– The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) as found in the Accounting Standards Codification (“ASC”) of the Financial Accounting Standards Board (“FASB”). The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the SEC applicable to interim period financial statements and do not include all of the information and disclosures required by accounting principles generally accepted in the United States (“GAAP”) for complete financial statements. In the opinion of management, the unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the financial position and the results of operations for the periods presented.

 

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto for the year ended December 31, 2025. Interim results are not necessarily indicative of the results that may be expected for a full year.

– Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company generally maintains balances in various operating accounts at financial institutions that management believes to be of high credit quality, in amounts that may, at times, exceed federally insured limits. The Company has not experienced any losses related to its cash and cash equivalents and does believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships. As of March 31, 2026 and December 31, 2025, all the Company’s cash and cash equivalents were held at accredited financial institutions.

Additionally, the Company had the following concentrations in net sales and accounts receivable during the three months ended March 31, 2026.

– Certain assets and liabilities of the Company are carried at fair value under U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

– Quoted prices in active markets for identical assets or liabilities.

– Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

– Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies, and similar techniques.

Derivative liabilities, warrant liabilities, SAFEs, investments at fair value, and securities pledged as collateral are measured using Level 3 inputs. Measurement of fair value using Level 3 inputs necessitates the use of estimates and assumptions that are inherently subjective, and the values determined by management as a result of using such inputs may differ from the values that would have been used had observable quotations in an active market existed, the differences could be material.

 

Except for investments at fair value, securities pledged as collateral, derivative liabilities, warrant liabilities, and SAFEs, the carrying amounts of the Company’s assets and liabilities, which are defined as financial instruments pursuant to U.S. GAAP, approximate fair value due to their short-term nature.

 

The following tables present changes in investments in fair value, securities pledged as collateral, derivative liabilities, and SAFEs, which are Level 3 assets and liabilities measured at fair value for the three months ended March 31, 2026. Note that during the fiscal year 2025, the Company sold their Investment in De Soi as part of a secured borrowing and, as such, the investment is a security pledged as collateral as of March 31, 2026; the first table below is presented comprehensive of both financial statement line items as they are interrelated:

 

 

 

 

Derivative liabilities arose from convertible notes November 2025 and were initially recorded at fair value of $37,046.  There was a change in fair value of $916 during the year ended December 31, 2025. In 2026, there were additional derivative liabilities incurred of $1,068,790 from the issuance of more convertible notes. Additionally, tock warrants issued in connection with the Company's convertible notes from November 2025 through March 2026 are accounted for as derivative liabilities under ASC 815-40. The Company also recognized a warrant derivative liability of $51,737 during the three months ended March 31, 2026. There was a change in fair value of $49,216 for all derivative liabilities during the three months ended March 31, 2026. Further, hanges in the fair value of derivative liabilities are recognized in the consolidated statements of operations within other income (expense).

 

In February 2025, the Company issued a Simple Agreement for Future Equity (SAFE), which was marked to the fair value of $500,000 at issuance. There was a change in fair value of $10,426 and $0 as of the three months ended March 31, 2026 and March 31, 2025, respectively. Changes in the fair value of SAFEs are recognized in the consolidated statement of operations within other income (expense).

 

There were no transfers between Levels 1, 2, or 3 during the three months ended March 31, 2026 nor March 31, 2025.

– The Company’s financial instruments measured at fair value on a recurring basis include investments at fair value, which are classified as Level 3 due to significant unobservable inputs used in their valuation.

 

The fair value of the Company’s investment at fair value/securities pledged as collateral is sensitive to changes in key unobservable inputs such as public company comparables for multiples, the weighting of various models, volatilities, discount rates, and financial projections. If these assumptions were to change materially, it could significantly impact the fair value conclusions.

 

To value the investment at fair value, the Company used a market based approach by identifying similar companies, applying multiples of revenues and liquidation waterfall to reach the Company’s equity value in the investment, considering discounts for lack of marketability and including weighting for transactions where we sold stock. Further, the Company considers recent transactions that occurred with the investment as evidence of fair value.

 

The Company sold a portion of its investments during the three months ended March 31, 2025, which caused losses. These losses were incurred for strategic reasons and not necessarily the value the Company would get for its highest and best use. However, such was used as an input in determining fair value as described above.

 

The Company’s derivative liabilities relate to embedded features in convertible debt instruments. These instruments are measured at fair value using a with-or-without probability weighted model. Significant unobservable inputs used in valuing derivative liabilities include the probability of conversion, the timeline for which the events are expected to occur, and discount rates applied. The fair value of the derivative liabilities is sensitive to changes in these significant unobservable inputs.

 

Additionally, the convertible debt instruments include embedded warrants. The Company values the warrant liabilities at fair value using a Monte Carlo simulation, which captures the path-dependent cash settlement mechanic under the Exchange Cap and the probability-weighted outcomes associated with a qualified financing event. Because the valuation relies on significant unobservable inputs, the arrant derivative liability is classified within Level 3 of the fair value hierarchy.

The Company’s SAFE is measured at fair value using a probability-weighted expected return valuation method. Significant unobservable inputs used in valuing the SAFE include the probability of each scenario, timeline for which the events are expected to occur, and discount rates. Because these inputs are unobservable and involve management judgement, the SAFE is classified as Level 3.

 

The fair value of the SAFE is sensitive to changes in these significant unobservable inputs. Increases in expected volatility, expected term, discount rates or probability of outcomes would generally increase the fair value of the SAFE, while decreases in these assumptions would generally decrease the fair value.

 

There were no changes in the valuation techniques used to determine the fair value of Level 3 instruments during the three months ended March 31, 2026 nor the three months ended March 31, 2025.

– Accounts receivable are derived from products and services delivered to customers and are stated at their net realizable value. The Company evaluates the creditworthiness of its customers prior to extending credit and monitors the aging and collectability of receivables on a continuous basis. Accounts receivable are generally written off when deemed uncollectible, and recoveries of receivables previously written off are recognized when received. Generally, no interest is charged on past-due accounts. The accounts receivable on Maison Thomas serve as collateral for the credit facility.

 

In accordance with ASC 326, the Company establishes an allowance for expected credit losses on financial assets, including trade and other receivables, at each reporting date. The allowance reflects management’s estimate of lifetime expected credit losses based on historical collection experience, the type and credit quality of the customer, the age of outstanding receivables, and current and expected future economic conditions.

 

Management uses the best information available to make these estimates; however, future adjustments may be required if there are significant changes in customer financial condition or broader economic trends. As of March 31, 2026 and December 31, 2025, the Company had a reserve for expected credit losses of $101,253 and $83,389, respectively.

– Property and equipment, net includes long-term fixed assets such as machinery, equipment, furniture, and fixtures reported, net of depreciation. Property and equipment are recorded at cost. Depreciation expensed using the straight-line method over the estimated useful lives of the assets. During the three months ended March 31, 2026 and March 31, 2025, the Company’s property and equipment were depreciated over five years, and leasehold improvements are amortized over the shorter of one to five years or the lease life. Additions and improvements are capitalized, while routine repairs and maintenance are charged to expense as incurred.

– Intangible consist of capitalized website development costs, tradenames and transferred intellectual property, customer base, and non-competes. Intangible assets have been determined to have definite lives and are amortized on a straight-line bases over their estimated economic lives which range from 5 to 15 years. Website development costs are amortized over two years.

– The Company accounts for the impairment and disposition of long-lived assets in accordance with ASC Subtopic 360-10-35,  (ASC 360). In accordance with ASC 360, the Company reviews its long-lived assets, including finite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company measures recoverability of assets to be held and used by comparing the carrying amount of an asset to future undiscounted net cash flows that it expects the asset to generate. When an asset is determined to be impaired, the Company recognizes the impairment amount, which is measured by the amount the carrying value of the asset exceeds its fair value. In addition, the Company evaluates goodwill for impairment in accordance ASC 350,  (ASC 350). Goodwill is tested at least annually, or more frequently if a triggering event occurs. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to the excess, not to exceed the total amount of goodwill. During the three months ended March 31, 2026 and March 31, 2025, impairment loss of $110,402and $0, respectively, was recognized.

– Customer represent cash received from customers in advance of the Company satisfying its performance obligations and are recorded as a liability within accrued expenses and other current liabilities. The balance as of December 31, 2025 relates to a single customer deposit that is expected to be earned in 2026, as the related performance obligation had not been fulfilled as of year-end. The obligation was not fully satisfied as of March 31, 2026.

– The Company recognizes revenue under FASB ASC 606, . The Company derives its revenue primarily through the sale of alcohol and non-alcoholic spirits and wine products in both wholesale and direct to consumer channels. Spirits and wine end customers consist primarily of retailers, bars, and restaurants. The Company determines revenue recognition through the following steps:

 

 

 

 

 

 

The Company’s revenue generating activities have a single performance obligation and are recognized when the ordered goods are shipped to the end customer, which is when control transfers. Revenue is measured as the amount of consideration the Company expects to receive in exchange for the sale of its product. The Company’s sales terms do not typically allow for a right of return on sales to wholesale and distributor customers except for matters related to any manufacturing defects. Amounts billed to customers for shipping and handling are included in net revenues.

As the Company’s standard payment terms are less than one year, the Company has elected, as a practical expedient, to not assess whether a contract has a significant financing component. The Company allocates the transaction price to each distinct product based on its relative standalone selling price. The product price as specified on the purchase order is considered the standalone selling price as it is an observable source that depicts the price as if sold to a similar customer in similar circumstances. Incidental items that are immaterial in the context of the contract are recognized as expense. The Company does not have any significant financing component as payments are received at or shortly after the point of sale.

 

Costs incurred to obtain a contract are expensed as incurred when the amortization period is less than a year. The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if it expects the benefit of those costs to be longer than one year. The Company has concluded that none of the costs it has incurred to obtain and fulfill its sales contracts meet the capitalization criteria, and as such, there are no costs deferred and recognized as assets on the consolidated balance sheets as of March 31, 2026 and December 31, 2025.

 

Net revenues reflect reductions attributable to consideration given to customers in various customer incentive programs, including pricing discounts on single transactions, volume discounts, promotional and advertising allowances, coupons, and rebates. This variable consideration is recognized as a reduction of the transaction price based upon expected amounts at the time revenue for the corresponding product sale is recognized. For example, customer promotional discount programs are entered into with certain distributors for certain periods of time. The amount ultimately reimbursed to distributors is determined based upon agreed-upon promotional discounts which are applied to distributors’ sales to retailers. Other common forms of variable consideration include volume rebates for meeting established sales targets, including discounts offered to the end customer. The determination of the reduction of the transaction price for variable consideration requires certain estimates and assumptions that affect the timing and amounts of revenue and liabilities recognized. Management estimates this variable consideration by taking into account factors such as the nature of the promotional activity, historical information, and current trends, availability of actual results, and expectations of customer and consumer behavior. All such estimates were not material for the three months ended March 31, 2026 and March 31, 2025.

 

Further, the Company offers discounts on e-commerce transitions such as first order discounts, free shipping on sales over certain thresholds, subscription discounts, and bundled set discounts. All e-commerce discounts are included as part of net revenues on the statements of operations and known at the time of the transaction.

 

Sales tax collected from customers is not considered revenue and is included in accrued expenses until remitted to the taxing authorities. Excise taxes were not material to the consolidated financial statements for the three months ended March 31, 2026, nor March 31, 2025.

– Cost of net revenues consists of the costs of inventory sold, which includes inbound freight, and production and fulfillment-related payroll. Outbound freight, third-party logistics costs, customs and duties, packaging materials, payment processing fees, and other fulfillment costs are also included in cost of net revenues. Shipping and handling costs amounted to $206,508 and $111,918 for the three months ended March 31, 2026 and March 31, 2025, respectively.

– Sales and marketing expenses include all expenditures incurred to market or sell products. These costs include expenditures by the sales team while in the field, marketing and advertising costs, distributor costs, and payroll costs for the sales, marketing, and digital departments.

– Advertising costs are expensed in the period incurred and are included as sales and marketing expenses in the consolidated statements of operations. Advertising costs amounted to $154,038 and $30,986 for the three months ended March 31, 2026 and March 31, 2025, respectively.

– Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common shares outstanding during the period, excluding shares subject to redemption or forfeiture. The Company presents basic and diluted net loss per share on the consolidated statements of operations. Diluted net loss per share reflect the actual weighted average of common shares issued and outstanding during the period, adjusted for potentially dilutive securities outstanding. Potentially dilutive securities are excluded from the computation of the diluted net loss per share if their inclusion would be anti-dilutive. Potentially dilutive securities include the any options, warrants, and convertible debt. The number of shares convertible debt is convertible into is indeterminable. Options and warrants outstanding are described in Note 13.

 

– In November 2024, the FASB issued a standard requiring disaggregated information about certain income statement expense line items to be disclosed on an annual and interim basis. We are required to adopt these disclosures for our annual period ending December 31, 2028, with early adoption permitted and this standard may be applied retrospectively. We expect this standard to impact our disclosures with no material impacts to our results of operations, cash flows, or financial condition.

 

Management does not believe that any other recently issued, but not yet effective, accounting standards could have a material effect on the accompanying consolidated financial statements. As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances.