YHC 10-K & 10-Q changes, risk factors and insider trading
LQR House Inc. · Nasdaq · Beverages · CIK 1843165 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Our pursuit of opportunistic investments outside our core business has resulted in significant capital outlays, and similar future investments may result in losses.”
New heading “We are pursuing a significant acquisition in a new line of business, which may expose us to substantial risks and uncertainties.”
New heading “Our proposed initial public offering of SWOL may not be completed and, if completed, would reduce our ownership interest and may result in a loss of control over SWOL.”
Largest changes
“Our business is subject to risks arising from political, trade, and regulatory developments in the jurisdictions in which we operate, including the United States, Mexico, and Canada. Changes in U.S. federal policies, international trade agreements, tariffs, import or export restrictions, or other geopolitical developments may be difficult to predict and could adversely affect our business, financial condition, and results of operations. …”see in full comparison
“Significant political, trade, or regulatory developments in the jurisdictions in which we sell our products, such as those stemming from the change in U.S. federal administration, are difficult to predict and may have a material adverse effect on us. Similarly, changes in U.S. federal policy that affect the geopolitical landscape could give rise to circumstances outside our control that could have negative impacts on our business operations. For example, in March 2025, the U.S. initially imposed a 25% tariff on imports from Canada and Mexico and imposed a 20% tariff on imports from China. …”see in full comparison
“Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern in its report on our consolidated financial statements. The accompanying financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have incurred significant net losses and negative cash flows from operations. …”see in full comparison
“Investments outside our core business involve significant risks, including limited operational experience, reliance on third-party partners, unproven business models, and exposure to rapidly evolving market conditions. The deployment of capital in such investments may reduce our available liquidity, create opportunity costs, and divert management attention from our core operations. …”see in full comparison
“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. …”see in full comparison
“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 $22,754,178 and $15,747,724 during the years ended December 31, 2024 and 2023, respectively, and had cash used in operations of $6,618,417 during the year ended December 31, 2024. The Company requires additional capital to operate and expects losses to continue for the foreseeable future. …”see in full comparison
Full comparison: every changed paragraph (27)
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 on Form 10-K, 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. These disclosures reflect the Company’s beliefs and opinions as to factors
statements.that could materially and adversely affect the Company and its securities in the future. References to past events are provided by way
of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in
the past or their likelihood of occurring in the future. Please refer to the section titled “Cautionary Statement Regarding Forward-Looking
Statements”.
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.
Our
business, revenue, and operations dependare
highly dependent on our continuing relationship with CWS.CWS, and any disruption in that relationship could materially adversely affect our business.
For the years ended December 31, 2025 and 2024, all of our revenue was derived from or directly related to our 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 revenue, CWS continues to be our sole distribution channel for alcoholic beverage products. Our reliance on CWS creates significant concentration risk. If CWS is unwilling or unable to continue to distribute products sold through the CWS Platform, whether due to business, regulatory, financial, or operational reasons, our ability to generate revenue would be materially and adversely affected. In addition, KBROS, which is responsible for fulfillment and logistics for the CWS Platform, is affiliated with CWS through common ownership. As a result, potential conflicts of interest may arise. KBROS may decline to pursue opportunities, including alternative distribution arrangements or operational changes, that could benefit us but may not be in the best interests of CWS. We do not currently have alternative distribution arrangements in place. If our relationship with CWS were terminated or disrupted, or if KBROS were unable or unwilling to support a transition to a new distributor, we may not be able to secure a replacement distributor on acceptable terms, or at all, in a timely manner. Any such disruption could result in delays in product delivery, loss of customers, and a material adverse effect on our business, financial condition, and results of operations.
In the years ended December 31, 2024 and 2023,
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,track record for certain aspects of our business,
which may make it difficult to evaluate our businessgrowth and prospects.prospects
While we have generated revenue in recent periods, certain aspects of our business, including our SWOL Tequila brand and newer strategic initiatives, have a limited operating track record. As a result, our ability to successfully execute our business strategy, scale operations, and achieve sustained profitability is subject to significant uncertainty. Our future performance will depend on a number of factors, including our ability to expand distribution, maintain key commercial relationships, manage costs, and respond to competitive and regulatory developments. There can be no assurance that we will be successful in achieving these objectives. Any failure to effectively execute our business strategy could materially adversely affect our business, financial condition and results of operations.
The
Company is an early, startup stage entity with little operating history. The Company only has nominal cash as of the date of this Annual Report on 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 toabout our ability to continue as a going concernconcern, inand itswe will require additional capital to sustain
report.our operations.
Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern in its report on our consolidated financial statements. The accompanying financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have incurred significant net losses and negative cash flows from operations. For the year ended December 31, 2025, we incurred net losses of $25,522,618, and as of December 31, 2025, we had an accumulated deficit of $67,829,421. We used $33,817,140 of cash in operating activities during the year ended December 31, 2025. We expect to continue to incur operating losses for the foreseeable future. Our ability to continue as a going concern depends on our ability to generate sufficient revenue and cash flows from operations and to raise additional capital. We have historically relied on equity financings, including proceeds from warrant exercises, at-the-market offerings, and registered direct offerings, to fund our operations. In March 2026, we entered into a sales agreement pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $50,273,610 in at-the-market transactions. There can be no assurance that we will be able to raise additional capital on acceptable terms, or at all. Any failure to obtain adequate financing when needed could require us to significantly reduce or discontinue operations, delay or abandon business initiatives, or otherwise materially adversely affect our business, financial condition, and results of operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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 $22,754,178 and $15,747,724 during the years ended December 31, 2024 and 2023,
respectively, and had cash used in operations of $6,618,417 during the year ended December 31, 2024. 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. During the year ended December
31, 2024, the Company received net proceeds of $1,543,079 from the sale of an aggregate of 1,485,575 shares of common stock pursuant to
an at-the-market public offering. In addition, the Company received gross proceeds of $350,020 from the sale of securities pursuant to
the December Purchase Agreement, and gross proceeds of $3,000,000 from the sale of securities pursuant to Lazar Purchase Agreement. Our
failure to raise additional capital in future 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.
Our pursuit of opportunistic investments outside our core business has resulted in significant capital outlays, and similar future investments may result in losses.
We have pursued opportunistic investments outside of our core alcohol e-commerce and tequila business, including investments in digital content monetization and related activities. These investments have required significant capital outlays and may not generate returns. We may continue to evaluate similar investment opportunities in the future.
For example, during the fiscal year ended December 31, 2025, we invested an aggregate of approximately $18.5 million in joint venture arrangements and paid approximately $3.3 million under certain distribution and marketing service arrangements. Although these arrangements were subsequently terminated and the invested amounts were returned, there can be no assurance that future investments will be similarly recoverable.
Investments outside our core business involve significant risks, including limited operational experience, reliance on third-party partners, unproven business models, and exposure to rapidly evolving market conditions. The deployment of capital in such investments may reduce our available liquidity, create opportunity costs, and divert management attention from our core operations. Future investments of a similar nature could result in permanent impairment of capital, losses, or other adverse financial consequences, which could materially adversely affect our business, financial condition and results of operations.
We are pursuing a significant acquisition in a new line of business, which may expose us to substantial risks and uncertainties.
We have entered into a Share Purchase Agreement to acquire up to 100% of Fusion Five Continents Securities Limited, a securities brokerage firm based in New Zealand, in a multi-step transaction that is subject to regulatory approvals and other closing conditions. There can be no assurance that we will complete the acquisition of the remaining interest or that the anticipated benefits of the transaction will be realized. This transaction represents an expansion into a new line of business that differs from our core alcohol e-commerce and tequila operations. As a result, we may face risks associated with limited experience in the securities brokerage industry, increased regulatory oversight, operational complexity, and integration challenges. In addition, the acquisition involves cross-border operations, which may expose us to additional legal, regulatory, and compliance risks. The initial purchase price is payable in digital assets (Tether, or USDT), which introduces additional risks, including volatility, regulatory uncertainty, and operational risks associated with the use of digital assets in transactions. If we are unable to successfully complete or integrate this acquisition, or if the acquired business does not perform as expected, our financial condition, results of operations, and business prospects could be materially adversely affected.
Our business may be impactedadversely affected
by political,
trade ortrade, and regulatory developmentsdevelopments, including changes in thetariffs jurisdictionsand ininternational whichtrade we sell our products.policies.
Our business is subject to risks arising from political, trade, and regulatory developments in the jurisdictions in which we operate, including the United States, Mexico, and Canada. Changes in U.S. federal policies, international trade agreements, tariffs, import or export restrictions, or other geopolitical developments may be difficult to predict and could adversely affect our business, financial condition, and results of operations. For example, in 2025, the United States imposed tariffs of up to 25% on certain imports from Canada and Mexico and approximately 20% on certain imports from China. In response, other countries, including China, implemented or proposed retaliatory tariffs of up to approximately 15% on certain U.S. exports. These measures were subject to subsequent modifications, exemptions, and policy changes. These developments illustrate the potential for rapidly changing trade policies and increasing geopolitical tensions, which may result in higher costs, supply chain disruptions, or reduced cross-border trade. We import our SWOL Tequila from Mexico and sell products in Canada. As a result, our business may be particularly sensitive to changes in trade policies affecting these jurisdictions. Any imposition of new tariffs, changes to existing trade agreements (including the United States-Mexico-Canada Agreement), or other trade restrictions could increase our costs, limit our ability to source or distribute products, or otherwise negatively impact our operations. In addition, broader geopolitical tensions and regulatory changes may reduce trade volume, investment, and economic activity between countries. The ultimate impact of these developments is uncertain and will depend on factors beyond our control, including the scope and duration of any trade measures and the responses of affected countries. We may not be able to fully mitigate the impact of such developments, including by passing increased costs on to customers, which could materially adversely affect our business, financial condition, and results of operations.
Significant political, trade, or regulatory developments
in the jurisdictions in which we sell our products, such as those stemming from the change in U.S. federal administration, are difficult
to predict and may have a material adverse effect on us. Similarly, changes in U.S. federal policy that affect the geopolitical landscape
could give rise to circumstances outside our control that could have negative impacts on our business operations. For example, in March
2025, the U.S. initially imposed a 25% tariff on imports from Canada and Mexico and imposed a 20% tariff on imports from China. The U.S.
largely reversed course and goods eligible for treatment under the 2020 United States-Mexico-Canada Agreement (“USMCA”)
can enter the U.S. tariff free until April 2, 2025. Historically, tariffs have led to increased trade and political tensions. In response
to tariffs, other countries have implemented retaliatory tariffs on U.S. goods. In retaliation to the recent U.S. imposed tariffs, China
imposed tariffs up to 15% on a wide array of U.S. farm exports, and Canada and Mexico have stated they will impose tariffs on the U.S.
Political tensions as a result of trade policies could reduce trade volume, investment, technological exchange and other economic activities
between major international economies, resulting in a material adverse effect on global economic conditions and the stability of global
financial markets. We import our SWOL Tequila from Mexico. We also sell out products in Canada. Any changes in political, trade, regulatory,
and economic conditions, including U.S. trade policies, could have a material adverse effect on our financial condition, results of operations
or our industry. The impact of these potential tariffs on our financial condition, results of operations or industry, if any, is subject
to a number of factors that are not yet known, including any countermeasures that the target countries may take in response to such tariffs.
In light of these uncertainties, we can provide no assurance that any mitigating actions that may become available to us, such as our
ability to pass along some or all of the costs of any tariffs to some or all of our customers, will be successful.
Our proposed initial public offering of SWOL may not be completed and, if completed, would reduce our ownership interest and may result in a loss of control over SWOL.
In January 2026, we filed a registration statement on Form S-1 with the Securities and Exchange Commission in connection with a proposed initial public offering of our subsidiary, SWOL. The registration statement has not yet been declared effective, and there can be no assurance that the offering will be completed on the terms currently contemplated, or at all. If the offering is not completed, we may not realize the anticipated benefits of the transaction, including access to additional capital to support SWOL’s growth. If the offering is completed, we expect to own approximately 41.40% of the outstanding equity of SWOL, which would significantly reduce our ownership interest and could result in a loss of control over SWOL. As a result, we may no longer be able to direct SWOL’s operations, strategy, or key decisions, and our interests may differ from those of other stockholders of SWOL. In addition, SWOL may operate independently and may enter into transactions or pursue strategies that are not aligned with our business objectives. Following the offering, our financial results may be impacted by changes in the accounting treatment of SWOL, including whether we continue to consolidate SWOL or account for our investment under the equity method. Any such changes could materially affect our reported revenues, expenses, and financial position. In addition, the offering could result in increased costs, including legal, accounting, and compliance expenses, and may require significant management attention. The proposed offering also exposes us to risks associated with market conditions and investor demand, which are outside of our control. Adverse market conditions or other factors could delay or prevent completion of the offering.
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.
Our share price is highly
volatile. DuringOver the periodpast from52 Augustweeks 10,ended 2023,April
9, to March 28, 20252026, the closing price of our common stock has ranged from aapproximately high$10.73 of $155.97
per share to a low of $0.22$0.65 per share. The stock market in
general has experienced extreme volatility that has often been unrelated to
the operating performance of particular companies. As a result
of this volatility, you may not be able to sell your common stock at or
above the public offering price and you may lose some or all of
your investment.
Although we are organized under the laws
of the
State of NevadaDelaware and investors are able to effect service of process in the United States upon us, some of the members of
our Board of
Directors and some members of our senior management reside outside of the United States and all or a substantial portion
of their assets
are located outside the United States. As a result, it may not be possible to serve process on these directors and
certain members of
our senior management in the United States or to enforce court judgments obtained in the United States against
these individuals based
on the civil liability provisions of the U.S. federal or state securities laws. In addition, awards of punitive
damages in actions brought
in the United States or elsewhere may not be enforceable outside the United States.
Management's Discussion & Analysis (MD&A)
New heading “Operating Expenses”
New heading “Loss from Operations”
New heading “Other Income (Expense)”
Removed heading “General and Administrative”
Removed heading “Sales and Marketing”
Removed heading “Cash Flow Activities”
Removed heading “Contractual Obligations”
Removed heading “Funding Commitment Agreement”
Removed heading “Related Party Transactions”
Removed heading “Revenue Recognition”
Removed heading “Related Parties”
Removed heading “Acquisitions, Goodwill and Other Intangible Assets”
Removed heading “Investments, at Cost”
Removed heading “Stock-Based Compensation”
Largest changes
“Acquisitions, Goodwill and Other Intangible Assets”see in full comparison
“Goodwill and indefinite-lived intangibles are not amortized but are instead evaluated annually for impairment as part of the Company’s annual financial review, or when indicators of a potential impairment are present. The annual test for impairment performed for goodwill can be qualitative or quantitative, taking into consideration certain factors surrounding the fair value of the goodwill including, level by which fair value exceeded carrying value in the prior valuation, as well as macroeconomic factors, industry conditions and actual results at the test date.”see in full comparison
“The primary driver was the net loss of $22,754,178. Non-cash items added back to reconcile net loss to cash used in operating activities included impairment of investments of $4,500,000 relating to the write-down of the DRNK Beverage Corp. investment, share based compensation of $2,533,256, write-off of advances to related party of $177,340, and gain on sale of marketable securities of $(5,674).”see in full comparison
“The accompanying 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 has not generated profits since inception, has sustained net losses of $22,754,178 and $15,747,724 for the years ended December 31, 2024 and 2023, and has negative cash flows from operations $6,618,417 and $9,113,855 for the years ended December 31, 2024 and 2023 respectively. The Company requires additional capital to operate and expects losses to continue for the foreseeable future. …”see in full comparison
“We have incurred net losses since inception and have financed our operations primarily through equity offerings. We expect to continue to incur losses for the foreseeable future as we execute on our growth strategy. Management plans to raise additional capital to fund operations through public or private equity offerings, debt financings, or other capital sources. However, there can be no assurance that we will be able to raise additional capital on terms acceptable to us, or at all. These conditions raise substantial doubt about our ability to continue as a going concern.”see in full comparison
“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 to fund operations through debt and/or equity financings. 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.”see in full comparison
Full comparison: every changed paragraph (101)
Our
company, LQR House Inc., intends to become
the full-service digital marketing and brand development face of the alcoholic beverage
space. We also intend to integrate the supply,
sales, and marketing facets of the alcoholic beverage space into one easy to use platform
and become the one-stop-shop for everything
related to alcohol. To date, our primary business includes the development of premium
limited batch spirit brands and marketing internal
and external brands through our ownership of the CWS Platform. Additionally,Through our wholly-owned subsidiary SWOL Holdings Inc., we aredevelop and
inmarket theSWOL processTequila, ofa establishingproprietary anlimited-edition exclusivetequila wine club.brand. We believe that the marketing and brand management services we provide
to our
wholly owned and third-party clients will increase brand recognition thereof, and drive sales thereof through our e-commerce platform
partner.
In May 2024, we acquired a minority stake of common shares of Cannon Estate Winery Ltd., a British Columbia corporation, an owner of Cannon Estate Winery, pursuant to a Share Exchange Agreement under which the Company issued 21,429 shares of common stock (750,000 shares of its common stock on pre-reverse split basis) with a fair value of $817,500 in exchange for 113,085 common shares of Cannon. During the year ended December 31, 2025, the Company determined the investment was fully impaired and recorded an impairment charge of $817,500. The carrying value of this investment was nil as of December 31, 2025.
In
May 2024, we acquired a minority stake of common shares of Cannon Estate Winery Ltd., a British Columbia corporation, an owner of Cannon
Estate Winery.
In June 2024, we acquired a minority stake of
common shares of DRNK
Beverage Corp., a British Columbia corporation (which became Chase Mocktails Ltd.), operating in the non-alcoholic
and ready-to-drink
beverage markets. AsDuring ofthe year ended December 31, 2024, the Company has recorded an impairment charge of $4,500,000 based on its evaluation
of the investee. Refer
toDuring the consolidatedyear financialended statementsDecember for31, further2025, disclosure.the Company recorded an additional impairment charge of $300,000, fully writing
down the remaining carrying value. The carrying value of this investment was nil as of December 31, 2025.
In December 2025, YHC Online Limited (“YHC”), a wholly-owned subsidiary of the Company, entered into four separate joint venture agreements with Bancroft Equity, Emerald Wealth Inc., Meridian Financial, and Sequoia Equity (collectively, the “Joint Ventures”). Each Joint Venture is engaged in the creation and monetization of multi-channel network (“MCN”) content for digital platforms, including TikTok, with each entity targeting a specific geographic market. YHC holds a 20% minority ownership interest in each Joint Venture, with the majority partner in each retaining full operational control. The following table summarizes the key terms of each agreement as of December 31, 2025:
Each agreement provides YHC with a put right, exercisable after the first anniversary of the respective agreement, to require the co-venturer to repurchase YHC’s interest at YHC’s total funded investment amount. As the agreements were executed in late 2025 and operations had not yet commenced as of December 31, 2025, no revenue was generated by any Joint Venture during the year ended December 31, 2025.
None of the co-venturers is a related party to the Company. In March 2026, all four agreements were terminated and all amounts previously funded, aggregating $18,494,000, were returned to YHC in full.
Comparison
of YearsYear Ended December 31, 2025 and Year Ended December 31, 2024 and 2023
The
following table sets forth key components of our results of operations during the years ended December 31, 2024 and 2023.
RevenueRevenues
Total revenues for the year ended December 31, 2025 were $1,564,823, a decrease of $936,837, or approximately 37%, compared to $2,501,660 for the year ended December 31, 2024. The decrease was primarily driven by a significant decline in product revenues, which fell from $2,383,695 in 2024 to $1,452,183 in 2025, a decrease of $931,512, or approximately 39%. The decline in product revenues reflects a strategic decision by management to reduce customer acquisition spending and marketing expenditures through the CWS Platform in order to minimize losses and focus on profitability with the existing customer base, rather than pursuing top-line growth at the expense of continued operating losses. As a result of reduced marketing spend, new customer acquisition and order volume through the CWS Platform declined during the year. Service revenues decreased by $5,325, or approximately 5%, from $117,965 in 2024 to $112,640 in 2025. The decrease was primarily attributable to a reduction in marketing service engagements and lower Vault membership subscription revenue during the period as the Company realigned its service offerings.
For
the years ended December 31, 2024 and 2023, service revenues were $117,965 and $474,048, respectively. Service revenues are earned
as we contract with third-party alcoholic beverage brands to utilize access to the CWS Platform, as well as vault memberships. Service
revenues decreased by $356,083 as more focus was emphasized on the CWS Platform.
For
the year ended December 31, 2024, product revenues were $2,383,695 compared to $646,574 in the similar 2023. The increase of $1,737,121
in revenues is due to product sales via the CWS Platform after the acquisition in November 2023.
Cost
of Revenue and Gross Profit (Loss)
Total cost of revenue for the year ended December 31, 2025 was $1,395,524, a decrease of $1,419,311, or approximately 50%, compared to $2,814,835 for the year ended December 31, 2024. Cost of revenue for services decreased from $178,851 in 2024 to $47,129 in 2025, reflecting the reduction in marketing service engagements during the year. Cost of revenue for product decreased from $2,635,984 in 2024 to $1,348,395 in 2025, primarily driven by the significant decline in CWS Platform product sales volume.
The elevated cost of revenue in 2024 was primarily attributable to higher CWS Platform product sales volume, which resulted in correspondingly higher product fulfillment and procurement costs, as well as higher service delivery costs associated with a greater number of active marketing service engagements during that year. These factors combined to produce a gross loss of $(313,175) in 2024, as total cost of revenue exceeded total revenues.
As a result of the proportionate decrease in product fulfillment costs relative to revenues driven by lower sales volume in 2025, the Company achieved a gross profit of $169,299 for the year ended December 31, 2025, compared to a gross loss of $(313,175) for the year ended December 31, 2024, an improvement of $482,474.
Operating Expenses
Total operating expenses for the year ended December 31, 2025 were $11,597,954, a decrease of $6,576,190, or approximately 36%, compared to $18,174,144 for the year ended December 31, 2024.
General and administrative expenses decreased from $14,556,220 in 2024 to $10,954,346 in 2025, a decrease of $3,601,874, or approximately 25%. The primary driver of this decrease was the non-recurrence of approximately $8,021,000 in retention, bonus, and settlement agreements recorded in 2024, most of which were paid to insiders and related parties of the Company, with no comparable amounts incurred during 2025. This decrease was partially offset by Legal and professional fees, including consulting and accounting fees, increased by $4,018,951, from $2,508,728 in 2024 to $6,527,679 in 2025. This increase was driven primarily by a significant increase in legal fees from $815,482 in 2024 to $4,622,571 in 2025, an increase of $3,807,089, attributable to legal costs associated with the Company’s litigation and corporate development activities. Consulting fees remained relatively consistent at $1,470,066 in 2025 compared to $1,446,790 in 2024, while accounting fees increased modestly from $246,456 to $435,042.
Sales and marketing expenses decreased from $3,617,924 in 2024 to $643,608 in 2025, a decrease of $2,974,316, or approximately 82%. The decrease was primarily attributable to a non-recurring write-off of approximately $2,150,000 recorded in 2024 in connection with the termination of the Company’s website development agreement with X-Media, with no comparable charge incurred during 2025. The remainder of the decrease of approximately $824,000 reflects a reduction in advertising, promotional, and marketing campaign expenditures as the Company transitioned its marketing investment strategy toward the distribution and marketing arrangements entered into during 2025, as described in Note 8.
Loss from Operations
Loss from operations for the year ended December 31, 2025 was $(11,428,655), compared to $(18,487,319) for the year ended December 31, 2024, an improvement of $7,058,664, or approximately 38%. The improvement reflects the combined effect of higher gross profit and lower operating expenses during the year.
Other Income (Expense)
Total other expense for the year ended December 31, 2025 was $(14,093,963), compared to $(4,266,859) for the year ended December 31, 2024, an increase in net expense of $9,827,104. The increase was primarily attributable to a legal settlement expense of $13,000,000 recognized during the year ended December 31, 2025, with no comparable charge in 2024. This was partially offset by a lower impairment charge on investments of $1,127,500 in 2025, compared to $4,500,000 in 2024. Other income decreased from $227,467 in 2024 to $33,537 in 2025. The 2024 other income consisted primarily of dividend income and gains on the sale of marketable securities.
For
the years ended December 31, 2024 and 2023, service cost of revenues was $178,851 and $351,823, respectively. Cost of revenues decreased
by $172,972 in 2024 due to decrease in service revenue. In 2023, cost of revenues included amortization of the marketing license, which
was impaired as of December 31, 2023.
Product
cost of revenues was $2,635,984 and $563,775 in the years ended December 31, 2024 and 2023, respectively. The increase was due to product
and shipping costs associated with the product sales via the CWS Platform, which was acquired in November 2023.
Gross
profit (loss) was ($313,175) and $205,024 for the years ended December 31, 2024 and 2023. The Company has incurred gross losses in 2024
as it transitions its strategies from marketing to the CWS Platform. Management is exploring various strategies, including customer acquisition
and new partnerships, to increase volume in order to achieve better gross margins in 2025.
General
and Administrative
For the years ended December 31, 2024
and 2023, general and administrative expenses were $14,556,220 and $11,426,747, respectively. General and administrative expenses
increased by $3,129,473 in 2024 as compared to 2023. In 2024, the Company recorded $2,533,256 in non-cash stock-based compensation
expense pertaining to the issuance of restricted stock units as compared to $1,091,648 recorded in 2023. General and administrative
expenses also increased due to personnel costs as the Company entered into several settlement, bonus and retention agreements
totaling $8,021,000 in late 2024 most of which were paid to insiders and related parties of the Company.
Bonus
and retention agreements reflect strategic decisions made by the Company to retain key talent and incentivize critical personnel.
These bonus and retention agreements were based on strategic decisions made by the Company to retain key talent and incentivize critical
personnel. These were designed to ensure continuity in leadership and support the Company’s long-term goals, even though the Company
is not currently profitable.
Sales
and Marketing
For the years ended December 31, 2024 and 2023, sales and marketing
expenses were $3,617,924 and $2,480,001, respectively. The increase of $1,137,923 was primarily due to advertising and marketing and investor
relation campaigns the Company entered into in late 2023, which extended throughout 2024. Lastly, The Company determined it was no longer
pursuing the website development services as per its October 2023 agreement with X-Media. As such, the full amount of the prepaid was
written of during the year, representing an expense of $2,150,000. The amount was included in sales and marketing expenses in the consolidated
statements of operations.
Impairments
For the year ended December 31, 2024, the Company
recognized an impairment expense $4,500,000 related to its investment in DRNK Beverage Corp, which was included in other income (expense)
in the consolidated statements of operations. The impairment was triggered by a significant decline in the fair value of the Company’s
investment upon management’s review and monitoring of the investee.
Upon
the acquisition of the CWS Platform, the Company determined that the license under the CWS Agreement was no longer applicable as the
Company now maintained ownership over the Platform and the relevant marketing efforts. As such, during the year ended December 31, 2023,
the Company recorded an impairment of the remaining carrying value of $1,875,000.
Net loss for the year ended December 31, 2025 was $(25,522,618), compared to $(22,754,178) for the year ended December 31, 2024, an increase in net loss of $2,768,440, or approximately 12%. The increased net loss was primarily driven by the $13,000,000 legal settlement expense recorded in 2025, partially offset by improvements in gross profit and reductions in operating expenses.
Net loss for the years ended December 31, 2024 and 2023 was $22,754,178
and $15,747,724, respectively.
As of December 31, 2025, we had cash and cash equivalents of $5,975,408 compared to $5,386,789 as of December 31, 2024. As of December 31, 2025, we had a working capital surplus of $14,135,897 and total stockholders’ equity of $29,332,638, compared to a working capital deficit of $(1,645,461) and total stockholders’ equity deficit of $(517,961) as of December 31, 2024. The improvement in our balance sheet reflects significant equity financing activities completed during 2025.
As
of December 31, 2024 and 2023, we had cash and cash equivalents of $5,386,789 and $7,064,348, respectively. To date, we have financed
our operations primarily through issuances of common stock and sales of our products and services.
During the year ended December 31, 2024, the
Company issued an aggregate of 1,518,188 shares of common stock pursuant to at-the-market offering agreement, dated
September 13, 2024, between the Company and H.C. Wainwright & Co., LLC, for net proceeds of $1,599,814. The Company paid to H.C.
Wainwright & Co., LLC, as the sales agent a compensation with respect to sale of such shares in the amount of $48,018. In 2025,
the Company has issued 13,816,082 shares of common stock pursuant to its ATM Agreement for net proceeds of $5,014,022.
The accompanying 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 has not generated profits since inception, has sustained net losses of $22,754,178 and $15,747,724 for the years
ended December 31, 2024 and 2023, and has negative cash flows from operations $6,618,417 and $9,113,855 for the years ended December 31,
2024 and 2023 respectively. 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 is exploring various strategies, including customer
acquisition and new partnerships, to increase volume in order to achieve better gross margins and profitability. The Company continues
to seek investment and acquisition opportunities which will help achieve its strategies.
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
to fund operations through debt and/or equity financings. 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.
Cash
Flow Activities
The
following table presents selected captions from our condensed consolidated
statement of cash flows for the years ended December 31, 20242025 and 20232024:
During the year ended December 31, 2025, we used net cash of $(33,817,140) in operating activities, compared to $(6,618,417) used in operating activities during the year ended December 31, 2024, an increase of cash used by $27,198,723.
The primary driver of cash used in operating activities was the net loss of $25,522,618, which included the $13,000,000 Kingbird legal settlement paid in cash during 2025. Non-cash items partially offsetting the net loss included share based compensation of $1,932,967, impairment of investments of $1,127,500, depreciation of $28,378, bad debts of $64,530, and provision for expected credit losses of $67,948.
The most significant working capital movements were as follows:
Accounts receivable — related party increased by $150,721, reflecting higher amounts owed by Country Wine & Spirits in connection with CWS Platform product revenues, against which a provision for expected credit losses of $67,948 was recorded. The outstanding balance was subsequently offset against payables due to KBROS LLC in early 2026.
Advance payment to distributor increased by $3,279,000, reflecting amounts paid to two Hong Kong distributors — $529,000 and $2,750,000 in 2025 — for market access and distribution rights in the Asian market, recorded as advance payment to distributor. Subsequent to December 31, 2025, both arrangements were terminated and the full $3,279,000 was returned to the Company in April 2026.
Due to/from related party decreased by $2,357,737, reflecting net advances made to the Company's CEO ($50,000) and President ($2,314,450) during 2025, partially offset by amounts due to a related party credit card of $6,713. The amounts due from related parties were received back in April 2026.
Accounts payable decreased by $454,124, reflecting settlement of outstanding vendor payables during the year.
Accrued and other payables — related party decreased by $5,210,025, representing cash payments made during 2025 to settle retention, bonus, and settlement obligations that had been accrued in 2024 in connection with agreements entered into with executives, directors, and related parties. These were non-recurring cash outflows with no comparable amounts expected in future periods.
During the year ended December 31, 2024, we used net cash of $(6,618,417) in operating activities.
The primary driver was the net loss of $22,754,178. Non-cash items added back to reconcile net loss to cash used in operating activities included impairment of investments of $4,500,000 relating to the write-down of the DRNK Beverage Corp. investment, share based compensation of $2,533,256, write-off of advances to related party of $177,340, and gain on sale of marketable securities of $(5,674).
The most significant working capital movements during 2024 were as follows:
Accounts receivable — related party decreased by $22,983, reflecting collections on amounts owed by Country Wine & Spirits in connection with CWS Platform product revenues.
Prepaid expenses decreased by $1,949,226, as prepaid balances established in prior periods — primarily prepaid marketing and service costs — were amortized into expense during 2024.
Accrued and other payables — related party increased by $5,971,000, representing the accrual during the fourth quarter of 2024 of retention, bonus, and settlement obligations entered into with executives, directors, and related parties of the Company. These obligations were designed to retain key personnel and ensure continuity of leadership and governance. The cash settlement of substantially all of these obligations was deferred to 2025.
What changed in the latest 10-Q
Risk Factors
New heading “We may not realize the anticipated benefits of the Fusion Five acquisition, and the integration of Fusion Five’s operations may be difficult, costly, or disruptive.”
New heading “We may be unable to complete the remaining closings of the Fusion Five acquisition, which are subject to regulatory approvals and our ability to obtain additional financing.”
New heading “Our use of digital assets, including USDT, to fund a substantial portion of the Fusion Five acquisition, and Fusion Five’s use of digital assets in connection with its client-related operations, expose us to risks associated with stablecoins and digital asset markets.”
New heading “Fusion Five depends on a single third-party execution broker, and a disruption to that relationship could adversely affect Fusion Five’s operations.”
New heading “Fusion Five’s operations subject us to New Zealand regulatory requirements and foreign currency risk.”
New heading “We have incurred substantial indebtedness in connection with the Fusion Five acquisition, which could adversely affect our financial condition.”
Largest changes
“Our use of digital assets, including USDT, to fund a substantial portion of the Fusion Five acquisition, and Fusion Five’s use of digital assets in connection with its client-related operations, expose us to risks associated with stablecoins and digital asset markets.”see in full comparison
“We issued $40,000,000 aggregate principal amount of promissory notes to fund a portion of the Fusion Five acquisition, which bear interest at 6.0% per annum and mature on May 20, 2028. Our ability to service this indebtedness depends on our future operating performance and financial condition, which are subject to prevailing economic conditions and other factors, many of which are beyond our control. …”see in full comparison
“We may be unable to complete the remaining closings of the Fusion Five acquisition, which are subject to regulatory approvals and our ability to obtain additional financing.”see in full comparison
“We may not realize the anticipated benefits of the Fusion Five acquisition, and the integration of Fusion Five’s operations may be difficult, costly, or disruptive.”see in full comparison
“Fusion Five depends on a single third-party execution broker, and a disruption to that relationship could adversely affect Fusion Five’s operations.”see in full comparison
“We have incurred substantial indebtedness in connection with the Fusion Five acquisition, which could adversely affect our financial condition.”see in full comparison
Full comparison: every changed paragraph (13)
There
Except as set forth below, there have been no material changes from the risk factors disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended
December 31, 2025.
We may not realize the anticipated benefits of the Fusion Five acquisition, and the integration of Fusion Five’s operations may be difficult, costly, or disruptive.
The acquisition of Fusion Five represents our entry into the financial services and securities brokerage industry, which is substantially different from our historical beverage alcohol operations. Successfully integrating Fusion Five’s operations, personnel, regulatory compliance functions, and financial reporting systems requires, and may continue to require, significant management attention and resources. We may encounter unforeseen difficulties, including differences in business practices, regulatory environments, and accounting systems between our historical operations and those of Fusion Five. Any failure to successfully integrate Fusion Five could adversely affect our business, financial condition, and results of operations.
We may be unable to complete the remaining closings of the Fusion Five acquisition, which are subject to regulatory approvals and our ability to obtain additional financing.
We have acquired an aggregate of 54% of Fusion Five’s issued and outstanding shares to date. The purchase of the remaining 46%, for an aggregate purchase price of $59,800,000, remains subject to the receipt of required regulatory approvals and our ability to secure additional financing. There can be no assurance that such approvals will be obtained or that adequate financing will be available on acceptable terms, or at all. Failure to complete the remaining closings could adversely affect our strategic plans, our investment in Fusion Five and our relationship with Fusion Five’s other shareholders.
Our use of digital assets, including USDT, to fund a substantial portion of the Fusion Five acquisition, and Fusion Five’s use of digital assets in connection with its client-related operations, expose us to risks associated with stablecoins and digital asset markets.
A substantial portion of the consideration paid for the Fusion Five acquisition was paid in USDT, a U.S. dollar-denominated stablecoin, and Fusion Five holds certain digital assets on behalf of its clients in USDT. Stablecoins are subject to risks relating to the issuer’s ability to maintain adequate reserves and honor redemptions, regulatory uncertainty regarding their treatment under U.S. and foreign law, cybersecurity and custodial risks associated with digital asset wallets and third-party trust companies, and the risk that a stablecoin may lose its peg to the U.S. dollar. The materialization of any of these risks could adversely affect the value of our digital assets, our liquidity and our ability to complete the remaining Fusion Five closings.
Fusion Five depends on a single third-party execution broker, and a disruption to that relationship could adversely affect Fusion Five’s operations.
Substantially all of Fusion Five’s client securities transactions are executed through a single third-party execution broker. Fusion Five does not itself hold a securities dealing license in each of the jurisdictions where its clients trade. A termination or disruption of this relationship, or a deterioration in the execution broker’s financial condition or regulatory standing, could impair Fusion Five’s ability to provide trading services to its clients and adversely affect our financial services segment.
Fusion Five’s operations subject us to New Zealand regulatory requirements and foreign currency risk.
Fusion Five is registered as a financial service provider in New Zealand and is subject to regulatory oversight that differs from the regulatory environment applicable to our historical U.S. operations. Changes in New Zealand financial services laws or regulation, or Fusion Five’s failure to maintain its registration or comply with applicable legal and regulatory requirements, could adversely affect our financial services segment. In addition, Fusion Five’s functional currency is the New Zealand dollar, and fluctuations in the NZD/USD exchange rate may affect the U.S. dollar value of Fusion Five’s assets, liabilities, and results of operations as reported in our consolidated financial statements.
We have incurred substantial indebtedness in connection with the Fusion Five acquisition, which could adversely affect our financial condition.
We issued $40,000,000 aggregate principal amount of promissory notes to fund a portion of the Fusion Five acquisition, which bear interest at 6.0% per annum and mature on May 20, 2028. Our ability to service this indebtedness depends on our future operating performance and financial condition, which are subject to prevailing economic conditions and other factors, many of which are beyond our control. Our failure to make required payments under the notes when due could result in an event of default, which could have a material adverse effect on our business, financial condition and results of operations.
Management's Discussion & Analysis (MD&A)
New heading “Common Stock Issuances”
New heading “Comparison of Six Months Ended June 30, 2026 and June 30, 2025”
New heading “Cost of Revenue and Gross Profit (Loss)”
New heading “General and Administrative”
New heading “Sales and Marketing”
New heading “Other Income (Expense)”
New heading “Net Income (Loss)”
New heading “Net Cash Used in Investing Activities”
Largest changes
Full comparison: every changed paragraph (71)
Following the acquisition of a controlling interest in Fusion Five Continents Securities Limited (“Fusion Five”) on June 1, 2026, we also operate a New Zealand financial services company operating an AI-powered cross-border securities trading platform with proprietary USDT-based funding and settlement capabilities that enable clients internationally to buy and sell securities electronically and to make stablecoin deposits for the trading of Hong Kong and United States equities. Our business accordingly consists of two operating segments: beverage alcohol and financial services. See Note 15 — Segment Reporting.
Through
our wholly owned subsidiary SWOL Holdings Inc., we develop and market SWOL Tequila. Through our wholly owned subsidiary YHC Online Limited,
we entered into joint venture agreements in December 2025 to cooperate in the creation and monetization of multi-channel network content
for digital platforms; subsequentin to March 31,April 2026, all such joint venture agreements were terminated. See Note 78 — Investment
in Joint Ventures and Note 154 — SubsequentBusiness Events.Combination.
On
March 11, 2026, the Company entered into a sales agreement with A.G.P./Alliance Global Partners, pursuant to which the Company may sell
shares of its common stock having an aggregate offering price of up to $50,273,610 from time to time in at-the-market transactions. The
sales agent is entitled to a commission of 3.0% of gross proceeds per share sold. NoDuring the three months ended June 30, 2026, the Company issued 1,619 shares hadof beencommon soldstock under the agreement asfor net proceeds of March
31, 2026.$165,999.
In
April 2026, all four joint venture agreements entered into in December 2025 by YHC Online Limited were terminated. In connection with
the terminations, all amounts previously funded, aggregating $18,494,000, were returned to the Company in full.the form of USDT, a digital asset, and, together with USDT received from other sources, applied toward the consideration for the acquisition of Fusion Five. See Note 4 — Business Combination.
In
April 2026, both distribution and marketing service agreements entered into during 2025 with two Hong Kong entities were terminated.
In connection with the terminations, all amounts previously paid under the agreements, aggregating $3,279,000, were returned to the Company
in full.the form of USDT, a digital asset, and, together with USDT received from other sources, applied toward the consideration for the acquisition of Fusion Five. See Note 4 — Business Combination.
On
April 11, 2026, the Company entered into a share purchase agreement with Fusion Five Continents Securities Limited, a New Zealand limited
company, and with its controlling shareholder, pursuant to which the Company agreed to acquire all of the issued and outstanding shares
of the company in multiple closings, at a total consideration of $126,880,000, payable in Tether (USDT). TheOn April 24, 2026, the Company completed the initial tranche,closing, representing
acquiring 24% of the outstanding shares, closed on April 11, 2026shares for $28,080,000. On June 1, 2026, the Company completed an additional closing, acquiring a further 30% of the outstanding shares for $39,000,000, bringing its aggregate holding to 54% and obtaining control of Fusion Five, which has been consolidated from that date. The remaining 76%46% of the outstanding shares are to be acquired at
ain secondone closingor more subsequent closings for $98,800,000,$59,800,000, subject to receipt of required regulatory approvals. The Company expects to require additional financing
to fund the secondremaining tranche consideration of $98,800,000.closings. Failure to secure adequate financing could delay or prevent the consummation
of the secondremaining closing.closings. The acquisition,acquisition if fully consummated, would representrepresents a significant use of capital, and the Company’s ability
to meet its other operational and liquidity needs during the interim period will depend on its ability to raise additional funds. See Note 4 — Business Combination.
On July 9, 2026, the Company filed a Certificate of Amendment to its Certificate of Incorporation to effect a one-for-one hundred (1-for-100) reverse stock split of its issued and outstanding common stock, which became effective on July 13, 2026. All share and per-share amounts in this Quarterly Report have been retroactively adjusted to reflect the Reverse Stock Split for all periods presented. See Note 1 — Nature of Operations and Note 18 — Subsequent Events.
Common Stock Issuances
Between July 1, 2026 and July 8, 2026, the Company issued an aggregate of 1,088,503 shares of common stock for net proceeds of $7,316,687, pursuant to its at-the-market offering program. See Note 18 — Subsequent Events.
Comparison
of Three Months Ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025
The
following table sets forth key components of our results of operations during the three months ended MarchJune 31,30, 2026 and 2025.
Service
revenues were $12,572$3,781 for the three months ended MarchJune 31,30, 2026, compared to $77,356$15,319 for the three months ended MarchJune 31,30, 2025, a decrease
of $64,784,$11,538, or approximately 84%.75 %. The decrease was attributable primarily attributable to a significant reduction infewer marketing service engagements
through the CWS Platform and lower Vault membership subscription revenue during the period as the Company continued to realign its service
offerings.revenue.
Product
revenues were $210,111$304,416 for the three months ended MarchJune 31,30, 2026, compared to $351,984$483,209 for the three months ended MarchJune 31,30, 2025, a decrease
of $141,873,$178,793, or approximately 40%.37 %. The decline reflects continued lower customer traffic and order activity through the CWS Platform,
consistent with management’s strategic decision to reduce customer acquisition spending and focus on profitability with the existing
customer base rather than pursuing top-line growth.
Brokerage revenues were $37,778 for the three months ended June 30, 2026, with no comparable revenue in the 2025 period. Brokerage revenue represents commissions and platform income earned by Fusion Five Continents Securities Limited (“Fusion Five”), following the Company’s acquisition of a controlling interest in Fusion Five on June 1, 2026. See Note 4 — Business Combination.
Service cost of revenues was $0 for both the three months ended June 30, 2026 and 2025.
For
the three months ended March 31, 2026 and 2025, service cost of revenues were $13,553 and $1,400, respectively. The increase reflects
a fixed cost retainer that commenced in July 2025, which has no corresponding expense in the 2025 period. The increase in service cost
of revenue, combined with the significant decline in service revenues, resulted in a service gross loss of $981 in the 2026 period compared
to service gross profit of $75,956 in the 2025 period.
Product
cost of revenues was $231,366$295,333 and $397,782 duringfor the three months ended MarchJune 31,30, 20262026, andcompared to $414,022 for the three months ended June 30, 2025, respectively. Thea decrease of $166,416,
$118,689, or approximately 42%,29%, wasconsistent primarily due towith the decline in product revenue duringdescribed the period, resulting from lower sales volume on the
CWS Platform.above.
Brokerage cost of revenues was $4,740 for the three months ended June 30, 2026, with no comparable amount in the 2025 period, representing fees paid to Fusion Five’s Execution Broker and other third parties for trade execution, clearing, and settlement services attributable to the post-acquisition period.
Gross
loss profit was $22,236$45,902 for the three months ended MarchJune 31,30, 2026, compared to gross profit of $30,158$84,506 for the samethree periodmonths inended 2025.June 30, 2025, a decrease of $38,604, or approximately 46%. The decrease
was primarily attributable to the decline in serviceproduct revenuesgross and the increase in service cost of revenue described above,profit, partially
offset by the improvement in product gross loss.profit contribution from Fusion Five’s brokerage operations following the acquisition.
General and administrative expenses were $1,263,129 for the three months ended June 30, 2026, compared to $2,207,612 for the three months ended June 30, 2025, a decrease of $944,483, or approximately 43%. The decrease was primarily attributable to lower professional fees and administrative costs in the Company’s beverage alcohol operations during the current period.
General
and administrative expenses increased $757,739, or 37%, to $2,780,900 in the 2026 period from $2,023,161 in the 2025 period. The increase
was primarily due to $1,150,000 of charges recorded, comprising $1,050,000 of indemnification payments and $100,000 of related legal
obligations, with no comparable amounts in the 2025 period.
Sales
and marketing expenses were $105,000$0 for the three months ended MarchJune 31,30, 2026, compared to $406,853$80,676 for the three months ended March
31,June 30, 2025, a decrease of $301,853,$80,676, or approximately100%, 74%.reflecting Thethe decreasecontinued wasabsence primarilyof attributable to reduceddiscretionary advertising and promotional
expenditures asspending during the Companycurrent continued to execute its strategy of minimizing marketing spend.period.
Other Income (Expense)
Interest expense was $263,014 for the three months ended June 30, 2026, with no comparable expense in the 2025 period, representing interest on the promissory notes issued in May 2026. See Note 12 — Notes Payable.
The Company recognized a loss on disposition of assets of $25,136 for the three months ended June 30, 2026, with no comparable amount in the 2025 period, in connection with the disposal of the Company’s motor vehicle. See Note 5 — Property and Equipment, Net.
The Company recognized a gain on remeasurement of the previously held equity interest of $4,206,055 for the three months ended June 30, 2026, with no comparable amount in the 2025 period, in connection with the remeasurement of the Company’s previously held 24% equity interest in Fusion Five to its acquisition-date fair value upon obtaining control on June 1, 2026. See Note 4 — Business Combination.
Other income was $1,237 for the three months ended June 30, 2026, compared to $1,400 for the three months ended June 30, 2025, a decrease of $163, or approximately 12%.
Other
income for the three months ended March 31, 2026 was $1,993,167, compared to $10,206 in the same period in 2025, increased of $1,982,961
primarily due to $1,944,603 of proceeds received under the Company’s directors and officers insurance policy, with no comparable
amounts in the 2025 period.
Net Income (Loss)
Net
loss income was $2,701,915 for the three months ended MarchJune 31,30, 2026 was $914,969,2026, compared to $2,389,650a net loss of $2,202,382 for the three months ended MarchJune 31,30, 2025, an improvement
of $1,474,681, or approximately 62%.$4,904,297. The improvement was primarily dueattributable to $1,944,603the $4,206,055 gain on remeasurement of insurancethe proceedspreviously received,held partiallyequity offset
byinterest $1,050,000in ofFusion indemnity-relatedFive chargesand includedthe decrease in general and administrative expensesexpenses, partially offset by interest expense on the promissory notes and the decreaseloss inon grossdisposition profitof discussed
above.the Company’s motor vehicle.
Comparison of Six Months Ended June 30, 2026 and June 30, 2025
The following table sets forth key components of our results of operations during the six months ended June 30, 2026 and 2025.
Revenue
Service revenues were $16,353 for the six months ended June 30, 2026, compared to $92,675 for the six months ended June 30, 2025, a decrease of $76,322, or approximately 82%. The decrease was primarily attributable to lower marketing service engagements through the CWS Platform and reduced Vault membership subscription revenue.
Product revenues were $514,527 for the six months ended June 30, 2026, compared to $835,193 for the six months ended June 30, 2025, a decrease of $320,666, or approximately 38%, reflecting continued lower customer traffic and order activity through the CWS Platform, consistent with management’s strategic focus on profitability with the existing customer base rather than top-line growth.
Brokerage revenues were $37,778 for the six months ended June 30, 2026, with no comparable revenue in the 2025 period, representing commissions and platform income earned by Fusion Five Continents Securities Limited (“Fusion Five”) since the Company’s acquisition of a controlling interest on June 1, 2026. See Note 4 — Business Combination.
Cost of Revenue and Gross Profit (Loss)
Service cost of revenues was $13,553 for the six months ended June 30, 2026, compared to $1,400 for the six months ended June 30, 2025, an increase of $12,153. The increase reflects a fixed cost retainer that commenced in July 2025, which has no corresponding expense in the 2025 period.
Product cost of revenues was $526,699 for the six months ended June 30, 2026, compared to $811,804 for the six months ended June 30, 2025, a decrease of $285,105, or approximately 35%, consistent with the decline in product revenue described above.
Brokerage cost of revenues was $4,740 for the six months ended June 30, 2026, with no comparable amount in the 2025 period, representing fees paid to Fusion Five’s Execution Broker and other third parties for trade execution, clearing, and settlement services attributable to the post-acquisition period.
Gross profit was $23,666 for the six months ended June 30, 2026, compared to $114,664 for the six months ended June 30, 2025, a decrease of $90,998, or approximately 79%. The decrease was primarily attributable to the decline in product gross profit and the increase in service cost of revenue described above.
General and Administrative
General and administrative expenses were $4,044,029 for the six months ended June 30, 2026, compared to $4,230,773 for the six months ended June 30, 2025, a decrease of $186,744, or approximately 4%. The net decrease reflects a $944,483 decline in general and administrative expenses during the second quarter of 2026, due to lower professional fees and administrative costs in the Company’s beverage alcohol operations, substantially offset by $1,150,000 of indemnification and related legal charges recorded in the first quarter of 2026, with no comparable amounts in the prior-year period.
Sales and Marketing
Sales and marketing expenses were $105,000 for the six months ended June 30, 2026, compared to $487,529 for the six months ended June 30, 2025, a decrease of $382,529, or approximately 78%. The decrease was primarily attributable to reduced advertising and promotional expenditures as the Company continued to execute its strategy of minimizing marketing spend.
Other Income (Expense)
Interest expense was $263,014 for the six months ended June 30, 2026, with no comparable expense in the 2025 period, representing interest on the promissory notes issued in May 2026. See Note 12 — Notes Payable.
The Company recognized a loss on disposition of assets of $25,136 for the six months ended June 30, 2026, with no comparable amount in the 2025 period, in connection with the disposal of the Company’s motor vehicle. See Note 5 — Property and Equipment, Net.
The Company recognized a gain on remeasurement of the previously held equity interest of $4,206,055 for the six months ended June 30, 2026, with no comparable amount in the 2025 period, in connection with the remeasurement of the Company’s previously held 24% equity interest in Fusion Five to its acquisition-date fair value upon obtaining control on June 1, 2026. See Note 4 — Business Combination.
Other income was $1,994,404 for the six months ended June 30, 2026, compared to $11,606 for the six months ended June 30, 2025, an increase of $1,982,798. The increase was primarily due to $1,944,603 of proceeds received under the Company’s directors and officers insurance policy during the three months ended March 31, 2026, with no comparable amount in the 2025 period.
Net Income (Loss)
Net income was $1,786,946 for the six months ended June 30, 2026, compared to a net loss of $4,592,032 for the six months ended June 30, 2025, an improvement of $6,378,978. The improvement was primarily attributable to the $4,206,055 gain on remeasurement of the previously held equity interest in Fusion Five and the $1,944,603 of directors and officers insurance proceeds received during the first quarter of 2026, partially offset by the $1,150,000 of indemnification and related legal charges recorded during the same period and interest expense on the promissory notes issued in May 2026.
As
of MarchJune 31,30, 2026 and December 31, 2025, we had cash and cash equivalents of $4,444,975$144,642 and $5,975,408, respectively.respectively, excluding cash held on behalf of clients of $316,932 as of June 30, 2026, representing client monies held in segregated accounts by Fusion Five Continents Securities Limited (“Fusion Five”). To date, we have
financed our operations primarily through issuances of common stock and sales of our products and services.
These
conditions raise substantial doubt about the Company’s ability to continue as a going concern. The indicators include: (i) net
losses incurred since inception, including a net loss of $914.969 for the three months ended March 31, 2026inception; (ii) an accumulated deficit
of $68,744,390$66,058,548 as of MarchJune 31,30, 2026; and (iii) cash and cash equivalents of $144,642 as of June 30, 2026, notwithstanding net income of $ 1,786,946 for the six months ended June 30, 2026, which was driven substantially by the non-cash gain on remeasurement of the previously held equity interest in Fusion Five and non-recurring insurance proceeds, rather than by cash generated from operations. Net cash used in operating activities ofwas $1,450,433$3,004,669 for the threesix months ended MarchJune 31,
30, 2026. Management is actively monitoring its liquidity position and evaluating various strategies to address these conditions. See Note
2 — Going Concern.
During the six months ended June 30, 2026, the Company raised $165,999 in net proceeds through the issuance of 1,619 shares of common stock under its at-the-market offering program. In April 2026, amounts previously funded under the Company’s joint venture agreements and distribution and marketing service agreements, aggregating $21,773,000, were returned to the Company in the form of USDT, a digital asset, and, together with USDT received from other sources, applied toward the consideration for the acquisition of Fusion Five. Subsequent to June 30, 2026, the Company issued an aggregate of 1,088,503 shares of common stock for net proceeds of $7,316,687. See Note 4 — Business Combination and Note 18 — Subsequent Events.
During
the three months ended March 31, 2026, the Company did not raise any capital through issuances of common stock. Subsequent to March 31,
2026, the Company received aggregate proceeds of $21,773,000 from April 9, 2026 to April 13, 2026 in connection with the termination
of its joint venture agreements and distribution and marketing service agreements. See note 15 — Subsequent Events.
On
March 11, 2026, the Company entered into a sales agreement with A.G.P./Alliance Global Partners, pursuant to which the Company may sell
shares of its common stock having an aggregate offering price of up to $50,273,610 from time to time in at-the-market transactions. As
ofThrough MarchJune 31,30, 2026, nothe Company had issued 1,619 shares hadof beencommon soldstock under the agreement.agreement for net proceeds of $165,999.
The
following table presents selected captions from our consolidated statement of cash flows for the threesix months ended MarchJune 31,30, 2026 and
2025:
Net
cash used in operating activities was $3,004,969 for the threesix months ended MarchJune 31,30, 2026 was $1,450,433,2026, compared to $6,619,373$8,263,348 for the threesix months
ended MarchJune 31,30, 2025, a decrease in cash used of $5,168,940,$4,718,109, or approximately 78%.57%. The significant reduction was primarily attributable
to the non-recurrence of $4,116,608$5,181,608 in cash payments made during Q1the six months ended June 30, 2025 to settle accrued and other payables to related parties, representing
retention, bonus, and settlement obligations that had been accrued in prior periods, withcompared noto $134,787 of comparable outflows arisingpayments during the three
six months ended MarchJune 31,30, 2026.
The
primaryNet driverincome ofwas cash$1,786,946 used in operating activities duringfor the threesix months ended MarchJune 31,30, 20262026, wascompared theto a net loss of $914,969,$4,592,032 reflecting
for the Company’ssix continuedmonths investmentended June 30, 2025; however, the improvement in itsnet operationsincome andwas corporatesubstantially infrastructure.non-cash Non-cashin itemsnature, includeddriven depreciationby the $4,206,055 gain on remeasurement of $17,027
relating to the Company’spreviously fixedheld assets.equity interest in Fusion Five Continents Securities Limited (“Fusion Five”), which is excluded from operating cash flows. No stock-based compensation or restricted stock unit vesting expense was recognized during the threesix months ended MarchJune 31,30, 2026,
compared to $868,189$220,200 and $1,360,205, respectively, during the threesix months ended MarchJune 31,30, 2025, as all restricted stock units had been fully vested or forfeited as
of December 31, 2025.
YHC insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding YHC (13F)
None of the 59 investors we track reported a position in their latest 13F.