| RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS |
NOTE 3 — RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
During the preparation of the Group’s consolidated
financial statements for the year ended December 31, 2025, management identified errors in the previously issued consolidated financial
statements as of and for the year ended December 31, 2024. The Group has restated the 2024 consolidated financial statements to correct
these errors. The principal corrections are summarized below.
Intangible Assets and Accumulated Deficit (IP Rights).
The Group corrected the timing of recognition of certain intellectual property (“IP”) rights acquired in August 2019 that
had previously been recognized based on the subsequent share issuance. The correction reflects the IP asset and related historical amortization
in the appropriate periods. The correction increased intangible assets, net by $35,496 as of December 31, 2024 and included an adjustment
to beginning accumulated deficit for historical amortization of $115,418 attributable to periods prior to 2024.
Asset Write-offs and Impairment. The Group
corrected the accounting for the Rockland distribution agreement and the Wired for Wine liquor license. In addition, the Group wrote off
a loan receivable and accrued interest receivable due from a related party. These corrections resulted in the write-off or impairment
of the related asset balances and increased 2024 impairment expense. As restated, impairment expense for the year ended December 31, 2024
was $1,861,833, compared with loss on asset write-off of $612,072 previously reported.
Unrecorded Equity Commitments. Management identified
an aggregate of $1,225,427 of contractual obligations established in or before 2024 to issue ordinary shares that had not been recorded
in the appropriate periods. These obligations included the Chief Executive Officer’s IPO bonus, board-approved staff and director
allocations, a 2021 agreement with Tradigital, and the 2019 IP asset acquisition. The corrections resulted in adjustments to salaries
and wages, other liabilities, ordinary shares and accumulated deficit.
Debt Issuances with Equity Components. The
Group previously accounted for certain debt issuances that included an equity component by recognizing the value attributed to the equity
component as an expense. The Group determined that the proceeds should instead be allocated between the debt and equity components on
a relative fair value basis. The correction reduced previously recognized expense and adjusted the carrying amount of the related debt
and ordinary shares.
Other Corrections and Reclassifications. The
restatement also includes corrections and reclassifications affecting certain prepaid expenses, right-of-use assets and lease balances,
equipment, accounts payable and accrued expenses, revenue and operating expense classifications, and foreign currency translation. These
corrections have been reflected in the restated consolidated balance sheet, statement of operations and comprehensive loss, statement
of stockholders’ equity, and statement of cash flows.
Impact of Restatement on 2024 Financial Statements
The following tables summarize the effects of the
corrections on the Group’s previously reported consolidated financial position as of December 31, 2024 and its consolidated results
of operations and cash flows for the year then ended.
Impact of Restatement on Consolidated Balance Sheet — December
31, 2024
| Schedule of Restatement on Consolidated Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
| Financial
Statement Line Item |
|
As
Previously
Reported |
|
Adjustments |
|
As
Restated |
| Cash
and cash equivalents |
|
$ |
619,944 |
|
|
$ |
1 |
|
|
$ |
619,945 |
|
| Accounts
receivable, net |
|
|
14,676 |
|
|
|
1 |
|
|
|
14,677 |
|
| Inventory,
at cost |
|
|
1,116,500 |
|
|
|
— |
|
|
|
1,116,500 |
|
| Prepaid
expenses and other current assets |
|
|
431,495 |
|
|
|
25,100 |
|
|
|
456,595 |
|
| Loan
receivable - stockholder, current portion |
|
|
405,687 |
|
|
|
(405,687 |
) |
|
|
— |
|
| Total
current assets |
|
|
2,588,302 |
|
|
|
(380,585 |
) |
|
|
2,207,717 |
|
| Deposits |
|
|
32,373 |
|
|
|
— |
|
|
|
32,373 |
|
| Finance
right-of-use asset, net |
|
|
3,352 |
|
|
|
(3,352 |
) |
|
|
— |
|
| Operating
right-of-use asset, net |
|
|
213,688 |
|
|
|
(35,263 |
) |
|
|
178,425 |
|
| Loan
receivable - stockholder, net of current portion |
|
|
328,642 |
|
|
|
(328,642 |
) |
|
|
— |
|
| Equipment,
net |
|
|
105,399 |
|
|
|
(19,286 |
) |
|
|
86,113 |
|
| Intangible
assets, net |
|
|
339,032 |
|
|
|
35,496 |
|
|
|
374,528 |
|
| Prepaid
distribution cost |
|
|
453,728 |
|
|
|
(453,728 |
) |
|
|
— |
|
| Deferred
tax asset |
|
|
890,857 |
|
|
|
— |
|
|
|
890,857 |
|
| Total
assets |
|
|
4,955,373 |
|
|
|
(1,185,360 |
) |
|
|
3,770,013 |
|
| Accounts
payable and accrued expenses |
|
|
1,479,983 |
|
|
|
25,099 |
|
|
|
1,505,082 |
|
| Notes
payable |
|
|
421,596 |
|
|
|
— |
|
|
|
421,596 |
|
| Operating
lease liability, current portion |
|
|
144,245 |
|
|
|
— |
|
|
|
144,245 |
|
| Other
liabilities |
|
|
232,642 |
|
|
|
992,785 |
|
|
|
1,225,427 |
|
| Total
current liabilities |
|
|
2,278,466 |
|
|
|
1,017,884 |
|
|
|
3,296,350 |
|
| Accrued
employee benefits, non-current |
|
|
17,689 |
|
|
|
— |
|
|
|
17,689 |
|
| Operating
lease liability, less current portion |
|
|
40,109 |
|
|
|
— |
|
|
|
40,109 |
|
| Total
liabilities |
|
|
2,336,264 |
|
|
|
1,017,884 |
|
|
|
3,354,148 |
|
| Ordinary
shares |
|
|
11,619,117 |
|
|
|
268,396 |
|
|
|
11,887,513 |
|
| Accumulated
other comprehensive loss |
|
|
(204,718 |
) |
|
|
(134,037 |
) |
|
|
(338,755 |
) |
| Accumulated
deficit |
|
|
(8,795,290 |
) |
|
|
(2,337,603 |
) |
|
|
(11,132,893 |
) |
| Total
stockholders' equity |
|
|
2,619,109 |
|
|
|
(2,203,244 |
) |
|
|
415,865 |
|
| Total
liabilities and stockholders' equity |
|
$ |
4,955,373 |
|
|
$ |
(1,185,360 |
) |
|
$ |
3,770,013 |
|
Impact of Restatement on Consolidated Statement of Operations and Comprehensive
Loss — Year Ended December 31, 2024
| Schedule of Restatement on Consolidated Statement of Operations and Comprehensive
Loss |
|
|
|
|
|
|
|
|
|
|
|
|
| Financial
Statement Line Item |
|
As
Previously
Reported |
|
Adjustments |
|
As
Restated |
| Revenues,
net |
|
$ |
2,931,243 |
|
|
($ |
9,002 |
) |
|
$ |
2,922,241 |
|
| Cost
of revenues |
|
|
699,329 |
|
|
|
(2,147 |
) |
|
|
697,182 |
|
| Gross
profit |
|
|
2,231,914 |
|
|
|
(6,855 |
) |
|
|
2,225,059 |
|
| General
and administrative |
|
|
1,555,190 |
|
|
|
(212,722 |
) |
|
|
1,342,468 |
|
| Salaries
and wages |
|
|
1,633,599 |
|
|
|
825,987 |
|
|
|
2,459,586 |
|
| Sales
and marketing |
|
|
155,371 |
|
|
|
(476 |
) |
|
|
154,895 |
|
| Contracted
services |
|
|
1,472,722 |
|
|
|
(1,940 |
) |
|
|
1,470,782 |
|
| Impairment
expense / loss on asset write-off |
|
|
612,072 |
|
|
|
1,249,761 |
|
|
|
1,861,833 |
|
| Total
operating expenses |
|
|
5,428,954 |
|
|
|
1,860,610 |
|
|
|
7,289,564 |
|
| Loss
from operations |
|
|
(3,197,040 |
) |
|
|
(1,867,465 |
) |
|
|
(5,064,505 |
) |
| Gain
on settlement of liabilities and other |
|
|
319,906 |
|
|
|
(148,475 |
) |
|
|
171,431 |
|
| Interest
income |
|
|
63,689 |
|
|
|
(63,689 |
) |
|
|
— |
|
| Interest
expense |
|
|
(244,166 |
) |
|
|
(47,859 |
) |
|
|
(292,025 |
) |
| Total
other income (expense), net |
|
|
139,429 |
|
|
|
(260,023 |
) |
|
|
(120,594 |
) |
| Net
loss before income taxes |
|
|
(3,057,611 |
) |
|
|
(2,127,488 |
) |
|
|
(5,185,099 |
) |
| Income
tax benefit (expense) |
|
|
486,278 |
|
|
|
(1,494 |
) |
|
|
484,784 |
|
| Net
loss |
|
|
(2,571,333 |
) |
|
|
(2,128,982 |
) |
|
|
(4,700,315 |
) |
| Foreign
currency translation adjustment |
|
|
(46,068 |
) |
|
|
(112,789 |
) |
|
|
(158,857 |
) |
| Comprehensive
loss |
|
($ |
2,617,401 |
) |
|
($ |
2,241,771 |
) |
|
($ |
4,859,172 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Basic
and diluted net loss per share* |
|
($ |
7.74 |
) |
|
($ |
6.34 |
) |
|
($ |
14.08 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted
average shares outstanding - basic and diluted* |
|
|
332,064 |
|
|
|
1,820 |
|
|
|
333,884 |
|
* As previously reported
share and per-share amounts have been retroactively adjusted for the cumulative 1-for-25 reverse stock split (1-for-5 on September 26,
2025 and 1-for-5 on January 30, 2026) to conform to the current presentation.
Impact of Restatement on Consolidated Statement of Cash Flows —
Year Ended December 31, 2024
| Schedule of Restatement on Consolidated Statement of Cash Flows |
|
|
|
|
|
|
|
|
|
|
|
|
| Financial
Statement Line Item |
|
As
Previously
Reported |
|
Adjustments |
|
As
Restated |
| Net
loss |
|
($ |
2,571,333 |
) |
|
($ |
2,128,982 |
) |
|
($ |
4,700,315 |
) |
| Depreciation
and amortization |
|
|
449,910 |
|
|
|
(32,184 |
) |
|
|
417,726 |
|
| Stock
compensation / stock-based compensation |
|
|
148,788 |
|
|
|
1,174,175 |
|
|
|
1,322,963 |
|
| Share
issuance for services |
|
|
972,925 |
|
|
|
(972,925 |
) |
|
|
— |
|
| Loss
on write-off of assets / impairment expense |
|
|
605,805 |
|
|
|
1,256,028 |
|
|
|
1,861,833 |
|
| Interest
capitalized to line of credit |
|
|
— |
|
|
|
68,557 |
|
|
|
68,557 |
|
| Accounts
receivable |
|
|
720,032 |
|
|
|
(441,029 |
) |
|
|
279,003 |
|
| Inventories |
|
|
(126,908 |
) |
|
|
1 |
|
|
|
(126,907 |
) |
| Prepaid
expenses and other current assets |
|
|
(369,846 |
) |
|
|
(31,017 |
) |
|
|
(400,863 |
) |
| Right-of-use
assets and liabilities |
|
|
(120,932 |
) |
|
|
119,873 |
|
|
|
(1,059 |
) |
| Deposits |
|
|
2,735 |
|
|
|
— |
|
|
|
2,735 |
|
| Deferred
tax asset |
|
|
(419,837 |
) |
|
|
— |
|
|
|
(419,837 |
) |
| Accounts
payable and accrued expenses |
|
|
(677,438 |
) |
|
|
(104,480 |
) |
|
|
(781,918 |
) |
| Deferred
revenue / contracts payable |
|
|
(161,038 |
) |
|
|
— |
|
|
|
(161,038 |
) |
| Other
liabilities |
|
|
— |
|
|
|
745,881 |
|
|
|
745,881 |
|
| Accrued
employee benefits |
|
|
(28,161 |
) |
|
|
— |
|
|
|
(28,161 |
) |
| Net
cash used in operating activities |
|
|
(1,575,298 |
) |
|
|
(346,102 |
) |
|
|
(1,921,400 |
) |
| Purchases
of equipment |
|
|
(6,385 |
) |
|
|
(720 |
) |
|
|
(7,105 |
) |
| Net
activity on due from related parties |
|
|
(54,638 |
) |
|
|
54,638 |
|
|
|
— |
|
| Net
cash provided by (used in) investing activities |
|
|
(61,023 |
) |
|
|
53,918 |
|
|
|
(7,105 |
) |
| Proceeds
from issuance of shares, net |
|
|
3,319,221 |
|
|
|
439,674 |
|
|
|
3,758,895 |
|
| Proceeds
from notes payable - related parties |
|
|
— |
|
|
|
145,266 |
|
|
|
145,266 |
|
| Repayments
of notes payable - related parties |
|
|
— |
|
|
|
(293,789 |
) |
|
|
(293,789 |
) |
| Repayments
of notes payable |
|
|
(1,178,132 |
) |
|
|
225,728 |
|
|
|
(952,404 |
) |
| Net
cash provided by financing activities |
|
|
2,141,089 |
|
|
|
516,879 |
|
|
|
2,657,968 |
|
| Effect
of exchange rate changes on cash |
|
|
101,036 |
|
|
|
(224,692 |
) |
|
|
(123,656 |
) |
| Net
increase in cash |
|
|
605,804 |
|
|
|
3 |
|
|
|
605,807 |
|
| Cash
at beginning of year |
|
|
14,140 |
|
|
|
(2 |
) |
|
|
14,138 |
|
| Cash
at end of year |
|
$ |
619,944 |
|
|
$ |
1 |
|
|
$ |
619,945 |
|
The restatement did not change the Group’s cash
flows in the aggregate; however, it changed the classification and presentation of certain operating, investing, financing and foreign-currency
amounts.
|