) | $(2,209,293) | $6,911 | 0% | - Total revenues decreased by 11% to $498,528, driven by a 62% decrease in service revenues and a 7% decrease in product revenues, primarily due to lower marketing services volume and reduced CWS Platform sales[135][136] - Gross profit significantly improved to $84,506 from a gross loss of $(152,190) in the prior year, attributed to a strategic shift towards the CWS Platform and lower cost of revenue[137][138][139] - Sales and marketing expenses decreased by 89% to $80,676, mainly due to the absence of significant website development costs incurred in the prior year[141] Comparison of Six Months Ended June 30, 2025 and June 30, 2024 This section compares the company's financial performance for the six-month periods ended June 30, 2025 and 2024 Key Components of Results of Operations (Six Months Ended June 30) | Metric | 2025 | 2024 | Var. $ | Var. % | |:---|:---|:---|:---|:---|\ | Revenue - services | $92,675 | $83,771 | $8,904 | 11% | | Revenue - product | $835,193 | $955,240 | $(120,047) | -13% | | Total revenues | $927,868 | $1,039,011 | $(111,143) | -11% | | Total cost of revenue | $813,204 | $1,270,698 | $(457,494) | -36% | | Gross profit (loss) | $114,664 | $(231,687) | $346,351 | -149% | | General and administrative | $4,230,773 | $2,963,856 | $1,266,917 | 43% | | Sales and marketing | $487,529 | $1,551,222 | $(1,063,693) | -69% | | Loss from operations | $(4,603,638) | $(4,746,765) | $143,127 | -3% | | Net loss | $(4,592,032) | $(4,636,685) | $44,653 | 0% | - Total revenues decreased by 11% to $927,868, with product revenues declining by 13% due to lower CWS Platform sales, while service revenues increased by 11% due to higher membership services[146][147] - Gross profit improved significantly to $114,664 from a gross loss of $(231,687) in the prior year, reflecting the strategic transition and reduced cost of revenue[148][149][150] - General and administrative expenses increased by 43% to $4,230,773, primarily due to higher professional fees and administrative costs[151] Liquidity and Capital Resources This section discusses the company's ability to meet its short-term and long-term financial obligations Cash and Cash Equivalents | Date | Cash and Cash Equivalents | |:---|:---|\ | June 30, 2025 | $4,566,936 | | December 31, 2024 | $5,386,789 | - The company raised $15,610,483 in net proceeds during the six months ended June 30, 2025, through ATM offerings ($11,559,068) and warrant exercises ($4,051,415)[155] - In July 2025, an additional $26,000,000 was raised through an ATM offering, which management believes alleviates substantial doubt about the company's going concern ability for the next 12 months[156][159] Cash Flow Activities This section analyzes the company's cash generation and usage across operating, investing, and financing activities Net Cash Used in Operating Activities This section details the cash flows generated or used by the company's primary business operations - Net cash used in operating activities for the six months ended June 30, 2025, was $8,263,348, primarily due to a net loss of $4,592,032 and $5,251,720 cash used in operating assets and liabilities, partially offset by $1,580,404 in non-cash charges[162] Net Cash Used in Investing Activities This section details the cash flows related to the acquisition and disposal of long-term assets and investments - Net cash used in investing activities was $8,166,988 for the six months ended June 30, 2025, primarily due to payments for prepaid joint venture agreements[163] - In 2024, investing activities included $4,015,742 in marketable securities purchases and $670,000 from return of deposits in escrow[164] Net Cash Provided By (Used in) Financing Activities This section details the cash flows related to debt, equity, and dividend transactions - Net cash provided by financing activities was $15,610,483 for the six months ended June 30, 2025, driven by $4,051,415 from warrant exercises and $11,559,068 from ATM share issuances[165] - In contrast, the company used $547,515 in financing activities in 2024 for share repurchases[165] Contractual Obligations and Related Party Transactions This section refers to disclosures regarding the company's commitments and dealings with related parties - Refer to Note 9 to the accompanying unaudited condensed consolidated financial statements for further disclosure on related party transactions[166] Off-Balance Sheet Arrangements This section discloses any transactions, agreements, or other contractual arrangements not recorded on the balance sheet - The company has no off-balance sheet arrangements that have or are reasonably likely to have a material effect on its financial condition or results of operations[167] Critical Accounting Policies This section discusses the accounting policies that require significant judgment and estimates by management - The discussion of financial condition and results of operations is based on GAAP financial statements, which require management estimates and assumptions[168] - No material changes have occurred in critical accounting policies since the Annual Report on Form 10-K for the fiscal year ended December 31, 2024[169] ITEM 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, LQR House Inc. is not required to provide quantitative and qualitative disclosures about market risk under SEC regulations - LQR House Inc. is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[170] ITEM 4. Controls and Procedures Management concluded that LQR House Inc.'s disclosure controls and procedures were ineffective as of June 30, 2025, primarily due to insufficient resources for adequate supervision and segregation of duties, and a lack of effective board oversight and formal accounting controls. The company intends to address these material weaknesses by increasing qualified financial personnel and improving accounting policies and procedures - As of June 30, 2025, management concluded that the company's disclosure controls and procedures were ineffective at a reasonable assurance level[172] - Material weaknesses include insufficient resources for adequate supervision and segregation of duties, and a lack of effective board oversight and formal accounting controls[173] - The company plans to cure these weaknesses by increasing qualified financial personnel and ensuring consistent accounting policies and procedures[174] - No material changes in internal control over financial reporting occurred during the six months ended June 30, 2025[175] PART II. OTHER INFORMATION This part covers legal proceedings, risk factors, equity sales, and other disclosures not included in financial statements ITEM 1. Legal Proceedings As of the reporting date, there are no legal proceedings to disclose under this item, although the company was named as a defendant in a lawsuit subsequent to the quarter end, as detailed in Note 10 - No legal proceedings are reported under this item[177] ITEM 1A. Risk Factors As a smaller reporting company, LQR House Inc. is not required to provide a full discussion of risk factors in this quarterly report. There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - As a smaller reporting company, LQR House Inc. is not required to provide risk factor information[178] - No material changes to risk factors have occurred since the Annual Report on Form 10-K filed on March 31, 2025[178] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds During the second quarter of 2025, LQR House Inc. issued several unregistered equity securities, including shares to a former president as part of a separation agreement, shares to board members upon RSU conversion, and shares to a third-party consultant for advisory services. These issuances were made under Section 4(a)(2) and/or Rule 506 of Regulation D - On April 2, 2025, 2,857 shares of common stock were issued to former President David Lazar as part of his separation agreement[180] - On June 30, 2025, shares were issued to board members (Hong Chun Yeung, Jing Lu, Lijun Chen, Yilin Lu, Sean Dollinger) due to the conversion of restricted stock units[181][182] - On June 30, 2025, 33,000 shares of common stock were issued to Integris Ventures LLC for advisory services[182] - These securities were issued pursuant to Section 4(a)(2) and/or Rule 506 of Regulation D, as they did not involve a public offering[183] ITEM 3. Defaults upon Senior Securities LQR House Inc. reported no defaults upon senior securities for the period - No defaults upon senior securities were reported[185] ITEM 4. Mine Safety Disclosures This item is not applicable to LQR House Inc - Mine Safety Disclosures are not applicable to the company[186] ITEM 5. Other Information No other information is reported under this item - No other information is reported under this item[187] ITEM 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including various corporate documents, agreements, certifications, and XBRL data files. It details amendments to articles of incorporation, employment agreements, stock option plans, and other material contracts - The report includes various exhibits such as corporate governance documents (Articles of Incorporation, Bylaws), material contracts (Product Handling Agreement, Funding Commitment Agreement), and certifications (CEO/CFO Sarbanes-Oxley Act certifications)[188][189][190][191][192] - Exhibits 32.1 and 32.2 (Sarbanes-Oxley Act certifications) are furnished, not filed, and are not deemed to be 'filed' for purposes of Section 18 of the Exchange Act[192] SIGNATURES This section provides the official signatures of the company's authorized officers for the quarterly report - The report was signed by Sean Dollinger, Chief Executive Officer, and Kumar Abhishek, Chief Financial Officer, on August 12, 2025[196]