UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number: 001-41778

LQR House Inc.

(Exact name of registrant as specified in its charter)

Nevada		86-1604197
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

6800 Indian Creek Dr. Suite 1E

Miami Beach, FL 33141

(786) 389-9771

(Address of principal executive offices, including zip code)

Tel: (786) 389-9771

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $0.0001 par value per share		LQR		The Nasdaq Stock Market LLC

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☒ No ☐

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and emerging growth company in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if this registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

The registrant was not a public company as of the last business day of its most recently completed second fiscal quarter and, therefore, cannot calculate the aggregate market value of its voting and non-voting common equity held by non-affiliates as of such date.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 1, 2024, the Company had 4,829,438 shares of common stock, $0.0001 par value, issued and outstanding.

TABLE OF CONTENTS

PART I
Item 1.	Business	1
Item 1A.	Risk Factors	13
Item 1B.	Unresolved Staff Comments	34
Item 1C	Cybersecurity	35
Item 2.	Properties	35
Item 3.	Legal Proceedings	35
Item 4.	Mine Safety Disclosures	35
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	36
Item 6.	Reserved	39
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 8.	Financial Statements and Supplementary Data	45
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	45
Item 9A.	Controls and Procedures	45
Item 9B.	Other Information	46
Item 9C	Disclosure Regarding Foreign Jurisdictions That Prevent Inspections	46
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	47
Item 11.	Executive Compensation	54
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	56
Item 13.	Certain Relationships and Related Transactions, and Director Independence	58
Item 14.	Principal Accounting Fees and Services	59
PART IV
Item 15.	Exhibits, Financial Statement Schedules	60
Item 16	Form 10-K Summary	60

IMPLICATIONS OF BEING AN EMERGING GROWTH COMPANY

As a company with less than $1.235 billion in revenue during our most recently completed fiscal year, we qualify as an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act,”) as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As an emerging growth company, we may take advantage of specified reduced disclosure and other exemptions from requirements that are otherwise applicable to public companies that are not emerging growth companies. These provisions include:

	●	Reduced disclosure about our executive compensation arrangements;

	●	Exemptions from non-binding shareholder advisory votes on executive compensation or golden parachute; and

	●	Exemption from auditor attestation requirement in the assessment of our internal control over financial reporting.

We will remain an emerging growth company until the earliest of (i) the last day of the year in which we have total annual gross revenue of $1.235 billion or more; (ii) the last day of the year following the fifth anniversary of the first sale of the common equity securities pursuant to an effective registration under the Securities Act; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission.

In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends impacting the financial condition of our business. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements.

Forward-looking statements include all statements that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “intend,” “seek,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential,” “might,” “forecast,” “continue,” or the negative of those terms, and similar expressions and comparable terminology intended to reference future periods. Forward-looking statements include, but are not limited to, statements about:

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our ability to introduce new products and services;

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our ability to obtain additional funding to develop additional products, services and offerings;

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compliance with obligations under intellectual property licenses with third parties;

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market acceptance of our new offerings;

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competition from existing online offerings or new offerings that may emerge;

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our ability to establish or maintain collaborations, licensing or other arrangements;

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our ability and third parties’ abilities to protect intellectual property rights;

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our ability to adequately support future growth;

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our goals and strategies;

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our future business development, financial condition and results of operations;

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expected changes in our revenue, costs or expenditures;

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growth of and competition trends in our industry;

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the accuracy and completeness of the data underlying our or third-party sources’ industry and market analyses and projections;

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our expectations regarding demand for, and market acceptance of, our products and services;

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our expectations regarding our relationships with investors, institutional funding partners and other parties with whom we collaborate;

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fluctuations in general economic and business conditions in the markets in which we operate; and

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relevant government policies and regulations relating to our industry.

Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.

Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We cannot guarantee future results, levels of activity, performance or achievements. Accordingly, the forward-looking statements in this Annual Report on Form 10-K should not be regarded as representations that the results or conditions described in such statements will occur or that our objectives and plans will be achieved, and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements.

iii

PART I

References in this annual report to “we,” “us,” “LQR House,” “LQR,” “Company,” or “our company” are to LQR House Inc., a Nevada corporation, References to “management” or our “management team” are to our officers and directors.

ITEM 1. BUSINESS

Our Company

Our Company, LQR House Inc., is an ecommerce company dedicated to forging a niche marketplace within the alcohol industry and intends to become the full-service digital marketing and brand development face of the alcoholic beverage space, LQR House Inc. is disrupting traditional paradigms with its direct-to-consumer platform and innovative marketing strategies. LQR House owns 100% of CWSpirits.com (the “CWS Platform”), a leading online marketplace offering a comprehensive range of alcohol-related products to customers across the United States, while presently not extending its services to Canada and Mexico. We acquired the CWS Platform from Ssquared Spirits, LLC (“Ssquared”) on November 1, 2023, pursuant to the Domain Name Transfer Agreement (the “Domain Name Transfer Agreement”), which ensures that we have permanent control over all aspects of the CWS Platform, notwithstanding the term or any other provisions of the Marketing Agreement described below. Our company places a significant emphasis on direct-to-consumer marketing, leveraging various channels such as social media, email campaigns, and both paid and organic digital strategies. Additionally, LQR House has cultivated its own network of influencers, effectively positioning brands in front of a dedicated audience and boasting a proven track record of increasing sales on CWSpirits.com. Effective November 1, 2023, LQR House secured full control of the CWS Platform through the Domain Name Transfer Agreement, ensuring perpetual oversight independent of previous contractual terms. Ssquared, previously responsible for product management and platform maintenance, has transitioned these duties to us. Pursuant to the Management Agreement (as defined below), KBROS, LLC (“KBROS”) is responsible for the fulfillment, and distribution of all products sold on the CWS Platform. On November 1, 2023, the Company entered into the Product Handling Agreement (the “Product Handling Agreement”) and the Funding Commitment Agreement (the “Funding Commitment Agreement” and collectively with the Product Handling Agreement, the “Management Agreement”) with KBROS.

Under the Product Handling Agreement, KBROS provides the Company the following services relating to the purchase and delivery of spirits and other beverage products purchased by customers of the Company through or in relation to websites associated with the CWS Platform:

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purchase of products to be delivered to customers of the Company, delivery of such products, and related receipt of returns of products and delivery of replacements of the products from time to time, necessary for the operation of the business by the Company, pursuant to orders for the products by the Company’s customers generated as the result of sales, promotion and marketing of the products through the CWS Platform; and

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procurement and maintenance of all certificates, licenses, authorizations and registrations required to import, possess, promote, sell, distribute and receive payment for the products and compliance with all laws, rules and regulations applicable thereto and to the operation of the CWS Platform and conduct of sales and processing of the products, as reasonably deemed necessary by the Company.

Under the Funding Commitment Agreement, the Company commits to provide annual funding to KBROS from time to time in the minimum amount of $2,500,000 to enable KBROS to purchase inventory from Company-approved vendors. The Company may, without notice to KBOS, elect not to advance funding for any inventory sold by any particular vendor with respect to which the Company reasonably feels insecure. The Funding Commitment Agreement concerns a funding commitment, and not the purchase of products from KBROS or vendors.

LQR also has a key partnership with Country Wine & Spirits LLC (“CWS”). Pursuant to an Exclusive Marketing Agreement (the “Marketing Agreement”) dated April 1, 2021 among CWS, Ssquared and us, Ssquared and CWS granted us the exclusive right, until April 1, 2031, to promote and market spirits, other beverage products and related products including but not limited to branded merchandise, apparel, glassware and the like through the CWS Platform for sale to customers with billing and shipping addresses within Canada, Mexico and the United States. At this time, the Company does not service customers in Canada and Mexico. The Marketing Agreement also provided us with the sole right to manage and make decisions with regard to user-facing content on the CWS Platform, including the placement and removal of products and the creation and management of promotional initiatives. Through the Marketing Agreement, LQR House was responsible for all digital marketing of products offered on the CWS Platform, including social media marketing and cooperation with their influencer network. Ssquared was responsible for product management on the CWS Platform and ensuring that the site is always live and accessible to the customers.

On March 19, 2021, we purchased the SWOL brand of tequila from Dollinger Innovations Inc., Dollinger Holdings LLC and Sean Dollinger pursuant to an Asset Purchase Agreement (the “Tequila Asset Purchase Agreement”). SWOL is manufactured at our request in Mexico by a local manufacturer who we contract with. We will only request SWOL to be manufactured based on purchase orders we receive from CWS, who is licensed to distribute alcohol in and from California. We also contract with Rilo Import & Export (“Rilo”) who we engage to import SWOL from Mexico to CWS in the United States. CWS pays us for its orders of SWOL and we pay a portion of such amounts to the local manufacturer to produce SWOL and to Rilo to import SWOL. However, it is important to note that we do not engage in the sale of alcoholic products in the United States or the distribution of any alcoholic products anywhere.

On May 31, 2021, we purchased from Dollinger Holdings LLC, all of the right, title and interest in all trademarks regardless of registration status for Soleil Vino and all associated trade dress and intellectual property rights, all labels, logos and other branding bearing the Soleil Vino marks or any mark substantially similar to the same, and all website and all related digital and social media content including but not limited to influencer networks, http://www.soleilvino.com, and all related content, and all related sales channels was transferred.

On July 7, 2023, the Company, Dollinger Innovations Inc. and Leticia Hermosillo Raverero (the “Producer”) signed a ratification of the agreement of assignment of rights of the Shared Responsibility and Bonding Agreement, which requires registration with the Mexican Institute of Industrial Property. The registration is required under Mexican law to put third parties on notice of the existence of agreements that contain intellectual property rights. The Company submitted documents to the Mexican Institute of Industrial Property to obtain such registration on July 12, 2023, but such registration will not be complete until it has been notified by the Mexican government and we cannot predict when that will occur. Until the registration is complete third parties in Mexico may be able to produce tequila under the SWOL name. See “Risk Factors — The Company’s ability to import SWOL Tequila may be suspended at any time by the Mexican authorities and until registration of the Company’s Mexican agreements is complete, the Company will not be able to enforce its authorization to use the denomination of origin “TEQUILA” applied in their products branded under the SWOL trademark against third parties in Mexico.”

On June 30, 2023, pursuant to an assignment agreement, Dollinger Innovations Inc., Dollinger Holdings LLC, and Sean Dollinger assigned their rights as distributor under the Packaging of Origin Co-Responsibility Agreement with the Producer dated July 6, 2020 to the Company. Subsequent to that, on July 11, 2023, the Producer and LQR House signed a Bottled at Origin Joint Responsibility Agreement, which requires registration with the Mexican institute of Industrial Property. The registration is required under Mexican law to put third parties on notice of the existence of agreements that contain intellectual property rights. The Company submitted documents to the Mexican Institute of Industrial Property to obtain such registration on July 13, 2023, but such registration will not be complete until it has been notified by the Mexican government and we cannot predict when that will occur. Until the registration is complete third parties in Mexico may be able to produce tequila under the SWOL name. See “Risk Factors — The Company’s ability to import SWOL Tequila may be suspended at any time by the Mexican authorities and until registration of the Company’s Mexican agreements is complete, the Company will not be able to enforce its authorization to use the denomination of origin “TEQUILA” applied in their products branded under the SWOL trademark against third parties in Mexico.”

LQR House has made a significant move in the realm of e-commerce with its acquisition of the CWS Platform, a leading platform in the wine and spirits industry in the USA. With this purchase, LQR House gains full ownership of one of the most established websites in the field, boasting a dedicated customer base of over 125,000. Leveraging their expertise in website management, design, development, email marketing, and SEO, LQR House aims to enhance sales on the platform, offering a diverse array of products including new releases, limited editions, celebrity-affiliated brands, cocktail content, and gift options. This acquisition marks a departure from previous marketing arrangements with Country Wine & Spirits, providing LQR House with direct control over the platform’s operations and facilitating improved access for both marketing clients and alcohol suppliers. Notably, product handling, packaging, and shipping for purchases made on the CWS Platform remain the responsibility of KBROS, the owner of Country Wine and Spirits’ brick-and-mortar locations. LQR House’s acquisition of the CWS Platform signifies a strategic move towards bolstering its presence in the online alcohol retail market, offering consumers across the nation an enhanced shopping experience.

Country Wine & Spirits, Inc.

CWS was formed in 2003 to buy and acquire distressed brick and mortar retail locations for the sale of beer, wine, spirits and create value in retail locations throughout Southern California and grew to 10 locations by 2013. In 2013 CWS found a demand for online shipping of alcohol and started to focus more on e-commerce with the assistance of our Chief Executive Officer, Sean Dollinger and Dollinger Innovations. With their help, CWS began online alcohol sales and built the business into a sizable alcohol e-commerce company. Today CWS has 6 brick and mortar locations and specializes in logistics of shipping and helping brands reach customers. CWS’s average brick and mortar store is 3000-5000 square feet in prestigious neighborhoods and offer brands that customers have a hard time sourcing. To date CWS has distributed all of the alcohol (other than SWOL Tequila) ordered by customers through the CWS Platform.

KBROS, LLC

KBROS was founded in 2013 and is an asset management company that specializes in managing e-commerce platforms and real estate and sourcing of logistic companies. The President of CWS, Shawn Kattoula, is also the 100% owner of KBROS.

Our Business Model

Since our inception in January 2021, we have put our business model to the test and believe it is our path towards future success. First, we create marketing content on the CWS Platform for our brands and the brands of our marketing services clients. Second, when consumers purchase products on the CWS Platform like tequila with our SWOL brand, a subscription to Vault (or to the Soleil Vino wine club, which we are going to launch), or the products of our marketing service clients, CWS will perform the distribution services related to the sale of those products. Simultaneously, Ssquared will manage the backend e-commerce operations related to the CWS Platform. Our company is the only authorized advertiser on the CWS Platform and will derive significant revenue from all sales made to our marketing partners via the CWS Platform and subscriptions offered through the CWS Platform. Moreover, we will derive significant revenue from the sale of alcohol that bears our SWOL trademark. The objective of these activities is to generate recurring monthly revenue through subscriptions and product placements.

We believe that our business model will result in multiple, highly sustainable revenue sources and an opportunity to capitalize on the growth in demand for liquor in the United States. To date, sales of alcoholic beverages have been generated through our exclusive arrangement with CWS, who sells these products. This includes third-party brands hiring the Company to market their alcoholic beverage products, subscriptions through our membership programs, and the product sale of tequila branded with our trademark, “SWOL,” bearing application number 2345291 and registration number 2141431. We intend to further diversify our revenue streams and anticipate that the diversity of our revenue streams will continue to grow as our internal brands gain market recognition and penetration, our marketing services abilities become well known, and our subscription services become popular.

Our Historical Performance

The Company’s independent registered public accounting firm has previously expressed substantial doubt as to the Company’s ability to continue as a going concern. During the years ended December 31, 2023 and 2022, we had net losses of $15,747,724 and $1,842,175, respectively.

The Company has raised funds from the IPO and an additional $16.6 million from its public offerings in October and November 2023. However, the Company expects that its cash and cash equivalents as of the date of issuance of these financial statements may not be sufficient to fund its operating expenses and acquisition plans for at least one year. The Company’s ability to continue as a going concern for the next twelve months is dependent upon its ability to generate sufficient cash flows from operations to meet its obligations, which it has not been able to accomplish to date, or to obtain additional capital financing to support current negative cash flow trends. No assurance can be given that the Company will be successful in these efforts.

For further discussion, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Going Concern”.

Industry Overview

We plan to address market demand by aligning with key industry trends and by utilizing strategic relationships to source, brand, finance and distribute products. Specifically, we will focus initially on tequila, wine, and other specialty products by utilizing e-commerce and technology to drive sales. The market for alcohol includes beverages such as spirits, wines, and beer. Our focus is on the United States market.

As set forth in the above chart, the United States, which is estimated to consume a total of approximately $283.8 billion worth of alcoholic beverages in 2023, represents one of the largest global markets for all alcoholic beverage category sales (Statista, Alcoholic Drinks — Worldwide, January 2023). This demonstrates a considerable amount of consumption and a large and stable market that is continuing to evolve. Spirits and wine account for approximately 50.6% of total consumption as of January 2023, as set forth in the following chart (Statista, Alcoholic Drinks — Revenue — United States, January 2023).

Moreover, we believe e-commerce is increasingly becoming a driver of demand for at-home consumption of alcoholic products, driven in part by the recent pandemic. Due to this shift, people who used to go to a bar or a restaurant to consume alcohol are now buying products increasingly online or even going to the manufacturer directly where the law permits, and we believe that this trend will continue even as the impact of the pandemic begins to lessen. We also believe that this demonstrates a great potential for continued market expansion and the relevance of e-commerce platforms for alcohol. In particular, the United States has shown a strong uptrend in the purchase of alcohol online, as set forth in the chart below (Vaimo, Martin Hjalm, Alcohol Ecommerce: Trends, Strategies, and Markets in 2023, January 2023).

In addition to sustained demand for the largest product categories (beer, wine and spirts) and increased prominence of e-commerce, the demand for quality and novel products continues to increase as well (Forbes, Joseph Micallef, The Top Ten Trends Shaping The Adult Beverage Market In 2021, January 2021). Within this market, the consumption of products is increasing due to several market trends, including the demand for new categories of beverages, such as specialty spirits, flavored wines and sparkling wines, and premixed carbonated drinks. A survey of 1,600 adult U.S. consumers by PwC Consumer Segment Survey sets forth this trend with 54% of those buying alcoholic beverages responding, “I am buying new brands even when my usual brands are available” (PwC, M&A breathes new life into brand portfolios for spirits companies, 2021) as opposed to only 47% of those buying non-alcoholic beverages.

As seen in the following graph, the transactional market for alcohol products has seen a considerable amount of activity with over $45 billion of transactions valued across 97 deals from January 1, 2016, to December 31, 2020 (PwC, M&A breathes new life into brand portfolios for spirits companies, 2021). We believe this transactional activity within the alcoholic beverage space also represents a key market trend related to the emergence of new specialty brands, as larger companies seek to gain access to new brands to continue to maintain their market position in a market of evolving consumer preferences.

Market Trends

We believe the following trends, as discussed in a Forbes interview of the Head of Consumer Insights at Drizly (Forbes, Joseph Micallef, The Top Ten Trends Shaping The Adult Beverage Market In 2021, January 2021), will continue to shape the alcoholic beverage market:

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Consumers are likely to continue to shop more online for adult beverages.

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Tequila and mezcal will continue to grow in popularity. Tequila surpassed bourbon in retailers’ expectations for growth among best-selling spirits, while mezcal is ready for its own (smoky) spotlight.

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Premiumization in the industry will accelerate as consumers reallocate funds from experiences to at-home indulgences.

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Craft seltzer will start to gain in market share, marked by more upscale ingredients, artisanal flavors and elevated packaging.

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Consumers are likely to continue to be more conscious of brand ownership and values.

We anticipate all these market trends will positively impact our business and present an opportunity to continue expanding. Specifically, we align with market trends by focusing our marketing and distribution efforts online and we expect to bring new and exciting premium products to market across categories. In addition, we generate online promotional activities around holidays and life events, while always being mindful of ethically sourcing products for distribution.

The Services and Brands

The CWS Platform is an American online retailer specializing in alcohol products, striving to become the most trusted and convenient destination for online alcohol purchases. Combining the personalized service of a neighborhood alcohol shop with the efficiency of e-commerce, we offer a wide selection of products, including our exclusive brand, SWOL Tequila, all at competitive prices with fast shipping and around-the-clock convenience. At the heart of our brand is a commitment to exceptional customer service, driving us to continuously innovate our operations for an enhanced shopping experience. From user-friendly website navigation and a top-rated mobile app to detailed order tracking and personalized product recommendations, we are revolutionizing the online alcohol shopping experience, ensuring customer satisfaction remains paramount in all our endeavors.

We provide marketing services with respect to the following products and services. Marketing these brands constitutes the core elements of our business model and allow us to serve every type of customer in the alcohol industry, including individual consumers, wholesalers, and third-party alcohol brands:

SWOL is a trademark, bearing application number 2345291 and bearing registration number 2141431 that was granted by the Mexican Institute of Industrial Property (“IMPI”) to Dollinger Innovations and which was later purchased by LQR House pursuant to the asset purchase agreement, dated March 19, 2021, among LQR House and Dollinger Innovations Inc., Dollinger Holdings LLC and Sean Dollinger.

SWOL Tequila is a limited-edition blend of Añejo Tequila made in exclusive batches of up to 10,000 bottles and represents the first installment under our “SWOL” trademarked alcohol branding. Through our partnership with CWS, we market Tequila bearing the “SWOL” trademark, which we call “SWOL Tequila,” on the CWS Platform, which distributes SWOL Tequila throughout the United States. SWOL Tequila is produced by Casa Cava de Oro S.A., an authentic tequila distillery in Jalisco, Mexico, sold by LQR House to CWS before it is imported from Mexico into the United States, and is imported into the United States by Rilo in cooperation with CWS. All marketing and branding for SWOL Tequila is led by our marketing team, who has led the way on all branding efforts from conceptualizing the bottle shape and size, to overseeing the design of the labels. We also work with the producers in Mexico on all product development, including the original SWOL Añejo and the additions of Peach and Cristalino.

When product testing was initiated for the label with the trademark SWOL on it, which we call “SWOL,” a campaign was created around a “Mystery Tequila” where CWS’s network of influencers promoted SWOL without showing the bottle or label. We believe that this marketing tactic generated customer excitement for the product and led to an increase in anticipation for its reveal. Since then, we have seen continuous growth in SWOL customer interest and have taken steps to expand the product line to match that interest. With each product, we focus on creating unique labels, each with the signature SWOL sew-on patch, which accompanies each hand-numbered bottle. The patch can be peeled off and sewn onto clothing or accessories.

We believe that our focus on our brand identity and product innovation will allow us to continue generating consumer interest and hype for each addition to the product line bearing the SWOL trademark. Moreover, SWOL has been developed to align with current consumer preferences and trends within the market. Essentially, we generate SWOL products that maintain the high-quality ingredients from the Tequila region of Mexico and combine that tradition of quality with new and exciting flavors. CWS is offering the following products bearing the SWOL trademark at competitive price points:

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SWOL Añejo Tequila is an extremely limited-edition tequila that is bottled in glass blown flasks inscribed with a unique ID number and adorned with our patch that displays a unique label specific to the Añejo Tequila line. Each bottle contains a tequila produced using artisanal Mexican and modern techniques that impart each drink with a smoky, rich, sweet flavor. The SWOL Añejo Tequila is currently priced at $89.99 (MRSP).

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SWOL Peach Tequila is an amber, dark coppery tequila that is bottled in glass blown flasks inscribed with a unique ID number and adorned with our patch that displays a unique label specific to the Peach Tequila line. The production imparts an authentic tequila taste with notes of peach, toasted nuts and oak. Through market analysis and sales data, our peach products are often in high demand, and we expect this trend to continue. The SWOL Peach Tequila is currently priced at $79.99 (MRSP).

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SWOL Cristalino Tequila is a crystalline tequila bottled glass blown flasks, inscribed with a unique ID number and adorned with our patch that displays a unique label specific to the Cristalino Tequila line. The tequila displays light blue crystalline flashes and production imparts an authentic tequila taste with notes of fruity oak, toasted nuts and light spice. The SWOL Cristalino Tequila is currently priced at $79.99 (MRSP).

Vault is the exclusive membership program for CWS customers. Through the CWS Platform, users can sign up for this exclusive membership where they will have access to all products available through CWS combined with special membership benefits including: (i) 10% off all products site wide; (ii) free ground shipping (2-5 business days) on orders over $50 (limited to three shipping addresses); (iii) access to special promotional offers; and (iv) free mystery vault gifts in every shipment. The monthly membership costs customers $29.95 and requires an initial 3-month start-up commitment. The objective is to create a loyal customer base that provide us with recurring monthly subscription revenue. Vault also provides us with the means to provide customers special discounts to marketing partner brands, which we make solely available to Vault members. We market this membership program on the CWS Platform.

Soleil Vino will be a wine subscription service that is marketed on the CWS Platform and will offer a selection of vintage and limited production wines. Through the CWS Platform, users will sign up for this exclusive membership where they will have access to curated selections of wine from around the world. With Soleil Vino, we intend to create the premium wine subscription service on the market with the highest quality, and diverse selections of wine offerings, which we refer to as our Wine Club. We expect our Wine Club to have three membership options based on different wine quality and price. Within each membership, our customers will select whether they want to receive two or four bottles each month, and whether they want white wine only, red wine only, or a variety box. Members will also get access to a members-only dashboard, where they can access informational blogs written by in-house wine experts. They will also receive monthly newsletters with additional information, and various discounts for other products on the CWS Platform. Membership fees for Soleil Vino will be charged monthly and can be cancelled at any time after the initial three months of subscription service. We are responsible for launching the Wine Club through a series of ads, social and email campaigns, and all exclusive content and wine selection for members will be handled by in-house wine experts. We will market the Wine Club on the CWS Platform and are entitled to all the revenue from the subscriptions. The Wine Club is expected to have three subscription membership options based on different wine quality, price, and quantity.

The following table is representative of the Soleil Vino membership options, that we intend to list on the CWS Platform:

Membership Option	Select Membership	Classic Membership	Premier Membership
Description	This package features, popular, value priced wines and consumer favorites.	This membership will feature quality vintage wine from well-known producers.	This membership includes hand-picked bottles of wine from award winning wineries
Fee for 2 bottles per month	$45.00/month	$55.00/month	$75.00/month
Fee for 4 bottles per month	$85.00/month	$105.00/month	$145.00/month

LQR House Marketing is a marketing service in which we utilize our marketing expertise to help our wholly owned brands and third-party clients market their products to consumers. For example, by engaging LQR House for its marketing services, our clients gain the ability to advertise and sell their brand on the CWS Platform. We generally charge a monthly fee for our marketing services and often enter into multi-month programs with clients. Monthly program costs generally range from $3,000 to $10,000 depending on the program options selected by the client. Our services also include the creation of a creative marketing campaign strategy, and the development of promotional materials. Key features of the marketing offering include:

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Leveraging multiple advertising campaigns to bring affordability to advertising methods such as influencer marketing, incentive-based sales, or product placement advertising.

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Combining multiple campaigns into one media buy.

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Leveraging specific assets available to LQR House such as the CWS Platform and email distribution list.

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Advertising with targeted banners.

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Leveraging LQR House online campaigns.

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Creating branding and product placement campaigns that elevate a brand’s reach to targeted demographics.

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Creating a brand around an influencer’s following and reach to leverage viewership and monetize their growth.

Central to the business model, we offer access to an exclusive network of industry influencers or brand ambassadors. Engaging with us provides clients with the opportunity to select a tailored list of influencers to promote their brand to an ideal target market. LQR House currently has relationships with 382 influencers, which is a significant differentiator and underscores the uniqueness of our company as a marketing platform. Influencers are provided a commission based on the number of products they sell and drive traffic to the CWS website. Commissions paid are solely the responsibility of CWS. The more an influencer generates in sales for a brand, the more the influencer makes in commissions. This directly aligns the objectives of the brand, influencer and LQR House. Key elements of a typical influencer program may include:

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Best efforts to maximize posts per months by various influencers.

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Monthly posts will include content from an influencer list with a cumulative following of at least 1.5 million followers. For example, a typical influencer mix would be as follows: (i) 2-3 Major Influencers, influencers with more than 500,000 followers, (ii) 3-5 Top-Tier Influencers, influencers with more than 100,000 followers, (iii) 5-10 Micro Influencers, influencers with 10,000 to 100,000 followers, and (iv) 3-5 Beginner Influencers, influencers with less than 10,000 followers.

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Posts presented on multiple social media platforms, including cross posting where the same video or content may be shared several times to capture many different audiences, targeting social media platforms such as Facebook and Facebook Reels, Instagram and Instagram Reels, YouTube and YouTube Shorts, Pinterest and Pinterest Idea Pins, X, Khal Media, Clapper, LinkedIn, Reddit, Twitch, Tumblr, etc.

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1-2 email blasts per month from the influencer featuring the brand.

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Placement of brand on the main sliding banner on the CWS Platform homepage or mobile app, in the category page and Spirits dropdown of the website, and in our holiday gift guide.

Within 5 days of the end of the month, we generate a summary report of the influencer program which includes the following types of data: (i) the total sales of product on the CWS Platform with basic customer location data, (ii) a list of posts per influencers with links to content across platforms, and (iii) a description of product placements on the CWS Platform.

Our Relationships with Third-Party Alcohol Brands

To date, we have engaged with various brands to bring their products to our customer base. We have engaged with brands including, but not limited to, Cocktail Caviar, Soda Jerk, Bake Sale and Just the Tipsy to market and sell their products on the CWS Platform. Our clients generally include newer alcohol brands that produce small batches and craft spirits. Many customers return for additional marketing programs after the initial engagement and elect to enter multiple month arrangements. The following graphics contain advertisements we created for some of our clients, to be run on the CWS Platform.

Our Competition and Competitive Strengths

The market for online sales and promotions of alcohol is competitive. This includes large online retailers such as Amazon, specialty e-commerce sites and direct sales from producers. These companies are often larger than us, and have considerable financial, technical and human capital resources. However, we believe that we have the following competitive strengths that will allow us to capitalize on the growing alcoholic beverage industry and alcohol e-commerce:

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Targeted marketing. We believe that our branding style, and the branding services we provide to our clients, allow us to market directly to the millennial market demographic. We believe we accomplish this marketing through our ad campaigns and marketing materials that have a sleek and modern look and feel. By implementing this targeted approach, in our view, we provide a unique and modern customer experience that helps us capture a key market in the alcoholic beverage industry. Our search engine optimization, or SEO, has been developed over many years. In our view, it provides customers with premium placement opportunities they often cannot source anywhere else.

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Extensive influencer network. We believe that our team has created one of the most extensive influencer relationship lists within the alcohol industry for small batch and exclusive brands. We have around 500 influencer relationships that differentiates us from many other online marketing channels available to brands.

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Extensive e-commerce and marketing expertise. Our team has decades of experience combined in e-commerce and implementing online strategies to maximize the benefit of marketing campaigns. This includes online promotional campaigns that drive sales of products.

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Working with highly differentiated brands. We vet the external brands we promote to ensure that all of the products we market align with our own brand and strategy. We believe our vetting process allows us to maximize the value we provide to our clients, while also allowing us to provide consumers with exclusive options not available from larger distributors.

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Strategic relationships. We believe we have developed and solidified relationships with multiple groups that can deliver value to external brand customers. This includes marketing, import, storage and retail/wholesale distribution relationships.

In addition to online competition, we face competition from other emerging products, as the market can be characterized as highly fragmented with many new brands coming to market. We believe we differentiate our wholly-owned brands in several ways:

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Development of products that are not generally available in the market. We focus our product development on flavors and variations of products that are not generally available in the market. This differentiation aligns with current market trends and results in alignment with modern consumer preference for new and exciting brand products that expand the profile of legacy products. For example, SWOL Peach Tequila.

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Setting competitive price points. We believe we set a competitive price point, which aligns with the uniqueness and quality of the products offered by the Company. This price point is important in the context of differentiating legacy or generic products in the industry. This comes from years of experience within the industry and significant data points about comparable products within the market that we and our partners collected.

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Focus on quality. We believe all our products are sourced from the highest quality producers, and we vet our producers by visiting locations to verify quality and control procedures.

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Labelling and marketing promotions. We believe that we have crafted unique labelling which aligns with our branding. Our labelling includes a removable patch that can be affixed to other items. This serves as continued marketing for our products, as the patch remains after the bottle has been consumed.

Our Growth Strategies

Marketing

We have developed three primary methods for facilitating deals through our marketing division:

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Channel Partners/Influencers. Our most successful service to date is the ability for liquor brands to have their products displayed by a social media influencer team via product placement, promotion and usage in advertorial collaborations. These influencers are often approached by new brands independently, which are then referred to us. We built up our own group (network) of influencers from scratch (bartenders, alcohol personalities, restaurateurs, social media personalities, alcohol representatives). These influencers have a direct line to qualified customers who are looking to buy products that they recommend. After signing a marketing client, we send their products to our influencers who then create client specific content that directs their followers to the CWS website to buy the product. The influencers are only paid on a percentage of sales.

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Direct Inbound Lead Generation. Due to the surge in demand for marketing companies that specialize in liquor and alcohol promotion, we have been contacted by an influx of new brands and medium-sized companies that are looking to scale via resources and available services. This is also being driven based on past successes with brands that refer their industry relationships to LQR House. For example, when we first launched the program, we contracted with four to five clients on a monthly basis. Since then, we have had at least 8 clients utilizing our marketing services on a monthly basis. As we continue to grow our operations and increase our service offerings, we intend to increase inbound marketing via Google Ads, social media promotion and search engine optimization to ensure new leads flowing in.

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Liquor Brand Development. Through our exclusive marketing agreements with external brands, we are developing a reputation as a premium marketer and advertiser for liquor brands, and one that offers efficient and cost-effective services. Brands that are looking to establish themselves often find the Company through web properties of those lines, such as swoltequila.com.

We believe that by continuing to develop leading brands for up-and-coming companies and, by aligning with celebrities and influencers with significant followings, we will continue to offer quality work-product that will attract start-ups looking to establish an online marketing presence. Moreover, we believe that we are developing a portfolio of successful marketing campaigns that will positively influence our word-of-mouth and referral lead generation and overall reputation in the industry.

Brands

We intend to continue expanding and developing our existing brands, like those associated with our SWOL trademark, in two ways. First, we plan to purchase larger amounts of SWOL products, which will allow us to sell to more customers and increase our brand recognition at a quicker rate. Second, we plan on increasing the marketing presence for SWOL and launching our Wine Club. Moreover, we will continue developing new flavors, like SWOL Cristalino and SWOL Peach, that align us with current market trends and evolving consumer preferences.

Acquisitions

We intend to pursue opportunistic acquisitions of the following types of companies involved in the alcoholic beverage industry, or companies that could be beneficial if integrated into our current business model:

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Existing Brands. We intend to target up-and-coming unique alcohol brands with initial market penetration and the potential to expand with additional marketing and distribution expertise. Our focus will be on the spirits, wine and specialty mixed drink segments of the market. One potential source of acquisitions would include approaching existing marketing clients to gauge their interest in becoming a majority owned subsidiary of our company.

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Technologies. We will also seek to acquire applications, analytics and distribution tools that can be utilized to complement our existing operations. Our technology acquisitions will focus on platforms that we believe will gain additional market insights and advertising opportunities for internal and external brands that we are developing, or plan to develop in the future.

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Distribution Licenses and Physical Storage Locations. We intend to target companies with importation licenses and storage facilities that will allow us to physically import and store our brands and our clients’ brands.

We expect to utilize a formal acquisition process for the identification and analysis of targets in the context of strategic alignment to our business objectives, approaching targets for solicitation of interest in a transaction, completing financial, legal and technical due diligence, and negotiating the terms of a transaction and related legal documentation. The core objective of this process is to scale our revenue and earnings and complement our existing operational activities. Each of our management team members has completed significant financial transactions over the course of their careers, and has with experience working with corporate issuers, investment and merchant banks, and law firms, and we believe that our management’s experience will help us achieve our business goals.

Intellectual Property

We consider intellectual property to be important to the operation of our business, and critical to driving growth in our commercial revenue. We acquired trademarks pursuant to the Asset Purchase Agreement in connection with SWOL between LQR House as the Buyer and Dollinger Innovations Inc., Dollinger Holdings LLC, and Sean Dollinger as the Sellers dated as of March 19, 2021 and pursuant to the Asset Purchase Agreement in connection with Soleil Vino among LQR House as the Buyer and Dollinger Holdings LLC as the Sellers dated as of May 31, 2021. We consider our intellectual property to be a key business asset and therefore have rights to use and market the following portfolio of intellectual property:

SWOL Intellectual Property

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Trademarks: SWOL and Design and all associated intellectual property rights, which are registered in Mexico only.

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All labels, logos and other branding bearing the SWOL and Design marks or any mark substantially similar to the same.

Soleil Vino Intellectual Property

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Trademarks for Soleil Vino and all associated trade dress and intellectual property rights (which are not currently registered by us).

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All labels, logos and other branding bearing the Soleil Vino marks or any mark substantially similar to the same.

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Website and all related digital and social media content including but not limited to influencer networks, http://www.soleilvino.com, and all related content, and all related sales channels.

Enforcement of our trademark rights is important in maintaining the value of each of our brands. While it would be cost-prohibitive to act in all instances, our aim is to consistently reduce trademark infringements by carrying out coordinated, cost-effective enforcement actions following investigation of suspected trademark infringements. Enforcement action takes a variety of forms, such as working with authorities to seize counterfeit goods and stopping the activities of unauthorized sellers to taking direct legal action against infringers, for example, by issuing cease and desist letters. In relation to materials for which copyright protection is available, our current practice is generally to secure copyright ownership where possible and appropriate.

Human Capital

As of April 1, 2024, we have 18 consultants, including Sean Dollinger, Kumar Abhishek, Jaclyn Hoffman, and Alexandra Hoffman. Our independent contractors include third-party service providers who staff our organization and supplement our teams as needed. None of our personnel are represented by labor unions, and we believe that we have an excellent relationship with everyone who works with us. We operate the Company under remote-first principles.

Seasonality

Seasonality has some impact on our business via the levels at which customers engage with our products and brand. For example, we have traditionally seen lower total sales in the post-holiday and winter months. Our marketing strategies, which may be informed by these seasonal trends, will also impact our quarterly results of operations. These trends may cause our cash requirements to vary from quarter to quarter depending on the variability in the volume and timing of sales. We believe that these seasonal trends have affected and will continue to affect our quarterly results.

Facilities

The Company owns an office lease pursuant to a commercial lease agreement between South Doll LLC and LQR House at 6800 Indian Creek Dr., Suite 1E, Miami Beach, FL, 33141 (the “premises”). The premises are used as a corporate office address and as the registered office address for the Company. The lease commenced on February 15, 2023 and will expire on February 28, 2025. Our total office space pursuant to this agreement is approximately 800 square feet. We believe our office space is adequate for at least the next 12 months.

Legal Proceedings

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition, or operating results.

Key Agreements with Supplier

In accordance with a certain asset purchase agreement dated March 19, 2021, by and between the Company, as buyer, and Dollinger Innovations Inc., Dollinger Holdings LLC, and Sean Dollinger, our Chief Executive Officer, as sellers, the Company became an assignee to that certain Shared Responsibility and Bonding Agreement dated March 19, 2021, between Leticia Hermosillo Ravelero (“Producer”) and Dollinger Innovations Inc., (the “Shared Responsibility and Bonding Agreement”). In connection with this assignment, on July 7, 2023, the Company, Dollinger Innovations Inc. and the Producer signed a ratification of the agreement of assignment of rights of the Shared Responsibility and Bonding Agreement, which requires registration with the Mexican Institute of Industrial Property. The Company submitted documents to the Mexican Institute of Industrial Property to obtain such registration on July 12, 2023. Pursuant to the Shared Responsibility and Bonding Agreement, the Producer produces and supplies to LQR House an alcoholic beverage “Tequila made 100% of agave” labeled “SWOL” and LQR House facilitates the distribution of this product in collaboration with Rilo. The Producer manufactures exclusively for Dollinger Innovations Inc. “Tequila Anejo” and “Tequila 100% De Agave”. The Shared Responsibility and Bonding Agreement as between the original parties, the Producer, and Dollinger Innovations Inc., became effective on August 6, 2021, which is the date of its registration with the Mexican Institute of Industrial Property. The cost and amount of each batch of tequila produced will be determined in advance of the production of each batch by agreement between Producer and the Company. The agreement prohibits distribution and marketing of the product supplied by the Producer in bulk. The Shared Responsibility and Bonding Agreement will terminate on August 6, 2026, unless terminated prior to that date by joint agreement with at least 30 days advance written notice.

On June 30, 2023, pursuant to an assignment agreement, Dollinger Innovations Inc., Dollinger Holdings LLC, and Sean Dollinger assigned their rights as distributor under the Packaging of Origin Co-Responsibility Agreement dated July 6, 2020 (the “Packaging of Origin Co-Responsibility Agreement”) to the Company. Subsequent to that on July 11, 2023, the Producer and LQR House signed a Bottled at Origin Joint Responsibility Agreement (the “Bottled at Origin Joint Responsibility Agreement”), which requires registration with the Mexican institute of Industrial Property, which was requested by the Company on July 13, 2023. Under that agreement, the Producer supplies to the Company, bottled at origin product that strictly complies with the “Official Tequila Standard” (as defined in the agreement) and allows the Company to use the word “Tequila” or “Tequila 100% Agave” on the SWOL brand. The Producer also supplies exclusively to the Company Tequila Anejo and tequila flavored in accordance with the orders submitted by the Company. In its turn, the Company agrees to use the “Tequila Denomination of Origin” and to distribute the product of the same name, supplied by the Producer exclusively in containers bearing the SWOL trademark, used to distinguish and identify the alcoholic beverage called “TEQUILA”. The agreement comes into force on the date when it is registered by the Mexican Institute of Industrial Property and is entered for indefinite term. The agreement can be terminated by mutual agreement of the parties. The agreement will also automatically be terminated in case of failure by either party to comply with the “Official Tequila Standard” as that will result in the suspension or cancellation of the export certificates issued by the RCT.

Both agreements require that the tequila supplied by the Producer should comply with the Mexican Official Tequila Standard.

Government Regulation

The Alcohol Industry

A complex multi-jurisdictional regime governs alcoholic beverage manufacturing, distribution, sales, and marketing in the United States. The alcoholic beverages industry in which we operate is subject to extensive regulation by the Alcohol and Tobacco Tax and Trade Bureau (and other federal agencies), each state’s liquor authority, and potentially local authorities depending on location. These regulations and laws dictate such matters as licensing requirements, production, importation, ownership restrictions, trade, and pricing practices, permitted distribution channels, delivery, and prohibitions on sales to minors, permitted, and required labeling, and advertising and relations with wholesalers and retailers. These laws, regulations and licensing requirements may, and sometimes are, interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other legal mandates or with the Company’s business practices. Further, these laws, rules, regulations, and interpretations are constantly changing because of litigation, legislation, and agency priorities, and could result in increased regulation. The Company’s actual or asserted non-compliance with any such law, regulation or requirement could expose us to investigations, claims, litigation, injunctive proceedings and other criminal or civil proceedings by private parties and regulatory authorities, as well as license suspension, license revocation, substantial fines, and negative publicity, any of which could adversely affect our results of operations, financial condition, and business.

The Internet

We are subject to several laws and regulations that affect companies conducting business on the Internet, many of which are still evolving and could be interpreted in ways that could harm our business. The way existing laws and regulations will be applied to the Internet and how they will relate to our business are often unclear. For example, we often cannot be certain how existing laws will apply in the e-commerce and online context, including with respect to such topics as privacy, defamation, pricing, credit card fraud, advertising, taxation, sweepstakes, promotions, content regulation, quality of products and services, and intellectual property ownership and infringement.

Numerous laws and regulatory schemes have been adopted at the national and state level in the United States, and in some cases internationally, that have a direct impact on our business and operations. For example:

The Credit Card Accountability Responsibility and Disclosure Act of 2009, or CARD Act, and similar laws and regulations adopted by several states regulate credit card and gift certificate use fairness, including expiration dates and fees. Our business also requires that we comply with payment card industry data security and other standards. We are subject to payment card association operating rules, certification requirements, and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, or if our data security systems are breached or compromised, we may be liable for card issuing banks’ costs, subject to fines and higher transaction fees, and lose our ability to accept credit and debit card payments from our customers, process electronic funds transfers, or facilitate other types of online payments, and our business and results of operations could be adversely affected.

The Digital Millennium Copyright Act (DMCA) provides relief for claims of circumvention of copyright protected technologies and includes a safe harbor intended to reduce the liability of online service providers for hosting, listing, or linking to third-party content that infringes copyrights of others.

The California Consumer Privacy Act (CCPA), which went into effect on January 1, 2020, provides consumers the right to know what personal data companies collect, how it is used, and the right to access, delete, and opt out of the sale of their personal information to third parties. It also expands the definition of personal information and gives consumers increased privacy rights and protections for that information. The CCPA also includes special requirements for California consumers under the age of 16. In addition, the European Union and United Kingdom have adopted the General Data Protection Regulation (GDPR), which likewise impose significant data protection obligations on enterprises, including limitations on data uses and constraints on certain uses of sensitive data. Effective January 1, 2023, we became subject to the California Privacy Rights Act, which expands upon the consumer data use restrictions, penalties and enforcement provisions under the California Consumer Privacy Act, and Virginia’s Consumer Data Protection Act, another comprehensive data privacy law. Effective July 1, 2023, we became subject to the Colorado Privacy Act and Connecticut’s An Act Concerning Personal Data Privacy and Online Monitoring, which are also comprehensive consumer privacy laws. Effective December 31, 2023, we will also become subject to the Utah Consumer Privacy Act, regarding business handling of consumers’ personal data.

ITEM 1A. RISK FACTORS

An investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors, together with the other information contained in this annual report, before purchasing our common stock. We have listed below (not necessarily in order of importance or probability of occurrence) what we believe to be the most significant risk factors applicable to us, but they do not constitute all of the risks that may be applicable to us. Any of the following factors could harm our business, financial condition, results of operations or prospects, and could result in a partial or complete loss of your investment. Some statements in this report, including statements in the following risk factors, constitute forward-looking statements. Please refer to the section titled “Cautionary Statement Regarding Forward-Looking Statements”.

Risks Related to Our Business and Industry

Our Chief Executive Officer, Sean Dollinger, has been the subject of a compliance review that was initiated by the British Columbia Securities Commission, and has not formally been concluded, in connection with the sale of a subsidiary by Namaste Technologies Inc. when Mr. Dollinger was the Chief Executive Officer there, and if the British Columbia Securities Commission or any other regulatory agency takes additional action against Mr. Dollinger, our business could be materially adversely affected.

Sean Dollinger, our Chief Executive Officer, was the Chief Executive Officer of Namaste Technologies Inc., or Namaste, a Canadian public company, from June 2015 to February 2019. In October 2017, Namaste sought to list its securities on the TSX Venture Exchange, or TSXV. During that time, the TSXV and the Toronto Stock Exchange, or TXV, advised their listed issuers that they could not hold interests in any entities engaging in activities related to cannabis in the United States. After receiving the TSXV Notice, Namaste sought to divest one of its subsidiaries who would be the subject of the TSXV’s notice, Dollinger Enterprises US Inc., or Dollinger US. On November 28, 2017, in a transaction approved by the Namaste board of directors, Namaste sold Dollinger US to ESC Hughes Holdings Ltd, or ESC Hughes, a company owned by David Hughes, who was acting as Chief Marketing Officer of Namaste through his wholly owned consulting firm, ORH Marketing Ltd. In an Investor call on November 29, 2017, Mr. Dollinger affirmed that the $400,000.00 purchase price for Dollinger US was fair market value and that the deal was conducted at arm’s length.

On September 13, 2018, and October 4, 2018, Citron Research, a company controlled by US-based short-seller Andrew Left, released two reports on Namaste. In those reports, Citron Research made allegations of securities fraud relating to the sale of Dollinger US. On October 9, 2018, and October 10, 2018, the British Columbia Securities Commission’s (“BCSC”) compliance department, which is a separate and distinct group from the BCSC’s enforcement department, issued comment letters to Namaste containing requests for information regarding the allegations in Citron Research’s report. Namaste responded to the letter and stated that neither ESC Hughes nor David Hughes was then, or is now, a “related party” to the Company (as defined in Multilateral Instrument 61-101, Protection of Minority Security Holders in Special Transactions) as neither ESC Hughes nor David Hughes individually, or in aggregate, held then, or hold now, greater than 10% of the outstanding securities of Namaste. Mr. Dollinger departed from Namaste in February 2019 but has offered his full cooperation to the BCSC in all requests. The BCSC has not filed an action against Mr. Dollinger, or Namaste, because of the Dollinger US transaction.

In connection with the sale of Dollinger US, on October 19, 2018, a class action complaint was filed in the Ontario Superior Court of Justice against Namaste and its former CEO, Sean Dollinger, and COO, Philip Van Den Berg on behalf of those who acquired securities of Namaste during certain time periods, alleging that the Defendants made misrepresentations of material facts relating to Namaste’s business, operations, and finances by omitting from core documents, non-core documents and statements, material facts about the sale of Dollinger US. The complaint asserted causes of action for misrepresentations with respect to securities under Section 138.3 of Ontario Securities Act (imposing liability “Where a responsible issuer or a person or company with actual, implied or apparent authority to act on behalf of a responsible issuer releases a document that contains a misrepresentation …”) and common law claims for secondary market negligent and fraudulent misrepresentations. The Ontario Court approved a settlement agreement on July 22, 2019, in which the plaintiffs received $2,150,000.00, paid out by Namaste’s insurance policy, and the defendants, including Mr. Dollinger, did not make any admissions of guilt, liability, or wrongdoing. We do not believe that Mr. Dollinger’s involvement in this class action, which was settled without any admissions of guilt or wrongdoing or liability, will have any effect on our ability to operate our business, the price of our stock, or the results of our operations.

Additionally, on November 19, 2018, a class action complaint was filed in the United States District Court for the Southern District of New York against Namaste, Sean Dollinger, Philip Van Den Berg, and former CFO, Kenneth Ngo, on behalf of persons and entities who or which purchased or otherwise acquired shares of Namaste common stock traded on the over-the-counter market between November 29, 2017, and March 6, 2019. In that claim, plaintiffs alleged violations of Section 10(b) and 20(a) of the Exchange Act and Rule 10b-5 based on allegations that the defendants made false or misleading statements or failed to disclose that Namaste did not disclose that it had sold Dollinger US to Namaste executives and, consequently, Namaste did not sell Dollinger US in an arm’s length transaction, and as a result, Namaste’s public statements were materially false and misleading at all relevant times relating to the sale of Dollinger US. The District Court in this case approved a settlement agreement on March 11, 2020, in which the plaintiffs were awarded $2,750,000.00, paid out by Namaste’s insurance policy, and the defendants, including Mr. Dollinger, did not make any admissions of guilt, liability, or wrongdoing. We do not believe that Mr. Dollinger’s involvement in this class action, which was settled without any admissions of guilt or wrongdoing or liability, will have any effect on our ability to operate our business, the price of our stock, or the results of our operations.

Regarding the BCSC compliance review and correspondence with Mr. Dollinger, we believe that it is reasonable to infer from the length of time that has passed since the last contact from the BCSC, though not a certainty, that the BCSC compliance department has concluded its review into Mr. Dollinger. Additionally, we believe it is reasonable to infer that, had the BCSC enforcement department, which has a six-year statute of limitations as to actionable securities fraud, found wrongdoing involving the matter described above, the BCSC enforcement department likely would have contacted Mr. Dollinger or his lawyer by now, though, again, that inference is by no means a certainty. We do not believe that there is an ongoing BCSC investigation or review in which Mr. Dollinger is a subject, however, we have not received formal confirmation to that effect, and we will likely never receive formal confirmation of that fact since the BCSC does not make public their confidential investigations. If there is an active investigation or review of Mr. Dollinger by the BCSC or any other enforcement division of a regulatory agency, and that review results in an enforcement action against him by the BCSC or any other regulatory agency, then the filing of that action or the result thereof could cause a diversion of the time that Mr. Dollinger has to spend on our business and otherwise may have a have a material adverse impact on the price of our securities and the results of our operations.

Our Chief Executive Officer and Director is, and may in the future become, affiliated with entities engaged in business activities similar to those that could be conducted by us and, accordingly, may in the future have conflicts of interest in allocating his time and determining to which entity a particular business opportunity should be presented.

We intend to become the full-service digital marketing and brand development face of the alcoholic beverage space. Our Chief Executive Officer is also a sole shareholder and Director of Dollinger Innovations Inc., a Canadian corporation, and the sole Member and Manager of Dollinger Holdings LLC, a Florida Limited liability Company.

Our Packaging of Origin Co-Responsibility Agreement, dated July 6, 2020 (the “Packaging of Origin Co-Responsibility Agreement”), originally signed by and among Leticia Hermosillo Ravelero (the “Producer”), Sean Dollinger, Dollinger Innovations Inc., and Dollinger Holdings LLC, was assigned to us pursuant to an assignment agreement, dated June 30, 2023 (the “June 30 Assignment Agreement”), by and among LQR House (assignee), Dollinger Innovations Inc., Dollinger Holdings LLC, Sean Dollinger (assignor), and the Producer. Following the assignment to us of all rights, title, and interest in the Packaging of Origin Co-Responsibility Agreement under the June 30 Assignment Agreement, we and the Producer signed a Bottled at Origin Joint Responsibility Agreement, dated July 11, 2023 (the “Bottled at Origin Joint Responsibility Agreement”).

Further, the Shared Responsibility & Bonding Agreement dated March 19, 2021 (the “Shared Responsibility and Bonding Agreement”), as originally among Sean Dollinger, Dollinger Innovations Inc., Dollinger Holdings, LLC, and the Producer, was assigned to us pursuant to (i) an asset purchase agreement dated March 19, 2021, which assigned over all rights, title, and interest in the Shared Responsibility and Bonding Agreement to LQR House and (ii) a ratification agreement containing the Producer’s assent to the assignment, among LQR House, Dollinger Innovations Inc., Dollinger Holdings LLC, and Sean Dollinger (collectively, the “Shared Responsibility and Bonding Assignment Agreement”).

Our business is materially dependent on the Bottled at Origin Joint Responsibility Agreement and the Shared Responsibility and Bonding Agreement.

Pursuant to the Bottled at Origin Joint Responsibility Agreement, the Producer supplies to us product that strictly complies with the “Official Tequila Standard” (as defined in the agreement) under Mexican law and allows us to use the word “Tequila” or “Tequila 100% Agave” on the SWOL brand. The Producer also supplies exclusively to us Tequila Anejo and flavored tequila in accordance with the orders submitted by us.

Pursuant to the Shared Responsibility and Bonding Agreement, the Producer produces and supplies to “Tequila made 100% of agave” and labeled with the trademark “SWOL” obtained in Mexico. We facilitate the distribution of tequila in collaboration with Rilo, who we engage to import SWOL branded tequila from Mexico to the United States.

Sean Dollinger, our Director and Chief Executive Officer is also the sole shareholder and Director of Dollinger Innovations Inc., and the sole Member and Manager of Dollinger Holdings LLC. If there is a disagreement between us on one hand and Dollinger Innovations Inc and Dollinger Holdings LLC on the other, with respect to the June 30 Assignment Agreement and the Shared Responsibility and Bonding Assignment Agreement, it could be in Mr. Dollinger’s personal interest to agree with Dollinger Innovations Inc. and Dollinger Holdings LLC in opposition to the interests of the Company. If this occurred, the Company could lose access to a material portion of its assets which would have a material adverse effect on our business, financial condition and results of operations.

Our business, revenue, and operations depend on our continuing relationship with CWS.

In the years ended December 31, 2023 and 2022, all revenue was derived from or directly related to contractual relationship with CWS. Although we acquired the CWS Platform from Ssquared on November 1, 2023, and no longer rely on the Marketing Agreement for any revenue, CWS will continue to be for the foreseeable future our only source of distribution of alcoholic beverages. Additionally, because the President of CWS is also the 100% equity owner of KBROS, we could have opportunities in the future to expand the number of our distributors or even replace CWS with a distributor that offer terms more favorable. These opportunities could be declined by KBROS as it is responsible for the management of the fulfillment of sales orders that are generated by the CWS Platform. Because of the affiliate relationship between KBROS and CWS, KBROS would be conflicted if presented with opportunities for the CWS Platform that are against the interests of CWS and may decline such opportunities against our interest. While our relationship with CWS is ongoing and is expected to continue, we cannot be certain that CWS will be willing or able to continue to distribute the products sold on the CWS Platform and although under the Management Agreement it is KBROS’s responsibility to fulfill orders, if we could not or KBROS were not able or willing to secure a new distributor for the CWS Platform if necessary, the lack of a distributor would have material adverse consequences on our financial condition and prospects.

We have a limited operating history, which may make it difficult to evaluate our business and prospects.

The Company is an early, startup stage entity with little operating history. The Company only has nominal cash as of the date of this Annuary Report on the Form 10-K. The revenue and income potential of the Company’s business and market are unproven. The Company’s limited operating history makes an evaluation of the Company and its prospects difficult and highly speculative. There can be no assurances that: (a) the Company will be able to develop products or services on a timely and cost effective basis; (b) the Company will be able to generate any increase in revenues; (c) the Company will have adequate financing or resources to continue operating its business and to provide products and services to customers; (d) the Company will earn a profit; (e) the Company can raise sufficient capital to support operations by attaining profitability; or (f) the Company can satisfy future liabilities.

Our independent registered public accounting firm has expressed substantial doubt as to our ability to continue as a going concern in its report.

The Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company sustained net losses of $15,747,724 and $1,842,175 during the years ended December 31, 2023 and 2022, respectively, and had cash used in operations of $9,113,855 during the year ended December 31, 2023. The Company requires additional capital to operate and expects losses to continue for the foreseeable future. These factors raise substantial doubts about the Company’s ability to continue as a going concern.

The Company’s ability to continue as a going concern until it reaches profitability is dependent upon its ability to generate cash from operating activities and to raise additional capital to fund operations. Management plans to raise additional capital to fund operations through debt and/or equity financings. The Company has raised funds from the IPO and an additional $16.6 million from its public offerings in October and November 2023. Our failure to raise additional capital could have a negative impact on not only our financial condition but also our ability to execute our business plan. No assurance can be given that the Company will be successful in these efforts. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company may not be able to obtain financing on acceptable terms, or at all.

The Company may need to raise additional capital to support its operations.

The Company may need to procure additional financing over time, the amount and timing of which will depend on a number of factors, including the pace of expansion of the Company’s opportunities and customer base, the scope of product development to be undertaken by the Company, the need to respond to customer needs for improvement of product offerings, the services offered and development efforts, the cash flow generated by its operations, the extent of losses, if any with respect to matters identified as risk factors herein and the extent of other unanticipated areas or amounts of expenditure. The Company cannot fully predict the extent to which it will require additional financing. There can be no assurance regarding the availability or terms of additional financing the Company may be able to procure over time. Any new investor may require that any future debt financing or issuance of preferred equity by the Company could be senior to the rights of stockholders, and any future issuance of equity could result in the dilution of the value of our shares.

The Company may incur significant losses, and there can be no assurance that the Company will ever become a profitable business.

During the years ended December 31, 2023 and 2022, we had net losses of $15,747,724 and $1,842,175, respectively. It is anticipated that the Company may continue to sustain operating losses. Its ability to become and/or remain profitable depends in material part on success in growing and expanding the Company’s products and services. There can be no assurance that this will occur. Unanticipated problems and expenses often encountered in offering new and unique products or services may impact whether the Company is successful. Furthermore, the Company may encounter substantial delays and unexpected expenses related to development, technological changes, marketing, insurance, legal or regulatory requirements and changes to such requirements or other unforeseen difficulties. There can be no assurance that the Company will remain profitable. If the Company sustains losses over a period of time, it may be unable to continue in business.

The Company’s future revenue and operating results are unpredictable and may fluctuate significantly.

It is difficult to accurately forecast the Company’s revenues and operating results, and they could fluctuate in the future due to several factors. These factors may include acceptance of the Company’s products and services; the amount and timing of operating costs and capital expenditures; competition from other market venues or services that may reduce market share and create pricing pressure; and adverse changes in general economic, industry and regulatory conditions and requirements. The Company’s operating results may fluctuate from year to year due to the factors listed above and others not listed. At times, these fluctuations may be significant.

We rely on a limited number of suppliers, or, in some cases, a sole supplier, and may not be able to find replacements or immediately transition to alternative suppliers.

Our SWOL Tequila is produced by the sole supplier, an individual based in Guadalajara, Mexico. This supplier is solely responsible for the production, bottling, labeling, capping, and packaging of our finished tequila product. If our contracts with this supplier are terminated for any reason (including, natural death of our supplier), we may not have alternative sources of supply at comparable prices and may not be able to complete orders for SWOL Tequila in time or at all. If we find a replacement, we also may not be able to raise the prices of our products to cover all, or even a portion, of the increased costs. In addition, if our supplier fails to perform satisfactorily, fails to handle increased orders, it could cause us to fail to meet orders, lose sales, incur additional costs and/or expose us to product quality issues. This could cause us to lose credibility in the marketplace and damage our relationships with our customers and partners, ultimately leading to a decline in our business and results of operations. We may not be able to obtain an acceptable substitute for production, bottling, labeling, capping, and packaging from another supplier on the same basis or at all. Even if we are able to obtain acceptable substitutes from replacement suppliers, their use could require us to significantly alter our business operations. An interruption in our business operations could occur if we encounter delays or difficulties in securing or maintaining the production of SWOL Tequila. Any such interruption could negatively impact our business development, launches of new products, and significantly affect our business, financial condition, results of operations, and reputation.

The Company’s ability to import SWOL Tequila may be suspended at any time by the Mexican authorities and until registration of the Company’s Mexican agreements is complete, the Company will not be able to enforce its authorization to use the denomination of origin “TEQUILA” applied in their products branded under the SWOL trademark against third parties in Mexico.

On March 19, 2021, the Company entered into an asset purchase agreement with Dollinger Innovations Inc., Dollinger Holdings LLC, and Sean Dollinger pursuant to which we acquired the assets related to the online or in-person sale of original SWOL tequila and other SWOL branded products. The transaction included the assignment of the Shared Responsibility and Bonding Agreement by and between Dollinger Innovations and Leticia Hermosillo Raverero relating to the production of original SWOL tequila for exclusive importation into the United States by Dollinger Innovations or its assigns. In connection with this assignment, on July 7, 2023, the Company, Dollinger Innovations Inc. and the Producer signed a ratification of the agreement of assignment of rights of the Shared Responsibility and Bonding Agreement, which requires registration with the Mexican Institute of Industrial Property. The Company submitted documents to the Mexican Institute of Industrial Property to obtain such registration on July 12, 2023.

On June 30, 2023, pursuant to an assignment agreement, Dollinger Innovations Inc., Dollinger Holdings LLC, and Sean Dollinger assigned their rights as distributor under the Packaging of Origin Co-Responsibility Agreement with the Producer dated July 6, 2020 to the Company. Subsequent to that, on July 11, 2023, the Producer and LQR House signed a Bottled at Origin Joint Responsibility Agreement, which requires registration with the Mexican institute of Industrial Property, which was requested by the Company on July 13, 2023.

The Company does not know when it will receive the completed registrations described above, and the Mexican authorities could suspend importation into the United States of SWOL branded products at any time. Until we obtain a completed registration, the Company will not be able to enforce its authorization to use the denomination of origin “TEQUILA” applied in their products branded under the SWOL trademark against third parties in Mexico. After we obtain such registrations, the Mexican authorities could suspend such importation of SWOL branded products only in case of cancellation of the registration, which would only happen in the following scenarios: i) if the parties fail to comply with the “Official Tequila Standard” as that will result in the suspension or cancellation of the export certificates issued by the regulatory Council of Tequila, A.C. (“RCT”); ii) if LQR House fails to include the phrases: “Protected Designation of Origin” in their products in the terms provided in article 302 of Mexico Federal Law for the Protection of Industrial Property; and iii) by termination of the validity of the authorization provided by the Producer. In the event that importation of SWOL products is suspended it would have a material adverse effect on the Company’s financial results and reputation.

If demand for our products and services does not develop as expected our projected revenues and profits will be affected.

Our future profits are influenced by many factors, including economics, world events and changing customer preferences. We believe that the markets in our product segment will continue to grow, that we will be successful in marketing our products and services in these markets. If our expectations as to the size of these markets and our ability to sell our products and services in this market are not correct, our revenue may not materialize, and our business will be adversely affected.

If we fail to acquire and retain new customers, or fail to do so in a cost-effective manner, we may be unable to increase net revenues, improve margins and achieve profitability.

Our success depends on our ability to acquire and retain new customers and to do so in a cost-effective manner. We must continue to acquire customers in order to increase net revenues, improve margins, and achieve profitability. We intend to make significant investments related to customer acquisition and expect to continue to spend significant amounts to acquire additional customers. We cannot assure you that the net revenues from the new customers we acquire will ultimately exceed the cost of acquiring those customers. If we fail to deliver a quality shopping experience, or if consumers do not perceive the products we offer to be of high value and quality, we may be unable to acquire or retain customers. If we are unable to acquire or retain customers who purchase products in volumes sufficient to grow our business, we may be unable to generate the scale necessary to achieve operational efficiency. Consequently, our prices may increase, or may not decrease to levels sufficient to generate customer interest, our net revenues may decrease, and our margins and profitability may decline or not improve. As a result, our business, financial condition, and results of operations may be materially and adversely affected.

We believe that many of our new customers will originate from word-of-mouth and other non-paid referrals from our customers. Therefore, we must ensure that our customers remain loyal to us to continue receiving those referrals. If our efforts to satisfy our customers are not successful, we may be unable to acquire new customers in sufficient numbers to continue to grow our business, and we may be required to incur significantly higher marketing expenses to acquire new customers.

We rely on other third parties to provide services essential to the success of our business.

Third parties provide a variety of essential business functions for us, including customer service, legal and distribution. It is possible that some of these third parties will fail to perform their services or will perform them in an unacceptable manner. It is possible that we will experience delays, errors, or other problems with their work that will materially impact our operations.

In particular, we rely on CWS for the distribution of products sold by our marketing clientele. In the event CWS were to lose their distribution license, for any reason, including but not limited to, changes in state and federal regulations, we would have to seek alternative distribution options immediately. The services we sell to our clients could be interrupted by the change in distribution provider and our business and reputation could suffer. If our efforts to contract with another distributor are unsuccessful, the Company may be unable to achieve or maintain profitability and may incur significant losses in the future. As a result, our business, financial condition, and results of operations may be materially and adversely affected.

The value of our brand also depends on effective customer support to provide a high-quality customer experience, which requires significant personnel expenses. If not managed properly, this expense could impact our profitability. Failure to manage or train our outsourced customer support representatives properly could compromise our ability to handle customer complaints effectively.

Reduced consumer demand for alcoholic beverages could harm our business.

There have been periods in the past in which overall per capita consumption of alcoholic beverages in the United States and other markets in which we participate has declined substantially. A limited or general decline in consumption in one or more of our product categories could occur in the future due to a variety of factors, including a general decline in economic conditions, increased concern about the health consequences of consuming alcoholic beverage products and about drinking and driving, a trend toward a healthier diet including lighter, lower-calorie beverages such as diet soft drinks, juices and water products, the increased activity of anti-alcohol groups and increased federal, state or foreign excise and other taxes on alcoholic beverage products. The competitive position of the Company’s products could also be affected adversely by any failure to achieve consistent, reliable quality in the product or service levels to customers.

The success of our business relies heavily on brand image, reputation, and product quality.

It is important that we maintain and increase the image and reputation of our existing brands and products. Concerns about product quality, even when unsubstantiated, could be harmful to our image and reputation of our brands and products. While we have quality control programs in place, in the event we experienced an issue with product quality, we may experience recalls or liability in addition to business disruption which could further negatively impact brand image and reputation and negatively affect our sales. Our brand image and reputation may also be more difficult to protect due to less oversight and control because of the outsourcing of some of our operations. We also could be exposed to lawsuits relating to product liability or marketing or sales practices. Deterioration to our brand equity may be difficult to combat or reverse and could have a material effect on our business and financial results.

In addition, in recent years, there has been a marked increase in the use of social media platforms and other forms of Internet-based communications that provide individuals with access to broad audiences, and the availability of information on social media platforms is virtually immediate, as can be its impact. Many social media platforms immediately publish the content their participants post, often without filters or checks on accuracy of the content posted. Furthermore, other Internet-based or traditional media outlets may in turn reference or republish such social media content to an even broader audience. Information concerning us, regardless of its accuracy, may be posted on such platforms at any time. Information posted may be adverse to our interests or may be inaccurate, each of which may materially harm our brand, reputation, performance, prospects and business, and such harm may be immediate and we may have little or no opportunity to respond or to seek redress or a correction.

Changes in consumer spending could have a negative impact on our financial condition and business results.

Alcohol sales depend upon a number of factors related to the level of consumer spending, including the general state of the economy, federal and state income tax rates, deductibility of business entertainment expenses under federal and state tax laws, and consumer confidence in future economic conditions. Changes in consumer spending in these and other areas can affect both the quantity and the price of wines that customers are willing to purchase online, at restaurants or through retail outlets. Reduced consumer confidence and spending may result in reduced demand for our products, limitations on our ability to increase prices and increased levels of selling and promotional expenses. This, in turn, may have a considerable negative impact upon sales and gross margins.

We are subject to, or voluntarily comply with, a number of other laws and regulations relating to the payments we accept from our customers and third parties, including with respect to money laundering, money transfers, privacy, and information security, and electronic fund transfers. These laws and regulations could change or be reinterpreted to make it difficult or impossible for us to comply. If we were found to be in violation of any of these applicable laws or regulations, we could be subject to civil or criminal penalties and higher transaction fees or lose our ability to accept credit and debit card payments from our customers, process electronic funds transfers or facilitate other types of online payments, which may make our services less convenient and less attractive to our customers and diminish the customer experience.

Adverse public opinion about alcohol may harm our business.

While a number of research studies suggest that moderate alcohol consumption may provide various health benefits, other studies conclude or suggest that alcohol consumption has no health benefits and may increase the risk of stroke, cancer and other illnesses. An unfavorable report on the health effects of alcohol consumption could significantly reduce the demand for wine, which could harm our business by reducing sales and increasing expenses.

In recent years, activist groups have used advertising and other methods to inform the public about the societal harms associated with the consumption of alcoholic beverages. These groups have also sought, and continue to seek, legislation to reduce the availability of alcoholic beverages, to increase the penalties associated with the misuse of alcoholic beverages, or to increase the costs associated with the production of alcoholic beverages. Over time, these efforts could cause a reduction in the consumption of alcoholic beverages generally, which could harm our business by reducing sales and increasing expenses.

Increased regulatory costs or taxes would harm our financial performance.

The Alcohol and Tobacco Tax and Trade Bureau of the U.S. Department of the Treasury, or the TTB, imposes excise taxes, and/or other taxes on beverage alcohol products, and/or on certain raw materials used to produce our beverage alcohol products, in varying amounts. TTB or other governmental bodies may propose changes to international trade agreements, tariffs, taxes and other government rules and regulations. Significant increases in taxes on, or that impact, beverage alcohol products could have a material adverse effect on our business, liquidity, financial condition and/or results of operations.

Changes in the prices of supplies and raw materials could have a materially adverse effect on our business.

There have been changes in the cost of raw materials used in tequila production and especially raw spirits in recent years. The increases in prices may also take place in the future and our inability to pass on increases to our customers could reduce our margins and profits and have a material adverse effect on our business. We cannot assure you that shortages or increases in the prices of our supplies or raw materials will not have a material adverse effect on our financial condition and results of operations.

We are subject to risks associated with payments to us from our customers and other third parties, including risks associated with fraud.

Nearly all of our customers’ payments, for marketing services, are made by credit card or debit card. We currently rely exclusively on one third party vendor to provide payment processing services, including the processing of payments from credit cards and debit cards, and our business would be disrupted if this vendor becomes unwilling or unable to provide these services to us and we are unable to find a suitable replacement on a timely basis. We are also subject to payment brand operating rules, payment card industry data security standards and certification requirements, which could change or be reinterpreted to make it more difficult or impossible for us to comply. If we fail to comply with these rules or requirements, we may be subject to fines and higher transaction fees and lose our ability to accept credit and debit card payments from customers, which would make our services less convenient and attractive to our customers and likely result in a substantial reduction in revenue. We may also incur losses as a result of claims that the customer did not authorize given purchases, fraud, erroneous transmissions and customers who have closed bank accounts or have insufficient funds in their accounts to satisfy payments owed to us.

We may not be able to fully exploit newly acquired brands.

We intend to acquire third-party brands. In our experience, not every brand deployment is successful. We may incur significant costs acquiring and promoting new brands only to have limited market acceptance and limited resulting sales. If this occurs, our financial results may be negatively impacted, and we may determine it is in the best interest of the Company to no longer support that brand.

We operate in highly competitive industries, and competitive pressures could have a material adverse effect on our business.

The alcoholic beverage distribution industry in the United States is intensely competitive and highly fragmented. The principal competitive factors in that industry include product range, pricing, distribution capabilities and responsiveness to consumer preferences, with varying emphasis on these factors depending on the market and the product. With respect to individual customers, we face significant competition from various regional distributors and brick and mortar stores, who compete principally on price. The effect of this competition could adversely affect our results of operations.

We are dependent on the continued services and performance of our senior management and other key employees, the loss of any of whom could adversely affect our business, operating results and financial condition.

Our future performance depends on the continued services and contributions of our senior management and other key employees, including Sean Dollinger, our founder and Chief Executive Officer, and Kumar Abhishek, our Chief Financial Officer and Jaclyn Hoffman, our Chief Marketing Officer. Without these key executives and employees, we may not have the ability to execute our business plans and to identify and pursue new opportunities and product innovations. The loss of services of senior management or other key employees could significantly delay or prevent the achievement of our development and strategic objectives. The loss of the services of our senior management or other key employees for any reason could adversely affect our business, financial condition and operating results. We do not presently maintain any key man life insurance policies.

We may not be able to manage future growth effectively.

If our business plans are successful, we may experience significant growth in a short period of time and potential scaling issues. Should we grow rapidly, our financial, management and operating resources may not expand sufficiently to adequately manage our growth. If we are unable to manage our growth, our costs may increase disproportionately, our future revenues may stop growing or decline and we may face dissatisfied customers. Our failure to manage our growth may adversely impact our business and the value of your investment.

If the Company fails to develop or protect its intellectual property adequately, the Company’s business could suffer.

The Company has attempted, and may attempt, to develop certain intellectual property of its own, but cannot assure that it will be able to obtain exclusive rights in trade secrets, patents, trademark registrations and copyright registrations. At this time, the Company is unsure of what types of intellectual property might be developed. The cost of developing, applying for and obtaining such enforceable rights is expensive. Even after such enforceable rights are obtained, there are significant costs for maintaining and enforcing them. The Company may lack the resources to put in place exclusive protection and enforcement efforts. Also, certain of the Company’s product or service offerings initially draws from publicly available technology in the marketplace. The Company’s failure to obtain or maintain adequate protection of its intellectual property rights for any reason could have a material adverse effect on its business, financial condition and results of operations.

If the Company were to develop intellectual property, the Company may seek to enforce its intellectual property rights on others through litigation. The Company’s claims, even if meritorious, may be found invalid or inapplicable to a party the Company believes infringes or has misappropriated its intellectual property rights. In addition, litigation can:

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be expensive and time consuming to prosecute or defend;

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result in a finding that the Company does not have certain intellectual property rights or that such rights lack sufficient scope or strength;

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divert management’s attention and resources; or

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require the Company to license its intellectual property.

We do not have any trademarks that are registered in the United States. Our SWOL trademark is registered in Mexico only. As a result, a third party may be able to successfully challenge our enforcement of the SWOL trademark in the United States. If a successful challenge to our enforcement of our trademarks rights with respect to SWOL were to occur, we could lose the ability to market SWOL in the United States and such an occurrence could have a material adverse effect on our financial condition.

The Company relies or may rely in the future on trademarks or service marks to establish a market identity for its products or services. To maintain the value of the Company’s trademarks or service marks, the Company might have to file lawsuits against third parties to prevent them from using marks confusingly similar to or dilutive of the Company’s registered or unregistered trademarks or service marks. The Company also might not obtain registrations for its pending or future trademark or service marks applications and might have to defend its registered trademark or service marks and pending applications from challenge by third parties. Enforcing or defending the Company’s registered and unregistered trademarks or service marks might result in significant litigation costs and damages, including the inability to continue using certain marks.

The laws of foreign countries in which the Company may contemplate doing business in the future may not recognize intellectual property rights or protect them to the same extent as do the laws of the United States. Adverse determinations in a judicial or administrative proceeding could prevent the Company from offering or providing its products or services or prevent the Company from stopping others from offering or providing competing services, and thereby have a material adverse effect on the Company’s business, financial condition, and results of operations.

The Company’s products, services or processes could be subject to claims of infringement of the intellectual property of others.

Claims that the Company’s products, services, business methods, or processes infringe upon the proprietary rights of others often are not asserted until after commencement of commercial sales of a product. Significant litigation regarding intellectual property rights exists in the Company’s industry. Third parties may make claims of infringement against the Company in connection with the use of its technology. Any claims, even those without merit, could:

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be expensive and time consuming to defend;

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cause the Company to cease making, licensing, or using services that incorporate the challenged intellectual property; or

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divert management’s attention and resources.

The Company cannot be certain of the outcome of any litigation. Any royalty or licensing agreement, if required, may not be available to the Company on acceptable terms or at all. The Company’s failure to obtain the necessary licenses or other rights could prevent the development, or distribution of the Company’s marketing technology and, therefore, could have a material adverse effect on the Company’s business.

We are exposed to fluctuations in currency exchange rates that could negatively impact our financial results and cash flows.

Our supplier is located in Mexico. Because of this we face exposure to adverse movements in foreign currency exchange rates. Our primary exposures are expected to be related to pesos denominated operating expenses in Mexico. These exposures may change over time as business practices evolve, and they could have a material adverse impact on our financial results and cash flows.

A failure or breach of our security systems or infrastructure as a result of cyberattacks could disrupt our business, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs and cause losses.

Information security risks for technology companies, such as the Company, have significantly increased in recent years in part because of the proliferation of new technologies, the use of the Internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists and other external parties. These threats may derive from fraud or malice on the part of our employees or third parties or may result from human error or accidental technological failure. These threats include cyberattacks, such as computer viruses, malicious code, phishing attacks or information security breaches.

Our operations will, in part, rely on the secure processing, transmission and storage of confidential proprietary and other information in our computer systems and networks. Our customers will rely on digital technologies, computers, email and messaging systems, software and networks to conduct their operations or to utilize our products or services. In addition, to access our products and services, our customers will use personal smartphones, tablet computers and other mobile devices that may be beyond our control.

If a cyberattack or other information security breach occurs, it could lead to security breaches of the networks, systems or devices that our customers use to access our products and services which could result in the unauthorized disclosure, release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other information (including account data information) or data security compromises. Such events could also cause service interruptions, malfunctions or other failures in the physical infrastructure or operations systems that will support our businesses and customers, as well as the operations of our customers or other third parties. Any actual attacks could lead to damage to our reputation with our customers and other parties and the market, additional costs to the Company (such as repairing systems, adding new personnel or protection technologies or compliance costs), regulatory penalties, financial losses to both us and our customers and partners and the loss of customers and business opportunities. If such attacks are not detected immediately, their effect could be compounded.

Although we will attempt to mitigate these risks, there can be no assurance that we will be immune to these risks and not suffer losses in the future.

Current market conditions and recessionary pressures in one or more of the Company’s markets could impact the Company’s ability to grow its business.

The U.S. economy faces continued concerns about the systemic impacts of adverse economic conditions such as the U.S. deficit, historically high inflation, volatile energy costs, geopolitical issues, the continued availability and cost of credit in the face of expected interest rate increases by the U.S. Federal Reserve, ongoing supply chain disruptions, the ongoing impact of the COVID-19 pandemic, and unstable financial and real estate markets. Foreign countries, including those in the Euro zone, are affected by similar systemic impacts. Turbulence in the United States and international markets and economic conditions may adversely affect the Company’s liquidity and financial condition, and the liquidity and financial condition of the Company’s customers. If these market conditions occur, they may limit the Company’s ability, and the ability of the Company’s customers, to replace maturing liabilities and to access the capital markets to meet liquidity needs, which could have a material adverse effect on the Company’s financial condition and results of operations. There is no assurance that the Company’s products and services will be accepted in the marketplace. To date, inflationary pressures have not had a material impact on the Company’s financial condition and results of operations, and we have not developed any plans or taken any action to mitigate such inflationary pressures. However, there is no assurance the inflationary pressures will not have a material effect on the Company’s financial condition and results of operations in the future. If inflationary pressures begin to have a material effect on the Company in the future, we may or may not develop plans to mitigate those pressures.

Risks Related to Government Regulation and Being a Public Company

We will face growing regulatory and compliance requirements which can be costly and time consuming.

New and evolving regulations and compliance standards for cyber security, data protection, privacy, and internal IT controls are often created in response to the tide of cyberattacks and will increasingly impact organizations like our company. Existing regulatory standards require that organizations implement internal controls for user access to applications and data. In addition, data breaches are driving a new wave of regulation, such as the European Union’s General Data Protection Regulation, with stricter enforcement and higher penalties. Regulatory and policy-driven obligations require expensive and time-consuming compliance measures. The fear of non-compliance, failed audits, and material findings has pushed organizations to spend more to ensure they are in compliance, often resulting in costly, one-off implementations to mitigate potential fines or reputational damage. The high costs associated with failing to meet regulatory requirements, combined with the risk of fallout from security breaches, has elevated this topic from the IT organization to the executive and board level. We may need to spend additional time and money ensuring we will meet future regulatory requirements.

Our business could be negatively impacted by changes in the U.S. political environment.

There is significant ongoing uncertainty with respect to potential legislation, regulation and government policy at the federal, state and local levels in the United States. Such uncertainty and any material changes in such legislation, regulation and government policy could significantly impact our business as well as the markets in which we compete. Specific legislative and regulatory proposals that might materially impact us include, but are not limited to, changes to liability rules for data privacy regulations, import and export regulations, income tax regulations and the U.S. federal tax code and public company reporting requirements, immigration policies and enforcement, healthcare law, minimum wage laws, climate and energy policies, foreign trade and relations with foreign governments, and pandemic response. To the extent changes in the political environment have a negative impact on us or on our customers, our markets, our business, results of operation and financial condition could be materially and adversely impacted in the future.

Failure to comply with data privacy and security laws and regulations could adversely affect our operating results and business.

In the ordinary course of our business, we might collect and store in our internal and external data centers, cloud services and networks sensitive data, including our proprietary business information and that of our customers, suppliers and business collaborators, as well as personal information of our customers and employees. The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. The number and sophistication of attempted attacks and intrusions that companies have experienced from third parties has increased over the past few years. Despite our security measures, it is impossible for us to eliminate this risk.

A number of U.S. states have enacted data privacy and security laws and regulations that govern the collection, use, disclosure, transfer, storage, disposal, and protection of personal information, such as social security numbers, financial information and other sensitive personal information. For example, all 50 states and several U.S. territories now have data breach laws that require timely notification to affected individuals, and at times regulators, credit reporting agencies and other bodies, if a company has experienced the unauthorized access or acquisition of certain personal information. Other state laws, such as the California Consumer Privacy Act, as amended, or the CCPA, among other things, contain disclosure obligations for businesses that collect personal information about residents in their state and affords those individuals new rights relating to their personal information that may affect our ability to collect and/or use personal information. Effective January 1, 2023, we became subject to the California Privacy Rights Act, which expands upon the consumer data use restrictions, penalties and enforcement provisions under the California Consumer Privacy Act, and Virginia’s Consumer Data Protection Act, another comprehensive data privacy law. Effective July 1, 2023, we became subject to the Colorado Privacy Act and Connecticut’s An Act Concerning Personal Data Privacy and Online Monitoring, which are also comprehensive consumer privacy laws. Effective December 31, 2023, we will also become subject to the Utah Consumer Privacy Act, regarding business handling of consumers’ personal data. Meanwhile, several other states and the federal government have considered or are considering privacy laws like the CCPA. We will continue to monitor and assess the impact of these laws, which may impose substantial penalties for violations, impose significant costs for investigations and compliance, allow private class-action litigation and carry significant potential liability for our business.

Outside of the U.S., data protection laws, including the EU General Data Protection Regulation, or the GDPR, also might apply to some of our operations or business collaborators. Legal requirements in these countries relating to the collection, storage, processing and transfer of personal data/information continue to evolve. The GDPR imposes, among other things, data protection requirements that include strict obligations and restrictions on the ability to collect, analyze and transfer EU personal data/information, a requirement for prompt notice of data breaches to data subjects and supervisory authorities in certain circumstances, and possible substantial fines for any violations (including possible fines for certain violations of up to the greater of 20 million Euros or 4% of total company revenue). Other governmental authorities around the world have enacted or are considering similar types of legislative and regulatory proposals concerning data protection.

The interpretation and enforcement of the laws and regulations described above are uncertain and subject to change and may require substantial costs to monitor and implement and maintain adequate compliance programs. Failure to comply with U.S. and international data protection laws and regulations could result in government enforcement actions (which could include substantial civil and/or criminal penalties), private litigation and/or adverse publicity and could negatively affect our operating results and business.

Our business depends on our customers’ continued and unimpeded access to the Internet and the development and maintenance of Internet infrastructure. Internet access providers may be able to block, degrade or charge for access to certain of our services, which could lead to additional expenses and the loss of customers.

Our services depend on the ability of our customers, and the customers of Country Wine & Spirits Inc., to access the Internet. Currently, this access is provided by companies having significant market power in the broadband and Internet access marketplace, including incumbent telephone companies, cable companies, mobile communications companies and government-owned service providers. Some of these providers have the ability to take measures including legal actions, that could degrade, disrupt or increase the cost of user access to certain of our services by restricting or prohibiting the use of their infrastructure to support our services, charging increased fees to our users, or regulating online speech. Such interference could result in a loss of existing users, advertisers and goodwill, could result in increased costs and could impair our ability to attract new users, thereby harming our revenue and growth.

Moreover, the adoption of any laws or regulations adversely affecting the growth, popularity or use of the Internet, including laws impacting Internet neutrality, could decrease the demand for our services and increase our operating costs. The legislative and regulatory landscape regarding the regulation of the Internet and, in particular, Internet neutrality, in the U.S. is subject to uncertainty.

To the extent any laws, regulations or rulings permit Internet service providers to charge some users higher rates than others for the delivery of their content, Internet service providers could attempt to use such law, regulation or ruling to impose higher fees or deliver our content with less speed, reliability or otherwise on a non-neutral basis as compared to other market participants, and our business could be adversely impacted. Internationally, government regulation concerning the Internet, and in particular, network neutrality, may be developing or non-existent. Within such a regulatory environment, we could experience discriminatory or anticompetitive practices impeding both our and our customers’ domestic and international growth, increasing our costs or adversely affecting our business. Additional changes in the legislative and regulatory landscape regarding Internet neutrality, or otherwise regarding the regulation of the Internet, could harm our business, operating results and financial condition.

Our business could be affected by new governmental regulations regarding the Internet.

To date, government regulations have not materially restricted the use of the Internet in most parts of the world. However, the legal and regulatory environment relating to the Internet is uncertain, and governments may impose regulation in the future. New laws may be passed, courts may issue decisions affecting the Internet, existing but previously inapplicable or unenforced laws may be deemed to apply to the Internet or regulatory agencies may begin to more rigorously enforce such formerly unenforced laws, or existing legal safe harbors may be narrowed, both by U.S. federal or state governments and by governments of foreign jurisdictions. The adoption of any new laws or regulations, or the narrowing of any safe harbors, could hinder growth in the use of the Internet and online services generally, and decrease acceptance of the Internet and online services as a means of communications, e-commerce and advertising. In addition, such changes in laws could increase our costs of doing business or prevent us from delivering our services over the Internet or in specific jurisdictions, which could harm our business and our results of operations.

Changes in laws and government regulations to which we are currently subject, including changes to the method or approach of enforcement, may increase our costs or limit our ability to market our alcohol brands and the brands of our clients, which could adversely affect our operating results and business.

A complex multi-jurisdictional regime governs alcoholic beverage manufacturing, distribution, sales, and marketing in the United States. The alcoholic beverages industry in which we operate is subject to extensive regulation by the TTB (and other federal agencies), each state’s liquor authority, and potentially local authorities depending on location. These regulations and laws dictate such matters as licensing requirements, production, importation, ownership restrictions, trade, and pricing practices, permitted distribution channels, delivery, and prohibitions on sales to minors, permitted, and required labeling, and advertising and relations with wholesalers and retailers. These laws, regulations and licensing requirements may, and sometimes are, interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other legal mandates or with the Company’s business practices. Further, these laws, rules, regulations, and interpretations are constantly changing because of litigation, legislation, and agency priorities, and could result in increased regulation. The Company’s actual or asserted non-compliance with any such law, regulation or requirement could expose us to investigations, claims, litigation, injunctive proceedings and other criminal or civil proceedings by private parties and regulatory authorities, as well as license suspension, license revocation, substantial fines, and negative publicity, any of which could adversely affect our results of operations, financial condition, and business.

Government laws and regulations may result in increased production and sales costs, including an increase on the applicable tax in various state, federal and foreign jurisdictions in which we do business. The amount of alcohol that CWS can sell directly to consumers over the internet is regulated, and in certain states CWS is not allowed to sell alcohol directly to consumers at all. Changes in these laws and regulations that tighten current rules could have an adverse impact on sales or increase costs to produce, market, package or sell alcohol. Changes in regulation that require significant additional source data for registration and sale, in the labelling or warning requirements, or limitations on the permissibility of any component, condition or ingredient, in the places in which our alcohol can be legally sold could inhibit sales of affected products in those markets. While we do not engage in the act of selling alcohol on the internet, our business depends on the ability of CWS to continue selling alcohol online through the CWS Platform.

If any regulation were to cause a negative impact on the ability of CWS to sell alcohol online, such an impact would have a negative effect on our business, results of operations, and financial condition. If CWS were ever to become unable to sell alcohol online through the CWS Platform, we would lose a significant source of our revenue, which would have a material adverse impact on our business, results of operations and financial condition.

The alcohol industry, and the ’sale’ of alcohol online, is subject to extensive regulation by a number of federal, state, and local authorities. These regulations and laws dictate such matters as trade and pricing practices, permitted distribution channels, permitted and required labeling, and advertising. New or updated regulations, requirements or licenses, particularly changes that impact CWS’ ability to sell direct to customer and/or retain accounts in the states in which it operates, or new or increased excise taxes, income taxes, sales taxes or international tariffs, could have an indirect, material adverse effect on our financial condition or results of operations. From time to time, states consider proposals to increase state alcohol excise taxes. New or revised regulations or increased licensing fees, requirements or taxes could have an indirect, material adverse effect on our business, financial condition, and results of operations.

The requirements of being a public company may strain our resources.

As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the listing standards of Nasdaq. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming and costly, and place significant strain on our personnel, systems and resources. Management’s attention may be diverted from other business concerns, which could adversely affect our business and operating results.

The Exchange Act requires that our company file annual, quarterly, and current reports with respect to our business, financial condition, and results of operations. In addition, establishing the corporate infrastructure necessary for operating a public company may divert our management’s attention from implementing our growth strategy, which could delay or slow the implementation of our business strategies, and in turn negatively impact our company’s financial condition and results of operations.

If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.

Our current internal controls and any new controls that we develop may become inadequate because of changes in conditions in our business or changes in the applicable laws, regulations and standards. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our operating results, cause us to fail to meet our reporting obligations, result in a restatement of our financial statements for prior periods or adversely affect the results of management evaluations and independent registered public accounting firm audits of our internal control over financial reporting that we will eventually be required to include in our periodic reports that will be filed with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on Nasdaq in the future.

Our management team has limited experience managing a public company.

Most members of our management team have limited experience managing a publicly traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage our transition to being a public company that is subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could harm our business, financial condition and results of operations.

Industry and other market data used in this or other periodic reports that we have filed or will in the future file with the SEC, including those undertaken by us or our engaged consultants, may not prove to be representative of current and future market conditions or future results.

This report includes or refers to, and periodic reports that we have filed and will in the future file with the SEC may include or refer to, statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties and surveys and studies that we undertook ourselves regarding the market potential for our current products. Although we believe that such information has been obtained from reliable sources, the sources of such data have not guaranteed the accuracy or completeness of such information. While we believe these industry publications and third-party research, surveys and studies are reliable, we have not independently verified such data. The results of this data represent various methodologies, assumptions, research, analysis, projections, estimates, composition of respondent pool, presentation of data and adjustments, each of which may ultimately prove to be incorrect, and cause actual results and market viability to differ materially from those presented in any such report or other materials.

Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect our current and projected business operations and our financial condition and results of operations.

Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. For example, on March 10, 2023, Silicon Valley Bank, or SVB, was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation, or the FDIC, as receiver. Similarly, on March 12, 2023, Signature Bank Corp., or Signature, and Silvergate Capital Corp. were each swept into receivership. Although a statement by the Department of the Treasury, the Federal Reserve and the FDIC indicated that all depositors of SVB would have access to all of their money after only one business day of closure, including funds held in uninsured deposit accounts, borrowers under credit agreements, letters of credit and certain other financial instruments with SVB, Signature or any other financial institution that is placed into receivership by the FDIC may be unable to access undrawn amounts thereunder. Although we are not a borrower under or party to any material letter of credit or any other such instruments with SVB, Signature or any other financial institution currently in receivership, if we enter into any such instruments and any of our lenders or counterparties to such instruments were to be placed into receivership, we may be unable to access such funds. In addition, if any of our partners, suppliers or other parties with whom we conduct business are unable to access funds pursuant to such instruments or lending arrangements with such a financial institution, such parties’ ability to pay their obligations to us or to enter into new commercial arrangements requiring additional payments to us could be adversely affected. In this regard, counterparties to credit agreements and arrangements with these financial institutions, and third parties such as beneficiaries of letters of credit (among others), may experience direct impacts from the closure of these financial institutions and uncertainty remains over liquidity concerns in the broader financial services industry. Similar impacts have occurred in the past, such as during the 2008 – 2010 financial crisis.

Inflation and rapid increases in interest rates have led to a decline in the trading value of previously issued government securities with interest rates below current market interest rates. Although the U.S. Department of Treasury, FDIC and Federal Reserve Board have announced a program to provide up to $25 billion of loans to financial institutions secured by certain of such government securities held by financial institutions to mitigate the risk of potential losses on the sale of such instruments, widespread demands for customer withdrawals or other liquidity needs of financial institutions for immediately liquidity may exceed the capacity of such program.

Our access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impaired by factors that affect us, any financial institutions with which we enter into credit agreements or arrangements directly, or the financial services industry or economy in general. These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry. These factors could involve financial institutions or financial services industry companies with which we have financial or business relationships but could also include factors involving financial markets or the financial services industry generally.

The results of events or concerns that involve one or more of these factors could include a variety of material and adverse impacts on our current and projected business operations and our financial condition and results of operations. These risks include, but may not be limited to, the following:

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delayed access to deposits or other financial assets or the uninsured loss of deposits or other financial assets;

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inability to enter into credit facilities or other working capital resources;

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potential or actual breach of contractual obligations that require us to maintain letters of credit or other credit support arrangements; or

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termination of cash management arrangements and/or delays in accessing or actual loss of funds subject to cash management arrangements.

In addition, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all. Any decline in available funding or access to our cash and liquidity resources could, among other risks, adversely impact our ability to meet our operating expenses or other obligations, financial or otherwise, result in breaches of our financial and/or contractual obligations, or result in violations of federal or state wage and hour laws. Any of these impacts, or any other impacts resulting from the factors described above or other related or similar factors, could have material adverse impacts on our liquidity and our current and/or projected business operations and financial condition and results of operations.

Any further deterioration in the macroeconomic economy or financial services industry could lead to losses or defaults by our partners, vendors or suppliers, which in turn, could have a material adverse effect on our current and/or projected business operations and results of operations and financial condition. For example, a partner may fail to make payments when due, default under their agreements with us, become insolvent or declare bankruptcy, or a supplier may determine that it will no longer deal with us as a customer. In addition, a vendor or supplier could be adversely affected by any of the liquidity or other risks that are described above as factors that could result in material adverse impacts on us, including but not limited to delayed access or loss of access to uninsured deposits or loss of the ability to draw on existing credit facilities involving a troubled or failed financial institution. The bankruptcy or insolvency of any partner, vendor or supplier, or the failure of any partner to make payments when due, or any breach or default by a partner, vendor or supplier, or the loss of any significant supplier relationships, could cause us to suffer material losses and may have a material adverse impact on our business.

Risks Related to Ownership of Our Common Stock

Our stock price may be volatile, and purchasers of our common stock could incur substantial losses.

The stock market in general has experienced significant price and volume fluctuations that have often been unrelated or disproportionate to operating performance of individual companies, particularly following a public offering of a company with a small public float. There is the potential for rapid and substantial price volatility of our commonstock. Broad market factors may seriously harm the market price of our common stock, regardless of our actual or expected operating performance and financial condition or prospects, which may make it difficult for investors to assess the rapidly changing value of our common stock. Additionally, the price and volume of our common stock may fluctuate significantly as a result of the following factors:

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quarterly variations in our operating results compared to market expectations;

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adverse publicity about us, the industries we participate in or individual scandals;

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announcements of new offerings or significant price reductions by us or our competitors;

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fluctuations in stock market prices and volumes;

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changes in senior management or key personnel;

SEC Form 10-K filed by LQR House Inc.